1

ARTICLE 428
SECOND DIVISION

[G.R. No. 126699. August 7, 1998]

AYALA
CORPORATION, petitioner,
CORPORATION, respondent.

vs. RAY

BURTON

DEVELOPMENT

DECISION
MARTINEZ, J.:
Petitioner Ayala Corporation (AYALA) is the owner of the Ayala estate located
in Makati City. The said estate was originally a raw land which was subdivided for
sale into different lots devoted for residential, commercial and industrial
purposes. The development of the estate consisted of road and building
construction and installation of a central sewerage treatment plant and drainage
system which services the whole Ayala Commercial Area.
On March 20, 1984, Karamfil Import-Export Company Ltd. (KARAMFIL) bought
from AYALA a piece of land identified as Lot 26, Block 2 consisting of 1,188 square
meters, located at what is now known as H.V. de la Costa Street, Salcedo Village,
Makati City. The said land, which is now the subject of this case, is more
particularly described as follows:
A parcel of land (Lot 26, Block 2, of the subdivision plan [LRC] Psd-6086, being a
portion of Block D, described as plan [LRC] Psd-5812 LRC [GLRO] Rec. No. 2029)
situated in the Municipality of Makati, Province of Rizal, Is. of Luzon. Bounded on
the NE., points 2 to 3 by Lot 31, Block 2 (Creek 6.00 m. wide) of the subdivision
plan, on the SE., points 3 to 4 by Lot 27, Block 2 of the Subdivision plan; on the SW,
points 4 to 5, by proposed Road, 17.00 m. wide (Block C[LRC] Psd-5812); points 5
to 1 by Street Lot 2 (17.00 m. wide) of the subdivision plan. On the NW, points 1
to 2 by Lot 25, Block 2 of the subdivision plan. x x x beginning, containing an area
of ONE THOUSAND ONE HUNDRED EIGHTY EIGHT (1,188) SQUARE METERS.
The transaction was documented in a Deed of Sale[1] of even date, which
provides, among others, that the vendee would comply with certain special
conditions and restrictions on the use or occupancy of the land, among which are -

Deed Restrictions:[2]
a) The total height of the building to be constructed on the lot shall not be more
than forty-two (42) meters, nor shall it have a total gross floor area of more than
five (5) times the lot area; and
b) The sewage disposal must be by means of connection into the sewerage system
servicing the area.
Special Conditions:[3]
a) The vendee must obtain final approval from AYALA of the building plans and
specifications of the proposed structures that shall be constructed on the land;
b) The lot shall not be sold without the building having been completed; and
c) Any breach of the stipulations and restrictions entitles AYALA to rescission of
the contract.
As a result of the sale, a Transfer Certificate of Title No. 132086 [4] was issued in
the name of KARAMFIL. The said special conditions and restrictions were attached
as an annex to the deed of sale and incorporated in the Memorandum of
Encumbrances at the reverse side of the title of the lot as Entry No. 2432/T131086.
On February 18, 1988, KARAMFIL sold the lot to Palmcrest Development and
Realty Corporation (PALMCREST) under a Deed of Absolute Sale[5] of even date.
This deed was submitted to AYALA for approval in order to obtain the latters
waiver of the special condition prohibiting the resale of the lot until after
KARAMFIL shall have constructed a building thereon. AYALA gave its written
conformity to the sale but reflecting in its approval the same special
conditions/restrictions as in the previous sale. AYALAs conformity was annotated
on the deed of sale.[6]PALMCREST did not object to the stipulated conditions and
restrictions.[7]
PALMCREST in turn sold the lot to Ray Burton Development Corporation
(RBDC), now respondent, on April 11, 1988, with the agreement that AYALA
retains possession of the Owners Duplicate copy of the title until a building is

erected on said parcel of land in accordance with the requirements and/or

restrictions of AYALA.[8] The Deed of Absolute Sale[9] executed on the said date was
also presented to AYALA for approval since no building had yet been constructed
on the lot at the time of the sale. As in the KARAMFIL-PALMCREST transaction,
AYALA gave its conformity to the sale, subject to RBDCs compliance with the
special conditions/restrictions which were annotated in the deed of sale, thus:
With our conformity, subject to the compliance by the Vendees of the Special
Conditions of Sale on the reverse side of the Deed of Sale dated March 20, 1984
per Doc. No. 140, Page No. 29, Book No. 1, Series of 1984 of the Notary Public
Silverio Aquino.[10]
The conditions and restrictions of the sale were likewise entered as encumbrances
at the reverse side of the Transfer Certificate of Title No. 155384 which was later
issued in the name of RBDC.[11] Like PALMCREST, RBDC was not also averse to the
aforesaid conditions and restrictions.[12]
Sometime in June of 1989, RBDC submitted to AYALA for approval a set of
architectural plans for the construction of a 5-storey office building on the subject
lot, with a height of 25.85 meters and a total gross floor area of 4,989.402 square
meters.[13] The building was to be known as Trafalgar Tower but later renamed
Trafalgar Plaza. Since the building was well within the 42-meter height
restriction, AYALA approved the architectural plans.
Upon written request[14] made by RBDC, AYALA likewise agreed to release the
owners copy of the title covering the subject lot to the China Banking Corporation
as guarantee of the loan granted to RBDC for the construction of the 5-storey
building.
Meanwhile, on November 28, 1989, RBDC, together with the Makati
Developers Association, Inc. (MADAI), of which RBDC is a member, and other lot
owners, filed a complaint against AYALA before the Housing and Land Use
Regulatory Board (HLRB), docketed as HLRB Case No. REM-A-0818 (OAALA-REM111489-4240). The complaint sought the nullification of the very same Deed
Restrictions incorporated in the deeds of sale of the lots purchased by the
complainants from AYALA and annotated on their certificates of title, on the
grounds, inter alia, that said restrictions purportedly: (a) place unreasonable

control over the lots sold by AYALA, thereby depriving the vendees of the full
enjoyment of the lots they bought, in violation of Article 428 of the Civil Code; (b)
have been superseded by Presidential Decree No. 1096 (the National Building
Code) and Metro Manila Commission Zoning Ordinance No. 81-01; (c) violate the
constitutional provision on equal protection of the laws, since the restrictions are
imposed without regard to reasonable standards or classifications; and (d) are
contracts of adhesion[15] since AYALA would not sell the lots unless the buyers
agree to the deed restrictions. The complaint also alleged that AYALA is
in estoppel from enforcing the restrictions in question when it allowed the
construction of other high-rise buildings in Makati City beyond the height and floor
area limits. AYALA was further charged with unsound business practice.
Early in June of 1990, RBDC made another set of building plans for Trafalgar
Plaza and submitted the same for approval, this time to the Building Official of
the Makati City Engineers Office,[16] not to AYALA. In these plans, the building was
to be 26-storey high, or a height of 98.60 meters, with a total gross floor area of
28,600 square meters. After having obtained the necessary building permits from
the City Engineers Office, RBDC began to construct Trafalgar Plaza in accordance
with these new plans.
On July 11, 1990, the majority of the lot owners in the Makati City area,
including the Salcedo and Legaspi Village areas, in a general assembly of the
Makati Commercial Estate Association, Inc. (MACEA), approved the revision of the
Deed Restrictions, which revision was embodied in the Consolidated and Revised
Deed Restrictions[17] (Revised Deed Restrictions) wherein direct height restrictions
were abolished in favor of floor area limits computed on the basis of floor area
ratios (FARs). In the case of buildings devoted solely to office use in Salcedo
Village such as the Trafalgar Plaza the same could have a maximum gross
floor area of only eight (8) times the lot area. Thus, under the Revised Deed
Restrictions, Trafalgar Plaza could be built with a maximum gross floor area of
only 9,504 square meters (1,188 sq. m. the size of the subject lot multiplied by
8). Even under the Revised Deed Restrictions, Trafalgar would still exceed 19,065
square meters of floor area on the basis of a FARs of 8:1. RBDC did not vote for
the approval of the Revised Deed Restrictions and, therefore, it continued to be
bound by the original Deed Restrictions.

In the meantime, on August 22, 1990, the HLRB En Banc rendered a

decision[18] (a) upholding the Deed Restrictions; (b) absolving AYALA from the
charge of unsound business practice; and (c) dismissing HLRB Case No. REM-A0818. MADAI and RBDC separately appealed the decision to the Office of the
President, which appeal was docketed as O.P. Case No. 4476.
While the appeal was pending before the Office of the President, the
September 21, 1990 issue of the Business World magazine[19] featured the
Trafalgar Plaza as a modern 27-storeystructure which will soon rise in Salcedo
Village, Makati City. Stunned by this information, AYALA, through counsel, then
sent a letter[20] to RBDC demanding the latter to cease the construction of the
building which dimensions do not conform to the previous plans it earlier
approved. RBDC, through counsel, replied with a series of letters[21] requesting for
time to assess the merits of AYALAs demand.
For failing to heed AYALAs bidding, RBDC was sued on January 25, 1991 before
the Regional Trial Court of Makati City (Branch 148). AYALAs complaint for
Specific Performance or Rescission, docketed as Civil Case No. 91-220, prayed inter
alia that judgment be rendered
x x x

xxx

xxx

b. Ordering the defendant to comply with its contractual obligations and to

remove or demolish the portions or areas of the Trafalgar Tower/Plaza Building
constructed beyond or in excess of the approved height as shown by building plans
approved by the plaintiff, including any other portion of the building constructed
not in accordance with the building plans and specifications submitted to and
approved by plaintiff.
c. Alternatively, in the event specific performance becomes impossible:
i) Ordering the cancellation and rescission of the Deed of Sale dated March 20,
1984 (Annex A hereof) and ordering defendant to return to plaintiff Lot 26, Block
2 of Salcedo Village;
ii) Ordering the cancellation of Transfer Certificate of Title No. 155384 (in the
name of defendant) and directing the Makati Register of Deeds to issue a new title
over the Lot in the name of plaintiff; and

d. Ordering defendant to pay plaintiff attorneys fees in the amount

of P500,000.00, exemplary damages in the amount of P5,000.00 and the costs of
the instant suit..[22]
In its answer (with counterclaim) to the complaint, RBDC denied having actual
or constructive notice of the Deed Restrictions imposed by AYALA on the subject
lot. RBDC alleged in essence that even if said deed restrictions exist, the same are
not economically viable and should not be enforced because they constitute
unreasonable restrictions on its property rights and are, therefore, contrary to law,
morals, good customs, public order or public policy. Moreover, RBDC claimed that
the enforcement of the deed restrictions has also been arbitrary or discriminatory
since AYALA has not made any action against a number of violators of the deed
restrictions.
Meantime, the appeal of MADAI in O.P. Case No. 44761 was considered
resolved when it entered into a compromise agreement with AYALA wherein the
latter adopted and acknowledged as binding the Revised Deed Restrictions of July
11, 1990.[23] On the other hand, RBDCs appeal was dismissed in an Order dated
February 13, 1992, for the reason that, insofar as the disposition of the appealed
(HLRB) decision is concerned, there is virtually no more actual controversy on the
subject of the Deed Restrictions because the same has been overriden by the
Revised (Deed) Restrictions which the appellee Ayala Corporation has in fact
acknowledged as binding and in full force and effect x x x.[24] Accordingly, aside
from dismissing RBDCs appeal, the Order of February 13, 1992 also set aside the
appealed HLRB decision. From this order, AYALA sought a reconsideration or
clarification, noting, inter alia, that while the said order has ruled that AYALA can
no longer enforce the Deed Restrictions against RBDC, it does not expressly state
that RBDC is bound by the Revised Deed Restrictions. Clarifying this matter, the
Office of the President issued a Resolution dated April 21, 1992, [25] modifying the
February 13, 1992 order, ruling: (1) that RBDC is bound by the original Deed
Restrictions, but it has the option to accept and be bound by the Revised Deed
Restrictions in lieu of the former; and (2) that the HLRB decision dated 22 August
1990, to the extent that it absolved Ayala from the charge of unsound business
practice, subject of the basic complaint, is affirmed. This time RBDC moved for a
reconsideration of the April 21, 1992 Order, but the motion was denied in a
Resolution dated October 15, 1993.[26] Another Resolution of March 21,

1994[27] was issued

reconsideration.

denying

with

finality

RBDCs

second

motion

for

AYALA then filed a Manifestation[28] in Civil Case No. 91-220, informing the trial
court of the pertinent rulings/resolutions in the proceedings before the HLRB and
the Office of the President, which rulings, AYALA suggested, amount to res
judicata on the issue of the validity and enforceability of the Deed Restrictions
involved in the said civil case.
After trial on the merits, the trial court rendered a Decision on April 28, 1994 in
favor of RBDC, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
defendant and against the plaintiff, and as a consequence:
1. The instant case is hereby dismissed;
2. The motion/application for the annotation of the lis pendens is hereby
DENIED;
3. The motion/application to hold defendant in continuing contempt is
hereby also DENIED;
4. No damages is awarded to any of the parties;
5. Plaintiff is hereby ordered to pay the defendant P30,000.00 for and as
attorneys fees and litigation expenses;
With costs against plaintiff.
SO ORDERED.[29]
The trial courts decision is based on its findings that: (1) RBDC had neither
actual nor constructive notice of the 42-meter height limitation of the building to
be constructed on the subject lot; (2) even if the Deed Restrictions did exist, AYALA
is estopped from enforcing the same against RBDC by reason of the formers
failure to enforce said restrictions against other violators in the same area; (3) the
Deed Restrictions partake of the nature of a contract of adhesion; (4) since the
Trafalgar Plaza building is in accord with the minimum requirements of P.D. No.
1096 (The National Building Code), the Deed Restrictions may not be followed by
RBDC; and (5) the rulings of the HLRB and the Office of the President do not have
binding effect in the instant case.

Dissatisfied, AYALA appealed to the Court of Appeals which affirmed the

judgment of the trial court in a Decision[30] dated February 27, 1996 in CA-G.R. CV
No. 46488. AYALAs motion for reconsideration was likewise denied in the
Resolution[31] of October 7, 1996.
AYALA now interposes the present petition for review on certiorari, citing
several errors in the decision of the Court of Appeals, some of which involve
questions of fact.
The resolution of factual issues raised in the petition would certainly call for a
review of the Court of Appeals findings of fact. As a rule, the re-examination of
the evidence proffered by the contending parties during the trial of the case is not
a function that this Court normally undertakes inasmuch as the findings of fact of
the Court of Appeals are generally binding and conclusive on the Supreme
Court.[32] The jurisdiction of this Court in a petition for review on certiorari under
Rule 45 of the Revised Rules of Court is limited to reviewing only errors of law. [33] A
reevaluation of factual issues by this Court is justified when the findings of fact
complained of are devoid of support by the evidence on record, or when the
assailed judgment is based on misapprehension of facts.[34]
The present petition has shown that certain relevant facts were overlooked by
the Court of Appeals, which facts, if properly appreciated, would justify a different
conclusion from the one reached in the assailed decision.
The principal error raised here by petitioner AYALA pertains to the Court of
Appeals finding that RBDC did not have actual or constructive notice of the 42meter height restriction, since what was annotated on its (RBDCs) title is the
erroneous 23-meter height limit which, according to AYALAs own witness, Jose
Cuaresma, was not applicable to RBDC.[35] Thus, the Court of Appeals concluded,
RBDC has the right to enjoy the subject property as if no restrictions and
conditions were imposed thereon.[36]
The above finding and conclusion of the Court of Appeals, AYALA submits, are
based on surmises and conjectures which are contrary to the evidence on
record and (RBDCs) own admissions.[37]
There is merit in AYALAs submission.

The erroneous annotation of the 23-meter height restriction in RBDCs title was
explained by Jose Cuaresma, AYALAs Assistant Manager for Marketing and
Sales. Cuaresma testified that when the deed of sale between PALMCREST and
RBDC was submitted to the Register of Deeds of Makati and the corresponding
title was issued in the name of RBDC, the Register of Deeds annotated the wrong
height limit in Entry No. 2432 on the said title, but he emphasized that the
incorrect annotation does not apply to RBDC.[38]
Jose Cuaresma further clarified that the correct height restriction imposed by
AYALA on RBDC was 42 meters.[39] This height ceiling, he said, is based on the
deed of restrictions attached as annex to the deed of sale,[40] and the same has
been uniformly imposed on the transferees beginning from the original deed of
sale between AYALA and KARAMFIL.[41]
This clarificatory statement of Jose Cuaresma should have cautioned the Court
of Appeals from making the unfounded and sweeping conclusion that RBDC can do
anything it wants on the subject property as if no restrictions and conditions
were imposed thereon, on the mistaken premise that RBDC was unaware of the
correct 42-meter height limit. It must be stressed that Cuaresmas testimony is
bolstered by documentary evidence and circumstances of the case which would
show that RBDC was put on notice about the 42-meter height restriction.
The record reveals that the subject Lot 26 was first sold by AYALA to KARAMFIL
under a deed of sale (Exhibit "A") dated March 20, 1984 and duly notarized by
Notary Public Silverio Aquino. Attached to the deed of sale is an appendix of
special conditions/restrictions (deed restrictions), which provides, inter alia, that
the building to be constructed on the lot must have a total height of not more than
42 meters, and that any building plans and specifications of the proposed
structures must have the approval of AYALA. The deed restrictions were
incorporated in the memorandum of encumbrances at the reverse side of the title
of the lot as Entry No. 2432. When the lot was sold by KARAMFIL to PALMCREST,
the deed of sale (Exhibit "B") on this transaction bears an annotation of AYALA's
conformity to the transfer, with the condition that the approval was "subject to
the compliance by the vendee of the special conditions of sale on the reverse side
of the deed of sale dated March 20, 1984, per Doc. No. 140, Page No. 29, Book
No. 1, Series of 1984 of Notary Public Silverio F. Aquino" (Exhibit "B1"). PALMCREST later resold the lot to RBDC by virtue of a deed of sale (Exhibit

10

"C"), to which AYALA's approval was also annotated therein (Exhibit "C-1"), but
with the same explicit inscription that RBDC, as vendee, must comply with the
special deed restrictions appended to the AYALA-KARAMFIL deed of sale of
March 20, 1984. All these three (3) deeds of sale and the accompanying special
deed restrictions imposing a 42-meter height limit, were duly registered with the
Register of Deeds. Thus, RBDC cannot profess ignorance of the 42-meter height
restriction and other special conditions of the sale.
Verily, the deed restrictions are integral parts of the PALMCREST-RBDC deed of
sale, considering that AYALA's required conformity to the transfer, as annotated
therein, was conditioned upon RBDC's compliance of the deed
restrictions. Consequently, as a matter of contractual obligation, RBDC is bound
to observe the deed restrictions which impose a building height of not more than
42 meters.
Moreover, RBDC was fully aware that it was bound by the 42-meter height
limit. This is shown by the fact that, pursuant to the special
conditions/restrictions of the sale, it submitted to AYALA, for approval, building
plans for a 5-storey structure with a height of 25.85 meters. Certainly, RBDC
would not have submitted such plans had it truly believed that it was restricted by
a lower 23-meter height ceiling, in the same manner that RBDC did not seek
AYALAs approval when it later made another set of building plans for the 26storey Trafalgar Plaza, knowing that the same would be disapproved for
exceeding the 42-meter height restriction. The fact that RBDC was later issued a
building permit from the Makati City Engineer's Office for the construction of the
Trafalgar Plaza is not a valid justification to disregard the stipulated contractual
restriction of 42 meters.
Another error which AYALA claims to have been committed by the Court of
Appeals is the latters finding that AYALA, under the principle of estoppel, is now
barred from enforcing the deed restrictions because it had supposedly failed to act
against other violators of the said restrictions. AYALA argues that such finding is
baseless and is contrary to the Civil Code provisions on estoppel and applicable
jurisprudence.
We agree with the petitioner.

11

In support of its finding that estoppel operates against AYALA, the Court of
Appeals merely cited its decision dated November 17, 1993, in CA-G.R. SP No.
29157, entitled Rosa-Diana Realty and Development Corporation, Petitioner vs.
Land Registration Authority and Ayala Corporation, Respondents, and reiterated its
findings therein, to wit:
Also, Ayala is barred from enforcing the deed of restrictions in question, pursuant
to the doctrines of waiver and estoppel. Under the terms of the deed of sale, the
vendee Sy Ka Kieng assumed faithful compliance with the special conditions of sale
and with the Salcedo Village deed of restrictions. One of the conditions was that a
building would be constructed within one year. Ayala did nothing to enforce the
terms of the contract. In fact, it even agreed to the sale of the lot by Sy Ka Kieng in
favor of the petitioner realty in 1989, or thirteen (13) years later. We, therefore,
see no justifiable reason for Ayala to attempt to enforce the terms of the
conditions of the sale against the petitioner. It should now be estopped from
enforcing the said conditions through any means.
xxx

xxx

xxx

Even assuming that petitioner RDR violated the floor area and height restrictions,
it is markedly significant that Ayala disregarded the fact that it had previously
allowed and tolerated similar and repeated violations of the same restrictive
covenants by property owners which it now seeks to enforce against the herein
petitioner. Some examples of existing buildings in Salcedo Village that greatly
exceeded the gross floor area (5 times lot area) and height (42 meters) limitations
are (Rollo, p. 32):
(1) Pacific Star (Nauru Center Building 29 stories and 112.5 meters high)
(2) Sagittarius Building 16 stories
(3) Shell House Building 14 stories
(4) Eurovilla Building 15 stories
(5) LPL Plaza Building 18 stories
(6) LPL Tower Building 24 stories.[42]
An examination of the decision in the said Rosa Diana case reveals that the sole
issue raised before the appellate court was the propriety of the lis
pendens annotation. However, the appellate court went beyond the sole issue

12

and made factual findings bereft of any basis in the record to inappropriately rule
that AYALA is in estoppel and has waived its right to enforce the subject
restrictions. Such ruling was immaterial to the resolution of the issue of the
propriety of the annotation of the lis pendens. The finding of estoppel was thus
improper and made in excess of jurisdiction.
Moreover, the decision in CA-G.R. SP No. 29157 is not binding on the parties
herein, simply because, except for Ayala, RBDC is not a party in that case. Section
49, Rule 39 of the Revised Rules of Court (now Sec. 47, Rule 39 of the 1997 Rules
of Civil Procedure) provides in part:
Sec. 49. Effect of judgments. The effect of a judgment or final order rendered by
a court or judge of the Philippines, having jurisdiction to pronounce the judgment
or order, may be as follows:
(a) x x x;
(b) In other cases the judgment or order is, with respect to the matter directly
adjudged or as to any other matter that could have been raised in relation thereto,
conclusive between the parties and their successors in interest by title
subsequent to the commencement of action or special proceeding, litigating for
the same thing and under the same title and in the same capacity; (emphasis
supplied)
(c) x x x.
The clear mandate of the above-quoted rule is that a final judgment or order
of a court is conclusive and binding only upon the parties to a case and their
successors in interest. Both the present case and the Rosa-Diana case, however,
involve different parties who are not litigating for the same thing nor under the
same title and in the same capacity. Hence, the Rosa-Diana decision cannot have
binding effect against either party to the instant case.
In any case, AYALA asserts that a few gross violators of the deed restrictions
have been, or are being, proceeded against.[43] AYALA admits, though, that there
are other violations of the restrictions but these are of a minor nature which do
not detract from substantial compliance by the lot owners of the deed
restrictions. AYALA submits that minor violations are insufficient to warrant
judicial action, thus:

13

As a rule, non-objection to trivial breaches of a restrictive covenant does not

result in loss of the right to enforce the covenant by injunction, and acquiescence
in violations of a restrictive covenant which are immaterial and do not affect or
injure one will not preclude him from restraining violations thereof which would so
operate as to cause him to be damaged. (20 Am Jur. 2d Sec. 271, p. 835;
underscoring provided).
Occasional and temporary violations by lot owners of a covenant forbidding
the use of property for mercantile purposes are not sufficient as a matter of law to
warrant a finding of a waiver or abandonment of the right to enforce the
restriction. A waiver in favor of one person and for a limited purpose is not a
waiver as to all persons generally. (id., at 836; underscoring provided).[44]
It is the sole prerogative and discretion of AYALA to initiate any action against
violators of the deed restrictions. This Court cannot interfere with the exercise of
such prerogative/discretion.
How AYALA could be considered in estoppel as found by both the trial court
and the Court of Appeals, was not duly established. Under the doctrine
of estoppel, an admission orrepresentation is rendered conclusive upon the
person making it, and cannot be denied or disproved as against the person relying
thereon. A party may not go back on his own acts and representations to the
prejudice of the other party who relied upon them. [45] Here, we find no
admission, false representation or concealment that can be attributed to AYALA
relied upon by RBDC.
What is clear from the record, however, is that RBDC was the party guilty of
misrepresentation and/or concealment when it resorted to the fraudulent scheme
of submitting two (2) sets of building plans, one (1) set conformed to the Deed
Restrictions, which was submitted to and approved by AYALA,[46] while another set
violated the said restrictions, and which it presented to the Makati City Building
Official in order to secure from the latter the necessary building permit. [47] It is
noteworthy that after the submission of the second set of building plans to the
Building Official, RBDC continued to make representations to AYALA that it would
build the five-storey building in accordance with the first set of plans approved by
AYALA, obviously for the purpose of securing the release of the title of the subject

14

lot to obtain bank funding. AYALA relied on RBDC's false representations and
released the said title. Hence, RBDC was in bad faith.
AYALA further assigns as error the finding of the respondent court that, while
the Deed of Sale to Ray Burton (RBDC) did not appear to be a contract of
adhesion, however, the subject Deed Restrictions annotated therein appeared
to be one.[48] The only basis for such finding is that the Deed Restrictions and
Special Conditions were pre-printed and prepared by AYALA, and that RBDCs
participation thereof was only to sign the Deed of Sale with the said restrictions
and conditions.[49]
The respondent court erred in ruling that the Deed Restrictions is a contract of
adhesion.
A contract of adhesion in itself is not an invalid agreement. This type of
contract is as binding as a mutually executed transaction. We have emphatically
ruled in the case of Ong Yiu vs. Court of Appeals, et. al.[50] that contracts of
adhesion wherein one party imposes a ready-made form of contract on the other x
x x are contracts not entirely prohibited. The one who adheres to the contract is in
reality free to reject it entirely; if he adheres he gives his consent. This ruling was
reiterated in Philippine American General Insurance Co., Inc. vs. Sweet Lines, Inc.,
et. al.,[51]wherein we further declared through Justice Florenz Regalado that not
even an allegation of ignorance of a party excuses non-compliance with the
contractual stipulations since the responsibility for ensuring full comprehension of
the provisions of a contract of carriage (a contract of adhesion) devolves not on
the carrier but on the owner, shipper, or consignee as the case may be.
Contracts of adhesion, however, stand out from other contracts (which are
bilaterally drafted by the parties) in that the former is accorded inordinate
vigilance and scrutiny by the courts in order to shield the unwary from deceptive
schemes contained in ready-made covenants. As stated by this Court, speaking
through Justice J.B.L. Reyes, in Qua Chee Gan vs. Law Union and Rock Insurance
Co., Ltd.:[52]
The courts cannot ignore that nowadays, monopolies, cartels and concentration
of capital, endowed with overwhelming economic power, manage to impose upon
parties dealing with themcunningly prepared agreements that the weaker
party may not change one whit, his participation in the agreement being reduced

15

to the alternative to take it or leave it labeled since Raymond Saleilles contracts

by adherence (contracts d adhesion) in contrast to those entered into by parties
bargaining on an equal footing. Such contracts (of which policies of insurance and
international bill of lading are prime examples) obviously call for greater strictness
and vigilance on the part of the courts of justice with a view to protecting the
weaker party from abuses and imposition, and prevent their becoming traps for
the unwary.[53] (Emphasis supplied)
The stringent treatment towards contracts of adhesion which the courts are
enjoined to observe is in pursuance of the mandate in Article 24 of the New Civil
Code that "(i)n all contractual, property or other relations, when one of the
parties is at a disadvantage on account of his moral dependence, ignorance,
indigence, mental weakness, tender age or other handicap, the courts must be
vigilant for his protection."
Thus, the validity and/or enforceability of a contract of adhesion will have to be
determined by the peculiar circumstances obtaining in each case and the situation
of the parties concerned.
In the instant case, the stipulations in the Deed Restrictions and Special
Conditions are plain and unambiguous which leave no room for
interpretation. Moreover, there was even no attempt on the part of RBDC to
prove that, in the execution of the Deed of Sale on the subject lot, it was a weaker
or a disadvantaged party on account of its moral dependence, ignorance, mental
weakness or other handicap. On the contrary, as testified to by Edwin Ngo,
President of RBDC, the latter is a realty firm and has been engaged in realty
business,[54] and that he, a businessman for 30 years,[55] represented RBDC in the
negotiations and in the eventual purchase of the subject lot from
PALMCREST.[56] Edwin Ngo's testimony proves that RBDC was not an unwary party
in the subject transaction. Instead, Edwin Ngo has portrayed RBDC as a
knowledgeable realty firm experienced in real estate business.
In sum, there is more than ample evidence on record pinpointing RBDCs
violation of the applicable FAR restrictions in the Consolidated and Revised Deed
Restrictions (CRDRs) when it constructed the 27-storey Trafalgar Plaza. The prayer
of petitioner is that judgment be rendered as follows:

16

a. Ordering Ray Burton to comply with its contractual obligations in the

construction of Trafalgar Plaza by removing or demolishing the portions of areas
thereof constructed beyond or in excess of the approved height, as shown by the
building plans submitted to, and approved by, Ayala, including any other portion of
the building constructed not in accordance with the said building plans;
b. Alternatively, in the event specific performance becomes impossible:
(1) ordering the cancellation and rescission of the March 20, 1984 Deed of Sale
and all subsequent Deeds of Sale executed in favor of the original vendees
successors-in-interest and ordering Ray Burton to return to Ayala Lot 26, Lot 2
of Salcedo Village;
(2) ordering the cancellation of Transfer Certificate of Title No. 155384 (in the
name of defendant) and directing the Office of the Register of Deeds of Makati to
issue a new title over the lot in the name of Ayala; and
xxx

xxx

x x x.[57]

However, the record reveals that construction of Trafalgar Plaza began in 1990,
and a certificate of completion thereof was issued by the Makati City Engineers
Office per ocular inspection on November 7, 1996.[58] Apparently Trafalgar Plaza
has been fully built, and we assume, is now fully tenanted. The alternative prayers
of petitioner under the CRDRs, i.e., the demolition of excessively built space or to
permanently restrict the use thereof, are no longer feasible.
Thus, we perforce instead rule that RBDC may only be held alternatively liable
for substitute performance of its obligations the payment of damages. In this
regard, we note that the CRDRs impose development charges on constructions
which exceed the estimated Gross Limits permitted under the original Deed
Restrictions but which are within the limits of the CRDRs.
In this regard, we quote hereunder pertinent portions of The Revised Deed
Restrictions, to wit:
"3. DEVELOPMENT CHARGE
For any building construction within the Gross Floor Area limits defined under
Paragraphs C-2.1 to C-2.4 above, but which will result in a Gross Floor Area

17

exceeding certain standards defined in Paragraphs C-3.1-C below, the OWNER shall
pay MACEA, prior to the start of construction of any new building or any expansion
of an existing building, a DEVELOPMENT CHARGE as a contribution to a trust fund
to be administered by MACEA. This trust fund shall be used to improve facilities
and utilities in the Makati Central Business District.
3.1 The amount of the development charge that shall be due from
the OWNER shall be computed as follows:
DEVELOPMENT CHARGE = A x (B - C - D)
where:
A - is equal to the Area Assessment which shall be set at Five Hundred Pesos
(P500.00) until December 31, 1990. Each January 1st thereafter, such amount shall
increase by ten percent (10%) over the Area Assessment charged in the
immediately preceding year; provided that, beginning 1995 and at the end of
every successive five-year period thereafter, the increase in the Area
Assessment shall be reviewed and adjusted by the VENDOR to correspond to the
accumulated increase in the construction cost index during the immediately
preceding five years as based on the weighted average of wholesale price and
wage indices of the National Census and Statistics Office and the Bureau of Labor
Statistics.
B - is equal to the total Gross Floor Area of the completed or expanded building in
square meters.
C - is equal to the estimated Gross Floor Area permitted under the original deed
restrictions, derived by multiplying the lot area by the effective original FAR shown
below for each location:"[59]
Accordingly, in accordance with the unique, peculiar circumstance of the case
at hand, we hold that the said development charges are a fair measure of
compensatory damages which RBDC has caused in terms of creating a
disproportionate additional burden on the facilities of the Makati Central Business
District.

18

As discussed above, Ray Burton Development Corporation acted in bad faith in

constructing Trafalgar Plaza in excess of the applicable restrictions upon a double
submission of plans and exercising deceit upon both AYALA and the Makati
Engineer's Office, and thus by way of example and correction, should be held liable
to pay AYALA exemplary damages in the sum ofP2,500,000.00.
Finally, we find the complaint to be well-grounded, thus it is AYALA which is
entitled to an award of attorney's fees, and while it prays for the amount
of P500,000.00, we award the amount ofP250,000.00 which we find to be
reasonable under the circumstances.
WHEREFORE, premises considered, the assailed Decision of the Court of
Appeals dated February 27, 1996, in CA-G.R. CV No. 46488, and its Resolution
dated October 7, 1996 are hereby REVERSED and SET ASIDE, and in lieu thereof,
judgment is hereby rendered finding that:
(1) The Deed Restrictions are valid and petitioner AYALA is not estopped from
enforcing them against lot owners who have not yet adopted the Consolidated
and Revised Deed Restrictions;
(2) Having admitted that the Consolidated and Revised Deed Restrictions are the
applicable Deed Restrictions to Ray Burton Development Corporations Trafalgar
Plaza, RBDC should be, and is, bound by the same;
(3) Considering that Ray Burton Development Corporations Trafalgar Plaza
exceeds the floor area limits of the Deed Restrictions, RBDC is hereby ordered to
pay development charges as computed under the provisions of the Consolidated
and Revised Deed Restrictions currently in force.
(4) Ray Burton Development Corporation is further ordered to pay AYALA
exemplary damages in the amount of P2,500,000.00, attorneys fees in the amount
of P250,000.00, and the costs of suit. SO ORDERED.

19

THIRD DIVISION

[G.R. No. 134692. August 1, 2000]

ELISEO FAJARDO, JR., and MARISSA FAJARDO, petitioners, vs. FREEDOM TO

BUILD, INC., respondent.
DECISION
VITUG, J.:
Freedom To Build, Incorporated, an owner-developer and seller of low-cost
housing, sold to petitioner-spouses, a house and lot designated Lot No. 33,
Block 14, of the De la Costa Homes in Barangka, Marikina, Metro Manila. The
Contract to Sell executed between the parties, contained a Restrictive
Covenant providing certain prohibitions, to wit:[1]
"Easements. For the good of the entire community, the homeowner
must observe a two-meter easement in front. No structure of any kind
(store, garage, bodega, etc.) may be built on the front easement.
"x x x.............................x x x.............................x x x
"Upward expansion. A second storey is not prohibited. But the second
storey expansion must be placed above the back portion of the house
and should not extend forward beyond the apex of the original
building.
"x x x.............................x x x.............................x x x
"Front expansion: 2nd Storey: No unit may be extended in the front
beyond the line as designed and implemented by the developer in the
60 sq. m. unit. In other words, the 2nd floor expansion, in front, is 6
meters back from the front property line and 4 meters back from the
front wall of the house, just as provided in the 60 sq. m. units."[2]
The above restrictions were also contained in Transfer Certificate of Title No.
N-115384 covering the lot issued in the name of petitioner-spouses.

20

The controversy arose when petitioners, despite repeated warnings from

respondent, extended the roof of their house to the property line and
expanded the second floor of their house to a point directly above the
original front wall.[3] Respondent filed before the Regional Trial Court,
National Capital Judicial Region, Branch 261, Pasig City, an action to demolish
the unauthorized structures.
After trial, judgment was rendered against petitioners; thus:
"WHEREFORE, premises considered, defendant spouses Eliseo B.
Fajardo, Jr., and Marissa F. Fajardo are hereby directed to immediately
demolish and remove the extension of their expanded housing unit that
exceeds the limitations imposed by the Restrictive Covenant, otherwise
the Branch Sheriff of this Court shall execute this decision at
the expense of the defendants.
"As to damages and attorney's fees, it appearing from the records of
this case that no evidence to sustain the same was adduced by either of
the parties, the Court deems it proper not to award any.
"SO ORDERED."[4]
On appeal to it, the Court of Appeals affirmed the decision of the trial court.
In their petition for review to this Court, the spouses contest the judgment of
the courts below. Adjacent owners reportedly have no objection to the
construction, and have even expressed interest in undertaking a similar
expansion in their respective residences. Moreover, the couple's two
children, a son and a daughter, might soon get married and then share, with
their families, living quarters with petitioners. The latter also assail the
personality of private respondent to question the construction which have
effectively relinquished its ownership, right or interest over the subdivision
upon the execution of the Deed of Absolute Sale in favor of the individual
homeowners. Per the contract between Freedom to Build Incorporated and
the De la Costa Low Income Project Homeowners' Association (hereinafter
homeowners' association), petitioners aver, the enforcement of the
prohibitions contained in the "Restrictive Covenant" originally residing on

21

respondent is now lodged in the homeowners' association. Petitioners

maintain that it is incumbent upon the homeowners' association, not on
respondent, to enforce compliance with the provisions of the covenant.
A perusal of the provisions of the covenant would show that the restrictions
therein imposed were intended "For the protection and benefit of the De La Costa Low Income Housing
Project, and of all the persons who may now, or hereafter become
owners of any part of the project, and as part of the consideration for
the conveyance of the housing unit, these restrictions are promulgated
in order that; the intents and purposes for which the project was
designed shall be upheld; to wit: subsequent duly approved sale and
assignments of housing units shall be made only to low income families;
a certain level of privacy shall be observed; a community spirit shall be
fostered; and an undisturbed possession and occupancy at the
homeowners shall be maintained."[5]
Restrictive covenants are not, strictly speaking, synonymous with easements.
While it may be correct to state that restrictive covenants on the use of land
or the location or character of buildings or other structures thereon may
broadly be said to create easements or rights, it can also be contended that
such covenants, being limitations on the manner in which one may use his
own property,[6] do not result in true easements,[7] but a case of servitudes
(burden), sometimes characterized to be negative easements or reciprocal
negative easements. Negative easement is the most common easement
created by covenant or agreement whose effect is to preclude the owner of
the land from doing an act, which, if no easement existed, he would be
entitled to do.[8]
Courts which generally view restrictive covenants with disfavor for being a
restriction on the use of one's property, have, nevertheless, sustained
them[9] where the covenants are reasonable,[10] not contrary to public
policy,[11] or to law,[12] and not in restraint of trade.[13] Subject to these
limitations, courts enforce restrictions to the same extent that will lend
judicial sanction to any other valid contractual relationship.[14] In general,

22

frontline restrictions on constructions have been held to be valid

stipulations.[15]
The provisions in a restrictive covenant prescribing the type of the building to
be erected are crafted not solely for the purpose of creating easements,
generally of light and view, nor as a restriction as to the type of
construction,[16] but may also be aimed as a check on the subsequent uses of
the building[17] conformably with what the developer originally might have
intended the stipulations to be. In its Memorandum, respondent states in
arguing for the validity of the restrictive covenant that the "x x x restrictions are not without specific purpose. In a low costsocialized housing, it is of public knowledge that owners-developers are
constrained to build as many number of houses on a limited land area
precisely to accommodate marginalized lot buyers, providing as much
as possible the safety, aesthetic and decent living condition by
controlling overcrowding. Such project has been designed to
accommodate at least 100 families per hectare."[18]
There appears to be no cogent reasons for not upholding restrictive
covenants aimed to promote aesthetics, health, and privacy or to prevent
overcrowding.
Viewed accordingly, the statement of petitioners that their immediate
neighbors have not opposed the construction is unavailing to their cause, the
subject restrictive covenant not being intended for the benefit of adjacent
owners but to prescribe the uses of the building, i.e., to ensure, among other
things, that the structures built on De la Costa Homes Subdivision would
prevent overcrowding and promote privacy among subdivision dwellers. The
argument then of petitioners that expansion is necessary in order to
accommodate the individual families of their two children must fail for like
reason. Nor can petitioners claim good faith; the restrictive covenants are
explicitly written in the Contract To Sell and annotated at the back of the
Transfer Certificate of Title.

23

Petitioners raise the issue of the personality of respondent to enforce the

provisions of the covenant. Broadly speaking, a suit for equitable
enforcement of a restrictive covenant can only be made by one for whose
benefit it is intended.[19] It is not thus normally enforceable by one who has
no right nor interest in the land for the benefit of which the restriction has
been imposed.[20] Thus, a developer of a subdivision can enforce restrictions,
even as against remote grantees of lots, only if he retains part of the
land.[21] There would have been merit in the argument of petitioners - that
respondent, having relinquished ownership of the subdivision to the
homeowners, is precluded from claiming any right or interest on the same
property - had not the homeowners' association, confirmed by its board of
directors, allowed respondent to enforce the provisions of the restrictive
covenant.
Finally, petitioners argue that for lack of a specific provision, prescribing the
penalty of demolition in the "Restrictive Covenant" in the event of a breach
thereof, the prayer of respondent to demolish the structure should fail. This
argument has no merit; Article 1168 of the New Civil Code states:
"When the obligation consists in not doing and the obligor does what
has been forbidden him, it shall be undone at his expense."
This Court is not unaware of its ruling in Ayala Corporation vs. Ray Burton
Development Corporation,[22] which has merely adjudged the payment of
damages in lieu of demolition. In the aforementioned case, however, the
elaborate mathematical formula for the determination of compensatory
damages which takes into account the current construction cost index during
the immediately preceding 5 years based on the weighted average of
wholesale price and wage indices of the National Census and Statistics Office
and the Bureau of Labor Statistics is explicitly provided for in the Deed of
Restrictions entered into by the parties. This unique and peculiar
circumstance, among other strong justifications therein mentioned, is not
extant in the case at bar.
In sum, the Court holds that -

24

(1)....The provisions of the Restrictive Covenant are valid;

(2)....Petitioners must be held to be bound thereby; and
(3)....Since the extension constructed exceeds the floor area limits of
the Restrictive Covenant, petitioner-spouses can be required to
demolish the structure to the extent that it exceeds the prescribed
floor area limits.
WHEREFORE, the assailed decision, dated 13 July 1998, of the Court of
Appeals in CA-G.R. CV No. 50085, sustaining that of the court a quo, is
AFFIRMED. No costs.
SO ORDERED.

25

SECOND DIVISION

[G.R. No. 134971. March 25, 2004]

HERMINIO TAYAG, petitioner, vs. AMANCIA LACSON, ROSENDO LACSON,

ANTONIO LACSON, JUAN LACSON, TEODISIA LACSON-ESPINOSA and THE
COURT OF APPEALS, respondents.
DECISION
CALLEJO, SR., J.:
Before us is a petition for review on certiorari of the Decision[1] and the
Resolution[2] of respondent Court of Appeals in CA-G.R. SP No. 44883.
The Case for the Petitioner
Respondents Angelica Tiotuyco Vda. de Lacson,[3] and her children Amancia,
Antonio, Juan, and Teodosia, all surnamed Lacson, were the registered owners of
three parcels of land located in Mabalacat, Pampanga, covered by Transfer
Certificates of Title (TCT) Nos. 35922-R, 35923-R, and 35925-R, registered in the
Register of Deeds of San Fernando, Pampanga. The properties, which were
tenanted agricultural lands,[4] were administered by Renato Espinosa for the
owner.
On March 17, 1996, a group of original farmers/tillers, namely, Julio Tiamson,
Renato Gozun, Rosita Hernandez, Bienvenido Tongol, Alfonso Flores, Norma
Quiambao, Rosita Tolentino, Jose Sosa, Francisco Tolentino, Sr., Emiliano
Laxamana, Ruben Torres, Meliton Allanigue, Dominga Laxamana, Felicencia de
Leon, Emiliano Ramos, and another group, namely, Felino G. Tolentino, Rica
Gozun, Perla Gozun, Benigno Tolentino, Rodolfo Quiambao, Roman Laxamana,
Eddie San Luis, Ricardo Hernandez, Nicenciana Miranda, Jose Gozun, Alfredo Sosa,
Jose Tiamson, Augusto Tolentino, Sixto Hernandez, Alex Quiambao, Isidro
Tolentino, Ceferino de Leon, Alberto Hernandez, Orlando Flores, and Aurelio
Flores,[5] individually executed in favor of the petitioner separate Deeds of
Assignment[6] in which the assignees assigned to the petitioner their respective
rights as tenants/tillers of the landholdings possessed and tilled by them for and
in consideration of P50.00 per square meter. The said amount was made payable
when the legal impediments to the sale of the property to the petitioner no

26

longer existed. The petitioner was also granted the exclusive right to buy the
property if and when the respondents, with the concurrence of the defendantstenants, agreed to sell the property. In the interim, the petitioner gave varied
sums of money to the tenants as partial payments, and the latter issued receipts
for the said amounts.
On July 24, 1996, the petitioner called a meeting of the defendants-tenants to
work out the implementation of the terms of their separate
agreements.[7] However, on August 8, 1996, the defendants-tenants, through
Joven Mariano, wrote the petitioner stating that they were not attending the
meeting and instead gave notice of their collective decision to sell all their rights
and interests, as tenants/lessees, over the landholding to the
respondents.[8] Explaining their reasons for their collective decision, they wrote as
follows:
Kami ay nagtiwala sa inyo, naging tapat at nanindigan sa lahat ng ating
napagkasunduan, hindi tumanggap ng ibang buyer o ahente, pero sinira ninyo ang
aming pagtitiwala sa pamamagitan ng demanda ninyo at pagbibigay ng problema
sa amin na hindi naman nagbenta ng lupa.
Kaya kami ay nagpulong at nagpasya na ibenta na lang ang aming karapatan o
ang aming lupang sinasaka sa landowner o sa mga pamilyang Lacson, dahil ayaw
naming magkaroon ng problema.
Kaya kung ang sasabihin ninyong itoy katangahan, lalo sigurong magiging
katangahan kung ibebenta pa namin sa inyo ang aming lupang sinasaka,
kaya pasensya na lang Mister Tayag. Dahil sinira ninyo ang aming pagtitiwala at
katapatan.[9]
On August 19, 1996, the petitioner filed a complaint with the Regional Trial
Court of San Fernando, Pampanga, Branch 44, against the defendants-tenants, as
well as the respondents, for the court to fix a period within which to pay the
agreed purchase price of P50.00 per square meter to the defendants, as provided
for in the Deeds of Assignment. The petitioner also prayed for a writ of
preliminary injunction against the defendants and the respondents therein. [10] The
case was docketed as Civil Case No. 10910.

27

In his complaint, the petitioner alleged, inter alia, the following:

4.
That defendants Julio Tiamson, Renato Gozun, Rosita
Hernandez, Bienvenido Tongol, Alfonso Flores, Norma Quiambao, Rosita
Tolentino, Jose Sosa, Francisco Tolentino, Sr., Emiliano Laxamana, Ruben
Torres, Meliton Allanigue, Dominga Laxamana, Felicencia de
Leon, Emiliano Ramos are original farmers or direct tillers of landholdings over
parcels of lands covered by Transfer Certificate of Title Nos. 35922-R, 35923R and 35925-R which are registered in the names of defendants LACSONS; while
defendants Felino G. Tolentino, Rica Gozun, Perla Gozun, Benigno
Tolentino, Rodolfo Quiambao, Roman Laxamana, Eddie San Luis, Alfredo
Gozun, Jose Tiamson, Augusto Tolentino, Sixto Hernandez, Alex Quiambao,
Isidro Tolentino, Ceferino de Leon, Alberto Hernandez, and Aurelio Flores are subtenants over the same parcel of land.
5.
That on March 17, 1996 the defendants TIAMSON, et al., entered into Deeds
of Assignment with the plaintiff by which the defendants assigned all their rights
and interests on their landholdings to the plaintiff and that on the same date
(March 17, 1996), the defendants received from the plaintiff partial payments in
the amounts corresponding to their names. Subsequent payments were also
received:
1st PAYMENT 2nd PAYMENT
1.Julio Tiamson - - - P 20,000
--

P 10,621.54

2. Renato Gozun - - P 10,000

---

96,000

CHECK
NO.

TOTAL

231281

P 30,621.54
106,000.00

[son of Felix Gozun (deceased)]

3. Rosita Hernandez
P 5,000
----

14,374.24

231274

P 19,374.24

P 10,000

14,465.90

231285

24,465.90

4. Bienvenido

28

Tongol - - [Son of Abundio Tongol (deceased)]

5. Alfonso Flores - - P 30,000
---

26,648.40

231271

56,648.40

6. Norma Quiambao
P 10,000
----

41,501.10

231279

51,501.10

7. Rosita Tolentino P 10,000

----

22,126.08

231284

32,126.08

8. Jose Sosa - - - - - P 10,000

---

14,861.31

231291

24,861.31

9. Francisco
Tolentino, Sr.

P 10,000

24,237.62

231283

34,237.62

10. Emiliano
Laxamana - -

P 10,000

11. Ruben Torres - P 10,000

----

------

------

------

P 33,587.31

------

P 43,587.31

[Son of Mariano Torres (deceased)]

12. Meliton
Allanigue

P 10,000

12,944.77

231269

P 22,944.77

13. Dominga
Laxamana

P 5,000

22,269.02

231275

27,269.02

14. Felicencia de
Leon

10,000

------

------

------

15. Emiliano Ramos

5,000

18,869.60

231280

23,869.60

16. Felino G.

10,000

------

------

------

29

Tolentino
17. Rica Gozun

5,000

------

------

------

18. Perla Gozun

10,000

------

------

------

19. Benigno
Tolentino

10,000

------

------

------

20. Rodolfo
Quiambao

10,000

------

------

------

21. Roman
Laxamana

10,000

------

------

------

22. Eddie San

Luis

10,000

------

------

------

23. Ricardo
Hernandez

10,000

------

------

------

24. Nicenciana
Miranda

10,000

------

------

------

25. Jose Gozun

10,000

------

------

------

26. Alfredo Sosa

5,000

------

------

------

27. Jose Tiamson

10,000

------

------

------

28. Augusto
Tolentino

5,000

------

------

------

29. Sixto
Hernandez

10,000

------

------

------

30. Alex Quiambao

10,000

------

------

------

31. Isidro

10,000

------

------

------

30

Tolentino
32. Ceferino de Leon

------

11,378.70

231270

------

33. Alberto
Hernandez

10,000

------

------

------

34. Orlando Florez

10,000

------

------

------

35. Aurelio
Flores

10,000

------

------

------

6.
That on July 24, 1996, the plaintiff wrote the defendants TIAMSON, et al.,
inviting them for a meeting regarding the negotiations/implementations of the
terms of their Deeds of Assignment;
7.
That on August 8, 1996, the defendants TIAMSON, et al., through Joven
Mariano, replied that they are no longer willing to pursue with the negotiations,
and instead they gave notice to the plaintiff that they will sell all their rights and
interests to the registered owners (defendants LACSONS).
A copy of the letter is hereto attached as Annex A etc.;
8.
That the defendants TIAMSON, et. al., have no right to deal with the
defendants LACSON or with any third persons while their contracts with the
plaintiff are subsisting; defendants LACSONS are inducing or have induced the
defendants TIAMSON, et. al., to violate their contracts with the plaintiff;
9.
That by reason of the malicious acts of all the defendants, plaintiff suffered
moral damages in the forms of mental anguish, mental torture and serious anxiety
which in the sum of P500,000.00 for which defendants should be held liable jointly
and severally.[11]
In support of his plea for injunctive relief, the petitioner, as plaintiff, also
alleged the following in his complaint:
11. That to maintain the status quo, the defendants TIAMSON, et al., should be
restrained from rescinding their contracts with the plaintiff, and the defendants

31

LACSONS should also be restrained from accepting any offer of sale or alienation
with the defendants TIAMSON, et al., in whatever form, the latters rights and
interests in the properties mentioned in paragraph 4 hereof; further, the LACSONS
should be restrained from encumbering/alienating the subject properties covered
by TCT No. 35922-R, 35923-R and TCT No. 35925-R, Registry of Deeds of San
Fernando, Pampanga;
12. That the defendants TIAMSON, et al., threaten to rescind their contracts
with the plaintiff and are also bent on selling/alienating their rights and interests
over the subject properties to their co-defendants (LACSONS) or any other persons
to the damage and prejudice of the plaintiff who already invested much money,
efforts and time in the said transactions;
13.

That the plaintiff is entitled to the reliefs being demanded in the complaint;

14. That to prevent irreparable damages and prejudice to the plaintiff, as the
latter has no speedy and adequate remedy under the ordinary course of law, it is
essential that a Writ of Preliminary Injunction be issued enjoining and restraining
the defendants TIAMSON, et al., from rescinding their contracts with the plaintiff
and from selling/alienating their properties to the LACSONS or other persons;
15. That the plaintiff is willing and able to put up a reasonable bond to answer
for the damages which the defendants would suffer should the injunction prayed
for and granted be found without basis.[12]
The petitioner prayed, that after the proceedings, judgment be rendered as
follows:
1.
Pending the hearing, a Writ of Preliminary Injunction be issued prohibiting,
enjoining and restraining defendants Julio Tiamson, Renato Gozun, Rosita
Hernandez, Bienvenido Tongol, Alfonso Flores, Norma Quiambao, Rosita
Tolentino, Jose Sosa, Francisco Tolentino Sr., Emiliano Laxamana, Ruben Torres,
Meliton Allanigue, Dominga Laxamana, Felicencia de Leon, Emiliano Ramos, Felino
G. Tolentino, Rica Gozun, Perla Gozun, Benigno Tolentino, Rodolfo Quiambao,
Roman Laxamana, Eddie San Luis, Ricardo Hernandez, Nicenciana Miranda, Jose
Gozun, Alfredo Sosa, Jose Tiamson, Augusto Tolentino, Ceferino de Leon, Alberto
Hernandez, Orlando Flores, and Aurelio Flores from rescinding their contracts with

32

the plaintiff and from alienating their rights and interest over the aforementioned
properties in favor of defendants LACSONS or any other third persons; and
prohibiting the defendants LACSONS from encumbering/alienating TCT Nos.
35922-R, 35923-R and 35925-R of the Registry of Deeds of San Fernando,
Pampanga.
2.
And pending the hearing of the Prayer for a Writ of Preliminary Injunction, it
is prayed that a restraining order be issued restraining the aforementioned
defendants (TIAMSON, et al.) from rescinding their contracts with the plaintiff and
from alienating the subject properties to the defendants LACSONS or any third
persons; further, restraining and enjoining the defendants LACSONS from
encumbering/selling the properties covered by TCT Nos. 35922-R, 35923-R, and
35925-R of the Registry of Deeds of San Fernando, Pampanga.
3.
Fixing the period within which plaintiff shall pay the balance of the purchase
price to the defendants TIAMSON, et al., after the lapse of legal impediment, if
any.
4.

Making the Writ of Preliminary Injunction permanent;

5.
Ordering the defendants to pay the plaintiff the sum of P500,000.00 as
moral damages;
6.
Ordering the defendants to pay the plaintiff attorneys fees in the sum
of P100,000.00 plus litigation expenses of P50,000.00;
Plaintiff prays for such other relief as may be just and equitable under the
premises.[13]
In their answer to the complaint, the respondents as defendants asserted that
(a) the defendant Angelica Vda. de Lacson had died on April 24, 1993; (b) twelve of
the defendants were tenants/lessees of respondents, but the tenancy status of the
rest of the defendants was uncertain; (c) they never induced the defendants
Tiamson to violate their contracts with the petitioner; and, (d) being merely
tenants-tillers, the defendants-tenants had no right to enter into any transactions
involving their properties without their knowledge and consent. They also averred
that the transfers or assignments of leasehold rights made by the defendants-

33

tenants to the petitioner is contrary to Presidential Decree (P.D.) No. 27 and

Republic Act No. 6657, the Comprehensive Agrarian Reform Program
(CARP).[14] The respondents interposed counterclaims for damages against the
petitioner as plaintiff.
The defendants-tenants Tiamson, et al., alleged in their answer with
counterclaim for damages, that the money each of them received from the
petitioner were in the form of loans, and that they were deceived into signing the
deeds of assignment:
a) That all the foregoing allegations in the Answer are hereby repleaded
and incorporated in so far as they are material and relevant herein;
b) That the defendants Tiamson, et al., in so far as the Deeds of Assignment
are concern[ed] never knew that what they did sign is a Deed of
Assignment. What they knew was that they were made to sign a
document that will serve as a receipt for the loan granted [to] them by
the plaintiff;
c) That the Deeds of Assignment were signed through the employment of
fraud, deceit and false pretenses of plaintiff and made the defendants
believe that what they sign[ed] was a mere receipt for amounts received
by way of loans;
d) That the documents signed in blank were filled up and completed after
the defendants Tiamson, et al., signed the documents and their
completion and accomplishment was done in the absence of said
defendants and, worst of all, defendants were not provided a copy
thereof;
e) That as completed, the Deeds of Assignment reflected that the
defendants Tiamson, et al., did assign all their rights and interests in the
properties or landholdings they were tilling in favor of the plaintiff. That
if this is so, assuming arguendo that the documents were voluntarily
executed, the defendants Tiamson, et al., do not have any right to
transfer their interest in the landholdings they are tilling as they have no
right whatsoever in the landholdings, the landholdings belong to their codefendants, Lacson, et al., and therefore, the contract is null and void;

34

f) That while it is admitted that the defendants Tiamson, et al., received

sums of money from plaintiffs, the same were received as approved loans
granted by plaintiff to the defendants Tiamson, et al., and not as part
consideration of the alleged Deeds of Assignment; and by way of:[15]
At the hearing of the petitioners plea for a writ of preliminary injunction, the
respondents counsel failed to appear. In support of his plea for a writ of
preliminary injunction, the petitioner adduced in evidence the Deeds of
Assignment,[16] the receipts[17] issued by the defendants-tenants for the amounts
they received from him; and the letter[18] the petitioner received from the
defendants-tenants. The petitioner then rested his case.
The respondents, thereafter, filed a Comment/Motion to dismiss/deny the
petitioners plea for injunctive relief on the following grounds: (a) the Deeds of
Assignment executed by the defendants-tenants were contrary to public policy
and P.D. No. 27 and Rep. Act No. 6657; (b) the petitioner failed to prove that the
respondents induced the defendants-tenants to renege on their obligations under
the Deeds of Assignment; (c) not being privy to the said deeds, the respondents
are not bound by the said deeds; and, (d) the respondents had the absolute right
to sell and dispose of their property and to encumber the same and cannot be
enjoined from doing so by the trial court.
The petitioner opposed the motion, contending that it was premature for the
trial court to resolve his plea for injunctive relief, before the respondents and the
defendants-tenants adduced evidence in opposition thereto, to afford the
petitioner a chance to adduce rebuttal evidence and prove his entitlement to a
writ of preliminary injunction. The respondents replied that it was the burden of
the petitioner to establish the requisites of a writ of preliminary injunction without
any evidence on their part, and that they were not bound to adduce any evidence
in opposition to the petitioners plea for a writ of preliminary injunction.
On February 13, 1997, the court issued an Order[19] denying the motion of the
respondents for being premature. It directed the hearing to proceed for the
respondents to adduce their evidence. The court ruled that the petitioner, on the
basis of the material allegations of the complaint, was entitled to injunctive
relief. It also held that before the court could resolve the petitioners plea for
injunctive relief, there was need for a hearing to enable the respondents and the
defendants-tenants to adduce evidence to controvert that of the petitioner. The

35

respondents filed a motion for reconsideration, which the court denied in its Order
dated April 16, 1997. The trial court ruled that on the face of the averments of the
complaint, the pleadings of the parties and the evidence adduced by the
petitioner, the latter was entitled to injunctive relief unless the respondents and
the defendants-tenants adduced controverting evidence.
The respondents, the petitioners therein, filed a petition for certiorari in the
Court of Appeals for the nullification of the February 13, 1997 and April 16, 1997
Orders of the trial court. The case was docketed as CA-G.R. SP No. 44883. The
petitioners therein prayed in their petition that:
1. An order be issued declaring the orders of respondent court dated
February 13, 1997 and April 16, 1997 as null and void;
2. An order be issued directing the respondent court to issue an order
denying the application of respondent Herminio Tayag for the issuance of
a Writ of Preliminary Injunction and/or restraining order.
3. In the meantime, a Writ of Preliminary Injunction be issued against the
respondent court, prohibiting it from issuing its own writ of injunction
against Petitioners, and thereafter making said injunction to be issued by
this Court permanent.
Such other orders as may be deemed just & equitable under the premises also
prayed for.[20]
The respondents asserted that the Deeds of Assignment executed by the
assignees in favor of the petitioner were contrary to paragraph 13 of P.D. No. 27
and the second paragraph of Section 70 of Rep. Act No. 6657, and, as such, could
not be enforced by the petitioner for being null and void. The respondents also
claimed that the enforcement of the deeds of assignment was subject to a
supervening condition:
3. That this exclusive and absolute right given to the assignee shall be exercised
only when no legal impediments exist to the lot to effect the smooth transfer of
lawful ownership of the lot/property in the name of the ASSIGNEE.[21]
The respondents argued that until such condition took place, the petitioner
would not acquire any right to enforce the deeds by injunctive

36

relief. Furthermore, the petitioners plea in his complaint before the trial court, to
fix a period within which to pay the balance of the amounts due to the tenants
under said deeds after the lapse of any legal impediment, assumed that the
deeds were valid, when, in fact and in law, they were not. According to the
respondents, they were not parties to the deeds of assignment; hence, they were
not bound by the said deeds. The issuance of a writ of preliminary injunction
would restrict and impede the exercise of their right to dispose of their property,
as provided for in Article 428 of the New Civil Code. They asserted that the
petitioner had no cause of action against them and the defendants-tenants.
On April 17, 1998, the Court of Appeals rendered its decision against the
petitioner, annulling and setting aside the assailed orders of the trial court; and
permanently enjoining the said trial court from proceeding with Civil Case No.
10901. The decretal portion of the decision reads as follows:
However, even if private respondent is denied of the injunctive relief he demands
in the lower court still he could avail of other course of action in order to protect
his interest such as the institution of a simple civil case of collection of money
against TIAMSON, et al.
For all the foregoing considerations, the orders dated 13 February 1997 and 16
April 1997 are hereby NULLIFIED and ordered SET ASIDE for having been issued
with grave abuse of discretion amounting to lack or excess of
jurisdiction. Accordingly, public respondent is permanently enjoined from
proceeding with the case designated as Civil Case No. 10901.[22]
The CA ruled that the respondents could not be enjoined from alienating or
even encumbering their property, especially so since they were not privies to the
deeds of assignment executed by the defendants-tenants. The defendantstenants were not yet owners of the portions of the landholdings respectively tilled
by them; as such, they had nothing to assign to the petitioner. Finally, the CA
ruled that the deeds of assignment executed by the defendants-tenants were
contrary to P.D. No. 27 and Rep. Act No. 6657.
On August 4, 1998, the CA issued a Resolution denying the petitioners motion
for reconsideration.[23]

37

Hence, the petitioner filed his petition for review on certiorari before this
Court, contending as follows:
I
A MERE ALLEGATION IN THE ANSWER OF THE TENANTS COULD NOT
BE USED AS EVIDENCE OR BASIS FOR ANY CONCLUSION, AS THIS
ALLEGATION, IS STILL THE SUBJECT OF TRIAL IN THE LOWER COURT
(RTC).[24]
II
THE COURT OF APPEALS CANNOT ENJOIN THE HEARING OF A
PETITION FOR PRELIMINARY INJUNCTION AT A TIME WHEN THE LOWER
COURT (RTC) IS STILL RECEIVING EVIDENCE PRECISELY TO DETERMINE
WHETHER OR NOT THE WRIT OF PRELIMINARY INJUNCTION BEING
PRAYED FOR BY TAYAG SHOULD BE GRANTED OR NOT.[25]
III
THE COURT OF APPEALS CANNOT USE FACTS NOT IN EVIDENCE,
TO SUPPORT ITS CONCLUSION THAT THE TENANTS ARE NOT YET
AWARDEES OF THE LAND REFORM.[26]
IV
THE COURT OF APPEALS CANNOT CAUSE THE PERMANENT
STOPPAGE OF THE ENTIRE PROCEEDINGS BELOW INCLUDING THE TRIAL
ON THE MERITS OF THE CASE CONSIDERING THAT THE ISSUE INVOLVED
ONLY THE PROPRIETY OF MAINTAINING THE STATUS QUO.[27]
V
THE COURT OF APPEALS CANNOT INCLUDE IN ITS DECISION THE
CASE OF THE OTHER 35 TENANTS WHO DO NOT QUESTION THE
JURISDICTION OF THE LOWER COURT (RTC) OVER THE CASE AND WHO
ARE IN FACT STILL PRESENTING THEIR EVIDENCE TO OPPOSE THE
INJUNCTION PRAYED FOR, AND TO PROVE AT THE SAME TIME THE
COUNTER-CLAIMS THEY FILED AGAINST THE PETITIONER.[28]
VI

38

THE LOWER COURT (RTC) HAS JURISDICTION OVER THE CASE FILED
BY TAYAG FOR FIXING OF PERIOD UNDER ART. 1197 OF THE NEW CIVIL
CODE AND FOR DAMAGES AGAINST THE LACSONS UNDER ART. 1314 OF
THE SAME CODE. THIS CASE CANNOT BE SUPPRESSED OR RENDERED
NUGATORY UNCEREMONIOUSLY.[29]
The petitioner faults the Court of Appeals for permanently enjoining the trial
court from proceeding with Civil Case No. 10910. He opines that the same was too
drastic, tantamount to a dismissal of the case. He argues that at that stage, it was
premature for the appellate court to determine the merits of the case since no
evidentiary hearing thereon was conducted by the trial court. This, the Court of
Appeals cannot do, since neither party moved for the dismissal of Civil Case No.
10910. The petitioner points out that the Court of Appeals, in making its findings,
went beyond the issue raised by the private respondents, namely, whether or not
the trial court committed a grave abuse of discretion amounting to excess or lack
of jurisdiction when it denied the respondents motion for the denial/dismissal of
the petitioners plea for a writ of preliminary injunction. He, likewise, points out
that the appellate court erroneously presumed that the leaseholders were not
DAR awardees and that the deeds of assignment were contrary to law. He
contends that leasehold tenants are not prohibited from conveying or waiving
their leasehold rights in his favor. He insists that there is nothing illegal with his
contracts with the leaseholders, since the same shall be effected only when there
are no more legal impediments.
At bottom, the petitioner contends that, at that stage, it was premature for the
appellate court to determine the merits of his case since no evidentiary hearing on
the merits of his complaint had yet been conducted by the trial court.
The Comment/Motion of the
Respondents to Dismiss/Deny
Petitioners Plea for a Writ
of Preliminary Injunction
Was Not Premature.
Contrary to the ruling of the trial court, the motion of the respondents to
dismiss/deny the petitioners plea for a writ of preliminary injunction after the
petitioner had adduced his evidence, testimonial and documentary, and had
rested his case on the incident, was proper and timely. It bears stressing that the

39

petitioner had the burden to prove his right to a writ of preliminary injunction. He
may rely solely on the material allegations of his complaint or adduce evidence in
support thereof. The petitioner adduced his evidence to support his plea for a writ
of preliminary injunction against the respondents and the defendants-tenants and
rested his case on the said incident. The respondents then had three options: (a)
file a motion to deny/dismiss the motion on the ground that the petitioner failed
to discharge his burden to prove the factual and legal basis for his plea for a writ of
preliminary injunction and, if the trial court denies his motion, for them to adduce
evidence in opposition to the petitioners plea; (b) forgo their motion and adduce
testimonial and/or documentary evidence in opposition to the petitioners plea for
a writ of preliminary injunction; or, (c) waive their right to adduce evidence and
submit the incident for consideration on the basis of the pleadings of the parties
and the evidence of the petitioner. The respondents opted not to adduce any
evidence, and instead filed a motion to deny or dismiss the petitioners plea for a
writ of preliminary injunction against them, on their claim that the petitioner failed
to prove his entitlement thereto. The trial court cannot compel the respondents
to adduce evidence in opposition to the petitioners plea if the respondents opt to
waive their right to adduce such evidence. Thus, the trial court should have
resolved the respondents motion even without the latters opposition and the
presentation of evidence thereon.
The RTC Committed a Grave
Abuse of Discretion Amounting
to Excess or Lack of Jurisdiction
in Issuing its February 13, 1997
and April 16, 1997 Orders
In its February 13, 1997 Order, the trial court ruled that the petitioner was
entitled to a writ of preliminary injunction against the respondents on the basis of
the material averments of the complaint. In its April 16, 1997 Order, the trial court
denied the respondents motion for reconsideration of the previous order, on its
finding that the petitioner was entitled to a writ of preliminary injunction based on
the material allegations of his complaint, the evidence on record, the pleadings of
the parties, as well as the applicable laws:
For the record, the Court denied the LACSONS COMMENT/MOTION on the
basis of the facts culled from the evidence presented, the pleadings and the law

40

applicable unswayed by the partisan or personal interests, public opinion or fear of

criticism (Canon 3, Rule 3.02, Code of Judicial Ethics).[30]
Section 3, Rule 58 of the Rules of Court, as amended, enumerates the grounds
for the issuance of a writ of preliminary injunction, thus:
(a)
That the applicant is entitled to the relief demanded, and the
whole or part of such relief consists in restraining the commission or
continuance of the act or acts complained of, or in requiring the
performance of an act or acts, either for a limited period or perpetually;
(b)
That the commission, continuance or non-performance of the act
or acts complained of during the litigation would probably work injustice
to the applicant; or
(c)
That a party, court, agency or a person is doing, threatening, or is
attempting to do, or is procuring or suffering to be done, some act or acts
probably in violation of the rights of the applicant respecting the subject
of the action or proceeding, and tending to render the judgment
ineffectual.
A preliminary injunction is an extraordinary event calculated to preserve or
maintain the status quo of things ante litem and is generally availed of to prevent
actual or threatened acts, until the merits of the case can be heard. Injunction is
accepted as the strong arm of equity or a transcendent remedy. [31] While
generally the grant of a writ of preliminary injunction rests on the sound discretion
of the trial court taking cognizance of the case, extreme caution must be observed
in the exercise of such discretion.[32] Indeed, in Olalia v. Hizon,[33] we held:
It has been consistently held that there is no power the exercise of which is more
delicate, which requires greater caution, deliberation and sound discretion, or
more dangerous in a doubtful case, than the issuance of an injunction. It is the
strong arm of equity that should never be extended unless to cases of great injury,
where courts of law cannot afford an adequate or commensurate remedy in
damages.
Every court should remember that an injunction is a limitation upon the freedom
of action of the defendant and should not be granted lightly or precipitately. It

41

should be granted only when the court is fully satisfied that the law permits it and
the emergency demands it.[34]
The very foundation of the jurisdiction to issue writ of injunction rests in the
existence of a cause of action and in the probability of irreparable injury,
inadequacy of pecuniary compensation and the prevention of the multiplicity of
suits. Where facts are not shown to bring the case within these conditions, the
relief of injunction should be refused.[35]
For the court to issue a writ of preliminary injunction, the petitioner was
burdened to establish the following: (1) a right in esse or a clear and unmistakable
right to be protected; (2) a violation of that right; (3) that there is an urgent and
permanent act and urgent necessity for the writ to prevent serious
damage.[36] Thus, in the absence of a clear legal right, the issuance of the
injunctive writ constitutes a grave abuse of discretion. Where the complainants
right is doubtful or disputed, injunction is not proper. Injunction is a preservative
remedy aimed at protecting substantial rights and interests. It is not designed to
protect contingent or future rights. The possibility of irreparable damage without
proof of adequate existing rights is not a ground for injunction.[37]
We have reviewed the pleadings of the parties and found that, as contended by
the respondents, the petitioner failed to establish the essential requisites for the
issuance of a writ of preliminary injunction. Hence, the trial court committed a
grave abuse of its discretion amounting to excess or lack of jurisdiction in denying
the respondents comment/motion as well as their motion for reconsideration.
First. The trial court cannot enjoin the respondents, at the instance of the
petitioner, from selling, disposing of and encumbering their property. As the
registered owners of the property, the respondents have the right to enjoy and
dispose of their property without any other limitations than those established by
law, in accordance with Article 428 of the Civil Code. The right to dispose of the
property is the power of the owner to sell, encumber, transfer, and even destroy
the property. Ownership also includes the right to recover the possession of the
property from any other person to whom the owner has not transmitted such
property, by the appropriate action for restitution, with the fruits, and for
indemnification for damages.[38] The right of ownership of the respondents is not,
of course, absolute. It is limited by those set forth by law, such as the agrarian

42

reform laws. Under Article 1306 of the New Civil Code, the respondents may enter
into contracts covering their property with another under such terms and
conditions as they may deem beneficial provided they are not contrary to law,
morals, good conduct, public order or public policy.
The respondents cannot be enjoined from selling or encumbering their
property simply and merely because they had executed Deeds of Assignment in
favor of the petitioner, obliging themselves to assign and transfer their rights or
interests as agricultural farmers/laborers/sub-tenants over the landholding, and
granting the petitioner the exclusive right to buy the property subject to the
occurrence of certain conditions. The respondents were not parties to the said
deeds. There is no evidence that the respondents agreed, expressly or impliedly,
to the said deeds or to the terms and conditions set forth therein. Indeed, they
assailed the validity of the said deeds on their claim that the same were contrary
to the letter and spirit of P.D. No. 27 and Rep. Act No. 6657. The petitioner even
admitted when he testified that he did not know any of the respondents, and that
he had not met any of them before he filed his complaint in the RTC. He did not
even know that one of those whom he had impleaded as defendant, Angelica Vda.
de Lacson, was already dead.
Q: But you have not met any of these Lacsons?
A: Not yet, sir.
Q: Do you know that two (2) of the defendants are residents of the United
States?
A: I do not know, sir.
Q: You do not know also that Angela Tiotuvie (sic) Vda. de Lacson had
already been dead?
A: I am aware of that, sir.[39]
We are one with the Court of Appeals in its ruling that:
We cannot see our way clear on how or why injunction should lie against
petitioners. As owners of the lands being tilled by TIAMSON, et al., petitioners,
under the law, have the right to enjoy and dispose of the same. Thus, they have
the right to possess the lands, as well as the right to encumber or alienate

43

them. This principle of law notwithstanding, private respondent in the lower court
sought to restrain the petitioners from encumbering and/or alienating the
properties covered by TCT No. 35922-R, 35923-R and TCT No. 35925-R of the
Registry of Deeds of San Fernando, Pampanga. This cannot be allowed to prosper
since it would constitute a limitation or restriction, not otherwise established by
law on their right of ownership, more so considering that petitioners were not
even privy to the alleged transaction between private respondent and
TIAMSON, et al.[40]
Second. A reading the averments of the complaint will show that the petitioner
clearly has no cause of action against the respondents for the principal relief
prayed for therein, for the trial court to fix a period within which to pay to each of
the defendants-tenants the balance of the P50.00 per square meter, the
consideration under the Deeds of Assignment executed by the defendantstenants. The respondents are not parties or privies to the deeds of
assignment. The matter of the period for the petitioner to pay the balance of the
said amount to each of the defendants-tenants is an issue between them, the
parties to the deed.
Third. On the face of the complaint, the action of the petitioner against the
respondents and the defendants-tenants has no legal basis. Under the Deeds of
Assignment, the obligation of the petitioner to pay to each of the defendantstenants the balance of the purchase price was conditioned on the occurrence of
the following events: (a) the respondents agree to sell their property to the
petitioner; (b) the legal impediments to the sale of the landholding to the
petitioner no longer exist; and, (c) the petitioner decides to buy the
property. When he testified, the petitioner admitted that the legal impediments
referred to in the deeds were (a) the respondents refusal to sell their property;
and, (b) the lack of approval of the Department of Agrarian Reform:
Q : There is no specific agreement prior to the execution of those
documents as when they will pay?
A : We agreed to that, that I will pay them when there are no legal
impediment, sir.
Q : Many of the documents are unlattered (sic) and you want to convey to
this Honorable Court that prior to the execution of these documents you

44

have those tentative agreement for instance that the amount or the cost
of the price is to be paid when there are no legal impediment, you are
using the word legal impediment, do you know the meaning of that?
A : When there are (sic) no more legal impediment exist, sir.
Q : Did you make how (sic) to the effect that the meaning of that phrase
that you used the unlettered defendants?
A : We have agreed to that, sir.
ATTY. OCAMPO:
May I ask, Your Honor, that the witness please answer my question not to
answer in the way he wanted it.
COURT:
Just answer the question, Mr. Tayag.
WITNESS:
Yes, Your Honor.
ATTY. OCAMPO:
Q : Did you explain to them?
A : Yes, sir.
Q : What did you tell them?
A : I explain[ed] to them, sir, that the legal impediment then especially if
the Lacsons will not agree to sell their shares to me or to us it would be
hard to (sic) me to pay them in full. And those covered by DAR. I
explain[ed] to them and it was clearly stated in the title that there is [a]
prohibited period of time before you can sell the property. I explained
every detail to them.[41]
It is only upon the occurrence of the foregoing conditions that the petitioner
would be obliged to pay to the defendants-tenants the balance of the P50.00 per
square meter under the deeds of assignment. Thus:
2. That in case the ASSIGNOR and LANDOWNER will mutually agree to sell the said
lot to the ASSIGNEE, who is given an exclusive and absolute right to buy the lot,

45

the ASSIGNOR shall receive the sum of FIFTY PESOS (P50.00) per square meter as
consideration of the total area actually tilled and possessed by the ASSIGNOR, less
whatever amount received by the ASSIGNOR including commissions, taxes and all
allowable deductions relative to the sale of the subject properties.
3. That this exclusive and absolute right given to the ASSIGNEE shall be exercised
only when no legal impediments exist to the lot to effect the smooth transfer of
lawful ownership of the lot/property in the name of the ASSIGNEE;
4. That the ASSIGNOR will remain in peaceful possession over the said property
and shall enjoy the fruits/earnings and/or harvest of the said lot until such time
that full payment of the agreed purchase price had been made by the
ASSIGNEE.[42]
There is no showing in the petitioners complaint that the respondents had
agreed to sell their property, and that the legal impediments to the agreement no
longer existed. The petitioner and the defendants-tenants had yet to submit the
Deeds of Assignment to the Department of Agrarian Reform which, in turn, had to
act on and approve or disapprove the same. In fact, as alleged by the petitioner in
his complaint, he was yet to meet with the defendants-tenants to discuss the
implementation of the deeds of assignment. Unless and until the Department of
Agrarian Reform approved the said deeds, if at all, the petitioner had no right to
enforce the same in a court of law by asking the trial court to fix a period within
which to pay the balance of the purchase price and praying for injunctive relief.
We do not agree with the contention of the petitioner that the deeds of
assignment executed by the defendants-tenants are perfected option
contracts.[43] An option is a contract by which the owner of the property agrees
with another person that he shall have the right to buy his property at a fixed price
within a certain time. It is a condition offered or contract by which the owner
stipulates with another that the latter shall have the right to buy the property at a
fixed price within a certain time, or under, or in compliance with certain terms and
conditions, or which gives to the owner of the property the right to sell or demand
a sale. It imposes no binding obligation on the person holding the option, aside
from the consideration for the offer. Until accepted, it is not, properly speaking,
treated as a contract.[44] The second party gets in praesenti, not lands, not an

46

agreement that he shall have the lands, but the right to call for and receive lands if
he elects.[45] An option contract is a separate and distinct contract from which the
parties may enter into upon the conjunction of the option.[46]
In this case, the defendants-tenants-subtenants, under the deeds of
assignment, granted to the petitioner not only an option but the exclusive right to
buy the landholding. But the grantors were merely the defendants-tenants, and
not the respondents, the registered owners of the property. Not being the
registered owners of the property, the defendants-tenants could not legally grant
to the petitioner the option, much less the exclusive right to buy the
property. As the Latin saying goes, NEMO DAT QUOD NON HABET.
Fourth. The petitioner impleaded the respondents as parties-defendants solely
on his allegation that the latter induced or are inducing the defendants-tenants to
violate the deeds of assignment, contrary to the provisions of Article 1314 of the
New Civil Code which reads:
Art. 1314. Any third person who induces another to violate his contract shall be
liable for damages to the other contracting party.
In So Ping Bun v. Court of Appeals,[47] we held that for the said law to apply, the
pleader is burdened to prove the following: (1) the existence of a valid contract;
(2) knowledge by the third person of the existence of the contract; and (3)
interference by the third person in the contractual relation without legal
justification.
Where there was no malice in the interference of a contract, and the impulse
behind ones conduct lies in a proper business interest rather than in wrongful
motives, a party cannot be a malicious interferer. Where the alleged interferer is
financially interested, and such interest motivates his conduct, it cannot be said
that he is an officious or malicious intermeddler.[48]
In fine, one who is not a party to a contract and who interferes thereon is not
necessarily an officious or malicious intermeddler. The only evidence adduced by
the petitioner to prove his claim is the letter from the defendants-tenants
informing him that they had decided to sell their rights and interests over the
landholding to the respondents, instead of honoring their obligation under the
deeds of assignment because, according to them, the petitioner harassed those

47

tenants who did not want to execute deeds of assignment in his favor, and
because the said defendants-tenants did not want to have any problem with the
respondents who could cause their eviction for executing with the petitioner the
deeds of assignment as the said deeds are in violation of P.D. No. 27 and Rep. Act
No. 6657.[49] The defendants-tenants did not allege therein that the respondents
induced them to breach their contracts with the petitioner. The petitioner himself
admitted when he testified that his claim that the respondents induced the
defendants-assignees to violate contracts with him was based merely on what he
heard, thus:
Q: Going to your last statement that the Lacsons induces (sic) the
defendants, did you see that the Lacsons were inducing the defendants?
A: I heard and sometime in [the] first week of August, sir, they went in the
barrio (sic). As a matter of fact, that is the reason why they sent me
letter that they will sell it to the Lacsons.
Q: Incidentally, do you knew (sic) these Lacsons individually?
A: No, sir, it was only Mr. Espinosa who I knew (sic) personally, the alleged
negotiator and has the authority to sell the property.[50]
Even if the respondents received an offer from the defendants-tenants to
assign and transfer their rights and interests on the landholding, the respondents
cannot be enjoined from entertaining the said offer, or even negotiating with the
defendants-tenants. The respondents could not even be expected to warn the
defendants-tenants for executing the said deeds in violation of P.D. No. 27 and
Rep. Act No. 6657. Under Section 22 of the latter law, beneficiaries under P.D. No.
27 who have culpably sold, disposed of, or abandoned their land, are disqualified
from becoming beneficiaries.
From the pleadings of the petitioner, it is quite evident that his purpose in
having the defendants-tenants execute the Deeds of Assignment in his favor was
to acquire the landholding without any tenants thereon, in the event that the
respondents agreed to sell the property to him. The petitioner knew that under
Section 11 of Rep. Act No. 3844, if the respondents agreed to sell the property, the
defendants-tenants shall have preferential right to buy the same under reasonable
terms and conditions:

48

SECTION 11. Lessees Right of Pre-emption. In case the agricultural lessor desires
to sell the landholding, the agricultural lessee shall have the preferential right to
buy the same under reasonable terms and conditions:Provided, That the entire
landholding offered for sale must be pre-empted by the Land Authority if the
landowner so desires, unless the majority of the lessees object to such
acquisition: Provided, further, That where there are two or more agricultural
lessees, each shall be entitled to said preferential right only to the extent of the
area actually cultivated by him. [51]
Under Section 12 of the law, if the property was sold to a third person without
the knowledge of the tenants thereon, the latter shall have the right to redeem
the same at a reasonable price and consideration. By assigning their rights and
interests on the landholding under the deeds of assignment in favor of the
petitioner, the defendants-tenants thereby waived, in favor of the petitioner, who
is not a beneficiary under Section 22 of Rep. Act No. 6657, their rights of
preemption or redemption under Rep. Act No. 3844. The defendants-tenants
would then have to vacate the property in favor of the petitioner upon full
payment of the purchase price. Instead of acquiring ownership of the portions of
the landholding respectively tilled by them, the defendants-tenants would again
become landless for a measly sum of P50.00 per square meter. The petitioners
scheme is subversive, not only of public policy, but also of the letter and spirit of
the agrarian laws. That the scheme of the petitioner had yet to take effect in the
future or ten years hence is not a justification. The respondents may well argue
that the agrarian laws had been violated by the defendants-tenants and the
petitioner by the mere execution of the deeds of assignment. In fact, the
petitioner has implemented the deeds by paying the defendants-tenants amounts
of money and even sought their immediate implementation by setting a meeting
with the defendants-tenants. In fine, the petitioner would not wait for ten years
to evict the defendants-tenants. For him, time is of the essence.
The Appellate Court Erred
In Permanently Enjoining
The Regional Trial Court
From Continuing with the
Proceedings in Civil Case
No. 10910.

49

We agree with the petitioners contention that the appellate court erred when
it permanently enjoined the RTC from continuing with the proceedings in Civil Case
No. 10910. The only issue before the appellate court was whether or not the trial
court committed a grave abuse of discretion amounting to excess or lack of
jurisdiction in denying the respondents motion to deny or dismiss the petitioners
plea for a writ of preliminary injunction. Not one of the parties prayed to
permanently enjoin the trial court from further proceeding with Civil Case No.
10910 or to dismiss the complaint. It bears stressing that the petitioner may still
amend his complaint, and the respondents and the defendants-tenants may file
motions to dismiss the complaint. By permanently enjoining the trial court from
proceeding with Civil Case No. 10910, the appellate court acted arbitrarily and
effectively dismissed the complaint motu proprio, including the counterclaims of
the respondents and that of the defendants-tenants. The defendants-tenants
were even deprived of their right to prove their special and affirmative defenses.
IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The
Decision of the Court of Appeals nullifying the February 13, 1996 and April 16,
1997 Orders of the RTC is AFFIRMED. The writ of injunction issued by the Court of
Appeals permanently enjoining the RTC from further proceeding with Civil Case
No. 10910 is hereby LIFTED and SET ASIDE. The Regional Trial Court of Mabalacat,
Pampanga, Branch 44, is ORDERED to continue with the proceedings in Civil Case
No. 10910 as provided for by the Rules of Court, as amended.
SO ORDERED.

50

SECOND DIVISION
ROSS RICA SALES CENTER,
INC. and JUANITO KING &
SONS, INC.,
Petitioners,

- versus -

SPOUSES GERRY ONG and

ELIZABETH ONG,
Respondents.

G.R. No. 132197

Present:
PUNO, J.,
Chairman,
AUSTRIA-MARTINEZ,
CALLEJO, SR.,
TINGA, and
CHICO-NAZARIO, JJ.

Promulgated:
August 16, 2005

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

DECISION
TINGA, J.:
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

51

three (3) parcels of land covered by Transfer Certificates of Title (TCT) Nos. 36466,
36467 and 36468. Petitioners likewise acknowledged respondent Elizabeth Ongs
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
MTCs 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.

52

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.
(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.

53

(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.

54

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 Reconsideration was 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 petitioners 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.

55

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 theMotion 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 appellees 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.

56

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:
....
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;

57

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
. . . .[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.

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

58

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] InRosanna 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 doesid not provide for rigid standards in

59

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 theirComment,[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]

60

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]

61

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.

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

62

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.

63

ARTICLE 429
G.R. No. 76217 September 14, 1989
GERMAN MANAGEMENT & SERVICES, INC., petitioner,
vs.
HON. COURT OF APPEALS and ERNESTO VILLEZA, respondents.
G.R. No. L-76216 September 14, 1989
GERMAN MANAGEMENT & SERVICES, INC., petitioner,
vs.
HON. COURT OF APPEALS and ORLANDO GERNALE, respondents.
Alam, Verano & Associates for petitioner.
Francisco D. Lozano for private respondents.

FERNAN, C.J.:
Spouses Cynthia Cuyegkeng Jose and Manuel Rene Jose, residents of Pennsylvania,
Philadelphia, USA are the owners of a parcel of land situated in Sitio Inarawan, San
Isidro, Antipolo, Rizal, with an area of 232,942 square meters and covered by TCT
No. 50023 of the Register of Deeds of the province of Rizal issued on September
11, 1980 which canceled TCT No. 56762/ T-560. The land was originally registered
on August 5, 1948 in the Office of the Register of Deeds of Rizal as OCT No. 19,
pursuant to a Homestead Patent granted by the President of the Philippines on
July 27, 1948, under Act No. 141.
On February 26, 1982, the spouses Jose executed a special power of attorney
authorizing petitioner German Management Services to develop their property
covered by TCT No. 50023 into a residential subdivision. Consequently, petitioner
on February 9,1983 obtained Development Permit No. 00424 from the Human
Settlements Regulatory Commission for said development. Finding that part of the
property was occupied by private respondents and twenty other persons,

64

petitioner advised the occupants to vacate the premises but the latter refused.
Nevertheless, petitioner proceeded with the development of the subject property
which included the portions occupied and cultivated by private respondents.
Private respondents filed an action for forcible entry against petitioner before the
Municipal Trial Court of Antipolo, Rizal, alleging that they are mountainside
farmers of Sitio Inarawan, San Isidro, Antipolo, Rizal and members of the
Concerned Citizens of Farmer's Association; that they have occupied and tilled
their farmholdings some twelve to fifteen years prior to the promulgation of P.D.
No. 27; that during the first week of August 1983, petitioner, under a permit from
the Office of the Provincial Governor of Rizal, was allowed to improve the
Barangay Road at Sitio Inarawan, San Isidro, Antipolo, Rizal at its expense, subject
to the condition that it shag secure the needed right of way from the owners of
the lot to be affected; that on August 15, 1983 and thereafter, petitioner deprived
private respondents of their property without due process of law by: (1) forcibly
removing and destroying the barbed wire fence enclosing their farmholdings
without notice; (2) bulldozing the rice, corn fruit bearing trees and other crops of
private respondents by means of force, violence and intimidation, in violation of
P.D. 1038 and (3) trespassing, coercing and threatening to harass, remove and
eject private respondents from their respective farmholdings in violation of P.D.
Nos. 316, 583, 815, and 1028. 1
On January 7,1985, the Municipal Trial Court dismissed private respondents'
complaint for forcible entry. 2 On appeal, the Regional Trial Court of Antipolo,
Rizal, Branch LXXI sustained the dismissal by the Municipal Trial Court. 3
Private respondents then filed a petition for review with the Court of Appeals. On
July 24,1986, said court gave due course to their petition and reversed the
decisions of the Municipal Trial Court and the Regional Trial Court. 4
The Appellate Court held that since private respondents were in actual possession
of the property at the time they were forcibly ejected by petitioner, private
respondents have a right to commence an action for forcible entry regardless of
the legality or illegality of possession. 5 Petitioner moved to reconsider but the
same was denied by the Appellate Court in its resolution dated September 26,
1986. 6

65

Hence, this recourse.

The issue in this case is whether or not the Court of Appeals denied due process to
petitioner when it reversed the decision of the court a quo without giving
petitioner the opportunity to file its answer and whether or not private
respondents are entitled to file a forcible entry case against petitioner. 7
We affirm. The Court of Appeals need not require petitioner to file an answer for
due process to exist. The comment filed by petitioner on February 26, 1986 has
sufficiently addressed the issues presented in the petition for review filed by
private respondents before the Court of Appeals. Having heard both parties, the
Appellate Court need not await or require any other additional pleading.
Moreover, the fact that petitioner was heard by the Court of Appeals on its motion
for reconsideration negates any violation of due process.
Notwithstanding petitioner's claim that it was duly authorized by the owners to
develop the subject property, private respondents, as actual possessors, can
commence a forcible entry case against petitioner because ownership is not in
issue. Forcible entry is merely a quieting process and never determines the actual
title to an estate. Title is not involved. 8
In the case at bar, it is undisputed that at the time petitioner entered the property,
private respondents were already in possession thereof . There is no evidence that
the spouses Jose were ever in possession of the subject property. On the contrary,
private respondents' peaceable possession was manifested by the fact that they
even planted rice, corn and fruit bearing trees twelve to fifteen years prior to
petitioner's act of destroying their crops.
Although admittedly petitioner may validly claim ownership based on the
muniments of title it presented, such evidence does not responsively address the
issue of prior actual possession raised in a forcible entry case. It must be stated
that regardless of the actual condition of the title to the property, the party in
peaceable quiet possession shall not be turned out by a strong hand, violence or
terror. 9 Thus, a party who can prove prior possession can recover such possession
even against the owner himself. Whatever may be the character of his prior
possession, if he has in his favor priority in time, he has the security that entitles

66

him to remain on the property until he is lawfully ejected by a person having a

better right by accion publiciana or accion reivindicatoria. 10
Both the Municipal Trial Court and the Regional Trial Court have rationalized
petitioner's drastic action of bulldozing and destroying the crops of private
respondents on the basis of the doctrine of self-help enunciated in Article 429 of
the New Civil Code. 11 Such justification is unavailing because the doctrine of selfhelp can only be exercised at the time of actual or threatened dispossession which
is absent in the case at bar. When possession has already been lost, the owner
must resort to judicial process for the recovery of property. This is clear from
Article 536 of the Civil Code which states, "(I)n no case may possession be acquired
through force or intimidation as long as there is a possessor who objects thereto.
He who believes that he has an action or right to deprive another of the holding of
a thing, must invoke the aid of the competent court, if the holder should refuse to
deliver the thing."
WHEREFORE, the Court resolved to DENY the instant petition. The decision of the
Court of Appeals dated July 24,1986 is hereby AFFIRMED. Costs against petitioner.
SO ORDERED.

67

FIRST DIVISION
G.R. No. L-48250 December 28, 1979
GRAND UNION SUPERMARKET, INC. and NELIA SANTOS FANDINO, petitioners,
vs.
JOSE J. ESPINO JR., and THE HONORABLE COURT OF APPEALS, respondents.

GUERRERO, J.
This is a petition tor certiorari by way of appeal from the decision of the Court of
Appeals 1 dated September 26, 1977 rendered in CA-G.R. No. 55186-R entitled
"Jose J. Espino, Jr., plaintiff-appellant. versus Grand Union Supermarket, Inc. and
Nelia Santos-Fandino, defendants-appellees," the dispositive portion of which
states;
WHEREFORE, the appealed judgment is hereby reversed and set aside.
Defendants are ordered to pay plaintiff-jointly and severally, the sum of
Seventy-Five Thousand Pesos (P75,000.00) by way of moral damages.
Twenty-Five Thousand Pesos (P25,000.00) as exemplary damages, and
Five Thousand Pesos (P5,000.00) as attorney's fee, Costs of both
instances shall be taxed against the defendant defendants.
The facts of the case are as stated in the decision of the respondent court to wit:
"Upon the evidence, and from the findings of the lower court, it appears that in
the morning of August 22, 1970, plaintiff Jose J. Espino. Jr., a civil engineer and an
executive of Procter and Gamble Philippines, Inc., and his wife and their two
daughters went to shop at the defendants' South Supermarket in Makati. While his
wife was shopping at the groceries section, plaintiff browsed around the other
parts of the market. Finding a cylindrical "rat tail" file which he needed in his
hobby and had been wanting to buy, plaintiff picked up that item from one of the
shelves. He held it in his hand thinking that it might be lost, because of its tiny size,
if he put it in his wife's grocery cart. In the course of their shopping, plaintiff and
his wife saw the maid of plaintiff's aunt. While talking to this maid, plaintiff stuck

68

the file into the front breast pocket of his shirt with a good part of the
merchandise exposed.
"At the check-out counter, the plaintiff paid for his wife's purchases which
amounted to P77.00, but he forgot to pay for the file. As he was leaving by the exit
of the supermarket on his way to his car, carrying two bags of groceries and
accompanied by his wife and two daughter, plaintiff was approached by a
uniformed guard of the supermarket who said: "Excuse me, Mr., I think you have
something in your pocket which you have not paid for." (p. 5, tsn, Aug. 13, 1971),
pointing to his left front breast pocket. Suddenly reminded of the file, plaintiff
apologized thus: "I am sorry," and he turned back toward the cashier to pay for the
file. But the guard stopped him and led him instead toward the rear of the
supermarket. The plaintiff protested but the guard was firm saying: "No, Mr.,
please come with me. It is the procedure of the supermarket to bring people that
we apprehend to the back of the supermarket" (p. 8, Ibid). The time was between
9 and 10 o'clock. A crowd of customers on their way into the supermarket saw the
plaintiff being stopped and led by a uniformed guard toward the rear of the
supermarket. Plaintiff acquiesced and signaled to his wife and daughters to wait.
"Into a cubicle which was immediately adjacent to the area where deliveries to the
supermarket were being made, the plaintiff was ushered. The guard directed him
to a table and gave the file to the man seated at the desk. Another man stood
beside the plaintiff. The man at the desk looked at the plaintiff and the latter
immediately explained the circumstances that led to the finding of the file in his
possession. The man at the desk pulled out a sheet of paper and began to ask
plaintiff's name, age, residence and other personal data. Plaintiff was asked to
make a brief statement, and on the sheet of paper or "Incident Report" he wrote
down the following: "While talking to my aunt's maid with my wife, I put this item
in my shirt pocket. I forgot to check it out with my wife's items" (Exhibit A).
Meanwhile, the plaintiff's wife joined him and asked what had taken him so long.
"The guard who had accosted plaintiff took him back inside the supermarket in the
company of his wife. Plaintiff and his wife were directed across the main entrance
to the shopping area, down the line of check-out counters, to a desk beside the
first checkout counter. To the woman seated at the desk, who turned out to be
defendant Nelia Santos-Fandino, the guard presented the incident report and the

69

file, Exhibit B. Defendant Fandino read the report and addressing the guard
remarked: "Ano, nakaw na naman ito" (p. 22, Id.). Plaintiff explained and narrated
the incident that led to the finding of the file in his pocket, telling Fandino that he
was going to pay for the file because he needed it. But this defendant replied:
"That is all they say, the people whom we cause not paying for the goods say...
They all intended to pay for the things that are found to them." (p. 23, Id). Plaintiff
objected and said that he was a regular customer of the supermarket.
"Extracting a P5.00 bill from his pocket, plaintiff told Fandino that he was paying
for the file whose cost was P3.85. Fandino reached over and took the P5.00 bill
from plaintiff with these words: "We are fining you P5.00. That is your the fine."
Plaintiff was shocked. He and his wife objected vigorously that he was not a
common criminal, and they wanted to get back the P5.00. But Fandino told them
that the money would be given as an incentive to the guards who apprehend
pilferers. People were milling around them and staring at the plaintiff. Plaintiff
gave up the discussion. He drew a P50.00 bill and took back the file. Fandino
directed him to the nearest check-out counter where he had to fall in line. The
people who heard the exchange of words between Fandino and plaintiff continued
to stare at him. At the trial, plaintiff expressed his embarrassment and humiliation
thus: " I felt as though I wanted to disappear into a hole on the ground" (p. 34, Id.).
After paying for the file, plaintiff and his wife walked as fast as they could out of
the supermarket. His first impulse was to go back to the supermarket that night to
throw rocks at its glass windows. But reason prevailed over passion and he
thought that justice should take its due course.
"Plaintiff was certain during the trial that when he signed the incident report,
Exhibit A, inside the cubicle at the back of the supermarket only his brief
statement of the facts (Exhibit A-2), aside from his name and personal
circumstances, was written thereon. He swore that the following were not in the
incident report at, the time he signed it:
Exhibit A-I which says opposite the stenciled word SUBJECT
"Shoplifting"
Exhibit A-3 which says opposite the stenciled words Action Taken:
Released by Mrs. Fandino after paying the item.

70

Exhibit A-4 which says opposite the stenciled words Remarks Noted:
"Grd. Ebreo requested Grd. Paunil to apprehend subject shoplifter.
Private respondent's complaint filed on October 8, 1970 is founded on Article 21 in
relation to Article 2219 of the New Civil Code and prays for moral damages,
exemplary damages, attorney s fees and 'expenses of litigation, costs of the suit
and the return of the P5.00 fine. After trial, the Court of First Instance of Pasig,
Rizal, Branch XIX dismissed the complaint, Interposing the appeal to the Court of
Appeals, the latter reversed and set aside the appealed judgment, granting and
damages as earlier stated.
Not satisfied with the decision of the respondent court, petitioners instituted the
present petition and submits the following grounds and/or assignment of errors,
to wit:
I
Respondent Court of Appeals erred in awarding moral and exemplary
damages to the respondent Espino under Articles 19 and 21 in relation
to Article 2219 of the Civil Code, considering that
A. Respondent Espino was guilty of theft;
B. Petitioners legitimately exercised their right of defense of property
within the context of Article 429 of the Civil Code negating the
application of Articles 19 and 21 of the same Code;
C. Petitioners acted upon probable cause in stopping and investigating
respondent Espino for shoplifting and as held in various decisions in the
United States on shoplifting, a merchant who acts upon probable cause
should not be held liable in damages by the suspected shoplifter;
D. Petitioners did not exercise their right maliciously, wilfully or in bad
faith; and/or
E. The proximate cause of respondent Espino's alleged injury or
suffering was his own negligence or forgetfulness; petitioners acted in
good faith.

71

II
Assuming arguendo that petitioners are hable for moral and exemplary
damages, the award of P75,000.00 for moral damages and P25,000.00
for exemplary damages by the respondent Court of Appeals is not
legally justified and/or is grossly excessive in the premises.
III
The award of P5,000.00 for attorney's fees by the respondent Court of
Appeals is unjustified and unwarranted under Article 2199 of the Civil
Code.
We agree with the holding of the respondent appellate court that "the evidence
sustains the court's finding that the plaintiff had absolutely no intention to steal
the file." The totality of the facts and circumstances as found by the Court of
Appeals unerringly points to the conclusion that private respondent did not intend
to steal the file and that is act of picking up the file from the open shelf was not
criminal nor done with malice or criminal intent for on the contrary, he took the
item with the intention of buying and paying for it.
This Court needs only to stress the following undisputed facts which strongly and
convincingly uphold the conclusion that private respondent was not "shoplifting."
Thus, the facts that private respondent after picking the cylindrical "rat-tail" file
costing P3.85 had placed it inside his left front breast pocket with a good portion
of the item exposed to view and that he did not conceal it in his person or hid it
from sight as well as the fact that he paid the purchases of his wife amounting to
P77.00 at the checkout counter of the Supermarket, owed that he was not acting
suspiciously or furtively. And the circumstance that he was with his family
consisting of his wife Mrs. Caridad Jayme Espino, and their two daughters at the
time negated any criminal intent on his part to steal. Moreover, when private
respondent was approached by the guard of the Supermarket as he was leaving by
the exit to his car who told him, "Excuse me, Mr., I think you have something in
your pocket which you have not paid for," Espino, immediately apologized and
answered, "I am sorry," which indicated his sincere apology or regrets. He turned
back towards the cashier to pay for the file which proved his honesty sincerity and

72

good faith in buying the item, and not to shoplift the same. His brief statement on
the sheet of paper called the Incident Report where private respondent wrote the
following: "While talking to my aunt's maid with my wife, I put this item in in my
shirt pocket. I forgot to check it out with my wife's item," was an instant and
contemporaneous explanation of the incident.
Considering further the personal circumstances of the private respondent. his
education, position and character showing that he is a graduate Mechanical
Engineer from U.P. Class 1950, employed as an executive of Proctor & Gamble
Phils., Inc., a corporate manager incharge of motoring and warehousing therein;
honorably discharged from the Philippine Army in 1946; a Philippine government
pensionado of the United States for six months; member of the Philippine veterans
Legion; author of articles published in the Manila Sunday Times and Philippines
Free Press; member of the Knights of Columbus, Council No. 3713; son of the late
Jose Maria Espino, retired Minister, Department of Foreign Affairs at the Philippine
Embassy Washington, We are fully convinced, as the trial and appellate courts
were, that private respondent did not intend to steal the article costing P3.85.
Nothing in the records intimates or hints whatsoever that private respondent has
had any police record of any sort much less suspicion of stealing or shoplifting.
We do not lay down here any hard-and-fast rule as to what act or combination of
acts constitute the crime of shoplifting for it must be stressed that each case must
be considered and adjudged on a case-to-case basis and that in the determination
of whether a person suspected of shoplifting has in truth and in fact committed
the same, all the attendant facts and circumstances should be considered in their
entirety and not from any single fact or circumstance from which to impute the
stigma of shoplifting on any person suspected and apprehended therefor.
We likewise concur with the Court of Appeals that "(u)pon the facts and under the
law, plaintiff has clearly made the cause of action for damages against the
defendants. Defendants wilfully caused loss or injury to plaintiff in a manner that
was contrary to morals, good customs or public policy, making them amenable to
damages under Articles 19 and 21 in relation to Article 2219 of the Civil Code." 2
That private respondent was falsely accused of shoplifting is evident. The Incident
Report (Exhibit A) with the entries thereon under Exhibit A-1 which says opposite

73

the stenciled word SUBJECT: "Shoplifting," Exhibit A-3 which says opposite the
stenciled words Action Taken: Relesed by Mrs. Fandino after paying the item,"
Exhibit A-4 which says opposite the stenciled words Remarks Noted: Grd. Ebreo
requested Grd. Paunil to apprehend subject shoplifter," established the opinion,
judgment or thinking of the management of petitioner's supermarket upon private
respondent's act of picking up the file. ln plain words, private respondent was
regarded and pronounced a shoplifter and had committed "shoplifting."
We also affirm the Court of Appeals' finding that petitioner Nelia Santos Fandino,
after reading the incident report, remarked the following: "Ano, nakaw na naman
ito". Such a remark made in the presence of private respondent and with
reference to the incident report with its entries, was offensive to private
respondent's dignity and defamatory to his character and honesty. When Espino
explained that he was going to pay the file but simply forgot to do so, Fandino
doubted the explanation. saying: "That is all what they say, the people whom we
caught not paying for the goods say... they all intended to pay for the things that
are found to them." Private respondent objected and said that he was a regular
customer of the Supermarket.
The admission of Fandino that she required private respondent to pay a fine of
P5.00 and did in fact take the P5.00 bill of private respondent tendered by the
latter to pay for the file, as a fine which would be given as an incentive to the
guards who apprehend pilferers clearly proved that Fandino branded private
respondent as a thief which was not right nor justified.
The testimony of the guard that management instructed them to bring the
suspected customers to the public area for the people to see those kind of
customers in order that they may be embarassed (p. 26, tsn, Sept. 30, 1971); that
management wanted "the customers to be embarrassed in public so that they will
not repeat the stealing again" (p. 2, tsn, Dec. 10, 1971); that the management
asked the guards "to bring these customers to different cashiers in order that they
will know that they are pilferers" (p. 2, Ibid.) may indicate the manner or pattern
whereby a confirmed or self-confessed shoplifter is treated by the Supermarket
management but in the case at bar, there is no showing that such procedure was
taken in the case of the private respondent who denied strongly and vehemently
the charge of shoplifting.

74

Nonetheless, the false accusation charged against the private respondent after
detaining and interrogating him by the uniformed guards and the mode and
manner in which he was subjected, shouting at him, imposing upon him a fine,
threatening to call the police and in the presence and hearing of many people at
the Supermarket which brought and caused him humiliation and embarrassment,
sufficiently rendered the petitioners liable for damages under Articles 19 and 21 in
relation to Article 2219 of the Civil Code. We rule that under the facts of the case
at bar, petitioners wilfully caused loss or injury to private respondent in a manner
that was contrary to morals, good customs or public policy. It is against morals,
good customs and public policy to humiliate, embarrass and degrade the dignity of
a person. Everyone must respect the dignity, personality, privacy and peace of
mind of his neighbors and other persons (Article 26, Civil Code). And one must act
with justice, give everyone his due and observe honesty and good faith (Article 19,
Civil Code).
Private respondent is entitled to damages but We hold that the award of SeventyFive Thousand Pesos (P75,000.00) for moral damages and Twenty-Five Thousand
Pesos (P25,000.00, for exemplary damages is unconscionable and excessive.
While no proof of pecuniary loss is necessary in order that moral, nominal,
temperate, liquidated or exemplary damages may be adjudicated, the assessment
of such damages, except liquidated ones, is left to the discretion of the court,
according to the circumstances of each case (Art. 2216, New Civil Code). In the
case at bar, there is no question that the whole incident that befell respondent
had arisen in such a manner that was created unwittingly by his own act of
forgetting to pay for the file. It was his forgetfullness in checking out the item and
paying for it that started the chain of events which led to his embarassment and
humiliation thereby causing him mental anguish, wounded feelings and serious
anxiety. Yet, private respondent's act of omission contributed to the occurrence of
his injury or loss and such contributory negligence is a factor which may reduce
the damages that private respondent may recover (Art. 2214, New Civil Code).
Moreover, that many people were present and they saw and heard the ensuing
interrogation and altercation appears to be simply a matter of coincidence in a
supermarket which is a public place and the crowd of onlookers, hearers or
bystanders was not deliberately sought or called by management to witness
private respondent's predicament. We do not believe that private respondent was

75

intentionally paraded in order to humiliate or embarrass him because petitioner's

business depended for its success and patronage the good will of the buying public
which can only be preserved and promoted by good public relations.
As succinctly expressed by Mr. Justice J. B. L. Reyes in his concurring and dissenting
opinion in Pangasinan Transportation Company, Inc, vs. Legaspi, 12 SCRA 598, the
purpose of moral damages is essentially indemnity or reparation, both punishment
or correction. Moral damages are emphatically not intended to enrich a
complainant at the expense of a defendant; they are awarded only to enable the
injured party to obtain means, diversion or amusements that will serve to alleviate
the moral suffering he has undergone, by reason of the defendant's culpable
action. In other words, the award of moral damages is aimed at a restoration,
within the limits of the possible, of the spiritual status quo ante and, it must be
proportionate to the suffering inflicted.
In Our considered estimation and assessment, moral damages in the amount of
Five Thousand Pesos (P5,000.00) is reasonable and just to award to private
respondent.
The grant of Twenty-Five Thousand Pesos (P25,000.00) as exemplary damages is
unjustified. Exemplary or corrective damages are imposed by way of example or
correction for the public good, in addition to the moral, temperate, liquidated or
compensatory damages (Art. 2229, New Civil Code). Exemplary damages cannot be
recovered as a matter of right; the court will decide whether or not they could be
adjudicated (Art. 2223, New Civil Code). Considering that exemplary damages are
awarded for wanton acts, that they are penal in character granted not by way of
compensation but as a punishment to the offender and as a warning to others as a
sort of deterrent, We hold that the facts and circumstances of the case at bar do
not warrant the grant of exemplary damages.
Petitioners acted in good faith in trying to protect and recover their property, a
right which the law accords to them. Under Article 429, New Civil Code, the owner
or lawful possessor of a thing has a right to exclude any person from the
enjoyment and disposal thereof and for this purpose, he may use such force as
may be reasonably necessary to repel or prevent an actual or threatened unlawful
physical invasion or usurpation of his property. And since a person who acts in the

76

fulfillment of a duty or in the lawful exercise of a right or office exempts him from
civil or criminal liability, petitioner may not be punished by imposing exemplary
damages against him. We agree that petitioners acted upon probable cause in
stopping and investigating private respondent for taking the file without paying for
it, hence, the imposition of exemplary damages as a warning to others by way of a
deterrent is without legal basis. We, therefore, eliminate the grant of exemplary
damages to the private respondent.
In the light of the reduction of the damages, We hereby likewise reduce the
original award of Five Thousand Pesos (P5,000.00) as attorney's fees to Two
Thousand Pesos (P2,000.00).
WHEREFORE, IN VIEW OF THE FOREGOING, the judgment of the Court of Appeals
is hereby modified. Petitioners are hereby ordered to pay, jointly and severally, to
private respondent moral damages in the sum of Five Thousand Pesos (P5,000.00)
and the amount of Two Thousand Pesos (P2,000.00) as and for attorney's fees; and
further, to return the P5.00 fine to private respondent. No costs.
SO ORDERED.

77

SECOND DIVISION

[G.R. No. 142668. August 31, 2004]

UNITED
COCONUT
PLANTERS
BANK
and
ONGSIAPCO, petitioners, vs. RUBEN E. BASCO, respondent.

LUIS

MA.

DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari assailing the Decision[1] of the Court of
Appeals dated March 30, 2000, affirming, with modifications, the Decision[2] of the
Regional Trial Court (RTC),Makati City, Branch 146, which found the petitioner
bank liable for payment of damages and attorneys fees.
The Case for the Respondent
Respondent Ruben E. Basco had been employed with the petitioner United
Coconut Planters Bank (UCPB) for seventeen (17) years.[3] He was also a
stockholder thereof and owned 804 common shares of stock at the par value
of P1.00.[4] He likewise maintained a checking account with the bank at its Las
Pias Branch under Account No. 117-001520-6.[5] Aside from his employment with
the bank, the respondent also worked as an underwriter at the United Coconut
Planters Life Association (Coco Life), a subsidiary of UCPB since December,
1992.[6] The respondent also solicited insurance policies from UCPB employees.
On June 19, 1995, the respondent received a letter from the UCPB informing
him of the termination of his employment with the bank for grave abuse of
discretion and authority, and breach of trust in the conduct of his job as Bank
Operations Manager of its Olongapo Branch. The respondent thereafter filed a
complaint for illegal dismissal, non-payment of salaries, and damages against the
bank in the National Labor Relations Commission (NLRC), docketed as NLRC Cases
Nos. 00-09-05354-92 and 00-09-05354-93. However, the respondent still
frequented the UCPB main office in Makati City to solicit insurance policies from
the employees thereat. He also discussed the complaint he filed against the bank
with the said employees.[7]

78

The respondent was also employed by All-Asia Life Insurance Company as an

underwriter. At one time, the lawyers of the UCPB had an informal conference
with him at the head office of the bank, during which the respondent was offered
money so that the case could be amicably settled. The respondent revealed the
incident to some of the bank employees.[8]
On November 15, 1995, Luis Ma. Ongsiapco, UCPB First Vice-President, Human
Resource Division, issued a Memorandum to Jesus Belanio, the Vice-President of
the Security Department, informing him that the respondents employment had
been terminated as of June 19, 1995, that the latter filed charges against the bank
and that the case was still on-going. Ongsiapco instructed Belanio not to allow the
respondent access to all bank premises.[9] Attached to the Memorandum was a
passport-size picture of the respondent. The next day, the security guards on duty
were directed to strictly impose the security procedure in conformity with
Ongsiapcos Memorandum.[10]
On December 7, 1995, the respondent, through counsel, wrote Ongsiapco,
requesting that such Memorandum be reconsidered, and that he be allowed entry
into the bank premises.[11] His counsel emphasized that
In the meantime, we are more concerned with your denying Mr. Basco access to
all bank premises. As you may know, he is currently connected with Cocolife as
insurance agent. Given his 17-year tenure with your bank, he has established good
relationships with many UCPB employees, who comprise the main source of his
solicitations. In the course of his work as insurance agent, he needs free access to
your bank premises, within reason, to add the unnecessary. Your memorandum
has effectively curtailed his livelihood and he is once again becoming a victim of
another illegal termination, so to speak. And Shakespeare said: You take his life
when you do take the means whereby he lives.
Mr. Bascos work as an insurance agent directly benefits UCPB, Cocolifes mother
company. He performs his work in your premises peacefully without causing any
disruption of bank operations. To deny him access to your premises for no reason
except the pendency of the labor case, the outcome of which is still in doubt his
liability, if any, certainly has not been proven is a clear abuse of right in violation
of our clients rights. Denying him access to the bank, which is of a quasi-public
nature, is an undue restriction on his freedom of movement and right to make a

79

livelihood, comprising gross violations of his basic human rights. (This is Human
Rights Week, ironically).
We understand that Mr. Basco has been a stockholder of record of 804 common
shares of the capital stock of UCPB since July 1983. As such, he certainly deserves
better treatment than the one he has been receiving from your office regarding
property he partly owns. He is a particle of corporate sovereignty. We doubt that
you can impose the functional equivalent of the penalty of destierro on our client
who really wishes only to keep his small place in the sun, to survive and
breathe. No activity can be more legitimate than to toil for a living. Let us live and
let live.[12]
In his reply dated December 12, 1995, Ongsiapco informed the respondent that
his request could not be granted:
As you understand, we are a banking institution; and as such, we deal with matters
involving confidences of clients. This is among the many reasons why we, as a
matter of policy, do not allow non-employees to have free access to areas where
our employees work. Of course, there are places where visitors may meet our
officers and employees to discuss business matters; unfortunately, we have
limited areas where our officers and employees can entertain non-official matters.
Furthermore, in keeping with good business practices, the Bank prohibits
solicitation, peddling and selling of goods, service and other commodities within
its premises as it disrupts the efficient performance and function of the
employees.
Please be assured that it is farthest from our intention to discriminate against your
client. In the same vein, it is highly improper for us to carve exceptions to our
policies simply to accommodate your clients business ventures.[13]
The respondent was undaunted. At 5:30 p.m. of December 21, 1995, he went
to the office of Junne Cacay, the Assistant Manager of the Makati Branch. Cacay
was then having a conference with Bong Braganza, an officer of the UCPB Sucat
Branch. Cacay entertained the respondent although the latter did have an
appointment. Cacay even informed him that he had a friend who wanted to
procure an insurance policy.[14] Momentarily, a security guard of the bank

80

approached the respondent and told him that it was already past office hours. He
was also reminded not to stay longer than he should in the bank
premises.[15] Cacay told the guard that the respondent would be leaving
shortly.[16] The respondent was embarrassed and told Cacay that he was already
leaving.[17]
At 1:30 p.m. of January 31, 1996, the respondent went to the UCPB Makati
Branch to receive a check from Rene Jolo, a bank employee, and to deposit money
with the bank for a friend.[18]He seated himself on a sofa fronting the tellers
booth[19] where other people were also seated.[20] Meanwhile, two security guards
approached the respondent. The guards showed him the Ongsiapcos
Memorandum and told him to leave the bank premises. The respondent pleaded
that he be allowed to finish his transaction before leaving. One of the security
guards contacted the management and was told to allow the respondent to finish
his transaction with the bank.
Momentarily, Jose Regino Casil, an employee of the bank who was in the
7 floor of the building, was asked by Rene Jolo to bring a check to the
respondent, who was waiting in the lobby in front of the tellers booth. [21] Casil
agreed and went down to the ground floor of the building, through the
elevator. He was standing in the working area near the Automated Teller Machine
(ATM) Section[22] in the ground floor when he saw the respondent standing near
the sofa[23] near the two security guards.[24] He motioned the respondent to come
and get the check, but the security guard tapped the respondent on the shoulder
and prevented the latter from approaching Casil. The latter then walked towards
the respondent and handed him the check from Jolo.
th

Before leaving, the respondent requested the security guard to log his presence
in the logbook. The guard did as requested and the respondents presence was
recorded in the logbook.[25]
On March 11, 1996, the respondent filed a complaint for damages against the
petitioners UCPB and Ongsiapco in the RTC of Manila, alleging inter alia, that
12. It is readily apparent from this exchange of correspondence that defendant
bank' acknowledged reason for barring plaintiff from its premises - the pending
labor case is a mere pretense for its real vindictive and invidious intent: to
prevent plaintiff, and plaintiff alone, from carrying out his trade as an insurance

81

agent among defendant banks employees, a practice openly and commonly

allowed and tolerated (encouraged even, for some favored proverbial sacred
cows) in the bank premises, now being unjustly denied to plaintiff on spurious
grounds.
13. Defendants, to this day, have refused to act on plaintiffs claim to be allowed
even in only the limited areas where [the banks] officers and employees can
entertain non-official matters and have maintained the policy banning plaintiff
from all bank premises. As he had dared exercised his legal right to question his
dismissal, he is being penalized with a variation of destierro, available in criminal
cases where the standard however, after proper hearing, is much more stringent
and based on more noble grounds than mere pique or vindictiveness.
14. This appallingly discriminatory policy resulted in an incident on January 31,
1996 at 1:30 p.m. at defendant banks branch located at its head office, which
caused plaintiff tremendous undeserved humiliation, embarrassment, and loss of
face.[26]

15. Defendants memorandum and the consequent acts of defendants security

guards, together with defendant Ongsiapcos disingenuous letter of December 12,
1995, are suggestive of malice and bad faith in derogation of plaintiffs right and
dignity as a human being and citizen of this country, which acts have caused him
considerable undeserved embarrassment. Even if defendants, for the sake of
argument, may be acting within their rights, they cannot exercise same abusively,
as they must, always, act with justice and in good faith, and give plaintiff his
due.[27]
The respondent prayed that, after trial, judgment be rendered in his favor, as
follows:
WHEREFORE, it is respectfully prayed that judgment issue ordering defendants:
1. To rescind the directive to its agents barring plaintiff from all bank premises as
embodied in the memorandum of November 15, 1995, and allow plaintiff access
to the premises of defendant bank, including all its branches, which are open to

82

members of the general public, during reasonable hours, to be able to conduct

lawful business without being subject to invidious discrimination; and
2. To pay plaintiff P100,000.00 as moral damages, P100,000.00 as exemplary
damages, and P50,000.00 by way of attorneys fees.
Plaintiff likewise prays for costs, interest, the disbursements of this action, and
such other further relief as may be deemed just and equitable in the premises.[28]
In their Answer to the complaint, the petitioners interposed the following
affirmative defenses:
9. Plaintiff had been employed as Branch Operations Officer, Olongapo Branch, of
defendant United Coconut Planters Bank.
In or about the period May to June 1992, he was, together with other fellow
officers and employees, investigated by the bank in connection with various
anomalies. As a result of the investigation, plaintiff was recommended terminated
on findings of fraud and abuse of discretion in the performance of his work. He
was found by the banks Committee on Employee Discipline to have been guilty of
committing or taking part in the commission of the following:
a. Abuse of discretion in connection with actions taken beyond or
outside the limits of his authority.
b. Borrowing money from a bank client.
c. Gross negligence or dereliction of duty in the implementation of
bank policies or valid orders from management.
d. Direct refusal or willful failure to perform, or delay in performing, an
assigned task.
e. Fraud or willful breach of trust in the conduct of his work.
f. Falsification or forgery of bank records/documents.
10. Plaintiff thereafter decided to contest his termination by filing an action for
illegal dismissal against the bank.
Despite the pendency of this litigation, plaintiff was reported visiting employees of
the bank in their place of work during work hours, and circulating false information

83

concerning the status of his case against the bank, including alleged offers by
management of a monetary settlement for his illegal dismissal.
11. Defendants acted to protect the banks interest by preventing plaintiffs access
to the banks offices, and at the same time informing him of that decision.
Plaintiff purported to insist on seeing and talking to the banks employees despite
this decision, claiming he needed to do this in connection with his insurance
solicitation activities, but the bank has not reconsidered.
12. The complaint states, and plaintiff has, no cause of action against
defendants.[29]
The petitioners likewise interposed compulsory counterclaims for damages.
The Case for the Petitioners
The petitioners adduced evidence that a day or so before November 15, 1995,
petitioner Ongsiapco was at the 10th floor of the main office of the bank where the
training room of the Management Development Training Office was
located. Some of the banks management employees were then undergoing
training. The bank also kept important records in the said floor. When Ongsiapco
passed by, he saw the respondent talking to some of the trainees. Ongsiapco was
surprised because non-participants in the training were not supposed to be in the
premises.[30] Besides, the respondent had been dismissed and had filed complaints
against the bank with the NLRC. Ongsiapco was worried that bank records could
be purloined and employees could be hurt.
The next day, Ongsiapco contacted the training supervisor and inquired why
the respondent was in the training room the day before. The supervisor replied
that he did not know why.[31] Thus, on November 15, 1995, Ongsiapco issued a
Memorandum to Belanio, the Vice-President for Security Services, directing the
latter not to allow the respondent access to the bank premises near the working
area.[32] The said Memorandum was circulated by the Chief of Security to the
security guards and bank employees.

84

At about 12:30 p.m. on January 31, 1996, Security Guard Raul Caspe, a
substitute for the regular guard who was on leave, noticed the respondent seated
on the sofa in front of the tellers booth.[33] Caspe notified his superior of the
respondents presence, and was instructed not to confront the respondent if the
latter was going to make a deposit or withdrawal.[34] Caspe was also instructed not
to allow the respondent to go to the upper floors of the building.[35] The
respondent went to the tellers booth and, after a while, seated himself anew on
the sofa. Momentarily, Caspe noticed Casil, another employee of the bank who
was at the working section of the Deposit Service Department (DSD), motioning to
the respondent to get the check. The latter stood up and proceeded in the
direction of Casils workstation. After the respondent had taken about six to seven
paces from the sofa, Caspe and the company guard approached him. The guards
politely showed Ongsiapcos Memorandum to the respondent and told the latter
that he was not allowed to enter the DSD working area; it was lunch break and no
outsider was allowed in that area.[36]The respondent looked at the Memorandum
and complied.
On May 29, 1998, the trial court rendered judgment in favor of the
respondent. The fallo of the decision reads:
WHEREFORE, premises considered, defendants are hereby adjudged liable to
plaintiff and orders them to rescind and set-aside the Memorandum of November
15, 1995 and orders them to pay plaintiff the following:
1) the amount of P100,000.00 as moral damages;
2) the amount of P50,000.00 as exemplary damages;
3) P50,000.00 for and as attorneys fees;
4) Cost of suit.
Defendants counterclaim is dismissed for lack of merit.
SO ORDERED.[37]
The trial court held that the petitioners abused their right; hence, were liable to
the respondent for damages under Article 19 of the New Civil Code.
The petitioners appealed the decision to the Court of Appeals and raised the
following issues:

85

4.1 Did the appellants abuse their right when they issued the Memorandum?
4.2 Did the appellants abuse their right when Basco was asked to leave the bank
premises, in implementation of the Memorandum, on 21 December 1995?
4.3. Did the appellants abuse their right when Basco was asked to leave the bank
premises, in implementation of the Memorandum, on 31 January 1995?
4.4. Is Basco entitled to moral and exemplary damages and attorneys fees?
4.5. Are the appellants entitled to their counterclaim?[38]
The CA rendered a Decision on March 30, 2000, affirming the decision of the
RTC with modifications. The CA deleted the awards for moral and exemplary
damages, but ordered the petitioner bank to pay nominal damages on its finding
that latter abused its right when its security guards stopped the respondent from
proceeding to the working area near the ATM section to get the check from
Casil. The decretal portion of the decision reads:
WHEREFORE, the Decision of the Regional Trial Court dated May 29, 1998 is
hereby MODIFIED as follows:
1. The awards for moral and exemplary damages are deleted;
2. The award for attorneys fees is deleted;
3. The order rescinding Memorandum dated November 15, 1995 is set aside; and
4. UCPB is ordered to pay nominal damages in the amount of P25,000.00 to
plaintiff-appellee.
Costs de oficio.[39]
The Present Petition
The petitioners now raise the following issues before this Court:

86

I. Whether or not the appellate court erred when it found that UCPB
excessively exercised its right to self-help to the detriment of Basco as a
depositor, when on January 31, 1996, its security personnel stopped
respondent from proceeding to the area restricted to UCPBs employees.
II. Whether or not the appellate court erred when it ruled that respondent
is entitled to nominal damages.
III.

Whether or not the appellate court erred when it did not

award the petitioners valid and lawful counterclaim.[40]

The core issues are the following: (a) whether or not the petitioner bank
abused its right when it issued, through petitioner Ongsiapco, the Memorandum
barring the respondent access to all bank premises; (b) whether or not petitioner
bank is liable for nominal damages in view of the incident involving its security
guard Caspe, who stopped the respondent from proceeding to the working area of
the ATM section to get the check from Casil; and (c) whether or not the petitioner
bank is entitled to damages on its counterclaim.
The Ruling of the Court
On the first issue, the petitioners aver that the petitioner bank has the right to
prohibit the respondent from access to all bank premises under Article 429 of the
New Civil Code, which provides that:
Art. 429. The owner or lawful possessor of a thing has the right to exclude any
person from the enjoyment and disposal thereof. For this purpose, he may use
such force as may be reasonably necessary to repel or prevent an actual or
threatened unlawful physical invasion or usurpation of his property.
The petitioners contend that the provision which enunciates the principle of
self-help applies when there is a legitimate necessity to personally or through
another, prevent not only an unlawful, actual, but also a threatened unlawful
aggression or usurpation of its properties and records, and its personnel and
customers/clients who are in its premises. The petitioners assert that petitioner
Ongsiapco issued his Memorandum dated November 15, 1995 because the
respondent had been dismissed from his employment for varied grave offenses;

87

hence, his presence in the premises of the bank posed a threat to the integrity of
its records and to the persons of its personnel. Besides, the petitioners contend,
the respondent, while in the bank premises, conversed with bank employees
about his complaint for illegal dismissal against the petitioner bank then pending
before the Labor Arbiter, including negotiations with the petitioner banks
counsels for an amicable settlement of the said case.
The respondent, for his part, avers that Article 429 of the New Civil Code does
not give to the petitioner bank the absolute right to exclude him, a stockholder
and a depositor, from having access to the bank premises, absent any clear and
convincing evidence that his presence therein posed an imminent threat or peril to
its property and records, and the persons of its customers/clients.
We agree with the respondent bank that it has the right to exclude certain
individuals from its premises or to limit their access thereto as to time, to protect,
not only its premises and records, but also the persons of its personnel and its
customers/clients while in the premises. After all, by its very nature, the business
of the petitioner bank is so impressed with public trust; banks are mandated to
exercise a higher degree of diligence in the handling of its affairs than that
expected of an ordinary business enterprise.[41] Banks handle transactions
involving millions of pesos and properties worth considerable sums of money. The
banking business will thrive only as long as it maintains the trust and confidence of
its customers/clients. Indeed, the very nature of their work, the degree of
responsibility, care and trustworthiness expected of officials and employees of the
bank is far greater than those of ordinary officers and employees in the other
business firms.[42]Hence, no effort must be spared by banks and their officers and
employees to ensure and preserve the trust and confidence of the general public
and its customers/clients, as well as the integrity of its records and the safety and
well being of its customers/clients while in its premises. For the said purpose,
banks may impose reasonable conditions or limitations to access by nonemployees to its premises and records, such as the exclusion of non-employees
from the working areas for employees, even absent any imminent or actual
unlawful aggression on or an invasion of its properties or usurpation thereof,
provided that such limitations are not contrary to the law.[43]
It bears stressing that property rights must be considered, for many purposes,
not as absolute, unrestricted dominions but as an aggregation of qualified

88

privileges, the limits of which are prescribed by the equality of rights, and the
correlation of rights and obligations necessary for the highest enjoyment of
property by the entire community of proprietors.[44] Indeed, in Rellosa vs.
Pellosis,[45] we held that:
Petitioner might verily be the owner of the land, with the right to enjoy and to
exclude any person from the enjoyment and disposal thereof, but the exercise of
these rights is not without limitations. The abuse of rights rule established in
Article 19 of the Civil Code requires every person to act with justice, to give
everyone his due; and to observe honesty and good faith. When right is exercised
in a manner which discards these norms resulting in damage to another, a legal
wrong is committed for which the actor can be held accountable.
Rights of property, like all other social and conventional rights, are subject to
such reasonable limitations in their enjoyment and to such reasonable restraints
established by law.[46]
In this case, the Memorandum of the petitioner Ongsiapco dated November
15, 1995, reads as follows:
MEMO TO :

MR. JESUS M. BELANIO

Vice President
Security Department

DATE

15 November 1995

RE

MR. RUBEN E. BASCO

Please be advised that Mr. Ruben E. Basco was terminated for a cause by the Bank
on 19 June 1992. He filed charges against the bank and the case is still on-going.
In view of this, he should not be allowed access to all bank premises.
(Sgd.) LUIS MA. ONGSIAPCO
First Vice President
Human Resource Division

89

16 November 1995
TO: ALL GUARDS
ON DUTY
Strictly adhere/impose Security Procedure RE: Admission to Bank premises.
For your compliance.
(Signature) 11/16/95
JOSE G. TORIAGA[47]
On its face, the Memorandum barred the respondent, a stockholder of the
petitioner bank and one of its depositors, from gaining access to all bank premises
under all circumstances. The said Memorandum is all-embracing and admits of no
exceptions whatsoever. Moreover, the security guards were enjoined to strictly
implement the same.
We agree that the petitioner may prohibit non-employees from entering the
working area of the ATM section. However, under the said Memorandum, even if
the respondent wished to go to the bank to encash a check drawn and issued to
him by a depositor of the petitioner bank in payment of an obligation, or to
withdraw from his account therein, or to transact business with the said bank and
exercise his right as a depositor, he could not do so as he was barred from entry
into the bank. Even if the respondent wanted to go to the petitioner bank to
confer with the corporate secretary in connection with his shares of stock therein,
he could not do so, since as stated in the Memorandum of petitioner Ongsiapco,
he would not be allowed access to all the bank premises. The said Memorandum,
as worded, violates the right of the respondent as a stockholder or a depositor of
the petitioner bank, for being capricious and arbitrary.
The Memorandum even contravenes Article XII, paragraph 4 (4.1 and 4.2) of
the Code of Ethics issued by the petitioner bank itself, which provides that one
whose employment had been terminated by the petitioner bank may,
nevertheless, be allowed access to bank premises, thus:
4.1 As a client of the Bank in the transaction of a regular bank-client activity.

90

4.2 When the offending party is on official business concerning his employment
with the Bank with the prior approval and supervision of the Head of HRD or of
the Division Head, or of the Branch Head in case of branches.[48]
For another, the Memorandum, as worded, is contrary to the intention of the
petitioners. Evidently, the petitioners did not intend to bar the respondent from
access to all bank premises under all circumstances. When he testified, petitioner
Ongsiapco admitted that a bank employee whose services had been terminated
may be allowed to see an employee of the bank and may be allowed access to the
bank premises under certain conditions, viz:
ATTY. R. ALIKPALA
Q So the permission you are referring to is merely a permission to be
granted by the security guard?
A

No, sir, not the security guard. The security will call the office where
they are going. Because this is the same procedure they do for
visitors. Anybody who wants to see anybody in the bank before they are
allowed access or entry, they call up the department or the division.

Q So I want to clarify, Mr. Witness. Former bank employees are not

allowed within the bank premises until after the security guard call,
which ever department they are headed for, and that they give the
permission and they tell the security guard to allow the person?
A

Yes, Sir, that is the usual procedure.

Q If an employee resigned from the bank, same treatment?

A

Yes, Sir.

Q If an employee was terminated by the bank for cause, same treatment?

A

Yes, Sir.

Q Outsiders who are not employees or who were never employees of the
bank also must ask permission?
A

Yes, Sir. Because there is a security control at the lobby.

Q You mentioned that this is a general rule?

91

Yes, Sir.

Q Is this rule written down in black and white anywhere?

A

I think this is more of a security procedure.

Q But being a huge financial institution, we expect Cocobank has its

procedure written down in black and white?
ATTY. A. BATUHAN
Your Honor, objection. Argumentative, Your Honor.
There is no question posed at all, Your Honor.
COURT
Answer. Is there any guideline?
A

There must be a guideline of the security.

Q But you are not very familiar about the security procedures?
A

Yes, Sir.

ATTY. R. ALIKPALA
Q Mr. Ongsiapco, the agency that you hired follows certain procedures?
A

Yes, Sir.

Q Which of course are under the direct control and supervision of the
bank?
A

Yes, Sir.

Q And did the security agency have any of this procedure written down?
A

It will be given to them by the Security Department, because they are

under the Security Department.

Q But if an employee is only entering the ground floor bank area, where
customers of the bank are normally allowed, whether depositors or not,
they dont need to ask for express permission, is that correct?
A

Yes, if they are client.

Q Even if they are not client, but let us say they have to encash a check
paid to them by someone?

92

He is a client then.

Q But he is not yet a client when he enters the bank premises. He only
becomes you know because you do not all these people, you do not
know every client of the bank so you just allow them inside the bank?
A

Yes, the premises.[49]

Petitioner Ongsiapco also testified that a former employee who is a

customer/client of the petitioner bank also has access to the bank
premises, except those areas reserved for its officers and employees, such as the
working areas:
ATTY. R. ALIKPALA
Q So Mr. Witness, just for the sake of clarity. The ground floor area is
where the regular consumer banking services are held? What do you
call this portion?
A

That is the Deposit Servicing Department.

Q Where the .
A

Where the people transact business.

ATTY. R. ALIKAPALA
Q They are freely allowed in this area?
A

Yes, Sir.

Q This is the area where there are counters, Teller, where a person would
normally go to let us say open a bank account or to request for
managers check, is that correct?
A

Yes, Sir.

Q So, in this portion, no, I mean beyond this portion, meaning the working
areas and second floor up, outsiders will have to ask express permission
from the security guard?
A

Yes, Sir.

Q And you say that the security guards are instructed to verify the purpose
of every person who goes into this area?

93

As far as I know, sir.[50]

It behooved the petitioners to revise such Memorandum to conform to its

Code of Ethics and their intentions when it was issued, absent facts and
circumstances that occurred pendente litewhich warrant the retention of the
Memorandum as presently worded.
On the second issue, the Court of Appeals ruled that the petitioner bank is
liable for nominal damages to the respondent despite its finding that the
petitioners had the right to issue the Memorandum. The CA ratiocinated that the
petitioner bank should have allowed the respondent to walk towards the
restricted area of the ATM section until they were sure that he had entered such
area, and only then could the guards enforce the Memorandum of petitioner
Ongsiapco. The Court of Appeals ruled that for such failure of the security guards,
the petitioner bank thereby abused its right of self-help and violated the
respondent's right as one of its depositors:
With respect, however, to the second incident on January 31, 1996, it appears that
although according to UCPB security personnel they tried to stop plaintiff-appellee
from proceeding to the stairs leading to the upper floors, which were limited to
bank personnel only (TSN, pp. 6-9, June 4, 1997), the said act exposed plaintiffappellee to humiliation considering that it was done in full view of other bank
customers. UCPB security personnel should have waited until they were sure that
plaintiff-appellee had entered the restricted areas and then implemented the
memorandum order by asking him to leave the premises. Technically, plaintiffappellee was still in the depositing area when UCPB security personnel
approached him. In this case, UCPBs exercise of its right to self-help was in excess
and abusive to the detriment of the right of plaintiff-appellee as depositor of said
Bank, hence, warranting the award of nominal damages in favor of plaintiffappellee. Nominal damages are adjudicated in order that a right of a plaintiff,
which has been violated or invaded by the defendant, may be vindicated or
recognized and not for the purpose of indemnifying any loss suffered by him
(Japan Airlines vs. Court of Appeals, 294 SCRA 19).[51]
The petitioners contend that the respondent is not entitled to nominal
damages and that the appellate court erred in so ruling for the following reasons:
(a) the respondent failed to prove that the petitioner bank violated any of his

94

rights; (b) the respondent did not suffer any humiliation because of the overt acts
of the security guards; (c) even if the respondent did suffer humiliation, there was
no breach of duty committed by the petitioner bank since its security guards
politely asked the respondent not to proceed to the working area of the ATM
section because they merely acted pursuant to the Memorandum of petitioner
Ongsiapco, and accordingly, under Article 429 of the New Civil Code, this is a case
of damnum absque injuria;[52] and (d) the respondent staged the whole incident so
that he could create evidence to file suit against the petitioners.
We rule in favor of the petitioners.
The evidence on record shows that Casil was in the working area of the ATM
section on the ground floor when he motioned the respondent to approach him
and receive the check. The respondent then stood up and walked towards the
direction of Casil. Indubitably, the respondent was set to enter the working area,
where non-employees were prohibited entry; from there, the respondent could go
up to the upper floors of the banks premises through the elevator or the
stairway. Caspe and the company guard had no other recourse but prevent the
respondent from going to and entering such working area. The security guards
need not have waited for the respondent to actually commence entering the
working area before stopping the latter. Indeed, it would have been more
embarrassing for the respondent to have started walking to the working area only
to be halted by two uniformed security guards and disallowed entry, in full view of
bank customers. It bears stressing that the security guards were polite to the
respondent and even apologized for any inconvenience caused him. The
respondent could have just motioned to Casil to give him the check at the lobby
near the tellers booth, instead of proceeding to and entering the working area
himself, which the respondent knew to be an area off-limits to non-employees. He
did not.
The respondent failed to adduce evidence other than his testimony that people
in the ground floor of the petitioner bank saw him being stopped from proceeding
to the working area of the bank. Evidently, the respondent did not suffer
embarrassment, inconvenience or discomfort which, however, partakes of the
nature of damnum absque injuria, i.e. damage without injury or damage inflicted
without injustice, or loss or damage without violation of legal rights, or a wrong

95

due to a pain for which the law provides no remedy.[53] Hence, the award of
nominal damages by the Court of Appeals should be deleted.
On the third issue, we now hold that the petitioner bank is not entitled to
damages and attorneys fees as its counterclaim. There is no evidence on record
that the respondent acted in bad faith or with malice in filing his complaint against
the petitioners. Well-settled is the rule that the commencement of an action does
not per se make the action wrongful and subject the action to damages, for the
law could not have meant to impose a penalty on the right to litigate.
We reiterate case law that if damages result from a partys exercise of a right, it
is damnum absque injuria.[54]
IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed
Decision of the Court of Appeals is REVERSED and SET ASIDE. The complaint of the
respondent in the trial court and the counterclaims of the petitioners are
DISMISSED.
No costs.
SO ORDERED.

96

ARTICLE 434
THIRD DIVISION

CORNELIO DEL FIERRO,

G.R. No. 152141

GREGORIO DEL FIERRO,

ILDEFONSO DEL FIERRO,

Present:

ASUNCION DEL FIERRO,

CIPRIANO DEL FIERRO,

CARPIO, * J.,

MANUELA DEL FIERRO, and

VELASCO, JR., J., Chairperson,

FRANCISCO DEL FIERRO

BRION,**

Petitioners, PERALTA, and

SERENO, ***JJ.

-versusPromulgated:

RENE SEGUIRAN,

August 8, 2011
Respondent.

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

97

DECISION

PERALTA, J.:

This is a petition for review on certiorari of the Decision of the Court of

Appeals dated October 2, 2001, and its Resolution dated February 11, 2002 in CAG.R. CV No. 60520.
The Court of Appeals affirmed the decision of the Regional Trial Court (RTC)
of Iba, Zambales, Branch 71, in Civil Case No. RTC-233-1, dismissing petitioners
complaint for reconveyance of property and cancellation of titles for insufficiency
of evidence as to the identity of the properties sought to be recovered.
The factual background of this case, as stated by the Court of Appeals, is
as follows:
The subject of this case are two parcels of agricultural land, Lot Nos. 1625
and 1626 with an area of 72,326 square meters and 116,598 square meters,
respectively. Both lots are situated in Locloc, Palauig, Zambales. The cadastral
survey of these lots were conducted sometime in December 1962 (Cad. 364-D,
Palauiag Cadastre, Zambales).[1] The records of the Lands Management Bureau,
RLO III, San Fernando, Pampanga show that the claimants of Lot No. 1625
was Lodelfo Marcial[2] versus Miguel del Fierro, while the claimants of Lot No.
1626 were Lodelfo Marcial versus Francisco Santos and Narciso Marcial.[3]
On April 29, 1965, Francisco Santos filed an application for free patent over
Lot No. 1626 with the Bureau of Lands, District Land Office No. 40 at Olongapo,
Zambales. The application remained pending until the commencement of this
litigation in 1985.[4] Francisco Santos died on December 9, 1978.

98

Meanwhile, on August 21, 1964, the heirs of Miguel del Fierro, led by his
widow Generosa Jimenez Vda. del Fierro, filed an ejectment case (forcible entry)
against Lodelfo Marcial and Narciso Marcial before the Municipal Trial Court of
Palauig, Zambales.[5] On October 31, 1972, the municipal court rendered a decision
in favor of the Del Fierros.[6] On appeal, the Court of First Instance (CFI) of
Zambales, Branch II-Iba, in a Decision[7] dated August 1, 1973, sustained the right
of the Del Fierros to the possession of the subject premises and ordered the
Marcials to vacate the premises.

On June 29, 1964, Lodelfo Marcial mortgaged to the Rural Bank of San
Marcelino, Inc. a parcel of land covered by Tax Declaration No. 21492 with an area
of 140,000 square meters.[8] The property is more particularly described as:

A parcel of land suitable for cultivation, upland rice, riceland and

nipa land, situated in Marala, Palauig, Zambales, containing an area of
140,000, sq. m., the improvements consists of mango trees in the
possession of the mortgagor; bounded on the North by River; on the
South by China Sea; on the East by heirs of Miguel del Fierro and on the
West by River; this property has been declared under Tax Declaration
No. 21492 and assessed at P1,550.00 in the name of the mortgagor; the
visible limits at simple sight on the North and East are Rivers; on the
South by China Sea and fence on the East.[9]

On December 26, 1972, the bank extrajudicially foreclosed the real estate
mortgage and was the highest bidder in the sale of the property per the Certificate
of Sale issued by the Provincial Sheriff.[10] On April 22, 1982, the Rural Bank of San
Marcelino, Inc. consolidated its ownership over the property.[11]

99

On October 28, 1981, Lodelfo Marcial executed in favor of respondent Rene

Seguiran a Deed of Absolute Sale over a parcel of swampland designated as Lot
Nos. 1625 and 1626, Palauig Cadastre with Free Patent Application No. L-4-201
applied for by Marcial in 1967 and covered by Tax Declaration No. 3250 for the
year 1974.[12] Marcial had Lot Nos. 1625 and 1626 surveyed by a private surveyor
on October 19, 1969.[13] On November 9, 1981, respondent Rene Seguiran
purchased Marcials foreclosed property from the Rural Bank of San Marcelino
Inc.[14] Respondent then filed an application for free patent over Lot Nos. 1625 and
1626, which was approved by the Bureau of Lands. On July 11, 1983, Free Patent
Nos. 598462 (Lot No. 1625) and 598461 (Lot No. 1626) were issued in
respondents name. On July 29, 1983, the Register of Deeds of Zambales issued in
the name of respondent Original Certificate of Title (OCT) Nos. P-7013 and P-7014
covering Lot Nos. 1625 and 1626, respectively.[15] On September 21, 1983,
respondent had Lot Nos. 1625 and 1626 surveyed by a private surveyor. [16] He also
paid the real property taxes and declared the property in his name beginning the
year 1985.[17] On August 26, 1983, petitioner petitioned the RTC of Iba, Zambales
to conduct a relocation survey of Lot Nos. 1625 and 1626, which petition was
approved by the court. However, on February 16, 1985, the heirs of Miguel and
Generosa del Fierro filed a Motion to Quash Order of Execution,[18] claiming they
are in actual physical possession of Lot Nos. 1625 and 1626, and that prior to the
sale of the said lots to respondent, the vendor, Lodelfo Marcial no longer had any
right over the properity, since he lost in Civil Case No. 706-1 for ejectment filed by
the Del Fierros. In an Order[19] dated March 20, 1985, the RTC of lba, Zambales,
Branch LXX held in abeyance the implementation of its earlier orders regarding the
relocation survey of the lots subject of the petition filed by petitioners.

On September 13, 1985, the heirs of Miguel and Generosa del Fierro,
namely, Cornelio, Gregorio, Ildefonso, Asuncion, Cipriano, Manuela and Francisco,
all surnamed Del Fierro, petitioners herein, filed a Complaint for reconveyance
and cancellation of titles against defendant Rene Seguiran, respondent herein,
before the RTC of Iba, Zambales, Branch 71 (trial court).
The Complaint[20] alleged that plaintiffs (petitioners) were the owners and
possessors of a parcel of land identified as Lot Nos. 1625 and 1626, formerly part

100

of Lot No. 1197, situated at Barangay Locloc, Palauig, Zambales. On July 26, 1964,
Lodelfo and Narciso Marcial unlawfully entered the land occupied by plaintiffs.
Plaintiffs sued them for forcible entry[21] before the Municipal Court of Palauig. The
municipal court ruled in favor of plaintiffs, which decision was affirmed on appeal
by the CFI of Iba, Zambales, Branch II on August 1, 1973. Consequently, Lodelfo
and Narciso Marcial were ejected from the premises. Meanwhile, on June 29,
1964, Marcial had mortgaged the lots to the Rural Bank of San Marcelino, Inc.,
which foreclosed the real estate mortgage on December 26, 1972, and
consolidated ownership over the lots on April 22, 1982. On October 28, 1981,
defendant Rene S. Seguiran purchased from Lodelfo Marcial (deceased) the
subject lots. On November 9, 1981, defendant purchased the subject lots again
from the Rural Bank of San Marcelino, Inc.
Moreover, plaintiffs alleged that Lodelfo Marcial, predecessor-in-interest of
defendant, had no legal right to convey the said lots to plantiffs, since he was
merely a deforciant in the said lots. Further, defendant, with evident bad faith,
fraudulently applied with the Bureau of Lands for a free patent over the said lots,
alleging that he was the actual possessor thereof, which constitutes a false
statement, since the plaintiffs were the ones in actual possession. Despite
knowing that the said lots were the subject of legal controversy before the CFI of
Iba, Zambales, Branch II, defendant fraudulently secured a certification from the
Court of Olongapo to prove that the said parcels of land were not subject of any
court action. As a consequence of the foregoing illegal and fraudulent acts,
defendant was able to secure OCT Nos. P-7013 and P-7014 for Lot Nos. 1625 and
1626, respectively.
Plaintiffs prayed that after trial, judgment be rendered: (1) ordering
defendant to reconvey the parcels of land covered by OCT Nos. P-7013 and P-7014
to them (plaintiffs); (2) ordering the Register of Deeds of lba, Zambales to cancel
the said titles and issue a new one in favor of plaintiffs; and (3) ordering defendant
to pay plaintiffs P40,000.00 as actual and consequential damages; P50,000.00 as
moral damages; and P10,000.00 as exemplary damages.[22]
Defendant was declared in default for failure to file an Answer, and plaintiffs
were allowed to present evidence ex parte.[23] On October 13, 1986, after the

101

completion of the testimonial evidence of the plaintiffs, the case was submitted
for decision.[24]
Meanwhile, on December 9, 1986, the heirs of Francisco Santos, who
intervened in the case, filed a protest[25] with the Bureau of Lands, questioning the
award of free patent in favor of respondent Rene Seguiran over Lot No. 1626 when
they were the actual owners and possessors of the said lot, since their father was
the registered claimant and applicant of the said lot, while respondent had never
set foot on the lot. The Director of Lands directed Land Investigator Alfredo S.
Mendoza of the Bureau of Lands District Office in Iba, Zambales to investigate the
matter.[26]
On February 26, 1981, the heirs of Francisco Santos, represented by their
attorney-in-fact Olivia C. Olaivar, filed a Motion for Leave to File a Complaint-inIntervention, which was granted by the trial court.[27] Intervenors claimed
ownership and possession of Lot No. 1626, being the heirs of the late Francisco
Santos who was the registered claimant of the said lot under the Cadastral Survey
Notification Card in 1962. The intervenors prayed that after hearing, the trial
court render judgment (1) annulling the Free Patent Application No (III-4) (1) 467-A
(Patent No. 598461) issued to defendant Rene Seguiran; (2) declaring the
intervenors the true and lawful owners of Lot No. 1626, since they are the legal
heirs of the late Francisco Santos; and (3) requiring defendant to pay to the
intervenors P5,000.00 as attorneys fees.[28]
In their Answer to [the] Complaint-in-Intervention,[29] plaintiffs denied that
the intervenors were the owners and possessors of Lot No. 1626; hence, the
intervenors had no cause of action against them. Plaintiffs prayed that the
complaint-in-intervention be dismissed.
On May 20, 1988, defendant filed his Answer,[30] claiming that when he
bought the land in dispute on October, 28, 1981, Lodelfo Marcial was no longer its
owner, but the Rural Bank of San Marcelino, Inc., since Marcial failed to redeem
the land within the one-year period of redemption. His only purpose for buying the
land from the mortgagor, Lodelfo Marcial in November 1981 was for the peaceful
turn-over of the property to him by Marcial. Defendant denied any fraud, illegality

102

or bad faith in securing OCT Nos. P-7013 and P-7014. He asserted that when he
secured a certification from the RTC on June 6, 1983, there was in truth no
pending case involving the subject properties in any court in Zambales; hence, no
bad faith could be attributed to him. Defendant prayed that judgment be rendered
by the trial court dismissing the complaint and ordering plaintiffs to pay him
actual, moral and exemplary damages as well as attorneys fees and the expenses
of litigation.
On August 2, 1988, defendant also filed his Answer to the Complaint-inIntervention[31] with the same defenses and counterclaim. On motion of
defendant, the earlier order declaring him in default was set aside, and the trial
court granted defendants counsel the right to cross-examine the witnesses who
had testified during the proceedings already conducted.[32]
At the pre-trial conference held on October 20, 1988, only the plaintiffs and
intervenors admitted that Lot No. 1625 was actually being occupied by the
plaintiffs (Del Fierros), while Lot No. 1626 was being occupied by the intervenors
(the heirs of Francisco Santos). Defendant did not admit the said facts.[33]
On October 13, 1995, intervenors filed a Motion to Hold the Proceedings in
Abeyance,[34] since their pending administrative protest, which involved the same
lots, had been scheduled for pre-trial conference on October 3, 1995 by the
Bureau of Lands.
In an Order[35] dated January 8, 1996, the trial court directed that the
proceedings be held in abeyance until after the resolution of the administrative
case. However, after plaintiffs sought reconsideration of the Order, the trial court
continued the proceedings in the interest of justice because the administrative
case for cancellation of title had yet to commence the reception of evidence, while
in this case, the intervenors (the complainants in the administrative case) had
already presented witnesses and marked evidences on their behalf; and the
suspension of this case would prove to be more expensive for all party
litigants.[36] The intervenors motion for whole or partial reconsideration of the
said order of reversal was denied by the trial court for lack of merit.[37]

103

On April 23, 1998, the trial court rendered judgment in favor of defendant,
respondent herein, the dispositive portion of which reads:
WHEREFORE, premises considered, the complaint dated
September 12, 1985 is dismissed for insufficiency of evidence as to the
identity of the properties sought to be recovered. The complaint-inintervention dated February 24, 1987 is dismissed for prematurity and
insufficiency of evidence.[38]
The trial court held that plaintiffs (petitioners) failed to prove the identity of
the property sought to be recovered. The numerous documents they presented to
prove ownership of Lot Nos. 1625 and 1626 showed that the properties covered
by sale or pacto de retro are located at Liozon,[39] Palauig, Zambales, while Lot Nos.
1625 and 1626 are located at Locloc, Palauig, Zambales; and there is no clear
showing that parts of Liozon became Locloc. Moreover, although the Del Fierros
were declared as the possessors of the property in the ejectment case (forcible
entry)[40] filed by Generosa del Fierro against Lodelfo and Narciso Marcial, the
property concerned in the said case is Lot No. 1197. There was no evidence as to
the original size of Lot No. 1197 and no proof that Lot Nos. 1625 and 1626 formed
part of Lot No. 1197. Based on the foregoing, the trial court dismissed plaintiffs
complaint.

The trial court also dismissed the complaint of intervenors on the ground of
non-exhaustion of administrative remedies as the protest filed earlier by
them against defendant (respondent) with the Bureau of Lands was still pending.
Both plaintiffs (petitioners) and intervenors appealed the decision of the trial
court to the Court of Appeals.
On October 2, 2001, the Court of Appeals upheld the decision of the trial
court. The dispositive portion of the appellate courts decision reads:

104

WHEREFORE, premises considered, the present appeals are

hereby DISMISSED and the appealed Decision in Civil case No. RTC-2331 is hereby AFFIRMED and UPHELD.[41]
The Court of Appeals held that petitioners are not entitled to reconveyance
of Lot Nos. 1625 and 1626, since they failed to prove the identity of the parcels of
land over which they claim ownership. The evidence they adduced to prove their
ownership of the said lots showed that the Spanish deeds of conveyance involved
properties that were located in Barrio Liozon and not in Locloc, Palauig, Zambales,
which is the actual location of Lot Nos. 1625 and 1626.
Moreover, the Court of Appeals stated that the fact that Lodelfo Marcial was
defeated in the forcible entry case filed by petitioners prior to the purchase by
respondent of the foreclosed property from Marcial and from the mortgagee bank
in 1973 could not serve as the basis for petitioners right of ownership or title over
Lot Nos. 1625 and 1626 as only Lot No. 1197 was involved in the ejectment case
and only the issues of possession thereof was adjudicated therein. The appellate
court stated that the said court decision could have buttressed petitioners claim
of ownership over Lot Nos. 1625 and 1626 if petitioners were able to establish in
this case that the said lots indeed formed part of Lot No. 1197.
In addition, the Court of Appeals held that petitioners failed to prove by clear
and convincing evidence that the issuance of the certificates of title in favor of
respondent was attended by fraud.
The Court of Appeals declared as unmeritorious the argument of intervenors
that this case is not covered by the rule on exhaustion of administrative
remedies. It citedGarcia v. Aportadera,[42] wherein it was held that where a party
seeks for the cancellation of a free patent with the Bureau of Lands, he must
pursue his action in the proper Department and a review by the court will not be
permitted unless the administrative remedies are first exhausted. Further,
an applicant for a free patent may not file an
action for reconveyance for that is the remedy of an owner whose land has been
erroneously registered in the name of another.[43]

105

Petitioners motion for reconsideration was denied for lack of merit by the
Court of Appeals in a Resolution[44] dated February 11, 2002.
Petitioners filed this petition, raising the following issues:
I
THE COURT OF APPEALS ERRED IN AFFIRMING THE DECISION OF
THE REGIONAL TRIAL COURT ON THE BASIS OF ISSUES NOT RAISED BY
RESPONDENT IN THE TRIAL COURT.
II
THE COURT OF APPEALS ERRED IN AFFIRMING THE DECISION OF
THE REGIONAL TRIAL COURT VIS--VIS THE JUDICIAL ADMISSION OF
RESPONDENT ON THE RIGHT OF THE PETITIONERS TO THE PROPERTY.
III
THE COURT OF APPEALS ERRED IN AFFIRMING THE DECISION OF
THE REGIONAL TRIAL COURT DESPITE THE FACT THAT THE
CONCLUSIONS OF LAW RUN COUNTER AND ARE DIAMETRICALLY
OPPOSED TO (THE) SUMMARY OF THE EVIDENCE GIVEN BY THE
REGIONAL TRIAL COURT.
The main issues are whether petitioners are entitled to reconveyance of Lot
Nos. 1625 and 1626, and whether the certificates of title of respondent to the said
lots should be cancelled.
The requisites of reconveyance are provided for in Article 434 of the Civil
Code, thus:
Art. 434. In an action to recover, the property must be identified,
and the plaintiff must rely on the strength of his title and not on the
weakness of the defendants claim.
Article 434 of the Civil Code provides that to successfully maintain an action
to recover the ownership of a real property, the person who claims a better right

106

to it must prove two (2) things: first, the identity of the land claimed; and second,
his title thereto.[45]

In regard to the first requisite, in an accion reinvindicatoria, the person who

claims that he has a better right to the property must first fix the identity of the
land he is claiming by describing the location, area and boundaries
thereof.[46] Anent the second requisite, i.e., the claimant's title over the disputed
area, the rule is that a party can claim a right of ownership only over the parcel of
land that was the object of the deed.[47]

In this case, petitioners failed to prove the identity of the parcels of

land sought to be recovered and their title thereto. Petitioners contend that they
are the owners of Lot Nos. 1625 and 1626 by virtue of the decision of the
Municipal Court of Palauig, Zambales in the ejectment case (forcible
entry)[48] against Lodelfo and Narciso Marcial, declaring them (petitioners) as the
ones in possession of the property, which decision was affirmed on appeal.
However, as stated by the trial court and the Court of Appeals, the property
involved in the ejectment case was Lot No. 1197, and it was never mentioned in
the respective decisions[49] of the Municipal Court of Palauig, Zambales and the CFI
of Zambales, Branch II-Iba that the portion intruded upon was Lot Nos. 1625 and
1626. Moreover, petitioners failed to adduce in evidence the technical description
of Lot No. 1197 and failed to prove that Lot Nos. 1625 and 1626 were part of or
used to be part of Lot No. 1197.
Further, the documents presented by petitioners to prove their title over Lot
Nos. 1625 and 1626 showed that the properties covered therein were located
in Barrio Liozon, Palauig, Zambales, while Lot Nos. 1625 and 1626 are located
in Barrio Locloc, Palauig, Zambales. In addition, petitioners failed to establish
which of the deeds of sale, donation or documents evidencing transfer of
properties to their father, Miguel del Fierro, which were adduced in evidence,
covered Lot Nos. 1625 and 1626. The Court of Appeals stated:

107

In support of their claim of ownership over Lot Nos. 1625 and

1626, plaintiffs-appellants (petitioners) submitted in evidence various
Spanish documents or deeds of purchase: (1) a Spanish document
dated June 1927, "Venta Real de Terreno executed by J.L. Faranal in
favor of Miguel del Fierro, over a parcel of land situated in Marala,
Barrio Liozon, Palauig, Zambales; (2) a Spanish document dated
December 18, 1939 executed by Justo Apostol in favor of Miguel del
Fierro, for the sale of a riceland situated in Barrio Liozon, Palauig,
Zambales (1,350 sq.m.); (3) Escritura de Compra Venta dated June 1,
1918 executed by Alejandro Abaga in favor of Feliciana Frase over a
parcel of land situated in Marala, Barrio Lioson, Palauig, Zambales; (4)
Renuncia De Derecho (Waiver of Rights) dated September 6, 1928
executed by Juan Saclolo in favor of Miguel del Fierro over a riceland
situated in Marala, Barrio Lioson, Palauig, Zambales; (5) "Venta Con
Pacto de Retro de Terrenos dated April 8, 1927 executed by Faustino
Barrentos in favor of Don Miguel del Fierro over a coconut plantation
located at Sitio Sasa, Barrio Liozon, Palauig, Zambales; (6) Venta Real
de Terrenos" dated July 24, 1926 executed by Jose Trinidad and Ursula
Villanueva in favor of Miguel de1 Fierro over a riceland situated in
Barrio Liozon, Palauig, Zambales (25,610 sq. ms.); (7) "Escritura de
Cancelacion de Hipoteca de Bienes Inmuebles" (Contract of
Cancellation of Mortgage of Real Estate Property) executed by Pedro
Redona in favor of Ursula Villanueva over a riceland situated in Barrio
Lioson, Palauig, Zambales; (8) "Declaracion Jurada" (Sworn Statement)
dated January 11, 1928 executed by Demetrio Sison, Aurea Sison and
Severino Anguac affirming the contract of sale dated September 25,
1925 signed by their deceased mother in favor of Miguel del Fierro over
a riceland situated in Barrio Lioson, Palauig, Zambales (15,660 sq. ms.);
(9) "Escritura de Compra Venta" dated September 25, 1925 executed by
Justa Romero and Aurea Sison in favor of Don Miguel del Fierro over a
piece of land situated in [Sitio] Sasa, Barrio Lioson, Palauig, Zambales (1
hectare, 56 ares and 60 centares); (10) "Escritura de Compra Venta"
dated August 29, 1921 executed by Juan Sison in favor of Miguel del
Fierro over a parcel of coconut land (83 ares and 70 centares) situated
in Barrio Lioson, Palauig, Zambales; (11) Venta Real de Terrenos"

108

dated September 16, 1925 executed by Agustin Abaga in favor of

Miguel del Fierro over a parcel of land situated in [Sitio] Sasa, Barrio
Lioson, Palauig, Zambales (7,200 sq. ms.); and (12) "Escritura de
Donacion" (Deed of Gift or Pure Donation) executed by Eugenio del
Fierro in favor of his son, Miguel del Fierro of a land situated in Marala,
Barrio Lioson, Paiauig, Zambales (12 hectares, 77 ares and 90 centares).
In addition to the foregoing documents, plaintiffs-appellants presented
various tax declarations for the years 1944 (Miguel del Fierro), 1952,
1968, 1974, 1977, 1980, 1985 and 1987 (Heirs of Miguel del Fierro).
These tax declarations pertain to lots situated in Locloc, Palauig,
Zambales but the designation of Lots 1625 and 1626 (as part of Lot
1197) was made only in TD Nos. 11-0099 and 11-0100 for 1984 and
1987, respectively.
A perusal of these documents would readily show that the lots
indicated in the Spanish deeds of conveyence were located in Barrio
Lioson and not in Locloc, Palauig, Zambales, the actual location of the
Lot Nos. 1625 and 1626. As to the tax declarations, the real properties
declared therein, although situated in Locloc, Palauig, Zambales were
not designated as Lot Nos. 1625 and 1626 until the year 1985, the same
year the said lots were titled in the name of defendant-appellee. And
even without such designation of Lot Nos. 1625 and 1626, plaintiffsappellants failed to show that the separate lots which their
predecessor-in-interest, Don Miguel del Fierro, had acquired in the
1920s, were the very same land (or included therein) which have been
designated as Lot Nos. 1625 and 1626, or which was covered by the
land supposedly donated by their grandfather to Don Miguel del Fierro.
In other words, the identity of the land being claimed by plaintiffsappellants could not be clearly established on the basis of either the
Spanish deeds of purchase and donation or the old tax declarations
presented by plaintiffs-appellants.[50]
Based on the foregoing, petitioners failed to prove the identity of the
properties sought to be recovered and their title thereto.

109

Petitioners argue that the issue of identity of the subject parcels of lands was
not among those raised during pre-trial or even during the trial. They contend that
the findings of the trial court, which were affirmed by the Court of Appeals, on the
issue of supposed insufficiency of evidence as to the identity of the properties not
only surprised them, but caused them manifest injustice. They assert that issues
not raised in the trial court cannot be raised for the first time on appeal.
Petitioners argument is unmeritorious.
Petitioners filed an action for reconveyance and cancellation of titles. Hence,
it was incumbent on petitioners to prove the requisites of reconveyance, one of
which is to establish the identity of the parcels of land petitioners are claiming. To
reiterate, in an accion reinvindicatoria, the person who claims that he has a better
right to the property must first fix the identity of the land he is claiming by
describing the location, area and boundaries thereof. [51] Petitioners failure to
present sufficient evidence on the identity of the properties sought to be
recovered and their title thereto resulted in the dismissal of their complaint.
As regards the second issue raised, petitioners contend that the Partial PreTrial Order stated that during the pre-trial conference the following facts were
stipulated on:
1) By the plaintiffs and intervenor that Lot 1625 is actually
occupied by the Del Fierros, while Lot 1626, Cad. Lot 364-D of the
Palauig is occupied by the heirs of Francisco Santos, who is already
deceased. The defendant did not admit this fact.
2) The plaintiffs and defendantsthat there exists a decision
rendered by the then Court of First Instance of Zambales thru
Honorable Judge Pedro Cenzon in favor of the plaintiffs in this case,
affirming the decision of the Municipal Trial Court of Palauig, Zambales
where it was stated that the plaintiffs are the ones in possession of Lots
1625 and 1626, which is docketed as Civil Case No. 706-I entitled

110

Generosa Jimenez Vda. de Del Fierro, et al. versus Leodolfo Marcial, et

al. The intervenor did not admit this fact.[52]
Petitioners contend that the said judicial admission is binding and conclusive
on the respondent and it cannot just be ignored by the trial court without doing
violence to Section 4, Rule 129 of the Rules of Evidence.[53] Petitioners also
contend that the decision of the appellate court in the ejectment case (Civil Case
No. 706-I), filed by petitioners against Lodelfo Marcial, respondents predecessorin-interest, is conclusive as to petitioners possession of Lot Nos. 1625 and 1626.
Since petitioners are in possession, respondent fraudulently applied for and
procured free patents, as the consideration in qualifying as a patentee is that the
applicant is in actual possession of the land applied for. Moreover, the undisputed
possession of petitioners and their predecessors of the land as early as 1920s had
long converted the parcels of land to private land and no longer part of the public
domain.

Petitioners contention does not persuade.

As stated by the trial court and the Court of Appeals, the ejectment
case entitled Generosa Jimenez Vda. de Del Fierro, et al. v. Leodolfo Marcial, et
al. involved Lot No. 1197, and there was no mention of Lot Nos. 1625 and 1626
therein. The land involved in the ejectment case was described by the plaintiffs
(petitioners) in their Complaint[54] as follows:
Consisting of 21.3196 hectares, more or less, and bounded on the
North by Leoncia Apostol, Heirs of P. Lesaca, Justa Ponce and P.
Artiquera; East by Hrs. of Potenciano Lesaca, M. Abdon, P. Artiquera,
David Abdon and D. Abdon; South by P. Garcia, Barrio Road and
Maximo Abdon and West by River and Beach. It is designated as Lot
No. 1197 of the Palauig Cadastre and declared for taxation purposes in
the name of the Heirs of Miguel del Fierro under Tax Declaration
No. 18324 and assessed at P5,330.00.[55]

111

Moreover, in this case, petitioners failed to prove that Lot Nos. 1625 and
1626 were part of Lot No. 1197. The Survey Map[56] of Lot 1626 showed that Lot
Nos. 1197, 1625, and 1626 are distinct lots. The cadastral survey of Lot Nos. 1625
and 1626 was conducted sometime in 1962.[57] The ejectment case was filed in
1964, after the cadastral survey of Lot Nos. 1625 and 1626, yet petitioners did not
mention in their complaint that the ejectment case involved Lot Nos. 1625 and
1626.
In view of the foregoing, the Partial Pre-trial Order[58] mistakenly stated that
petitioners were declared as the ones in possession of Lot Nos. 1625 and 1626 in
the ejectment case. Even the trial court stated during the pre-trial conference held
on October 28, 1988 that there was no mention of Lot Nos. 1625 and 1626 in the
decision[59] of the CFI of Zambales, Branch II-Iba in the ejectment case (Civil Case
No. 706-I).[60] Moreover, contrary to the contention of petitioners, respondent did
not admit that petitioners and the intervenors were in possession of Lot Nos. 1625
and 1626, respectively, which fact was clearly stated in the Partial Pre-trial Order.
As regards the third issue raised, petitioners cited their testimonial evidence
as narrated by the trial court, and contend that the identity of the land and their
possession thereof were established as shown by the decision of the trial court.
They contend that they seek reconveyance because the free patent titles were
issued to respondent on false representation as they (petitioners) were in
possession of the land.
The contention lacks merit.
The testimonial evidence of petitioners showed that they did not know the
land area of Lot Nos. 1625 and 1626;[61] they had no tax declaration specifically for
Lot Nos. 1625 and 1626;[62] they did not know who was residing in Lot No.
1626; they could not identify which of the documents evidencing transfer of
properties to their father, Miguel del Fierro, covered Lot Nos. 1625 and
1626;[63] and they had no survey plan of the property over which they were
claiming ownership. However, Ildefonso del Fierro testified that he has a
fishpond and an approximately two-hectare riceland in Lot No. 1625;[64] hence, he
did not allow the relocation survey by respondent of Lot Nos. 1625 and 1626,

112

because it would pass through his fishpond and it would be

disturbed.[65] Nevertheless, petitioners failed to identify the specific area of Lot
No. 1625 or of Lot No. 1626 where the fishpond, riceland or houses of petitioners
are located. Instead, they claim possession of the entire area of Lot Nos. 1625 and
1626, but not one of their documents showing transfer of properties in the name
of their father, Miguel del Fierro, specifically states that it covers Lot No. 1625 or
Lot No. 1626, and petitioner could not identify which documents referred to Lot
Nos. 1625 and 1626. Thus, petitioners erred in claiming that their testimonial
evidence established the identity of the parcels of land sought to be recovered
and their title thereto.
The Court notes that the trial court did not discuss the merits of the
testimonial evidence of petitioners, but the Court of Appeals did, stating thus:
x x x [T]he testimonies of plaintiffs witnesses did not serve to clarify
the matter of identity of the subject properties as they even failed to
indicate the precise boundaries or areas of Lot Nos. 1625 and 1626, and
likewise admitted they have no tax declaration specifically for Lot Nos.
1625 and 1526 even after the cadastral survey in 1962. Failing in their
duty to clearly identify the lands sought to be recovered by them,
plaintiffs-appellants action for reconveyance must necessarily fail. To
reiterate, in order that an action to recover ownership of real property
may prosper, the person who claims he has a better right to it must
prove not only his ownership of the same but also satisfactorily
prove the identity thereof. x x x [66]
In fine, petitioners failed to prove the identity of the properties over which
they claimed ownership and sought to be reconveyed to them, and they also failed
to prove their title over Lot Nos. 1625 and 1626; hence, the Court of Appeals did
not err in affirming the decision of the trial court, which dismissed petitioners
Complaint.
WHEREFORE, the petition is DENIED. The Court of Appeals Decision dated
October 2, 2001 and its Resolution dated February 11, 2002 in CA-G.R. CV No.
60520 are hereby AFFIRMED.

113

No costs.
SO ORDERED.

114

THIRD DIVISION

DATU
KIRAM
SAMPACO,
substituted by HADJI SORAYA S.
MACABANDO,
Petitioner,

G.R. No. 163551

Present:

CARPIO,* J.,
VELASCO, JR., J., Chairperson,
- versus -

PERALTA,
ABAD, and
MENDOZA, JJ.

HADJI SERAD MINGCA

LANTUD,

Promulgated:

Respondent.
July 18, 2011
x-----------------------------------------------------------------------------------------x

DECISION
PERALTA, J.:

115

This is a petition for review on certiorari of the Court of Appeals Decision

dated August 15, 2003 in CA-G.R. CV No. 63801 and its Resolution dated May 13,
2004, denying petitioners motion for reconsideration.
The facts, as stated by the Court of Appeals, are as follows:
On September 14, 1984, respondent Hadji Serad Mingca Lantud, the plaintiff
in the lower court, filed an action to quiet title with damages [1] with the Regional
Trial Court (RTC) of Lanao del Sur, Branch 8, Marawi City (trial court), against
petitioner Datu Kiram Sampaco (deceased), the defendant in the lower court, who
has been substituted by his heirs, represented by Hadji Soraya SampacoMacabando.[2]
Respondent alleged in his Complaint[3] that he is the owner in fee simple of
a parcel of residential lot located at Marinaut, Marawi City, with an area of 897
square meters covered by Original Certificate of Title (OCT) No. P-658. On August
25, 1984, petitioner Datu Kiram Sampaco, through his daughter Soraya SampacoMacabando with several armed men, forcibly and unlawfully entered his property
and destroyed the nursery buildings, cabbage seedlings and other improvements
therein worth P10,000.00. On August 30, 1984, Barangay Captain Hadji Hassan
Abato and his councilmen prepared and issued a decision[4] in writing stating that
petitioner Datu Kiram Sampaco is the owner of the subject parcel of
land. Respondent stated that the acts of petitioner and the said decision of the
Barangay Captain may cast a cloud over or otherwise prejudice his
title. Respondent stated that he and his predecessors-in-interest have been in
open, public and exclusive possession of the subject property. He prayed that the
acts of petitioner and the decision of Barangay Captain Hadji Hassan Abato and his
councilmen be declared invalid, and that petitioner be ordered to pay respondent
damages in the amount of P10,000.00 and attorneys fees.
In his Answer,[5] defendant Datu Kiram Sampaco, petitioner herein, denied
the material allegations of the Complaint. Petitioner asserted that he and his
predecessors-in-interest are the ones who had been in open, public, continuous,
and exclusive possession of the property in dispute. Petitioner alleged that OCT
No. P-658 was secured in violation of laws and through fraud, deception and

116

misrepresentation, considering that the subject parcel of land is a residential

lot and the title issued is a free patent. Moreover, respondent and his
predecessors-in-interest had never taken actual possession or occupied the land
under litigation. On the contrary, petitioner has all the evidence of actual
possession and ownership of permanent improvements and other plants on the
land in dispute.
Petitioner filed a counterclaim for actual and moral damages, and attorney's
fees for the unfounded complaint and prayed for its dismissal. He also sought the
cancellation of respondents OCT No. P-658 and the reconveyance of the subject
parcel of land.
During the trial, respondent Hadji Lantud testified that he acquired the
subject lot from his grandmother, Intumo Pagsidan, a portion thereof from his
grandmothers helper, Totop Malacop, pursuant to a court decision after litigating
with him.[6] Respondent had been residing on the lot for more than 30 years,
applied for a title thereto and was issued OCT No. P-658.[7] He paid the
corresponding real estate taxes for the land. [8] He planted assorted trees and
plants on the lot like bananas, jackfruits, coconuts and others. [9] He testified that
he was not aware of the alleged litigation over the lot before Barangay Captain
Hadji Hassan Abato, although he was furnished a copy of the decision.[10]
On the other hand, petitioner Datu Kiram Sampaco testified that the land
under litigation is only a portion of the 1,800 square meters of land that he
inherited in 1952 from his father, Datu Sampaco Gubat. [11] Since then, he had been
in adverse possession and ownership of the subject lot, cultivating and planting
trees and plants through his caretaker Hadji Mustapha Macawadib. [12] In 1962, he
mortgaged the land (1,800 square meters) with the Development Bank of
the Philippines, Ozamis branch.[13] He declared the land (1,800 square meters) for
taxation purposes[14] and paid real estate taxes, and adduced in evidence the
latest Tax Receipt No. 1756386 dated September 15, 19[9]3.[15]Petitioner
presented four corroborating witnesses as regards his possession of the subject
property.

117

After trial on the merits, the trial court rendered a Decision on March 31,
1999 in favor of petitioner, the dispositive portion of which reads:
WHEREFORE, premises considered the court is of the opinion and
so holds that the preponderance of evidence is in favor of the
defendant and against the plaintiff. Judgment is hereby rendered as
follows:
1.
2.

Dismissing plaintiffs complaint for lack of merit;

Declaring Original Certificate of Title No. P-658 (Exh. A)
null and void and of no legal effect;
3.
Declaring the defendant the absolute or true owner and
possessor of the land in dispute; and
4.
Ordering the plaintiff to pay the defendant the sum
of P10,000.00 for attorneys fees plus P500.00 per
appearance.[16]

The trial court held that the issuance of respondents title, OCT No. P-658,
was tainted with fraud and irregularities and the title is, therefore, spurious;
hence, it is null and void, and without any probative value. The finding of fraud
was based on: (1) the Certification issued by Datu Samra Andam, A/Adm. Assistant
II, Natural Resources District No. XII-3, Marawi City, stating that the data contained
in respondents title were verified and had no record in the said office; (2) the said
Certification was not refuted or rebutted by respondent; (3) while free patents are
normally issued for agricultural lands, respondents title is a free patent title issued
over a residential land as the lot is described in the Complaint as a residential lot;
and (4) Yusoph Lumampa, an employee of the local Bureau of Lands, to whom
respondent allegedly entrusted the paperwork of the land titling, was not
presented as a witness.
Moreover, the trial court stated that respondent failed to establish with
competent and credible evidence that he was in prior possession of the subject
property. No corroborative witness was presented to further prove his prior
possession.

118

On the other hand, the trial court stated that petitioner offered documentary
evidence, consisting of a contract of real estate mortgage of the subject property,
tax declarations, an official tax receipt, and testimonial evidence to prove that he
had been in open, public, continuous, and lawful possession of the subject
property in the concept of owner.
Respondent appealed the decision of the trial court to the Court of Appeals.
On August 15, 2003, the Court of Appeals rendered a Decision reversing the
decision of the trial court, the dispositive portion of which reads:
WHEREFORE:
1. The appeal is granted and the appealed judgment is hereby totally
REVERSED.
2. To quiet his title, plaintiff-appelant Hadji Serad Mingca Lantud is
confirmed the owner of the parcel of land covered by Original
Certificate of Title No. P-658;
3. The defendant-appellee is ordered to pay P50,000.00 as attorneys
fees to the plaintiff-appellant; and
4. Costs against the defendant-appellee.[17]
Petitioners motion for reconsideration was denied by the Court of Appeals
in its Resolution[18] dated May 13, 2004.
The Court of Appeals held that there is no controversy that respondent is a
holder of a Torrens title; hence, he is the owner of the subject property. The
appellate court stressed that Section 47[19] of the Land Registration Act (Act No.
496) provides that the certificate of title covering registered land shall be received
as evidence in all courts of thePhilippines and shall be conclusive as to all matters
stated therein.
The Court of Appeals stated that the Torrens title has three attributes: (1) a
Torrens title is the best evidence of ownership over registered land and, unless
annulled in an appropriate proceeding, the title is conclusive on the issue of
ownership; (2) a Torrens title is incontrovertible and indefeasible upon the

119

expiration of one year from the date of the entry of the decree of
registration;[20] and (3) a Torrens title is not subject to collateral attack.[21]
The Court of Appeals held that petitioners counterclaim filed on October 15,
1984 for cancellation of respondents original certificate of title issued on May 22,
1981 was filed beyond the statutory one-year period; hence, petitioners title had
become indefeasible, and cannot be affected by the decision made by Barangay
Captain Hadji Hassan Abato and his councilmen. Moreover, the appellate court
held that petitioners prayer for the cancellation of respondents title, OCT No. P658, through a counterclaim included in his Answer is a collateral attack, which the
law does not allow, citing Cimafranca v. Court of Appeals[22] and Natalia Realty
Corporation v. Valdez.[23]
The allegation of fraud in securing OCT No. P-658 on the ground that the
property in dispute is a residential lot and not subject of a free patent was not
given weight by the appellate court as it was supported only by testimonial
evidence that did not show how (by metes and bounds) and why the property in
dispute could not have been the subject of a free patent. The appellate court
stated that a mere preponderance of evidence is not adequate to prove fraud;[24] it
must be established by clear and convincing evidence.
The Court of Appeals also noted that petitioner claimed that the subject
property is only part of his larger property. Although petitioner introduced proof
of payment of the real estate taxes of the said property, as well as a previous
mortgage of the property, petitioner did not show that the disputed property is
part of his larger property. Hence, the appellate court stated that under such
circumstances, it cannot rule that petitioner owned the land under litigation, since
petitioner failed to show that it is part of his larger property.
The Court of Appeals did not award actual and moral damages, because
respondent failed to prove the amount of any actual damages sustained, and the
instances enumerated under Article 2219 of the Civil Code warranting the award
of moral damages were not present.

120

However, the Court of Appeals awarded attorney's fees in the amount

of P50,000.00, considering that respondent was forced to incur expenses to
protect his right through the action to quiet title.
Petitioner filed this petition raising the following issues:
I
THE COURT OF APPEALS MISERABLY FAILED TO CONSIDER THE
FACT THAT THE TORRENS TITLE INVOLVED HEREIN WAS ISSUED
PURSUANT TO A FREE PATENT WHICH COULD NOT BE VALIDLY ISSUED
OVER A PRIVATE LAND.
II
THE COURT OF APPEALS ERRED IN DISREGARDING THE FACT THAT
AS CERTIFIED TO BY THE BUREAU OF LANDS ITSELF NO SUCH FREE
PATENT OVER THESUBJECT LAND WAS ISSUED BY IT; HENCE, SAID FREE
PATENT IS SPURIOUS.
III
THE COURT OF APPEALS ERRED IN REVERSING THE DECISION OF
THE TRIAL COURT THAT THE SUBJECT LOT HAD LONG BEEN OWNED,
POSSESSED AND CULTIVATED BY THE DEFENDANT (PETITIONER HEREIN)
OR HIS PREDECESSORS-IN-INTEREST SINCE TIME IMMEMORIAL IN THE
CONCEPT OF AN OWNER.
IV
THE COURT OF APPEALS ERRED IN RULING THAT THE
PETITIONERS COUNTERCLAIM FOR CANCELLATION OF RESPONDENTS
TITLE IS BARRED.
V
THE COURT OF APPEALS ERRED IN RULING THAT THE
COUNTERCLAIM
IN
THE
INSTANT
CASE
IS
A
COLLATERAL ATTACK ON RESPONDENT-PLAINTIFFS TITLE.

121

VI
THE COURT OF APPEALS ERRED IN DENYING PETITIONERS
MOTION FOR RECONSIDERATION.[25]

The main issue is whether or not the Court of Appeals erred in sustaining the
validity of OCT No. P-658 and confirming respondent as owner of the property in
dispute.
Petitioner contends that the Court of Appeals erred in disregarding the fact
that the Torrens title was issued to respondent by virtue of a free patent covering
a residential lot that is private land as it has been acquired by petitioner
through open, public, continuous and lawful possession of the land in the concept
of owner. Petitioner thus prayed for the cancellation of respondents title and the
reconveyance of the subject property. Hence, the Court of Appeals erred in
declaring that the subject lot belongs to respondent.
The contention is without merit.
The Torrens title is conclusive evidence with respect to the ownership of the
land described therein, and other matters which can be litigated and decided in
land registration proceedings.[26] Tax declarations and tax receipts cannot prevail
over a certificate of title which is an incontrovertible proof of ownership. [27] An
original certificate of title issued by the Register of Deeds under an administrative
proceeding is as indefeasible as a certificate of title issued under judicial
proceedings.[28] However, the Court has ruled that indefeasibility of title does not
attach to titles secured by fraud and misrepresentation.[29]
In this case, petitioner alleged in his Answer to respondents Complaint in the
trial court that respondents title, OCT No. P-658, was secured in violation of the
law and through fraud, deception and misrepresentation, because the subject
parcel of land is a residential lot, which cannot be subject of a free patent, since
only agricultural lands are subject of a free patent.

122

The trial court found that [t]he lot under litigation as clearly described in the
complaint is a residential lot and a free patent title thereto cannot validly be
issued. This finding was one of the bases for the trial courts declaration that the
issuance of OCT was tainted with fraud and irregularities and is, therefore,
spurious; thus, OCT No. P-658 is null and void.
It should be pointed out that the allegation in the Complaint that the land is
residential was made only by respondent, but the true classification of the
disputed land as residential was not shown to have been made by the President,
upon recommendation by the Secretary of Environment and Natural Resources,
pursuant to Section 9 of Commonwealth Act No. 141, otherwise known as The
Public Land Act.[30] Hence, the trial court erred in concluding that there was fraud
in the issuance of respondents free patent title on the ground that it covered
residential land based only on the Complaint which stated that the property was
residential land when it was not shown that it was the President who classified the
disputed property as residential, and OCT No. P-658 itself stated that the free
patent title covered agricultural land. It has been stated that at present,not only
agricultural lands, but also residential lands, have been made available by recent
legislation for acquisition by free patent by any natural born Filipino
citizen.[31] Nevertheless, the fact is that in this case, the free patent title was
granted over agricultural land as stated in OCT No. P-658.
Moreover,
petitioner
contends
in
his
petition
that
the
[32]
Certification dated July 24, 1987 issued by Datu Samra I. Andam, A/Adm.
Assistant II, Natural Resources District No. XII-3, Bureau of Lands, Marawi City,
certifying that the data contained in OCT No. P-658 in respondents name had no
records in the said office, showed that respondentsTorrens title was spurious.
The Court holds that the certification, by itself, is insufficient to prove the
alleged fraud. Fraud and misrepresentation, as grounds for cancellation of patent
and annulment of title, should never be presumed, but must be proved by clear
and convincing evidence, mere preponderance of evidence not being
adequate.[33] Fraud is a question of fact which must be proved.[34] The signatory of
the certification, Datu Samra Andam, A/Adm. Assistant II, Natural Resources
District No. XII-3, Marawi City, was not presented in court to testify on the due

123

issuance of the certification, and to testify on the details of his certification,

particularly the reason why the said office had no records of the data contained in
OCT No. P-658 or to testify on the fact of fraud, if any.
Thus, the Court holds that the evidence on record is insufficient to prove that
fraud was committed in the issuance of respondents Torrens title. Hence,
respondentsTorrens title is a valid evidence of his ownership of the land in
dispute.
On the other hand, petitioner claims ownership of the subject lot, which is
merely a portion of a larger property (1,800 square meters) that he allegedly
inherited from his father in 1952, by virtue of open, public and continuous
possession of the land in the concept of owner making it petitioners private
property. Hence, petitioner prays for reconveyance of the said property.
Article 434 of the Civil Code governs an action for reconveyance, thus:
Art. 434. In an action to recover, the property must be identified,
and the plaintiff must rely on the strength of his title and not on the
weakness of the defendants claim.

Under Article 434 of the Civil Code, to successfully maintain an action to

recover the ownership of a real property, the person who claims a better right to it
must prove two (2) things: first, the identity of the land claimed; and second, his
title thereto.[35]

In regard to the first requisite, in an accion reinvindicatoria, the person who

claims that he has a better right to the property must first fix the identity of the
land he is claiming by describing the location, area and boundaries thereof.[36]

In this case, petitioner claims that the property in dispute is part of his larger
property. However, petitioner failed to identify his larger property by providing

124

evidence of the metes and bounds thereof, so that the same may be compared
with the technical description contained in the title of respondent, which would
have shown whether the disputed property really formed part of petitioners
larger property. The appellate court correctly held in its Resolution dated May 13,
2004 that petitioners claim is solely supported by testimonial evidence, which did
not conclusively show the metes and bounds of petitioners larger property in
relation to the metes and bounds of the disputed property; thus, there is no
sufficient evidence on record to support petitioners claim that the disputed
property is part of his larger property.
In regard to the second requisite of title to property, both petitioner and
respondent separately claim that they are entitled to ownership of the property by
virtue of open, public, continuous and exclusive possession of the same in the
concept of owner. Petitioner claims that he inherited the subject property from
his father in 1952, while respondent claims that he acquired the property from his
grandmother Intumo Pagsidan, a portion thereof from his grandmothers helper
Totop Malacop pursuant to a court decision after litigating with
him.[37] Respondent has OCT No. P-658 to prove his title to the subject property,
while petitioner merely claims that the property is already his private land by
virtue of his open, public, continuous possession of the same in the concept of
owner.
The Court holds that petitioner failed to prove the requisites of reconveyance
as he failed to prove the identity of his larger property in relation to the disputed
property, and his claim of title by virtue of open, public and continuous possession
of the disputed property in the concept of owner is nebulous in the light of a
similar claim by respondent who holds a free patent title over the subject
property. As stated in Ybaez v. Intermediate Appellate Court,[38] it is relatively
easy to declare and claim that one owns and possesses public agricultural land, but
it is entirely a different matter to affirmatively declare and to prove before a court
of law that one actually possessed and cultivated the entire area to the exclusion
of other claimants who stand on equal footing under the Public Land
Act (Commonwealth Act No. 141, as amended) as any other pioneering claimants.
Further, petitioner contends that the Court of Appeals erred in ruling that
petitioners counterclaim is time-barred, since the one-year prescriptive period

125

does not apply when the person seeking annulment of title or reconveyance is in
possession of the lot, citing Heirs of Simplicio Santiago v. Heirs of Mariano E.
Santiago.[39] Petitioner also contends that the Court of Appeals erred in ruling that
the counterclaim in this case is a collateral attack on respondents title,
citing Cimafranca v. Intermediate Appellate Court.[40] Petitioner cites the case
of Heirs of Simplicio Santiago v. Heirs of Mariano E. Santiago,[41] which held that
a counterclaim can be considered a direct attack on the title.
The Court notes that the case of Cimafranca v. Intermediate Appellate
Court,[42] cited by the Court of Appeals to support its ruling that the prayer for
the cancellation of respondents title through a counterclaim included in
petitioners Answer is a collateral attack on the said title, is inapplicable to this
case. In Cimafranca, petitioners therein filed a complaint for Partition and
Damages, and respondents therein indirectly attacked the validity of the title
involved in their counterclaim. Hence, the Court ruled that a Torrenstitle cannot be
attacked collaterally, and the issue on its validity can be raised only in an action
expressly instituted for that purpose.
Here, the case cited by petitioner, Heirs of Simplicio Santiago v. Heirs of
Mariano E. Santiago, declared that the one-year prescriptive period does not
apply when the party seeking annulment of title or reconveyance is in possession
of the lot, as well as distinguished a collateral attack under Section 48 of PD No.
1529 from a direct attack, and held that a counterclaim may be considered as a
complaint or an independent action and can be considered a direct attack on the
title, thus:
The one-year prescriptive period, however, does not apply when
the person seeking annulment of title or reconveyance is in
possession of the lot. This is because the action partakes of a suit to
quiet title which is imprescriptible. In David v. Malay, we held that a
person in actual possession of a piece of land under claim of ownership
may wait until his possession is disturbed or his title is attacked before
taking steps to vindicate his right, and his undisturbed possession gives
him the continuing right to seek the aid of a court of equity to ascertain
and determine the nature of the adverse claim of a third party and its
effect on his title.

126

xxxx
Section 48 of P.D. 1529, the Property Registration Decree,
provides that a certificate of title shall not be subject to collateral
attack and cannot be altered, modified, or canceled except in a direct
proceeding. An action is an attack on a title when the object of the
action is to nullify the title, and thus challenge the judgment or
proceeding pursuant to which the title was decreed. The attack is
direct when the object of an action is to annul or set aside such
judgment, or enjoin its enforcement. On the other hand, the attack is
indirect or collateral when, in an action to obtain a different relief, an
attack on the judgment or proceeding is nevertheless made as an
incident thereof.
x x x A counterclaim can be considered a direct attack on the
title. In Development Bank of the Philippines v. Court Appeals, we ruled
on the validity of a certificate of title despite the fact that the nullity
thereof was raised only as a counterclaim. It was held that a
counterclaim is considered a complaint, only this time, it is the
original defendant who becomes the plaintiff. It stands on the same
footing and is to be tested by the same rules as if it were an
independent action. x x x[43]

The above ruling of the court on the definition of collateral attack under
Section 48 of P.D. No. 1529 was reiterated in Leyson v. Bontuyan,[44] Heirs of
Enrique Diaz v. Virata,[45] Arangote v. Maglunob,[46] and Catores v. Afidchao.[47]

Based on the foregoing, the Court holds that petitioners counterclaim for
cancellation of respondents title is not a collateral attack, but a direct attack on
the Torrens title of petitioner. However, the counterclaim seeking for the
cancellation of title and reconveyance of the subject property has prescribed as

127

petitioner has not proven actual possession and ownership of the property due to
his failure to prove the identity of his larger property that would show that the
disputed property is a part thereof, and his claim of title to the subject property
by virtue of open, public and continuous possession in the concept of owner is
nebulous in the light of a similar claim by respondent who holds a Torrens title to
the subject property.
Respondents original certificate of title was issued on May 22, 1981, while
the counterclaim was filed by petitioner on October 15, 1984, which is clearly
beyond the one-year prescriptive period.
In fine, the Court of Appeals did not err in confirming that respondent is the
owner of the parcel of land covered by OCT No. P-658.
WHEREFORE, the petition is DENIED. The Court of Appeals
decision dated August 15, 2003, and its Resolution dated May 13, 2004 in CAG.R. CV No. 63801, are hereby AFFIRMED. No costs. SO ORDERED.

128

FIRST DIVISION
ROGELIO J. JAKOSALEM and

G.R. No. 175025

GODOFREDO B. DULFO
Petitioners,

Present:

CORONA, C.
Chairperson,

J.,

LEONARDO-DE CASTRO,
- versus-

DEL CASTILLO,
PEREZ, and
SERENO, JJ.

ROBERTO S. BARANGAN,
Respondent.

Promulgated:
February 15, 2012

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

DECISION

DEL CASTILLO, J.:

This case exemplifies the age-old rule that the one who holds a Torrens title over a
lot is the one entitled to its possession.[1]

129

This Petition for Review on Certiorari[2] under Rule 45 of the Rules of Court assails
the Decision[3] dated August 3, 2006 and the Resolution[4] dated October 4, 2006 of the
Court of Appeals (CA) in CA-G.R. CV No. 79283.

Factual Antecedents

On August 13, 1966, respondent Col. Roberto S. Barangan (respondent Barangan)

entered into a Land Purchase Agreement[5] with Ireneo S. Labsilica of Citadel Realty
Corporation whereby respondent Barangan agreed to purchase on installment a 300
square meter parcel of land, covered by Transfer Certificate of Title (TCT) No.
165456,[6] located in Antipolo, Rizal.[7] Upon full payment of the purchase price, a Deed
of Absolute Sale[8] was executed on August 31, 1976 in his favor.[9] Consequently, the
old title, TCT No. 171453,[10] which was a transfer from TCT No. 165456,[11] was
cancelled and a new one, TCT No. N-10772,[12] was issued in his name.[13] Since then, he
has been dutifully paying real property taxes for the said property.[14] He was not,
however, able to physically occupy the subject property because as a member of the
Philippine Air Force, he was often assigned to various stations in the Philippines.[15]

On December 23, 1993, when he was about to retire from the government
service, respondent Barangan went to visit his property, where he was planning to build
a retirement home. It was only then that he discovered that it was being occupied by
petitioner Godofredo Dulfo (petitioner Dulfo) and his family.[16]
On February 4, 1994, respondent Barangan sent a letter[17] to petitioner Dulfo
demanding that he and his family vacate the subject property within 30 days. In reply,
petitioner Atty. Rogelio J. Jakosalem (petitioner Jakosalem), the son-in-law of petitioner
Dulfo, sent a letter[18] claiming ownership over the subject property.

130

On February 19, 1994, respondent Barangan filed with Barangay San Luis,
Antipolo, Rizal, a complaint for Violation of Presidential Decree No. 772 or the AntiSquatting Law against petitioners.[19] No settlement was reached; hence, the complaint
was filed before the Prosecutors Office of Rizal.[20] The case, however, was dismissed
because the issue of ownership must first be resolved in a civil action.[21]

On May 28, 1994, respondent Barangan commissioned Geodetic Engineer Lope C.

Jonco (Engr. Jonco) of J. Surveying Services to conduct a relocation survey of the subject
property based on the technical description appearing on respondent Barangans
TCT.[22] The relocation survey revealed that the property occupied by petitioner Dulfo
and his family is the same property covered by respondent Barangans title.[23]
On November 17, 1994, respondent Barangan filed a Complaint[24] for Recovery of
Possession, docketed as Civil Case No. 94-3423, against petitioners Dulfo and Jakosalem
with the Regional Trial Court (RTC), Branch 73, Antipolo City. Respondent Barangan
prayed that petitioners Dulfo and Jakosalem be ordered to vacate the subject property
and pay a monthly rental ofP3,000.00 for the use and occupancy of the subject property
from May 1979 until the time the subject property is vacated, plus moral and exemplary
damages and cost of suit.[25]
In their Answer with Counterclaim,[26] petitioners Dulfo and Jakosalem claimed
that the subject property was assigned to petitioner Jakosalem by Mr. Nicanor Samson
(Samson);[27]that they have been in possession of the subject property since May 8,
1979;[28] and that the property covered by respondent Barangans title is not the
property occupied by petitioner Dulfo and his family.[29]
During the trial, respondent Barangan testified for himself and presented three
witnesses: (1) Gregorio Estardo (Estardo), the caretaker of Villa Editha Subdivision and
Rodville Subdivision[30] employed by Citadel Realty Corporation, who stated under oath
that petitioner Dulfo used to rent the lot owned by Dionisia Ordialez (Estardos Aunt)
and that when petitioner Dulfo could no longer pay the rent, he and his family squatted
on the property of respondent Barangan;[31] (2) Candida Lawis, a representative of the

131

Municipal Assessor of Antipolo, Rizal, who confirmed that respondent Barangan is

included in the list of registered owners of lots in Villa Editha Subdivision III and Rodville
Subdivision[32] and; (3) Engr. Jonco, who testified that the property occupied by
petitioner Dulfo and his family and the property owned by respondent Barangan are
one and the same.[33]

The defense moved for the dismissal of the case on demurrer to evidence but was
denied by the RTC.[34] Thus, the defense presented petitioner Jakosalem who
maintained that he acquired the subject property by assignment from its previous
owner, Samson.[35] The defense likewise requested an ocular inspection of the subject
property to show that it is not the property covered by respondent Barangans
title.[36] However, instead of granting the request, the RTC issued an Order[37] dated
September 15, 2000 directing Engr. Romulo Unciano of the Department of Environment
and Natural Resources (DENR) Antipolo City to conduct a resurvey or replotting of land
based on the title of respondent Barangan and to submit a report within 15 days.[38] The
resurvey, however, did not push through because the defense in an Omnibus
Motion[39] dated September 20, 2000 abandoned its request for an ocular inspection
claiming that it was no longer necessary.[40]
Ruling of the Regional Trial Court
On March 19, 2003, the RTC rendered a Decision[41]against respondent Barangan
for failure to present sufficient evidence to prove his claim.[42] The RTC further said that
even if the subject property is owned by respondent Barangan, prescription and laches
have already set in; thus, respondent Barangan may no longer recover the same.[43] The
dispositive portion reads:

WHEREFORE, premises considered, for insufficiency of evidence

judgment is hereby rendered in favor of the defendant and against the
plaintiff. By way of counterclaim, the plaintiff is hereby ordered to pay
defendant Jakosalem the following amounts:

132

a.

P100,000 for moral damages;

b.

P50,000 as actual damages;

c.

P25,000 as exemplary damages;

d.
e.

P20,000 for litigation expenses; and

Costs of suit.

SO ORDERED.[44]

Ruling of the Court of Appeals

On appeal, the CA reversed the findings of the RTC. It found respondent

Barangan entitled to recover possession of the subject property because he was able to
sufficiently prove the identity of the subject property and that the same is owned by
him, as evidenced by TCT No. N-10772.[45] And since respondent Barangan was
deprived of possession of the subject property, the CA ruled that he is entitled to
reasonable compensation for the use of the property with interest, as well as the
payment of moral, temperate or moderate damages, and attorneys fees,[46] to wit:

WHEREFORE, premises considered, the appeal is GRANTED. The

Decision dated 19 March 2003 of the Regional Trial Court of Antipolo City,
Branch 73 in Civil Case No. 94-3423 is hereby REVERSED AND SET ASIDE and
a new one is rendered declaring, as follows:

133

1.
Appellant Roberto S. Barangan is entitled to the possession
of the subject property-Lot 11, Block 5, of the subdivision plan (LRC) Psd60846 situated in Rodville Subdivision, Barangay San Luis, Antipolo, Rizal,
covered by Transfer Certificate of Title No. N-10772 of the Registry of Deeds
for the Province of Rizal;

2.
Appellees and all persons deriving rights under them who are
occupants of the subject property are ordered to vacate the subject
property and surrender peaceful possession thereof to appellant;

3.
Appellees and all persons deriving rights under them who are
occupants of the subject property are ordered to pay to appellant
reasonable compensation for the use of the subject property in the amount
of Php3,000.00 per month from 17 November 1994 until they vacate the
subject property and turn over the possession to appellant, plus legal
interest of 12% per annum, from the date of promulgation of this Decision
until full payment of all said reasonable compensation; and

4.
Appellees are ordered to pay to appellant the amount of
Php100,000.00 as moral damages, Php50,000.00 as temperate or moderate
damages, and Php50,000.00 as attorneys fees.

Cost against appellees.

SO ORDERED.[47]

134

Issues

Hence, the instant petition with the following issues:

1.

WHETHER X X X [BARANGAN] WAS ABLE TO IDENTIFY

THE EXACT LOCATION OF HIS PROPERTY DESCRIBED UNDER TCT NO.
N-10772 [AND WHETHER] THE PROPERTY OCCUPIED BY DULFO [IS]
THE SAME PROPERTY CLAIMED BY [BARANGAN];

2.

WHETHER X X X [BARANGAN] HAS FULLY SATISFIED

THE REQUIREMENTS OF ARTICLE 434 OF THE CIVIL CODE X X X;

3.

WHETHER X X X THE AMOUNT OF PHP3,000.00 AS

MONTHLY LEASE RENTAL OR COMPENSATION FOR THE USE OF THE
PROPERTY IS REASONABLE;

4.

WHETHER X X X THE GRANT OF XXX MORAL,

TEMPERATE OR MODERATE [DAMAGES] AND ATTORNEYS FEES, X X X
IS IN ACCORDANCE WITH EVIDENCE AND LAW;

5.

WHETHER X X X LACHES AND PRESCRIPTION [HAVE]

BARRED THE FILING OF THIS CASE.[48]

135

Petitioners Arguments

Petitioners Dulfo and Jakosalem contend that the CA erred in reversing the
findings of the RTC as respondent Barangans property was not properly
identified.[49] They claim that the relocation survey conducted by Engr. Jonco violated
the agreement they made before the Barangay that the survey should be conducted in
the presence of both parties.[50] They also claim that the title number stated in the Land
Purchase Agreement is not the same number found in the Deed of Absolute
Sale.[51] They likewise insist that laches and prescription barred respondent Barangan
from filing the instant case.[52] Lastly, they contend that the damages ordered by the CA
are exorbitant, excessive and without factual and legal bases.[53]

Respondents Arguments

Respondent Barangan, on the other hand, argues that being the registered owner
of the subject property, he is entitled to its possession.[54] He maintains that
his Torrens title prevails over the Assignment of a Right[55] presented by
petitioners.[56] Moreover, laches and prescription do not apply against him as there was
no delay on his part to assert his right to the property.[57]

Our Ruling
The petition lacks merit.

Respondent Barangan is entitled to recover the

subject property

136

Article 434 of the Civil Code provides that [i]n an action to recover, the property
must be identified, and the plaintiff must rely on the strength of his title and not on the
weakness of the defendants claim. In other words, in order to recover possession, a
person must prove (1) the identity of the land claimed, and (2) his title.[58]

In this case, respondent Barangan was able to prove the identity of the property
and his title. To prove his title to the property, he presented in evidence the following
documents: (1) Land Purchase Agreement;[59] (2) Deed of Absolute Sale;[60] (3) and
a Torrens title registered under his name, TCT No. N-10772.[61] To prove the identity of
the property, he offered the testimonies of Engr. Jonco, who conducted the relocation
survey,[62] and Estardo, the caretaker of the subdivision, who showed respondent
Barangan the exact location of the subject property.[63] He likewise submitted as
evidence the Verification Survey Plan of Lot 11, Block 5, (LRC) Psd-60846, which was
plotted based on the technical description appearing on respondent Barangans title.[64]

Petitioners contention that the relocation survey was done in violation of their
agreement deserves scant consideration. Petitioners were informed[65] beforehand of
the scheduled relocation survey on May 29, 1994 but they opted not to attend. In fact,
as testified by respondent Barangan and Engr. Jonco, the relocation survey had to be
postponed several times because petitioners refused to participate.[66] By refusing to
attend and participate in the relocation survey, they are now estopped from
questioning the results of the relocation survey.[67]

Records also show that during the trial, the RTC ordered the DENR to conduct a
resurvey of the subject property; but petitioners moved that the same be abandoned
claiming that the resurvey would only delay the proceedings.[68] To us, the persistent
refusal of petitioners to participate in the relocation survey does not speak well of their
claim that they are not occupying respondent Barangans property. In fact, their
unjustified refusal only shows either of two things: (1) that they know for a fact that the
result would be detrimental to their case; or (2) that they have doubts that the result
would be in their favor.

137

Neither is there any discrepancy between the title number stated in the Land
Purchase Agreement and the Deed of Absolute Sale. As correctly found by the CA, TCT
No. 171453, the title stated in the Deed of Absolute Sale, is a transfer from TCT No.
165456, the title stated in the Land Purchase Agreement.[69] Hence, both TCTs pertain
to the same property.
Respondent Barangan is entitled to actual and
moral damages as well as attorneys fees

Since respondent Barangan was deprived of possession of the subject property,

he is entitled to reasonable compensation in the amount of P3,000.00[70] per month
from November 17, 1994, the date of judicial demand, up to the time petitioners vacate
the subject property. The legal interest of which shall be at the rate of 6% per annum
from November 17, 1994 and at the rate of 12% per annum from the time the
judgment of this Court becomes final and executory until the obligation is fully
satisfied.[71]

The award of temperate damages in the amount of P50,000.00, representing the

expenses for the relocation survey, however, must be deleted as these expenses were
not alleged in the complaint.[72]

For the mental anguish, sleepless nights, and serious anxiety suffered by
respondent Barangan, he is entitled to moral damages under Article 2217[73] of the Civil
Code but in the reduced amount of P50,000.00, which is the amount prayed for in the
complaint.[74]

Although not alleged in the complaint, we sustain the CAs award of P50,000.00 as
attorneys fees because it is sanctioned by law, specifically, paragraphs 2 and 11 of
Article 2208[75]of the Civil Code.[76]

138

Laches and prescription do not apply

Finally, as to the issue of laches and prescription, we agree with the CA that these
do not apply in the instant case. Jurisprudence consistently holds that prescription and
laches can not apply to registered land covered by the Torrens system because under
the Property Registration Decree, no title to registered land in derogation to that of the
registered owner shall be acquired by prescription or adverse possession.[77]

WHEREFORE, the petition is hereby DENIED. The assailed Decision dated August
3, 2006 and the Resolution dated October 4, 2006 of the Court of Appeals in CA-G.R. CV
No. 79283 are hereby AFFIRMED with MODIFICATIONS. The award of moral damages
is REDUCED to P50,000.00 while the award of temperate damages is DELETED. The
reasonable monthly rental of P3,000.00 shall earn legal interest of six percent (6%) per
annum from November 17, 1994, and at the rate of twelve percent (12%) per annum
from the finality of this judgment until the obligation is fully satisfied.

SO ORDERED.

139

ARTICLE 435
SECOND DIVISION

[G.R. No. 158563. June 30, 2005]

AIR TRANSPORTATION OFFICE (ATO) and MACTAN-CEBU INTERNATIONAL

AIRPORT AUTHORITY (MCIAA), petitioners, vs. APOLONIO GOPUCO,
JR., respondent.
DECISION
CHICO-NAZARIO, J.:
When private land is expropriated for a particular public use, and that
particular public use is abandoned, does its former owner acquire a cause of action
for recovery of the property?
The trial courts ruling in the negative was reversed by the Court of Appeals in
its Decision[1] of 28 February 2001. Hence this petition for review under Rule 45 of
the 1997 Rules of Civil Procedure of the said Decision of the court a quo, and its
Resolution[2] of 22 May 2003 dismissing petitioners motion for reconsideration.
The facts, as adduced from the records, are as follows:
Respondent Apolonio Gopuco, Jr. was the owner of Cadastral Lot No. 72
consisting of 995 square meters located in the vicinity of the Lahug Airport in Cebu
City covered by Transfer Certificate of Title (TCT) No. 13061-T.
The Lahug Airport had been turned over by the Unites States Army to the
Republic of the Philippines sometime in 1947 through the Surplus Property
Commission, which accepted it in behalf of the Philippine Government. In 1947,
the Surplus Property Commission was succeeded by the Bureau of Aeronautics,
which office was supplanted by the National Airport Corporation (NAC). The NAC
was in turn dissolved and replaced with the Civil Aeronautics Administration
(CAA).[3]
Sometime in 1949, the NAC informed the owners of the various lots
surrounding the Lahug Airport, including the herein respondent, that the
government was acquiring their lands for purposes of expansion. Some
landowners were convinced to sell their properties on the assurance that they

140

would be able to repurchase the same when these would no longer be used by the
airport. Others, including Gopuco, refused to do so.
Thus, on 16 April 1952, the CAA filed a complaint with the Court of First
Instance (CFI) of Cebu for the expropriation of Lot No. 72 and its neighboring
realties, docketed as Civil Case No. R-1881.
On 29 December 1961, the CFI promulgated a Decision,
1.
Declaring the expropriation of [the subject lots, including Lot No. 72]
justified and in lawful exercise of the right of eminent domain;
2.
Declaring . a balance of P1,990 in favor of Apolonio Go Puco, Jr. with legal
interest from November 16, 1947 until fully paid. ;
3.
After the payment of the foregoing financial obligation to the landowners,
directing the latter to deliver to the plaintiff the corresponding Transfer
Certificates of Title to their respective lots; and upon the presentation of the said
titles to the Register of Deeds, ordering the latter to cancel the same and to issue,
in lieu thereof, new Transfer Certificates of Title in the name of the plaintiff.[4]
No appeal was taken from the above Decision on Lot No. 72, and the judgment
of condemnation became final and executory. Thereafter, on 23 May 1962,
absolute title to Lot No. 72 was transferred to the Republic of the Philippines
under TCT No. 25030.[5]
Subsequently, when the Mactan International Airport commenced operations,
the Lahug Airport was ordered closed by then President Corazon C. Aquino in a
Memorandum of 29 November 1989.[6] Lot No. 72 was thus virtually abandoned.[7]
On 16 March 1990, Gopuco wrote[8] the Bureau of Air Transportation, through
the manager of the Lahug Airport, seeking the return of his lot and offering to
return the money previously received by him as payment for the
expropriation. This letter was ignored.[9]
In the same year, Congress passed Republic Act No. 6958 creating the MactanCebu International Airport Authority (MCIAA) and in part providing for the transfer
of the assets of the Lahug Airport thereto. Consequently, on 08 May 1992,
ownership of Lot No. 72 was transferred to MCIAA under TCT No. 120356. [10]

141

On 06 August 1992, Apolonio Gopuco, Jr. filed an amended complaint [11] for
recovery of ownership of Lot No. 72 against the Air Transportation Office[12] and
the Province of Cebu with the Regional Trial Court (RTC) of Cebu, Branch X,
docketed as Civil Case No. CEB-11914. He maintained that by virtue of the closure
of the Lahug Airport, the original purpose for which the property was expropriated
had ceased or otherwise been abandoned, and title to the property had therefore
reverted to him.
Gopuco further alleged that when the original judgment of expropriation had
been handed down, and before they could file an appeal thereto, the CAA offered
them a compromise settlement whereby they were assured that the expropriated
lots would be resold to them for the same price as when it was expropriated in the
event that the Lahug Airport would be abandoned. Gopuco claims to have
accepted this offer.[13] However, he failed to present any proof on this matter, and
later admitted that insofar as the said lot was concerned, no compromise
agreement was entered into by the government and the previous owners.[14]
Lastly, Gopuco asserted that he had come across several announcements in the
papers that the Lahug Airport was soon to be developed into a commercial
complex, which he took to be a scheme of the Province of Cebu to make
permanent the deprivation of his property.
On 20 May 1994, the trial court rendered a Decision [15] dismissing the
complaint and directing the herein respondent to pay the MCIAA exemplary
damages, litigation expenses and costs.
Aggrieved by the holding of the trial court, Gopuco appealed to the Court of
Appeals, which overturned the RTC decision, ordered the herein petitioners to
reconvey Lot No. 72 to Gopuco upon payment of the reasonable price as
determined by it, and deleted the award to the petitioners of exemplary damages,
litigation expenses and costs.
The Motion for Reconsideration was denied[16] on 22 May 2003, hence this
petition, which raises the following issues:
WHETHER THE COURT OF APPEALS ERRED IN HOLDING THAT RESPONDENT HAS
THE RIGHT TO RECLAIM OWNERSHIP OVER THE SUBJECT EXPROPRIATED LOT

142

BASED ON THE IMPORT OF THE DECEMBER 29, 1961 DECISION IN CIVIL CASE NO.
1881.
WHETHER THE COURT OF APPEALS ERRED IN DELETING THE AWARD OF LITIGATION
EXPENSES AND COSTS IN FAVOR OF PETITIONERS.
In deciding the original expropriation case that gave rise to the present
controversy, Civil Case No. R-1881, the CFI reasoned that the planned expansion of
the airport justified the exercise of eminent domain, thus:
As for the public purpose of the expropriation proceeding, it cannot be doubted.
Although the Mactan Airport is being constructed, it does not take away the actual
usefulness and importance of the Lahug Airport; it is handling the air traffic both
civilian and military. From it aircrafts fly to Mindanao and Visayas and pass thru it
on their return flights to the North and Manila. Then, no evidence was adduced to
show how soon is the Mactan Airport to be placed in operation and whether the
Lahug Airport will be closed immediately thereafter. It is for the other
departments of the Government to determine said matters. The Court cannot
substitute its judgment for those of the said departments or agencies. In the
absence of such a showing, the Court will presume that the Lahug Airport will
continue to be in operation.[17] (emphasis supplied)
By the time Gopuco had filed his action for recovery of ownership of Lot No. 72,
Lahug Airport had indeed ceased to operate. Nevertheless, the trial court held:
The fact of abandonment or closure of the Lahug Airport admitted by the
defendant did not by itself, result in the reversion of the subject property back to
the plaintiff. Nor did it vest in the plaintiff the right to demand reconveyance of
said property.
When real property has been acquired for public use unconditionally, either by
eminent domain or by purchase, the abandonment or non-use of the real
property, does not ipso facto give to the previous owner of said property any right
to recover the same (Fery vs. Municipality of Cabanatuan, 42 Phil. 28).[18]
In reversing the trial court, the Court of Appeals called attention to the fact that
both parties cited Fery v. Municipality of Cabanatuan,[19] which the trial court also

143

relied on in its Decision. The court a quo agreed in Gopucos interpretation

of Fery that when the CFI in Civil Case No. R-1881 held that,
. . . [T]hen, no evidence was adduced to show how soon is the Mactan Airport to
be placed in operation and whether the Lahug Airport will be closed immediately
thereafter.In the absence of such a showing, the Court will presume that the
Lahug Airport will continue to be in operation, . . . .[20]
the expropriation of the property was conditioned on its continued devotion to its
public purpose. Thus, although the MCIAA stressed that nothing in the judgment
of expropriation expressly stated that the lands would revert to their previous
owners should the public use be terminated or abandoned, the Court of Appeals
nevertheless ruled that,
. . . [W]hile, there is no explicit statement that the land is expropriated with the
condition that when the purpose is ended the property shall return to its owner,
the full import of the decision (in Civil Case No. R-1881) suggests that the
expropriation was granted because there is no clear showing that Lahug Airport
will be closed, the moment Mactan International Airport is put to operation. It
stands to reason that should that public use be abandoned, then the expropriated
property should revert back to its former owner.
Moreover, the foundation of the right to exercise the power of eminent domain is
genuine necessity. Condemnation is justified only if it is for the public good and
there is genuine necessity of a public character. Thus, when such genuine
necessity no longer exists as when the State abandons the property expropriated,
government interest must yield to the private right of the former land owner,
whose property right was disturbed as a consequence of the exercise of eminent
domain.
Justice, equity and fair play demand that the property should revert back to
plaintiff-appellant upon paying the reasonable value of the land to be based on the
prevailing market value at the time of judicial demand to recover the property. If
the State expects landowners to cooperate in its bid to take private property for its
public use, so must it apply also the same standard, to allow the landowner to
reclaim the property, now that the public use has been abandoned.[21]

144

In this petition, the MCIAA reiterates that the Republic of the Philippines validly
expropriated Lot No. 72 through the proceedings in Civil Case No. R-1881, the
judgment of which had long become final and executory. It further asserts that
said judgment vested absolute and unconditional title in the government,
specifically on the petitioners, there having been no condition whatsoever that the
property should revert to its owners in case the Lahug Airport should be
abandoned.
On the other hand, the respondent would have us sustain the appellate courts
interpretation of Fery as applied to the original judgment of expropriation, to the
effect that this was subject to the condition that the Lahug Airport will continue
to be in operation.
We resolve to grant the petition.
In Fery, the Court asked and answered the same question confronting us
now: When private land is expropriated for a particular public use, and that
particular public use is abandoned, does the land so expropriated return to its
former owner?[22]
The answer to that question depends upon the character of the title acquired by
the expropriator, whether it be the State, a province, a municipality, or a
corporation which has the right to acquire property under the power of eminent
domain. If, for example, land is expropriated for a particular purpose, with the
condition that when that purpose is ended or abandoned the property shall
return to its former owner, then, of course, when the purpose is terminated or
abandoned the former owner reacquires the property so expropriated. If, for
example, land is expropriated for a public street and the expropriation is granted
upon condition that the city can only use it for a public street, then, of course,
when the city abandons its use as a public street, it returns to the former owner,
unless there is some statutory provision to the contrary. . . If upon the contrary,
however, the decree of expropriation gives to the entity a fee simple title, then of
course, the land becomes the absolute property of the expropriator, whether it be
the State, a province, or municipality, and in that case the non-user does not have
the effect of defeating the title acquired by the expropriation proceedings. (10
R.C.L., 240, sec. 202; 20 C.J. 1234, secs. 593-599 and numerous cases cited;

145

Reichling vs. Covington Lumber Co., 57 Wash., 225; 135 Am. St. Rep., 976;
McConihay vs. Wright, 121 U.S., 201.)
When land has been acquired for public use in fee simple, unconditionally, either
by the exercise of eminent domain or by purchase, the former owner retains no
rights in the land, and the public use may be abandoned or the land may be
devoted to a different use, without any impairment of the estate or title
acquired, or any reversion to the former owner. (Fort Wayne vs. Lake Shore, etc.
Ry. Co., 132 Ind., 558; 18 L.R.A., 367.) (Emphases Supplied)[23]
Did the judgment of expropriation in Civil Case No. R-1881 vest absolute and
unconditional title in the government? We have already had occasion to rule on
this matter in Mactan-Cebu International Airport Authority v. Court of
Appeals,[24] which is a related action for reconveyance of a parcel of land also
subject of the expropriation proceedings in Civil Case No. R-1881. One of the
landowners affected by the said proceeding was Virginia Chiongbian, to whom the
CFI ordered the Republic of the Philippines to pay P34,415.00, with legal interest
computed from the time the government began using her land. Like the herein
respondent, she did not appeal from the CFIs judgment. Also like Gopuco, she
eventually filed for the reconveyance of her property when the airport
closed. Although she was upheld by both the RTC of Cebu and the Court of
Appeals, on appeal we held that the terms of the judgment (in Civil Case No. R1881) are clear and unequivocal and granted title to Lot No. 941 in fee simple to
the Republic of the Philippines. There was no condition imposed to the effect
that the lot would return to CHIONGBIAN or that CHIONGBIAN had a right to
repurchase the same if the purpose for which it was expropriated is ended or
abandoned or if the property was to be used other than as the Lahug
Airport.[25] Moreover, we held that although other lot owners were able to
successfully reacquire their lands by virtue of a compromise agreement, since
CHIONGBIAN was not a party to any such agreement, she could not validly invoke
the same.
The respondent would have us revisit this ruling for three reasons. First,
because he claims there is no showing that the government benefited from
entering into compromise agreements with the other lot owners; second, because
such a doctrine supposedly discriminates against those who have neither the

146

werewithal nor the savvy to contest the expropriation, or agree to modify the
judgment; and third, because there exists between the government and the
owners of expropriated realty an implied contract that the properties involved
will be used only for the public purpose for which they were acquired in the first
place.
As to respondents first and second arguments, we have time and again ruled
that a compromise agreement, when not contrary to law, public order, public
policy, morals, or good customs, is a valid contract which is the law between the
parties.[26] It is a contract perfected by mere consent,[27] whereby the parties,
making reciprocal concessions, avoid litigation or put an end to one already
commenced. It has the force of law and is conclusive between the parties,[28] and
courts will not relieve parties from obligations voluntarily assumed, simply
because their contracts turned out to be unwise.[29] Note that respondent has not
shown that any of the compromise agreements were in any way tainted with
illegality, irregularity or imprudence. Indeed, anyone who is not a party to a
contract or agreement cannot be bound by its terms, and cannot be affected by
it.[30] Since Gopuco was not a party to the compromise agreements, he cannot
legally invoke the same.[31]
Lastly, Gopuco argues that there is present, in cases of expropriation, an
implied contract that the properties will be used only for the public purpose for
which they were acquired. No such contract exists.
Eminent domain is generally described as the highest and most exact idea of
property remaining in the government that may be acquired for some public
purpose through a method in the nature of a forced purchase by the State. [32] Also
often referred to as expropriation and, with less frequency, as condemnation, it is,
like police power and taxation, an inherent power of sovereignty and need not be
clothed with any constitutional gear to exist; instead, provisions in our
Constitution on the subject are meant more to regulate, rather than to grant, the
exercise of the power. It is a right to take or reassert dominion over property
within the state for public use or to meet a public exigency and is said to be an
essential part of governance even in its most primitive form and thus inseparable
from sovereignty.[33] In fact, all separate interests of individuals in property are
held of the government under this tacit agreement or implied
reservation. Notwithstanding the grant to individuals, the eminent domain, the

147

highest and most exact idea of property, remains in the government, or in the
aggregate body of people in their sovereign capacity; and they have the right
to resume the possession of the property whenever the public interest so requires
it.[34]
The ubiquitous character of eminent domain is manifest in the nature of the
expropriation proceedings. Expropriation proceedings are not adversarial in the
conventional sense, for the condemning authority is not required to assert any
conflicting interest in the property. Thus, by filing the action, the condemnor in
effect merely serves notice that it is taking title and possession of the property,
and the defendant asserts title or interest in the property, not to prove a right to
possession, but to prove a right to compensation for the taking.[35]
The only direct constitutional qualification is thus that private property shall
not be taken for public use without just compensation.[36] This prescription is
intended to provide a safeguard against possible abuse and so to protect as well
the individual against whose property the power is sought to be enforced.[37]
In this case, the judgment on the propriety of the taking and the adequacy of
the compensation received have long become final. We have also already held
that the terms of that judgment granted title in fee simple to the Republic of the
Philippines. Therefore, pursuant to our ruling in Fery, as recently cited in Reyes v.
National Housing Authority,[38] no rights to Lot No. 72, either express or implied,
have been retained by the herein respondent.
We are not unaware of the ruling in Heirs of Timoteo Moreno v. Mactan-Cebu
International Airport Authority,[39] concerning still another set of owners of lots
declared expropriated in the judgment in Civil Case No. R-1881. As with
Chiongbian and the herein respondent, the owners of the lots therein did not
appeal the judgment of expropriation, but subsequently filed a complaint for
reconveyance. In ordering MCIAA to reconvey the said lots in their favor, we held
that the predicament of petitioners therein involved a constructive trust akin to
the implied trust referred to in Art. 1454[40] of the Civil Code.[41] However, we
qualified our Decision in that case, to the effect that,
We adhere to the principles enunciated in Fery and in Mactan-Cebu International
Airport Authority, and do not overrule them. Nonetheless the weight of their
import, particularly our ruling as regards the properties of respondent Chiongbian

148

in Mactan-Cebu International Airport Authority, must be commensurate to the

facts that were established therein as distinguished from those extant in the case
at bar. Chiongbian put forth inadmissible and inconclusive evidence, while in the
instant case we have preponderant proof as found by the trial court of the
existence of the right of repurchase in favor of petitioners.
Neither has Gopuco, in the present case, adduced any evidence at all concerning a
right of repurchase in his favor. Heirs of Moreno is thus not in point.
The trial court was thus correct in denying Gopucos claim for the reconveyance
of Lot No. 72 in his favor. However, for failure of the petitioners to present any
proof that this case was clearly unfounded or filed for purposes of harassment, or
that the herein respondent acted in gross and evident bad faith, the reimposition
of litigation expenses and costs has no basis. It is not sound public policy to set a
premium upon the right to litigate where such right is exercised in good faith, as in
the present case.[42]
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in
CA-G.R. SP No. 49898 dated 28 February 2001, and its Resolution of 22 May 2003
are hereby REVERSED and SET ASIDE. The Decision of RTC-Branch X of Cebu dated
20 May 1994 in Civil Case No. CEB-11914 is REINSTATED with the modification that
the award of exemplary damages, litigation expenses and costs are DELETED.
SO ORDERED.

149

EN BANC

[G.R. No. 161656. June 29, 2005]

REPUBLIC OF THE PHILIPPINES, GENERAL ROMEO ZULUETA,

COMMODORE EDGARDO GALEOS, ANTONIO CABALUNA,
DOROTEO MANTOS & FLORENCIO BELOTINDOS, petitioners, vs.
VICENTE G. LIM, respondent.
RESOLUTION
SANDOVAL-GUTIERREZ, J.:
Justice is the first virtue of social institutions.[1] When the state wields its
power of eminent domain, there arises a correlative obligation on its part to
pay the owner of the expropriated property a just compensation. If it fails,
there is a clear case of injustice that must be redressed. In the present
case, fifty-seven (57) years have lapsed from the time the Decision in the
subject expropriation proceedings became final, but still the Republic of the
Philippines, herein petitioner, has not compensated the owner of the
property. To tolerate such prolonged inaction on its part is to encourage
distrust and resentment among our people the very vices that corrode the
ties of civility and tempt men to act in ways they would otherwise shun.
A revisit of the pertinent facts in the instant case is imperative.
On September 5, 1938, the Republic of the Philippines (Republic)
instituted a special civil action for expropriation with the Court of First
Instance (CFI) of Cebu, docketed as Civil Case No. 781, involving Lots 932
and 939 of the Banilad Friar Land Estate, Lahug, Cebu City, for the purpose
of establishing a military reservation for the Philippine Army. Lot 932 was
registered in the name of Gervasia Denzon under Transfer Certificate of
Title (TCT) No. 14921 with an area of 25,137 square meters, while Lot 939
was in the name of Eulalia Denzon and covered by TCT No. 12560
consisting of 13,164 square meters.
After depositing P9,500.00 with the Philippine National Bank, pursuant to
the Order of the CFI dated October 19, 1938, the Republic took possession
of the lots. Thereafter, or on May 14, 1940, the CFI rendered its Decision
ordering the Republic to pay the Denzons the sum of P4,062.10 as just
compensation.

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The Denzons interposed an appeal to the Court of Appeals but it was

dismissed on March 11, 1948. An entry of judgment was made on April 5,
1948.
In 1950, Jose Galeos, one of the heirs of the Denzons, filed with the
National Airports Corporation a claim for rentals for the two lots, but it
denied knowledge of the matter. Another heir, Nestor Belocura, brought
the claim to the Office of then President Carlos Garcia who wrote the Civil
Aeronautics Administration and the Secretary of National Defense to
expedite action on said claim. On September 6, 1961, Lt. Manuel Cabal
rejected the claim but expressed willingness to pay the appraised value of
the lots within a reasonable time.
For failure of the Republic to pay for the lots, on September 20, 1961, the
Denzons successors-in-interest, Francisca Galeos-Valdehueza and
Josefina Galeos-Panerio,[2] filed with the same CFI an action for recovery
of possession with damages against the Republic and officers of the Armed
Forces of the Philippines in possession of the property. The case was
docketed as Civil Case No. R-7208.
In the interim or on November 9, 1961, TCT Nos. 23934 and 23935
covering Lots 932 and 939 were issued in the names of Francisca
Valdehueza and Josefina Panerio, respectively. Annotated thereon was the
phrase subject to the priority of the National Airports Corporation to acquire
said parcels of land, Lots 932 and 939 upon previous payment of a
reasonable market value.
On July 31, 1962, the CFI promulgated its Decision in favor of
Valdehueza and Panerio, holding that they are the owners and have
retained their right as such over Lots 932 and 939 because of the Republics
failure to pay the amount of P4,062.10, adjudged in the expropriation
proceedings. However, in view of the annotation on their land titles, they
were ordered to execute a deed of sale in favor of the Republic. In view of
the differences in money value from 1940 up to the present, the court
adjusted the market value at P16,248.40, to be paid with 6% interest per
annum from April 5, 1948, date of entry in the expropriation proceedings,
until full payment.
After their motion for reconsideration was denied, Valdehueza and
Panerio appealed from the CFI Decision, in view of the amount in

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controversy, directly to this Court. The case was docketed as No. L21032.[3] On May 19, 1966, this Court rendered its Decision affirming the
CFI Decision. It held that Valdehueza and Panerio are still the registered
owners of Lots 932 and 939, there having been no payment of just
compensation by the Republic. Apparently, this Court found nothing in the
records to show that the Republic paid the owners or their successors-ininterest according to the CFI decision. While it deposited the amount
of P9,500,00, and said deposit was allegedly disbursed, however, the
payees could not be ascertained.
Notwithstanding the above finding, this Court still ruled that Valdehueza
and Panerio are not entitled to recover possession of the lots but may only
demand the payment of their fair market value, ratiocinating as follows:
Appellants would contend that: (1) possession of Lots 932 and 939 should be
restored to them as owners of the same; (2) the Republic should be ordered to pay
rentals for the use of said lots, plus attorneys fees; and (3)the court a quo in the
present suit had no power to fix the value of the lots and order the execution of the
deed of sale after payment.
It is true that plaintiffs are still the registered owners of the land, there not having
been a transfer of said lots in favor of the Government. The records do not show
that the Government paid the owners or their successors-in-interest according to the
1940 CFI decision although, as stated, P9,500.00 was deposited by it, and said
deposit had been disbursed. With the records lost, however, it cannot be known
who received the money (Exh. 14 says: It is further certified that the corresponding
Vouchers and pertinent Journal and Cash Book were destroyed during the last
World War, and therefore the names of the payees concerned cannot be
ascertained.) And the Government now admits that there is no available
record showing that payment for the value of the lots in question has been
made (Stipulation of Facts, par. 9, Rec. on Appeal, p. 28).
The points in dispute are whether such payment can still be made and, if so, in
what amount. Said lots have been the subject of expropriation
proceedings. By final and executory judgment in said proceedings, they were
condemned for public use, as part of an airport, and ordered sold to the
Government. In fact, the abovementioned title certificates secured by plaintiffs
over said lots contained annotations of the right of the National Airports

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Corporation (now CAA) to pay for and acquire them. It follows that both by
virtue of the judgment, long final, in the expropriation suit, as well as the
annotations upon their title certificates, plaintiffs are not entitled to recover
possession of their expropriated lots which are still devoted to the public use
for which they were expropriated but only to demand the fair market value
of the same.
Meanwhile, in 1964, Valdehueza and Panerio mortgaged Lot 932
to Vicente Lim, herein respondent,[4] as security for their loans. For their
failure to pay Lim despite demand, he had the mortgage foreclosed in
1976. Thus, TCT No. 23934 was cancelled, and in lieu thereof, TCT No.
63894 was issued in his name.
On August 20, 1992, respondent Lim filed a complaint for quieting of
title with the Regional Trial Court (RTC), Branch 10, Cebu City, against
General Romeo Zulueta, as Commander of the Armed Forces of the
Philippines, Commodore Edgardo Galeos, as Commander of Naval District
V of the Philippine Navy, Antonio Cabaluna, Doroteo Mantos and Florencio
Belotindos, herein petitioners. Subsequently, he amended the complaint to
implead the Republic.
On May 4, 2001, the RTC rendered a decision in favor of respondent,
thus:
WHEREFORE, judgment is hereby rendered in favor of plaintiff Vicente Lim
and against all defendants, public and private, declaring plaintiff Vicente Lim the
absolute and exclusive owner of Lot No. 932 with all the rights of an absolute
owner including the right to possession. The monetary claims in the complaint
and in the counter claims contained in the answer of defendants are ordered
Dismissed.
Petitioners elevated the case to the Court of Appeals, docketed therein
as CA-G.R. CV No. 72915. In its Decision[5] dated September 18, 2003, the
Appellate Court sustained the RTC Decision, thus:
Obviously, defendant-appellant Republic evaded its duty of paying what was
due to the landowners. The expropriation proceedings had already become
final in the late 1940s and yet, up to now, or more than fifty (50) years after,
the Republic had not yet paid the compensation fixed by the court while

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continuously reaping benefits from the expropriated property to the prejudice

of the landowner. x x x. This is contrary to the rules of fair play because the
concept of just compensation embraces not only the correct determination of
the amount to be paid to the owners of the land, but also the payment for the
land within a reasonable time from its taking. Without prompt payment,
compensation cannot be considered just for the property owner is made to
suffer the consequence of being immediately deprived of his land while being
made to wait for a decade or more, in this case more than 50 years, before
actually receiving the amount necessary to cope with the loss. To allow the
taking of the landowners properties, and in the meantime leave them emptyhanded by withholding payment of compensation while the government
speculates on whether or not it will pursue expropriation, or worse, for
government to subsequently decide to abandon the property and return it to
the landowners, is undoubtedly an oppressive exercise of eminent domain that
must never be sanctioned. (Land Bank of the Philippines vs. Court of Appeals, 258
SCRA 404).
x x x

x x

An action to quiet title is a common law remedy for the removal of any cloud or
doubt or uncertainty on the title to real property. It is essential for the plaintiff or
complainant to have a legal or equitable title or interest in the real property, which
is the subject matter of the action. Also the deed, claim, encumbrance or
proceeding that is being alleged as cloud on plaintiffs title must be shown to be in
fact invalid or inoperative despite its prima facie appearance of validity or legal
efficacy (Robles vs. Court of Appeals, 328 SCRA 97). In view of the foregoing
discussion, clearly, the claim of defendant-appellant Republic constitutes a
cloud, doubt or uncertainty on the title of plaintiff-appellee Vicente Lim that
can be removed by an action to quiet title.
WHEREFORE, in view of the foregoing, and finding no reversible error in the
appealed May 4, 2001 Decision of Branch 9, Regional Trial Court of Cebu City, in
Civil Case No. CEB-12701, the said decision isUPHELD AND
AFFIRMED. Accordingly, the appeal is DISMISSED for lack of merit.
Undaunted, petitioners, through the Office of the Solicitor General, filed
with this Court a petition for review on certiorari alleging that the Republic

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has remained the owner of Lot 932 as held by this Court in Valdehueza vs.
Republic.[6]
In our Resolution dated March 1, 2004, we denied the petition outright on
the ground that the Court of Appeals did not commit a reversible
error. Petitioners filed an urgent motion for reconsideration but we denied
the same with finality in our Resolution of May 17, 2004.
On May 18, 2004, respondent filed an ex-parte motion for the issuance
of an entry of judgment. We only noted the motion in our Resolution of July
12, 2004.
On July 7, 2004, petitioners filed an urgent plea/motion for clarification,
which is actually a second motion for reconsideration. Thus, in our
Resolution of September 6, 2004, we simply noted without action the motion
considering that the instant petition was already denied with finality in our
Resolution of May 17, 2004.
On October 29, 2004, petitioners filed a very urgent motion for leave to
file a motion for reconsideration of our Resolution dated September 6, 2004
(with prayer to refer the case to the En Banc). They maintain that the
Republics right of ownership has been settled in Valdehueza.
The basic issue for our resolution is whether the Republic has retained
ownership of Lot 932 despite its failure to pay respondents predecessorsin-interest the just compensation therefor pursuant to the judgment of the
CFI rendered as early as May 14, 1940.
Initially, we must rule on the procedural obstacle.
While we commend the Republic for the zeal with which it pursues the
present case, we reiterate that its urgent motion for clarification filed on July
7, 2004 is actually a second motion for reconsideration. This motion is
prohibited under Section 2, Rule 52, of the 1997 Rules of Civil Procedure,
as amended, which provides:
Sec. 2. Second motion for reconsideration. No second motion for reconsideration
of a judgment or final resolution by the same party shall be entertained.
Consequently, as mentioned earlier, we simply noted without action the
motion since petitioners petition was already denied with finality.

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Considering the Republics urgent and serious insistence that it is still the
owner of Lot 932 and in the interest of justice, we take another hard look at
the controversial issue in order to determine the veracity of petitioners
stance.
One of the basic principles enshrined in our Constitution is that no
person shall be deprived of his private property without due process of law;
and in expropriation cases, an essential element of due process is that there
must be just compensation whenever private property is taken for public
use.[7] Accordingly, Section 9, Article III, of our Constitution mandates:
Private property shall not be taken for public use without just
compensation.
The Republic disregarded the foregoing provision when it failed and
refused to pay respondents predecessors-in-interest the just compensation
for Lots 932 and 939. The length of time and the manner with which it
evaded payment demonstrate its arbitrary high-handedness and
confiscatory attitude. The final judgment in the expropriation proceedings
(Civil Case No. 781) was entered on April 5, 1948. More than half of a
century has passed, yet, to this day, the landowner, now respondent, has
remained empty-handed. Undoubtedly, over 50 years of delayed payment
cannot, in any way, be viewed as fair. This is more so when such delay is
accompanied by bureaucratic hassles. Apparent from Valdehueza is the
fact that respondents predecessors-in-interest were given a run around by
the Republics officials and agents. In 1950, despite the benefits it derived
from the use of the two lots, the National Airports Corporation denied
knowledge of the claim of respondents predecessors-in-interest. Even
President Garcia, who sent a letter to the Civil Aeronautics Administration
and the Secretary of National Defense to expedite the payment, failed in
granting relief to them. And, on September 6, 1961, while the Chief of Staff
of the Armed Forces expressed willingness to pay the appraised value of
the lots, nothing happened.
The Court of Appeals is correct in saying that Republics delay is
contrary to the rules of fair play, as just compensation embraces not
only the correct determination of the amount to be paid to the owners
of the land, but also the payment for the land within a reasonable time
from its taking. Without prompt payment, compensation cannot be
considered just. In jurisdictions similar to ours, where an entry to the

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expropriated property precedes the payment of compensation, it has been

held that if the compensation is not paid in a reasonable time, the party
may be treated as a trespasser ab initio.[8]
Corollarily, in Provincial Government of Sorsogon vs. Vda. De
Villaroya,[9] similar to the present case, this Court expressed its disgust over
the governments vexatious delay in the payment of just compensation,
thus:
The petitioners have been waiting for more than thirty years to be paid for
their land which was taken for use as a public high school. As a matter of fair
procedure, it is the duty of the Government, whenever it takes property from private
persons against their will, to supply all required documentation and facilitate
payment of just compensation. The imposition of unreasonable requirements
and vexatious delays before effecting payment is not only galling and arbitrary
but a rich source of discontent with government. There should be some kind of
swift and effective recourse against unfeeling and uncaring acts of middle or
lower level bureaucrats.
We feel the same way in the instant case.
More than anything else, however, it is the obstinacy of the Republic that
prompted us to dismiss its petition outright. As early as May 19, 1966,
in Valdehueza, this Court mandated the Republic to pay respondents
predecessors-in-interest the sum of P16,248.40 as reasonable market
value of the two lots in question. Unfortunately, it did not comply and
allowed several decades to pass without obeying this Courts
mandate. Such prolonged obstinacy bespeaks of lack of respect to private
rights and to the rule of law, which we cannot countenance. It is tantamount
to confiscation of private property. While it is true that all private properties
are subject to the need of government, and the government may take them
whenever the necessity or the exigency of the occasion demands, however,
the Constitution guarantees that when this governmental right of
expropriation is exercised, it shall be attended by compensation. [10] From
the taking of private property by the government under the power of eminent
domain, there arises an implied promise to compensate the owner for his
loss.[11]

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Significantly, the above-mentioned provision of Section 9, Article III of the

Constitution is not a grant but a limitation of power. This limiting function is
in keeping with the philosophy of the Bill of Rights against the arbitrary
exercise of governmental powers to the detriment of the individuals
rights.
Given
this function, the provision should therefore
be strictly interpreted against the expropriator, the government,
and liberally in favor of the property owner.[12]
Ironically, in opposing respondents claim, the Republic is invoking this
Courts Decision in Valdehueza, a Decision it utterly defied. How could the
Republic acquire ownership over Lot 932 when it has not paid its owner the
just compensation, required by law, for more than 50 years? The
recognized rule is that title to the property expropriated shall pass from the
owner to the expropriator only upon full payment of the just
compensation. Jurisprudence on this settled principle is consistent both
here and in other democratic jurisdictions. In Association of Small
Landowners in the Philippines, Inc. et al., vs. Secretary of Agrarian
Reform,[13] thus:
Title to property which is the subject of condemnation proceedings does not
vest the condemnor until the judgment fixing just compensation is entered and
paid, but the condemnors title relates back to the date on which the petition under
the Eminent Domain Act, or the commissioners report under the Local
Improvement Act, is filed.
x x x Although the right to appropriate and use land taken for a canal is
complete at the time of entry, title to the property taken remains in the owner
until payment is actually made. (Emphasis supplied.)
In Kennedy v. Indianapolis, the US Supreme Court cited several cases holding that
title to property does not pass to the condemnor until just compensation had actually
been made. In fact, the decisions appear to be uniform to this effect. As early as
1838, in Rubottom v. McLure, it was held that actual payment to the owner of
the condemned property was a condition precedent to the investment of the
title to the property in the State albeit not to the appropriation of it to public
use. In Rexford v. Knight, the Court of Appeals of New York said that the
construction upon the statutes was that the fee did not vest in the State until the
payment of the compensation although the authority to enter upon and appropriate

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the land was complete prior to the payment. Kennedy further said that both on
principle and authority the rule is . . . that the right to enter on and use the
property is complete, as soon as the property is actually appropriated under
the authority of law for a public use, but that the title does not pass from the
owner without his consent, until just compensation has been made to him.
Our own Supreme Court has held in Visayan Refining Co. v. Camus and Paredes,
that:
If the laws which we have exhibited or cited in the preceding discussion are
attentively examined it will be apparent that the method of expropriation
adopted in this jurisdiction is such as to afford absolute reassurance that no
piece of land can be finally and irrevocably taken from an unwilling owner
until compensation is paid...(Emphasis supplied.)
Clearly, without full payment of just compensation, there can be no
transfer of title from the landowner to the expropriator. Otherwise stated, the
Republics acquisition of ownership is conditioned upon the full payment of
just compensation within a reasonable time.[14]
Significantly, in Municipality of Bian v. Garcia[15] this Court ruled that the
expropriation of lands consists of two stages, to wit:
x x x The first is concerned with the determination of the authority of the plaintiff
to exercise the power of eminent domain and the propriety of its exercise in the
context of the facts involved in the suit. It ends with an order, if not of dismissal of
the action, of condemnation declaring that the plaintiff has a lawful right to take
the property sought to be condemned, for the public use or purpose described in the
complaint, upon the payment of just compensation to be determined as of the date
of the filing of the complaint x x x.
The second phase of the eminent domain action is concerned with the determination
by the court of the just compensation for the property sought to be taken. This is
done by the court with the assistance of not more than three (3) commissioners.
x x x.
It is only upon the completion of these two stages that expropriation is
said to have been completed. In Republic v. Salem Investment
Corporation,[16] we ruled that, the process is not completed until payment of

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just compensation. Thus, here, the failure of the Republic to pay

respondent and his predecessors-in-interest for a period of 57 years
rendered the expropriation process incomplete.
The Republic now argues that under Valdehueza, respondent is not
entitled to recover possession of Lot 932 but only to demand payment of its
fair market value. Of course, we are aware of the doctrine that nonpayment of just compensation (in an expropriation proceedings) does not
entitle the private landowners to recover possession of the expropriated
lots. This is our ruling in the recent cases of Republic of the Philippines vs.
Court of Appeals, et al.,[17] and Reyes vs. National Housing
Authority.[18] However, the facts of the present case do not justify its
application. It bears stressing that the Republic was ordered to pay just
compensation twice, the first was in the expropriation proceedings and
the second, in Valdehueza. Fifty-seven (57) years have passed since
then. We cannot but construe the Republics failure to pay just
compensation as a deliberate refusal on its part. Under such
circumstance, recovery of possession is in order. In several jurisdictions,
the courts held that recovery of possession may be had when property has
been wrongfully taken or is wrongfully retained by one claiming to act under
the power of eminent domain[19] or where a rightful entry is made and the
party condemning refuses to pay the compensation which has been
assessed or agreed upon;[20]or fails or refuses to have the compensation
assessed and paid.[21]
The Republic also contends that where there have been constructions
being used by the military, as in this case, public interest demands that the
present suit should not be sustained.
It must be emphasized that an individual cannot be deprived of his
property for the public convenience.[22] In Association of Small Landowners
in the Philippines, Inc. vs. Secretary of Agrarian Reform,[23] we ruled:
One of the basic principles of the democratic system is that where the rights of the
individual are concerned, the end does not justify the means. It is not enough that
there be a valid objective; it is also necessary that the means employed to pursue it
be in keeping with the Constitution. Mere expediency will not excuse constitutional
shortcuts. There is no question that not even the strongest moral conviction or
the most urgent public need, subject only to a few notable exceptions, will

160

excuse the bypassing of an individual's rights. It is no exaggeration to say that

a person invoking a right guaranteed under Article III of the Constitution is a
majority of one even as against the rest of the nation who would deny him that
right.
The right covers the persons life, his liberty and his property under Section 1
of Article III of the Constitution. With regard to his property, the owner
enjoys the added protection of Section 9, which reaffirms the familiar rule that
private property shall not be taken for public use without just compensation.
The Republics assertion that the defense of the State will be in grave
danger if we shall order the reversion of Lot 932 to respondent is an
overstatement. First, Lot 932 had ceased to operate as an airport. What
remains in the site is just the National Historical Institutes marking stating
that Lot 932 is the former location of Lahug Airport. And second, there are
only thirteen (13) structures located on Lot 932, eight (8) of which
are residence apartments of military personnel. Only two (2) buildings are
actually used as training centers. Thus, practically speaking, the reversion
of Lot 932 to respondent will only affect a handful of military personnel. It
will not result to irreparable damage or damage beyond pecuniary
estimation, as what the Republic vehemently claims.
We thus rule that the special circumstances prevailing in this case entitle
respondent to recover possession of the expropriated lot from the Republic.
Unless this form of swift and effective relief is granted to him, the grave
injustice committed against his predecessors-in-interest, though no fault or
negligence on their part, will be perpetuated. Let this case, therefore, serve
as a wake-up call to the Republic that in the exercise of its power of eminent
domain, necessarily in derogation of private rights, it must comply with the
Constitutional limitations. This Court, as the guardian of the peoples right,
will not stand still in the face of the Republics oppressive and confiscatory
taking of private property, as in this case.
At this point, it may be argued that respondent Vicente Lim acted in bad
faith in entering into a contract of mortgage with Valdehueza and Panerio
despite the clear annotation in TCT No. 23934 that Lot 932 is subject to
the priority of the National Airports Corporation [to acquire said
parcels of land] x x x upon previous payment of a reasonable market
value.

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The issue of whether or not respondent acted in bad faith is immaterial

considering that the Republic did not complete the expropriation process. In
short, it failed to perfect its title over Lot 932 by its failure to pay just
compensation. The issue of bad faith would have assumed relevance if the
Republic actually acquired title over Lot 932. In such a case, even if
respondents title was registered first, it would be the Republics title or right
of ownership that shall be upheld. But now, assuming that respondent
was in bad faith, can such fact vest upon the Republic a better title
over Lot 932? We believe not. This is because in the first place, the
Republic has no title to speak of.
At any rate, assuming that respondent had indeed knowledge of the
annotation, still nothing would have prevented him from entering into a
mortgage contract involving Lot 932 while the expropriation proceeding was
pending. Any person who deals with a property subject of an
expropriation does so at his own risk, taking into account the ultimate
possibility of losing the property in favor of the government. Here, the
annotation merely served as a caveat that the Republic had
a preferential right to acquire Lot 932 upon its payment of a reasonable
market value. It did not proscribe Valdehueza and Panerio from exercising
their rights of ownership including their right to mortgage or even to dispose
of their property. In Republic vs. Salem Investment Corporation,[24] we
recognized the owners absolute right over his property pending completion
of the expropriation proceeding, thus:
It is only upon the completion of these two stages that expropriation is said to have
been completed. Moreover, it is only upon payment of just compensation that title
over the property passes to the government. Therefore, until the action for
expropriation has been completed and terminated, ownership over the property
being expropriated remains with the registered owner. Consequently, the latter
can exercise all rights pertaining to an owner, including the right to dispose of
his property subject to the power of the State ultimately to acquire it through
expropriation.
It bears emphasis that when Valdehueza and Panerio mortgaged Lot
932 to respondent in 1964, they were still the owners thereof and their title
had not yet passed to the petitioner Republic. In fact, it never did. Such title
or ownership was rendered conclusive when we categorically ruled

162

in Valdehueza that: It is true that plaintiffs are still the registered

owners of the land, there not having been a transfer of said lots in
favor of the Government.
For respondents part, it is reasonable to conclude that he entered into
the contract of mortgage with Valdehueza and Panerio fully aware of the
extent of his right as a mortgagee. A mortgage is merely an accessory
contract intended to secure the performance of the principal obligation. One
of its characteristics is that it is inseparable from the property. It adheres to
the property regardless of who its owner may subsequently
be.[25] Respondent must have known that even if Lot 932 is ultimately
expropriated by the Republic, still, his right as a mortgagee is protected. In
this regard, Article 2127 of the Civil Code provides:
Art. 2127. The mortgage extends to the natural accessions, to the improvements,
growing fruits, and the rents or income not yet received when the obligation
becomes due, and to the amount of the indemnity granted or owing to the
proprietor from the insurers of the property mortgaged, or in virtue of
expropriation for public use, with the declarations, amplifications, and limitations
established by law, whether the estate remains in the possession of the
mortgagor or it passes in the hands of a third person.
In summation, while the prevailing doctrine is that the non-payment of
just compensation does not entitle the private landowner to recover
possession of the expropriated lots,[26] however, in cases where the
government failed to pay just compensation within five (5)[27] years from
the finality of the judgment in the expropriation proceedings, the
owners concerned shall have the right to recover possession of their
property. This is in consonance with the principle that the government
cannot keep the property and dishonor the judgment.[28] To be sure, the
five-year period limitation will encourage the government to pay just
compensation punctually. This is in keeping with justice and equity. After
all, it is the duty of the government, whenever it takes property from private
persons against their will, to facilitate the payment of just
compensation. In Cosculluela v. Court of Appeals,[29] we defined just
compensation as not only the correct determination of the amount to be paid
to the property owner but also the payment of the property within

163

a reasonable time. Without prompt payment, compensation cannot be

considered just.
WHEREFORE, the assailed Decision of the Court of Appeals in CA-G.R.
CV No. 72915 is AFFIRMED in toto.
The Republics motion for reconsideration of our Resolution dated March
1, 2004 is DENIED with FINALITY. No further pleadings will be allowed.
Let an entry of judgment be made in this case.
SO ORDERED.

164

Republic of the Philippines

Supreme Court
Manila
FIRST DIVISION

NATIONAL POWER
CORPORATION,
Petitioner,

- versus -

G.R. No. 165828

Present:
CORONA, C.J., Chairperson,
LEONARDO-DE CASTRO,
BERSAMIN,
DEL CASTILLO, and
VILLARAMA, JR., JJ.

HEIRS OF MACABANGKIT
SANGKAY, namely: CEBU,
Promulgated:
BATOWA-AN, SAYANA,
NASSER, MANTA, EDGAR,
PUTRI , MONGKOY*, and
August 24, 2011
AMIR, all surnamed
MACABANGKIT,
Respondents.
x-----------------------------------------------------------------------------------------x
DECISION

BERSAMIN, J.:
Private property shall not be taken for public use without just
compensation.
Section 9, Article III, 1987 Constitution
The application of this provision of the Constitution is the focus of this
appeal.

165

Petitioner National Power Corporation (NPC) seeks the review

on certiorari of the decision promulgated on October 5, 2004,[1] whereby the Court
of Appeals (CA) affirmed the decision dated August 13, 1999 and the supplemental
decision dated August 18, 1999, ordering NPC to pay just compensation to the
respondents, both rendered by the Regional Trial Court, Branch 1, in Iligan City
(RTC).
Antecedents
Pursuant to its legal mandate under Republic Act No. 6395 (An Act Revising
the Charter of the National Power Corporation), NPC undertook the Agus River
Hydroelectric Power Plant Project in the 1970s to generate electricity for Mindanao.
The project included the construction of several underground tunnels to be used in
diverting the water flow from the Agus River to the hydroelectric plants.[2]
On November 21, 1997, the respondents, namely: Cebu, Bangowa-an,
Sayana, Nasser, Manta, Edgar, Putri, Mongkoy and Amir, all surnamed
Macabangkit (Heirs of Macabangkit), as the owners of land with an area
of 221,573 square meters situated in Ditucalan, Iligan City, sued NPC in the RTC
for the recovery of damages and of the property, with the alternative prayer for the
payment of just compensation.[3] They alleged that they had belatedly discovered
that one of the underground tunnels of NPC that diverted the water flow of the Agus
River for the operation of the Hydroelectric Project in Agus V, Agus VI and Agus
VII traversed their land; that their discovery had occurred in 1995 after Atty. Saidali
C. Gandamra, President of the Federation of Arabic Madaris School, had rejected
their offer to sell the land because of the danger the underground tunnel might pose
to the proposed Arabic Language Training Center and Muslims Skills Development
Center; that such rejection had been followed by the withdrawal by Global Asia
Management and Resource Corporation from developing the land into a housing
project for the same reason; that Al-Amanah Islamic Investment Bank of the
Philippines had also refused to accept their land as collateral because of the
presence of the underground tunnel; that the underground tunnel had been
constructed without their knowledge and consent; that the presence of the tunnel
deprived them of the agricultural, commercial, industrial and residential value of
their land; and that their land had also become an unsafe place for habitation
because of the loud sound of the water rushing through the tunnel and the constant
shaking of the ground, forcing them and their workers to relocate to safer grounds.

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In its answer with counterclaim,[4] NPC countered that the Heirs of

Macabangkit had no right to compensation under section 3(f) of Republic Act No.
6395, under which a mere legal easement on their land was established; that their
cause of action, should they be entitled to compensation, already prescribed due to
the tunnel having been constructed in 1979; and that by reason of the tunnel being
an apparent and continuous easement, any action arising from such easement
prescribed in five years.
Ruling of the RTC
On July 23, 1998, an ocular inspection of the land that was conducted by RTC
Judge Mamindiara P. Mangotara and the representatives of the parties resulted in
the following observations and findings:
a.

That a concrete post which is about two feet in length from the
ground which according to the claimants is the middle point of the
tunnel.

b.

That at least three fruit bearing durian trees were uprooted and as a
result of the construction by the defendant of the tunnel and about one
hundred coconuts planted died.

c.

That underground tunnel was constructed therein.[5]

After trial, the RTC ruled in favor of the plaintiffs (Heirs of

Macabangkit),[6] decreeing:

WHEREFORE, premises considered:

1. The prayer for the removal or dismantling of defendants
tunnel is denied. However, defendant is hereby directed and ordered:

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a)To pay plaintiffs land with a total area of 227,065 square

meters, at the rate of FIVE HUNDRED (P500.00) PESOS per
square meter, or a total of ONE HUNDRED THIRTEEN MILLION
FIVE HUNDRED THIRTY TWO THOUSAND AND FIVE
HUNDRED (P113,532,500.00), PESOS, plus interest, as actual
damages or just compensation;
b)
To pay plaintiff a monthly rental of their land in the
amount of THIRTY THOUSAND (P30,000.00) PESOS from 1979
up to July 1999 with 12% interest per annum;
c)To pay plaintiffs the sum of TWO HUNDRED THOUSAND
(P200,000.00) PESOS, as moral damages;
d)
To pay plaintiffs, the sum of TWO HUNDRED
THOUSAND (P200,000.00) PESOS, as exemplary damages;
e)To pay plaintiffs, the sum equivalent to 15% of the total
amount awarded, as attorneys fees, and to pay the cost.
SO ORDERED.

The RTC found that NPC had concealed the construction of the tunnel in
1979 from the Heirs of Macabangkit, and had since continuously denied its
existence; that NPC had acted in bad faith by taking possession of the subterranean
portion of their land to construct the tunnel without their knowledge and prior
consent; that the existence of the tunnel had affected the entire expanse of the land,
and had restricted their right to excavate or to construct a motorized deep well; and
that they, as owners, had lost the agricultural, commercial, industrial and residential
value of the land.
The RTC fixed the just compensation at P500.00/square meter based on the
testimony of Dionisio Banawan, OIC-City Assessor of Iligan City, to the effect that
the appraised value of the adjoining properties ranged from P700.00 to P750.00,
while the appraised value of their affected land ranged from P400.00 to P500.00.

168

The RTC also required NPC to pay rentals from 1979 due to its bad faith in
concealing the construction of the tunnel from the Heirs of Macabangkit.
On August 18, 1999, the RTC issued a supplemental decision,[7] viz:
Upon a careful review of the original decision dated August 13,
1999, a sentence should be added to paragraph 1(a) of the dispositive
portion thereof, to bolster, harmonize, and conform to the findings of the
Court, which is quoted hereunder, to wit:
Consequently, plaintiffs land or properties are hereby
condemned in favor of defendant National Power Corporation, upon
payment of the aforesaid sum.
Therefore, paragraph 1(a) of the dispositive portion of the original
decision should read, as follows:
a)

To pay plaintiffs land with a total area of 227,065 square

meters, at the rate of FIVE HUNDRED (P500.00) PESOS per
square meter, or a total of ONE HUNDRED THIRTEEN
MILLION FIVE HUNDRED THIRTY TWO THOUSAND
AND FIVE HUNDRED (P113,532,500.00) PESOS, plus interest,
as actual damages or just compensation; Consequently, plaintiffs
land or properties are hereby condemned in favor of defendant
National Power Corporation, upon payment of the aforesaid sum;

This supplemental decision shall be considered as part of

paragraph 1(a) of the dispositive portion of the original decision.
Furnish copy of this supplemental decision to all parties
immediately.
SO ORDERED.
On its part, NPC appealed to the CA on August 25, 1999.[8]

169

Earlier, on August 18, 1999, the Heirs of Macabangkit filed an urgent motion
for execution of judgment pending appeal.[9] The RTC granted the motion and
issued a writ of execution,[10] prompting NPC to assail the writ by petition
for certiorari in the CA. On September 15, 1999, the CA issued a temporary
restraining order (TRO) to enjoin the RTC from implementing its decision. The
Heirs of Macabangkit elevated the ruling of the CA (G.R. No. 141447), but the
Court upheld the CA on May 4, 2006.[11]
Ruling of the CA
NPC raised only two errors in the CA, namely:

I
THE COURT A QUO SERIOUSLY ERRED IN RULING THAT
NAPOCORS UNDERGROUND TUNNEL IN ITS AGUS RIVER
HYDRO-ELECTRIC PLANT PROJECT TRAVERSED AND/OR
AFFECTED APPELLEES PROPERTY AS THERE IS NO CLEAR
EVIDENCE INDUBITABLY ESTABLISHING THE SAME
II
THE COURT A QUO SERIOUSLY ERRED IN GRANTING
APPELLEES CLAIMS IN THEIR ENTIRETY FOR GRANTING
ARGUENDO THAT NAPOCORS UNDERGROUND TUNNEL
INDEED TRAVERSED APPELLEES PROPERTY, THEIR CAUSE
OF ACTION HAD ALREADY BEEN BARRED BY PRESCRIPTION,
ESTOPPEL AND LACHES
On October 5, 2004, the CA affirmed the decision of the RTC, holding that
the testimonies of NPCs witness Gregorio Enterone and of the respondents
witness Engr. Pete Sacedon, the topographic survey map, the sketch map, and the
ocular inspection report sufficiently established the existence of the underground
tunnel traversing the land of the Heirs of Macabangkit; that NPC did not
substantiate its defense that prescription already barred the claim of the Heirs of
Macabangkit; and that Section 3(i) of R.A. No. 6395, being silent about tunnels, did
not apply, viz:

170

As regard Section 3(i) of R.A. No. 6395 (An Act Revising the
Charter of the National Power Corporation), it is submitted that the same
provision is not applicable. There is nothing in Section 3(i) of said law
governing claims involving tunnels. The same provision is applicable to
those projects or facilities on the surface of the land, that can easily be
discovered, without any mention about the claims involving tunnels,
particularly those surreptitiously constructed beneath the surface of the
land, as in the instant case.
Now, while it is true that Republic Act No. 6395 authorizes
NAPOCOR to take water from any public stream, river, creek, lake,
spring or waterfall in the Philippines for the realization of the purposes
specified therein for its creation; to intercept and divert the flow of
waters from lands of riparian owners (in this case, the Heirs), and
from persons owning or interested in water which are or may be
necessary to said purposes, the same Act expressly mandates the
payment of just compensation.
WHEREFORE, premises considered, the instant appeal is hereby
DENIED for lack of merit. Accordingly, the appealed Decision dated
August 13, 1999, and the supplemental Decision dated August 18, 1999,
are hereby AFFIRMED in toto.
SO ORDERED.[12]
Issue
NPC has come to the Court, assigning the lone error that:
THE APPELLATE COURT ERRED ON A QUESTION OF LAW
WHEN IT AFFIRMED THE DECISION AND SUPPLEMENTAL
DECISION OF THE COURT A QUO DIRECTING AND ORDERING
PETITIONER
TO
PAY
JUST
COMPENSATION
TO
RESPONDENTS.
NPC reiterates that witnesses Enterone and Sacedon lacked personal
knowledge about the construction and existence of the tunnel and were for that

171

reason not entitled to credence; and that the topographic and relocation maps
prepared by Sacedon should not be a basis to prove the existence and location of the
tunnel due to being self-serving.
NPC contends that the CA should have applied Section 3(i) of Republic Act
No. 6395, which provided a period of only five years from the date of the
construction within which the affected landowner could bring a claim against it; and
that even if Republic Act No. 6395 should be inapplicable, the action of the Heirs of
Macabangkit had already prescribed due to the underground tunnel being
susceptible to acquisitive prescription after the lapse of 10 years pursuant to Article
620 of the Civil Code due to its being a continuous and apparent legal easement
under Article 634 of the Civil Code.
The issues for resolution are, therefore, as follows:
(1) Whether the CA and the RTC erred in holding that there was an
underground tunnel traversing the Heirs of Macabangkits land
constructed by NPC; and
(2) Whether the Heirs of Macabangkits right to claim just
compensation had prescribed under section 3(i) of Republic Act No.
6395, or, alternatively, under Article 620 and Article 646 of the Civil
Code.
Ruling
We uphold the liability of NPC for payment of just compensation.
1.
Factual findings of the RTC,
when affirmed by the CA, are binding
The existence of the tunnel underneath the land of the Heirs of Macabangkit,
being a factual matter, cannot now be properly reviewed by the Court, for questions
of fact are beyond the pale of a petition for review on certiorari. Moreover, the
factual findings and determinations by the RTC as the trial court are generally

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binding on the Court, particularly after the CA affirmed them.[13] Bearing these
doctrines in mind, the Court should rightly dismiss NPCs appeal.
NPC argues, however, that this appeal should not be dismissed because the
Heirs of Macabangkit essentially failed to prove the existence of the underground
tunnel. It insists that the topographic survey map and the right-of-way map
presented by the Heirs of Macabangkit did not at all establish the presence of any
underground tunnel.
NPC still fails to convince.
Even assuming, for now, that the Court may review the factual findings of the
CA and the RTC, for NPC to insist that the evidence on the existence of the tunnel
was not adequate and incompetent remains futile. On the contrary, the evidence on
the tunnel was substantial, for the significance of the topographic survey map and
the sketch map (as indicative of the extent and presence of the tunnel construction)
to the question on the existence of the tunnel was strong, as the CA correctly
projected in its assailed decision, viz:
Among the pieces of documentary evidence presented showing the
existence of the said tunnel beneath the subject property is the
topographic survey map. The topographic survey map is one conducted
to know about the location and elevation of the land and all existing
structures above and underneath it. Another is the Sketch Map which
shows the location and extent of the land traversed or affected by the
said tunnel. These two (2) pieces of documentary evidence readily
point the extent and presence of the tunnel construction coming
from the power cavern near the small man-made lake which is the
inlet and approach tunnel, or at a distance of about two (2)
kilometers away from the land of the plaintiffs-appellees, and then
traversing the entire and the whole length of the plaintiffs-appellees
property, and the outlet channel of the tunnel is another small manmade lake. This is a sub-terrain construction, and considering that both
inlet and outlet are bodies of water, the tunnel can hardly be noticed. All
constructions done were beneath the surface of the plaintiffs-appellees
property. This explains why they could never obtain any knowledge of

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the existence of such tunnel during the period that the same was
constructed and installed beneath their property.[14]
The power cavern and the inlet and outlet channels established the presence
of the underground tunnel, based on the declaration in the RTC by Sacedon, a
former employee of the NPC.[15] It is worthy to note that NPC did not deny the
existence of the power cavern, and of the inlet and outlet channels adverted to and
as depicted in the topographic survey map and the sketch map. The CA cannot be
faulted for crediting the testimony of Sacedon despite the effort of NPC to discount
his credit due to his not being an expert witness, simply because Sacedon had
personal knowledge based on his being NPCs principal engineer and supervisor
tasked at one time to lay out the tunnels and transmission lines specifically for the
hydroelectric projects,[16] and to supervise the construction of the Agus 1
Hydroelectric Plant itself[17] from 1978 until his retirement from NPC.[18] Besides,
he declared that he personally experienced the vibrations caused by the rushing
currents in the tunnel, particularly near the outlet channel.[19] Under any
circumstances, Sacedon was a credible and competent witness.
The ocular inspection actually confirmed the existence of the tunnel
underneath the land of the Heirs of Macabangkit. Thus, the CA observed:
More so, the Ocular inspection conducted on July 23, 1998 further
bolstered such claim of the existence and extent of such tunnel. This was
conducted by a team composed of the Honorable Presiding Judge of the
Regional Trial Court, Branch 01, Lanao del Norte, herself and the
respective lawyers of both of the parties and found that, among others,
said underground tunnel was constructed beneath the subject
property.[20]
It bears noting that NPC did not raise any issue against or tender any contrary
comment on the ocular inspection report.

2.
Five-year prescriptive period under Section 3(i) of Republic Act No.
6395 does not apply to claims for just compensation

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The CA held that Section 3(i) of Republic Act No. 6395 had no application to
this action because it covered facilities that could be easily discovered, not tunnels
that were inconspicuously constructed beneath the surface of the land.[21]
NPC disagrees, and argues that because Article 635[22] of the Civil
Code directs the application of special laws when an easement, such as the
underground tunnel, was intended for public use, the law applicable was Section
3(i) of Republic Act No. 6395, as amended, which limits the action for recovery of
compensation to five years from the date of construction. It posits that the five-year
prescriptive period already set in due to the construction of the underground tunnel
having been completed in 1979 yet.
Without necessarily adopting the reasoning of the CA, we uphold its
conclusion that prescription did not bar the present action to recover just
compensation.
Section 3 (i) of Republic Act No. 6395, the cited law, relevantly provides:
Section 3. Powers and General Functions of the Corporation. The
powers, functions, rights and activities of the Corporation shall be the
following:
xxx
(i) To construct works across, or otherwise, any stream,
watercourse, canal, ditch, flume, street, avenue, highway or
railway of private and public ownership, as the location of said
works may require:Provided, That said works be constructed in
such a manner as not to endanger life or property; And provided,
further, That the stream, watercourse, canal ditch, flume, street,
avenue, highway or railway so crossed or intersected be restored
as near as possible to their former state, or in a manner not to
impair unnecessarily their usefulness. Every person or entity
whose right of way or property is lawfully crossed or intersected
by said works shall not obstruct any such crossings or
intersection and shall grant the Board or its representative, the
proper authority for the execution of such work. The Corporation

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is hereby given the right of way to locate, construct and maintain

such works over and throughout the lands owned by the Republic
of the Philippines or any of its branches and political
subdivisions. The Corporation or its representative may also enter
upon private property in the lawful performance or prosecution of
its business and purposes, including the construction of the
transmission lines thereon; Provided, that the owner of such
property shall be indemnified for any actual damage caused
thereby;Provided, further, That said action for damages is filed
within five years after the rights of way, transmission lines,
substations, plants or other facilities shall have been
established; Provided, finally, That after said period, no suit shall
be brought to question the said rights of way, transmission lines,
substations, plants or other facilities;
A cursory reading shows that Section 3(i) covers the construction of works
across, or otherwise, any stream, watercourse, canal, ditch, flume, street, avenue,
highway or railway of private and public ownership, as the location of said works
may require. It is notable that Section 3(i) includes no limitation except those
enumerated after the termworks. Accordingly, we consider the term works as
embracing all kinds of constructions, facilities, and other developments that can
enable or help NPC to meet its objectives of developing hydraulic power expressly
provided under paragraph (g) of Section 3.[23] The CAs restrictive construal of
Section 3(i) as exclusive of tunnels was obviously unwarranted, for the provision
applies not only to development works easily discoverable or on the surface of the
earth but also to subterranean works like tunnels. Such interpretation accords with
the fundamental guideline in statutory construction that when the law does not
distinguish, so must we not.[24] Moreover, when the language of the statute is plain
and free from ambiguity, and expresses a single, definite, and sensible meaning,
that meaning is conclusively presumed to be the meaning that the Congress
intended to convey.[25]
Even so, we still cannot side with NPC.
We rule that the prescriptive period provided under Section 3(i) of Republic
Act No. 6395 is applicable only to an action for damages, and does not extend to an

176

action to recover just compensation like this case. Consequently, NPC cannot
thereby bar the right of the Heirs of Macabangkit to recover just compensation for
their land.
The action to recover just compensation from the State or its expropriating
agency differs from the action for damages. The former, also known as inverse
condemnation, has the objective to recover the value of property taken in fact by the
governmental defendant, even though no formal exercise of the power of eminent
domain has been attempted by the taking agency.[26] Just compensation is the full
and fair equivalent of the property taken from its owner by the expropriator. The
measure is not the takers gain, but the owners loss. The word just is used to
intensify the meaning of the word compensation in order to convey the idea that the
equivalent to be rendered for the property to be taken shall be real, substantial, full,
and ample.[27] On the other hand, the latter action seeks to vindicate a legal wrong
through damages, which may be actual, moral, nominal, temperate, liquidated, or
exemplary. When a right is exercised in a manner not conformable with the norms
enshrined in Article 19[28] and like provisions on human relations in the Civil
Code,and the exercise results to the damage of another, a legal wrong is committed
and the wrongdoer is held responsible.[29]
The two actions are radically different in nature and purpose. The action to
recover just compensation is based on the Constitution [30] while the action for
damages is predicated on statutory enactments. Indeed, the former arises from the
exercise by the State of its power of eminent domain against private property for
public use, but the latter emanates from the transgression of a right. The fact that the
owner rather than the expropriator brings the former does not change the essential
nature of the suit as an inverse condemnation,[31] for the suit is not based on tort, but
on the constitutional prohibition against the taking of property without just
compensation.[32] It would very well be contrary to the clear language of the
Constitution to bar the recovery of just compensation for private property taken for
a public use solely on the basis of statutory prescription.
Due to the need to construct the underground tunnel, NPC should have first
moved to acquire the land from the Heirs of Macabangkit either by voluntary tender
to purchase or through formal expropriation proceedings. In either case, NPC would
have been liable to pay to the owners the fair market value of the land, for Section

177

3(h) of Republic Act No. 6395 expressly requires NPC to pay the fair market value
of such property at the time of the taking, thusly:
(h) To acquire, promote, hold, transfer, sell, lease, rent, mortgage,
encumber and otherwise dispose of property incident to, or necessary,
convenient or proper to carry out the purposes for which the
Corporation was created: Provided, That in case a right of way is
necessary for its transmission lines, easement of right of way shall only
be sought: Provided, however, That in case the property itself shall be
acquired by purchase, the cost thereof shall be the fair market value
at the time of the taking of such property.

This was what NPC was ordered to do in National Power Corporation v.

Ibrahim,[33] where NPC had denied the right of the owners to be paid just
compensation despite their land being traversed by the underground tunnels for
siphoning water from Lake Lanao needed in the operation of Agus II, Agus III,
Agus IV, Agus VI and Agus VII Hydroelectric Projects in Saguiran, Lanao del Sur,
in Nangca and Balo-I in Lanao del Norte and in Ditucalan and Fuentes in Iligan
City. There, NPC similarly argued that the underground tunnels constituted a mere
easement that did not involve any loss of title or possession on the part of the
property owners, but the Court resolved against NPC, to wit:
Petitioner contends that the underground tunnels in this case
constitute an easement upon the property of the respondents which does
not involve any loss of title or possession. The manner in which the
easement was created by petitioner, however, violates the due process
rights of respondents as it was without notice and indemnity to them and
did not go through proper expropriation proceedings. Petitioner could
have, at any time, validly exercised the power of eminent domain to
acquire the easement over respondents property as this power
encompasses not only the taking or appropriation of title to and
possession of the expropriated property but likewise covers even the
imposition of a mere burden upon the owner of the condemned property.
Significantly, though, landowners cannot be deprived of their right over
their land until expropriation proceedings are instituted in court. The

178

court must then see to it that the taking is for public use, that there is
payment of just compensation and that there is due process of law.[34]
3.
NPCs construction of the tunnel
constituted taking of the land, and
entitled owners to just compensation

The Court held in National Power Corporation v. Ibrahim that NPC was
liable to pay not merely an easement fee but rather the full compensation for land
traversed by the underground tunnels, viz:
In disregarding this procedure and failing to recognize respondents
ownership of the sub-terrain portion, petitioner took a risk and exposed
itself to greater liability with the passage of time. It must be emphasized
that the acquisition of the easement is not without expense. The
underground tunnels impose limitations on respondents use of the
property for an indefinite period and deprive them of its ordinary use.
Based upon the foregoing, respondents are clearly entitled to the
payment of just compensation. Notwithstanding the fact that
petitioner only occupies the sub-terrain portion, it is liable to pay
not merely an easement fee but rather the full compensation for
land. This is so because in this case, the nature of the easement
practically deprives the owners of its normal beneficial use.
Respondents, as the owner of the property thus expropriated, are
entitled to a just compensation which should be neither more nor
less, whenever it is possible to make the assessment, than the money
equivalent of said property.[35]

Here, like in National Power Corporation v. Ibrahim, NPC constructed a

tunnel underneath the land of the Heirs of Macabangkit without going through
formal expropriation proceedings and without procuring their consent or at least
informing them beforehand of the construction. NPCs construction adversely
affected the owners rights and interests because the subterranean intervention by

179

NPC prevented them from introducing any developments on the surface, and from
disposing of the land or any portion of it, either by sale or mortgage.
Did such consequence constitute taking of the land as to entitle the owners to
just compensation?
We agree with both the RTC and the CA that there was a full taking on the
part of NPC, notwithstanding that the owners were not completely and actually
dispossessed. It is settled that the taking of private property for public use, to be
compensable, need not be an actual physical taking or appropriation. [36] Indeed, the
expropriators action may be short of acquisition of title, physical possession, or
occupancy but may still amount to a taking.[37] Compensable taking includes
destruction, restriction, diminution, or interruption of the rights of ownership or of
the common and necessary use and enjoyment of the property in a lawful manner,
lessening or destroying its value.[38] It is neither necessary that the owner be wholly
deprived of the use of his property,[39] nor material whether the property is removed
from the possession of the owner, or in any respect changes hands.[40]
As a result, NPC should pay just compensation for the entire land. In that
regard, the RTC pegged just compensation at P500.00/square meter based on its
finding on what the prevailing market value of the property was at the time of the
filing of the complaint, and the CA upheld the RTC.
We affirm the CA, considering that NPC did not assail the valuation in the
CA and in this Court. NPCs silence was probably due to the correctness of the
RTCs valuation after careful consideration and weighing of the parties evidence,
as follows:
The matter of what is just compensation for these parcels of land is a
matter of evidence. These parcels of land is (sic) located in the City of
Iligan, the Industrial City of the South. Witness Dionisio Banawan, OICCity Assessors Office, testified, Within that area, that area is classified
as industrial and residential. That plaintiffs land is adjacent to many
subdivisions and that is within the industrial classification. He testified
and identified Exhibit AA and AA-1, a Certification, dated April 4,
1997, showing that the appraised value of plaintiffs land ranges
from P400.00 to P500.00 per square meter (see, TSN, testimony of

180

Dionisio Banawan, pp. 51, 57, and 71, February 9, 1999). Also, witness
Banawan, testified and identified Two (2) Deeds of Sale, marked as
Exhibit AA-2 and AA-3,[] showing that the appraised value of the
land adjoining or adjacent to plaintiff land ranges from P700.00
to P750.00 per square meter. As between the much lower price of the
land as testified by defendants witness Gregorio Enterone, and that of
the City Assessor of Iligan City, the latter is more credible. Considering
however, that the appraised value of the land in the area as determined
by the City Assessors Office is not uniform, this Court, is of the opinion
that the reasonable amount of just compensation of plaintiffs land
should be fixed at FIVE HUNDRED (500.00) PESOS, per square meter.
xxx.[41]
The RTC based its fixing of just compensation ostensibly on the prevailing
market value at the time of the filing of the complaint, instead of reckoning from
the time of the taking pursuant to Section 3(h) of Republic Act No. 6395. The CA
did not dwell on the reckoning time, possibly because NPC did not assign that as an
error on the part of the RTC.
We rule that the reckoning value is the value at the time of the filing of the
complaint, as the RTC provided in its decision. Compensation that is reckoned on
the market value prevailing at the time either when NPC entered or when it
completed the tunnel, as NPC submits, would not be just, for it would compound
the gross unfairness already caused to the owners by NPCs entering without the
intention of formally expropriating the land, and without the prior knowledge and
consent of the Heirs of Macabangkit. NPCs entry denied elementary due process of
law to the owners since then until the owners commenced the inverse condemnation
proceedings. The Court is more concerned with the necessity to prevent NPC from
unjustly profiting from its deliberate acts of denying due process of law to the
owners. As a measure of simple justice and ordinary fairness to them, therefore,
reckoning just compensation on the value at the time the owners commenced these
inverse condemnation proceedings is entirely warranted.
In National Power Corporation v. Court of Appeals,[42] a case that involved
the similar construction of an underground tunnel by NPC without the prior consent
and knowledge of the owners, and in which we held that the basis in fixing just
compensation when the initiation of the action preceded the entry into the property

181

was the time of the filing of the complaint, not the time of taking, [43] we pointed out
that there was no taking when the entry by NPC was made without intent to
expropriate or was not made under warrant or color of legal authority.
4.
Awards for rentals, moral damages, exemplary
damages, and attorneys fees are deleted
for insufficiency of factual and legal bases
The CA upheld the RTCs granting to the Heirs of Macabangkit of rentals
of P 30,000.00/month from 1979 up to July 1999 with 12% interest per annum by
finding NPC guilty of bad faith in taking possession of the land to construct the
tunnel without their knowledge and consent.
Granting rentals is legally and factually bereft of justification, in light of the
taking of the land being already justly compensated. Conformably with the ruling
in Manila International Airport Authority v. Rodriguez,[44] in which the award of
interest was held to render the grant of back rentals unwarranted, we delete the
award of back rentals and in its place prescribe interest of 12% interest per
annum from November 21, 1997, the date of the filing of the complaint, until the
full liability is paid by NPC. The imposition ofinterest of 12% interest per
annum follows a long line of pertinent jurisprudence,[45] whereby the Court has
fixed the rate of interest on just compensation at 12% per annumwhenever the
expropriator has not immediately paid just compensation.
The RTC did not state any factual and legal justifications for awarding to the
Heirs of Macabangkit moral and exemplary damages each in the amount
of P200,000.00. The awards just appeared in the fallo of its decision. Neither did
the CA proffer any justifications for sustaining the RTC on the awards. We consider
the omissions of the lower courts as pure legal error that we feel bound to correct
even if NPC did not submit that for our consideration. There was, to begin with, no
factual and legal bases mentioned for the awards. It is never trite to remind that
moral and exemplary damages, not by any means liquidated or assessed as a matter
of routine, always require evidence that establish the circumstances under which the
claimant is entitled to them. Moreover, the failure of both the RTC and the CA to
render the factual and legal justifications for the moral and exemplary damages in

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the body of their decisions immediately demands the striking out of the awards for
being in violation of the fundamental rule that the decision must clearly state the
facts and the law on which it is based. Without the factual and legal justifications,
the awards are exposed as the product of conjecture and speculation, which have no
place in fair judicial adjudication.
We also reverse and set aside the decree of the RTC for NPC to pay to the
Heirs of Macabangkit the sum equivalent to 15% of the total amount awarded, as
attorneys fees, and to pay the cost. The body of the decision did not state the
factual and legal reasons why NPC was liable for attorneys fees. The
terse statement found at the end of the body of the RTCs decision, stating: xxx
The contingent attorneys fee is hereby reduced from 20% to only 15% of the total
amount of the claim that may be awarded to plaintiffs, without more, did
not indicate or explain why and how the substantial liability of NPC for attorneys
fees could have arisen and been determined.
In assessing attorneys fees against NPC and in favor of the respondents, the
RTC casually disregarded the fundamental distinction between the two concepts of
attorneys fees the ordinary and the extraordinary. These concepts were aptly
distinguished in Traders Royal Bank Employees Union-Independent v.
NLRC,[46] thuswise:
There are two commonly accepted concepts of attorneys fees, the
so-called ordinary and extraordinary. In its ordinary concept, an
attorneys fee is the reasonable compensation paid to a lawyer by his
client for the legal services he has rendered to the latter. The basis of this
compensation is the fact of his employment by and his agreement with
the client.
In its extraordinary concept, an attorneys fee is an indemnity for
damages ordered by the court to be paid by the losing party in a
litigation. The basis of this is any of the cases provided by law where
such award can be made, such as those authorized in Article 2208, Civil
Code, and is payable not to the lawyer but to the client, unless they have
agreed that the award shall pertain to the lawyer as additional
compensation or as part thereof.

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By referring to the award as contingency fees, and reducing the award from
20% to 15%, the RTC was really referring to a supposed agreement on attorneys
fees between the Heirs of Macabangkit and their counsel. As such, the concept of
attorneys fees involved was the ordinary. Yet, the inclusion of the attorneys fees
in the judgment among the liabilities of NPC converted the fees to extraordinary.
We have to disagree with the RTC thereon, and we express our discomfort that the
CA did not do anything to excise the clearly erroneous and unfounded grant.
An award of attorneys fees has always been the exception rather than the
rule. To start with, attorneys fees are not awarded every time a party prevails in a
suit.[47] Nor should an adverse decision ipso facto justify an award of attorneys
fees to the winning party.[48] The policy of the Court is that no premium should be
placed on the right to litigate.[49] Too, such fees, as part of damages, are assessed
only in the instances specified in Art. 2208, Civil Code.[50] Indeed, attorneys fees
are in the nature of actual damages.[51] But even when a claimant is compelled to
litigate with third persons or to incur expenses to protect his rights, attorneys fees
may still be withheld where no sufficient showing of bad faith could be reflected in
a partys persistence in a suit other than an erroneous conviction of the
righteousness of his cause.[52] And, lastly, the trial court must makeexpress findings
of fact and law that bring the suit within the exception. What this demands is that
the factual, legal or equitable justifications for the award must be set forth

not only in the fallo but also in the text of the decision, or else, the award should be
thrown out for being speculative and conjectural.[53]
Sound policy dictates that even if the NPC failed to raise the issue of
attorneys fees, we are not precluded from correcting the lower
courts patently erroneous application of the law.[54] Indeed, the Court, in
supervising
the
lower
courts,
possesses
the
ample authority
to
review legal matters like this one even if not specifically raised or assigned as error
by the parties.
5.

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Attorneys fees under quantum meruit principle

are fixed at 10% of the judgment award

Based on the pending motions of Atty. Macarupung Dibaratun and Atty.

Manuel D. Ballelos to assert their respective rights to attorneys fees, both
contending that they represented the Heirs of Macabangkit in this case, a conflict
would ensue from the finality of the judgment against NPC.
A look at the history of the legal representation of the Heirs of Macabangkit
herein provides a helpful predicate for resolving the conflict.
Atty. Dibaratun was the original counsel of the Heirs of Macabangkit. When
the appeal was submitted for decision in the CA, [55] Atty. Ballelos filed his entry of
appearance,[56] and
a
motion
for
early
decision.[57] Atty.
Ballelos
[58]
subsequently filed also a manifestation,
supplemental manifestation,[59]
reply,[60] and ex parte motion reiterating the motion for early decision.[61] It appears
that a copy of the CAs decision was furnished solely to Atty. Ballelos. However,
shortly before the rendition of the decision, Atty. Dibaratun filed in the CA a
motion to register attorneys lien,[62] alleging that he had not withdrawn his
appearance and had not been aware of the entry of appearance by Atty. Ballelos. A
similar motion was also received by the Court from Atty. Dibaratun a few days after
the petition for review was filed.[63]Thus, on February 14, 2005,[64] the Court
directed Atty. Dibaratun to enter his appearance herein. He complied upon filing the
comment.[65]
Amir Macabangkit confirmed Atty. Dibaratuns representation through an ex
parte manifestation that he filed in his own behalf and on behalf of his siblings
Mongkoy and Putri.[66] Amir reiterated his manifestation on March 6, 2006,[67] and
further imputed malpractice to Atty. Ballelos for having filed an entry of
appearance bearing Amirs forged signature and for plagiarism, i.e., copying
verbatim the arguments contained in the pleadings previously filed by Atty.
Dibaratun.[68]
On September 11, 2008, Atty. Ballelos submitted two motions, to wit: (a) a
manifestation and motion authorizing a certain Abdulmajeed Djamla to receive his

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attorneys fees equivalent of 15% of the judgment award,[69] and (b) a motion to
register his attorneys lien that he claimed was contingent.[70]
Both Atty. Dibaratun and Atty. Ballelos posited that their entitlement to
attorneys fees was contingent. Yet, a contract for a contingent fees is an
agreement in writing by which the fees, usually a fixed percentage of what may be
recovered in the action, are made to depend upon the success in the effort to enforce
or defend a supposed right. Contingent fees depend upon an express contract,
without which the attorney can only recover on the basis of quantum
meruit.[71] With neither Atty. Dibaratun nor Atty. Ballelos presenting a written
agreement bearing upon their supposed contingent fees, the only way to determine
their right to appropriate attorneys fees is to apply the principle of quantum meruit.
Quantum meruit literally meaning as much as he deserves is used as
basis for determining an attorneys professional fees in the absence of an express
agreement.[72]The recovery of attorneys fees on the basis of quantum meruit is a
device that prevents an unscrupulous client from running away with the fruits of the
legal services of counsel without paying for it and also avoids unjust enrichment on
the part of the attorney himself.[73] An attorney must show that he is entitled to
reasonable compensation for the effort in pursuing the clients cause, taking into
account certain factors in fixing the amount of legal fees.[74]
Rule 20.01 of the Code of Professional Responsibility lists the guidelines for
determining the proper amount of attorney fees, to wit:
Rule 20.1 A lawyer shall be guided by the following factors in
determining his fees:
a)
The time spent and the extent of the services rendered or
required;
b)

The novelty and difficult of the questions involved;

c)

The important of the subject matter;

d)

The skill demanded;

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e)
The probability of losing other employment as a result of
acceptance of the proffered case;
f)
The customary charges for similar services and the schedule
of fees of the IBP chapter to which he belongs;
g)
The amount involved in the controversy and the benefits
resulting to the client from the service;
h)

The contingency or certainty of compensation;

i)
The character of the employment, whether occasional or
established; and
j)

The professional standing of the lawyer.

In the event of a dispute as to the amount of fees between the attorney and his
client, and the intervention of the courts is sought, the determination requires that
there be evidence to prove the amount of fees and the extent and value of the
services rendered, taking into account the facts determinative thereof.[75] Ordinarily,
therefore, the determination of the attorneys fees on quantum meruit is remanded
to the lower court for the purpose. However, it will be just and equitable to now
assess and fix the attorneys fees of both attorneys in order that the resolution of a
comparatively simple controversy, as Justice Regalado put it in Traders Royal
Bank Employees Union-Independent v. NLRC,[76] would not be needlessly
prolonged, by taking into due consideration the accepted guidelines and so much of
the pertinent data as are extant in the records.
Atty. Dibaratun and Atty. Ballelos each claimed attorneys fees equivalent to
15% of the principal award of P113,532,500.00, which was the amount granted by
the RTC in its decision. Considering that the attorneys fees will be defrayed by the
Heirs of Macabangkit out of their actual recovery from NPC, giving to each of the
two attorneys 15% of the principal award as attorneys fees would be excessive
and unconscionable from the point of view of the clients. Thus, the Court, which
holds and exercises the power to fix attorneys fees on a quantum meruit basis in
the absence of an express written agreement between the attorney and the client,
now fixes attorneys fees at 10% of the principal award of P113,532,500.00.

187

Whether it is Atty. Dibaratun or Atty. Ballelos, or both, who should receive

attorneys fees from the Heirs of Macabangkit is a question that the Court must next
determine and settle by considering the amount and quality of the work each
performed and the results each obtained.
Atty. Dibaratun, the attorney from the outset, unquestionably carried the bulk
of the legal demands of the case. He diligently prepared and timely filed in behalf
of the Heirs of Macabangkit every pleading and paper necessary in the full
resolution of the dispute, starting from the complaint until the very last motion filed
in this Court. He consistently appeared during the trial, and examined and crossexamined all the witnesses presented at that stage of the proceedings. The nature,
character, and substance of each pleading and the motions he prepared for the Heirs
of Macabangkit indicated that he devoted substantial time and energy in researching
and preparing the case for the trial. He even advancedP250,000.00 out of his own
pocket to defray expenses from the time of the filing of the motion to execute
pending appeal until the case reached the Court.[77] His representation of all the
Heirs of Macabangkit was not denied by any of them.
We note that Atty. Dibaratun possessed some standing in the legal profession
and in his local community. He formerly served as a member of the Board of
Director of the Integrated Bar of the Philippines (IBP), Lanao del Norte-Iligan City
Chapter, and was an IBP national awardee as Best Legal Aid Committee Chairman.
He taught at Mindanao State University College of Law Extension. He was
a Municipal Mayor of Matungao, Lanao del Norte, and was enthroned Sultan a
Gaus.
In contrast, not much about the character and standing of Atty. Ballelos, as
well as the nature and quality of the legal services he rendered for the Heirs of
Macabangkit are in the records. The motions he filed in the
Court and in the CA lacked enlightening research and were insignificant to the
success of the clients cause. His legal service, if it can be called that, manifested no
depth or assiduousness, judging from the quality of the pleadings from him. His
written submissions in the case appeared either to have been lifted verbatim from
the pleadings previously filed by Atty. Dibaratun, or to have been merely quoted
from the decisions and resolutions of the RTC and the CA. Of the Heirs of
Macabangkit, only Cebu, Batowa-an, Sayana, Nasser, Manta, Mongkoy[78] and

188

Edgar gave their consent to Atty. Ballelos to appear in their behalf in the CA, which
he did despite Atty. Dibaratun not having yet filed any withdrawal of his
appearance. The Court did not receive any notice of appearance for the Heirs of
Macabangkit from Atty. Ballelos, but that capacity has meanwhile become doubtful
in the face of Amirs strong denial of having retained him.
In fairness and justice, the Court accords full recognition to Atty. Dibaratun as
the counsel de parte of the Heirs of Macabangkit who discharged his responsibility
in the prosecution of the clients cause to its successful end. It is he, not Atty.
Ballelos, who was entitled to the full amount of attorneys fees that the clients ought
to pay to their attorney. Given the amount and quality of his legal work, his
diligence and the time he expended in ensuring the success of his prosecution of the
clients cause, he deserves the recognition, notwithstanding that some of the clients
might appear to have retained Atty. Ballelos after the rendition of a favorable
judgment.[79]
Atty. Ballelos may claim only from Cebu, Batowa-an, Sayana, Nasser, Manta
and Edgar, the only parties who engaged him. The Court considers his work in the
case as very minimal. His compensation under the quantum meruit principle is fixed
at P5,000.00, and only the Heirs of Macabangkit earlier named are liable to him.

WHEREFORE, the Court AFFIRMS the decision promulgated on October

5, 2004 by the Court of Appeals, subject to the following MODIFICATIONS, to
wit:
(a) Interest at the rate of 12% per annum is IMPOSED on the principal
amount of P113,532,500.00 as just compensation, reckoned from the
filing of the complaint on November 21, 1997 until the full liability is
paid;
(b) The awards of P30,000.00 as rental fee, P200,000.00 as moral
damages, and P200,000.00 as exemplary damages are DELETED;
and
(c) The award of 15% attorneys fees decreed to be paid by National
Power Corporation to the Heirs of Macabangkit is DELETED.

189

The Court PARTLY GRANTS the motion to register attorneys lien filed by
Atty. Macarupung Dibaratun, and FIXES Atty. Dibaratuns attorneys fees on the
basis ofquantum meruit at 10% of the principal award of P113,532,500.00.
The motion to register attorneys lien of Atty. Manuel D. Ballelos
is PARTLY GRANTED, and Atty. Ballelos is DECLARED ENTITLED TO
RECOVER from Cebu, Batowa-an, Sayana, Nasser, Manta and Edgar, all
surnamed Macabangkit, the amount of P5,000.00 as attorneys fees on the basis
of quantum meruit.
Costs of suit to be paid by the petitioner.
SO ORDERED.