ANECO REALTY AND DEVELOPMENT CORPORATION, Petitioner,

vs.
LANDEX DEVELOPMENT CORPORATION, Respondent.

DECISION

REYES, R.T., J.:

THIS is a simple case of a neighbor seeking to restrain the landowner from

fencing his own property. The right to fence flows from the right of
ownership. Absent a clear legal and enforceable right, We will not unduly
restrain the landowner from exercising an inherent proprietary right.

Before Us is a petition for review on certiorari of the Decision1 of the Court

of Appeals (CA) affirming the Order2 of the Regional Trial Court (RTC)
dismissing the complaint for injunction filed by petitioner Aneco Realty and
Development Corporation (Aneco) against respondent Landex Development
Corporation (Landex).

Facts

Fernandez Hermanos Development, Inc. (FHDI) is the original owner of a

tract of land in San Francisco Del Monte, Quezon City. FHDI subdivided the
land into thirty-nine (39) lots.3 It later sold twenty-two (22) lots to
petitioner Aneco and the remaining seventeen (17) lots to respondent
Landex.4

The dispute arose when Landex started the construction of a concrete wall
on one of its lots. To restrain construction of the wall, Aneco filed a
complaint for injunction5 with the RTC in Quezon City. Aneco later filed two
(2) supplemental complaints seeking to demolish the newly-built wall and
to hold Landex liable for two million pesos in damages.6

Landex filed its Answer7 alleging, among others, that Aneco was not
deprived access to its lots due to the construction of the concrete wall.
Landex claimed that Aneco has its own entrance to its property along Miller
Street, Resthaven Street, and San Francisco del Monte Street. The
Resthaven access, however, was rendered inaccessible when Aneco
constructed a building on said street. Landex also claimed that FHDI sold
ordinary lots, not subdivision lots, to Aneco based on the express
stipulation in the deed of sale that FHDI was not interested in pursuing its
own subdivision project.

RTC Disposition

On June 19, 1996, the RTC rendered a Decision8 granting the complaint for
injunction, disposing as follows:

Wherefore, premises considered, and in the light aforecited decision of the

Supreme Court judgment is hereby rendered in favor of the plaintiff and
the defendant is hereby ordered:

1. To stop the completion of the concrete wall and excavation of the

road lot in question and if the same is already completed, to remove
the same and to return the lot to its original situation;

2. To pay actual and compensatory damage to the plaintiff in the

total amount of P50,000.00;

3. To pay attorney’s fees in the amount of P20,000.00;

4. To pay the cost.

SO ORDERED.9

Landex moved for reconsideration.10 Records reveal that Landex failed to

include a notice of hearing in its motion for reconsideration as required
under Section 5, Rule 15 of the 1997 Rules of Civil Procedure. Realizing the
defect, Landex later filed a motion11 setting a hearing for its motion for
reconsideration. Aneco countered with a motion for execution12 claiming
that the RTC decision is already final and executory.

Acting on the motion of Landex, the RTC set a hearing on the motion for
reconsideration on August 28, 1996. Aneco failed to attend the slated
hearing. The RTC gave Aneco additional time to file a comment on the
motion for reconsideration.13

On March 13, 1997, the RTC issued an order14 denying the motion for
execution of Aneco.
On March 31, 1997, the RTC issued an order granting the motion for
reconsideration of Landex and dismissing the complaint of Aneco. In
granting reconsideration, the RTC stated:

In previously ruling for the plaintiff, this Court anchored its decision on the
ruling of the Supreme Court in the case of "White Plains Association vs.
Legaspi, 193 SCRA 765," wherein the issue involved was the ownership of
a road lot, in an existing, fully developed and authorized subdivision, which
after a second look, is apparently inapplicable to the instant case at bar,
simply because the property in question never did exist as a subdivision.
Since, the property in question never did exist as a subdivision, the
limitations imposed by Section 1 of Republic Act No. 440, that no portion of
a subdivision road lot shall be closed without the approval of the Court is
clearly in appropriate to the case at bar.

The records show that the plaintiff’s property has access to a public road
as it has its own ingress and egress along Miller St.; That plaintiff’s
property is not isolated as it is bounded by Miller St. and Resthaven St. in
San Francisco del Monte, Quezon City; that plaintiff could easily make an
access to a public road within the bounds and limits of its own property;
and that the defendant has not yet been indemnified whatsoever for the
use of his property, as mandated by the Bill of rights. The foregoing
circumstances, negates the alleged plaintiffs right of way.15

Aneco appealed to the CA.16

CA Disposition

On March 31, 2003, the CA rendered a Decision17 affirming the RTC order,
disposing as follows:

WHEREFORE, in consideration of the foregoing, the instant appeal is

perforce dismissed. Accordingly, the order dated 31 March 1996 is hereby
affirmed.

SO ORDERED.18

In affirming the RTC dismissal of the complaint for injunction, the CA held
that Aneco knew at the time of the sale that the lots sold by FHDI were not
subdivision units based on the express stipulation in the deed of sale that
FHDI, the seller, was no longer interested in pursuing its subdivision
project, thus:

The subject property ceased to be a road lot when its former owner
(Fernandez Hermanos, Inc.) sold it to appellant Aneco not as subdivision
lots and without the intention of pursuing the subdivision project. The law
in point is Article 624 of the New Civil Code, which provides:

Art. 624. The existence of an apparent sign of easement between two

estates, established or maintained by the owner of both, shall be
considered, should either of them be alienated, as a title in order that the
easement may continue actively and passively, unless, at the time the
ownership of the two estates is divided, the contrary should be provided in
the title of conveyance of either of them, or the sign aforesaid should be
removed before the execution of the deed. This provision shall also apply
in case of the division of a thing owned in common by two or more
persons.

Viewed from the aforesaid law, there is no question that the law allows the
continued use of an apparent easement should the owner alienate the
property to different persons. It is noteworthy to emphasize that the lot in
question was provided by the previous owner (Fernandez Hermanos, Inc.)
as a road lot because of its intention to convert it into a subdivision project.
The previous owner even applied for a development permit over the
subject property. However, when the twenty-two (22) lots were sold to
appellant Aneco, it was very clear from the seller’s deed of sale that the
lots sold ceased to be subdivision lots. The seller even warranted that it
shall undertake to extend all the necessary assistance for the consolidation
of the subdivided lots, including the execution of the requisite
manifestation before the appropriate government agencies that the seller is
no longer interested in pursuing the subdivision project. In fine, appellant
Aneco knew from the very start that at the time of the sale, the 22 lots
sold to it were not intended as subdivision units, although the titles to the
different lots have yet to be consolidated. Consequently, the easement that
used to exist on the subject lot ceased when appellant Aneco and the
former owner agreed that the lots would be consolidated and would no
longer be intended as a subdivision project.
Appellant Aneco insists that it has the intention of continuing the
subdivision project earlier commenced by the former owner. It also holds
on to the previous development permit granted to Fernandez Hermanos,
Inc. The insistence is futile. Appellant Aneco did not acquire any right from
the said previous owner since the latter itself expressly stated in their
agreement that it has no more intention of continuing the subdivision
project. If appellant desires to convert its property into a subdivision
project, it has to apply in its own name, and must have its own provisions
for a road lot.19

Anent the issue of compulsory easement of right of way, the CA held that
Aneco failed to prove the essential requisites to avail of such right, thus:

An easement involves an abnormal restriction on the property of the

servient owner and is regarded as a charge or encumbrance on the
servient owner and is regarded as a charge or encumbrance on the
servient estate (Cristobal v. CA, 291 SCRA 122). The essential requisites to
be entitled to a compulsory easement of way are: 1) that the dominant
estate is surrounded by other immovables and has no adequate outlet to a
public highway; 2) that proper indemnity has been paid; 3) that the
isolation was not due to acts of the proprietor of the dominant estate; 4)
that the right of way claimed is at a point least prejudicial to the servient
estate and in so far as consistent with this rule, where the distance from
the dominant estate to a public highway may be the shortest (Cristobal v.
Court of Appeals, 291 SCRA 122).

An in depth examination of the evidence adduced and offered by appellant

Aneco, showed that it had failed to prove the existence of the
aforementioned requisites, as the burden thereof lies upon the appellant
Aneco.20

Aneco moved for reconsideration but its motion was denied.21 Hence, the
present petition or appeal by certiorari under Rule 45.

Issues

Petitioner Aneco assigns quadruple errors to the CA in the following tenor:

A.
 THE COURT OF APPEALS GRAVELY ERRED IN DISMISSING
PETITIONER’S APPEAL AND SUSTAINING THE TRIAL COURT’S
ORDER DATED 31 MARCH 1997 GRANTING RESPONDENT’S MOTION
FOR RECONSIDERATION WHICH IS FATALLY DEFECTIVE FOR LACK
OF NOTICE OF HEARING.

B.

THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE TRIAL

COURT’S ORDER WHICH GAVE FULL WEIGHT AND CREDIT TO THE
MISLEADING AND ERRONEOUS CERTIFICATION ISSUED BY GILDA
E. ESTILO WHICH SHE LATER EXPRESSLY AND CATEGORICALLY
RECANTED BY WAY OF HER AFFIDAVIT.

C.

THE COURT OF APPEALS GRAVELY ERRED IN APPLYING THE

LIBERAL CONSTRUCTION OF THE RULES IN ORDER TO SUSTAIN
THE TRIAL COURT’S ORDER DATED 31 MARCH 1997.

D.

THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE TRIAL

COURT’S ORDER THAT MADE NO PRONOUNCEMENTS AS TO COSTS,
AND IN DISREGARDING THE MERIT OF THE PETITIONER’S CAUSE
OF ACTION.22

Our Ruling

The petition is without merit.

Essentially, two (2) issues are raised in this petition. The first is the
procedural issue of whether or not the RTC and the CA erred in liberally
applying the rule on notice of hearing under Section 5, Rule 15 of the 1997
Rules of Civil Procedure. The second is the substantive issue of whether or
not Aneco may enjoin Landex from constructing a concrete wall on its own
property.

We shall discuss the twin issues sequentially.

Strict vs. Liberal Construction of Procedural Rules; Defective motion was
cured when Aneco was given an opportunity to comment on the motion for
reconsideration.

Section 5, Rule 15 of the 1997 Rules of Civil Procedure23 requires a notice

of hearing for a contested motion filed in court. Records disclose that the
motion for reconsideration filed by Landex of the RTC decision did not
contain a notice of hearing. There is no dispute that the motion for
reconsideration is defective. The RTC and the CA ignored the procedural
defect and ruled on the substantive issues raised by Landex in its motion
for reconsideration. The issue before Us is whether or not the RTC and the
CA correctly exercised its discretion in ignoring the procedural defect.
Simply put, the issue is whether or not the requirement of notice of hearing
should be strictly or liberally applied under the circumstances.

Aneco bats for strict construction. It cites a litany of cases which held that
notice of hearing is mandatory. A motion without the required notice of
hearing is a mere scrap of paper. It does not toll the running of the period
to file an appeal or a motion for reconsideration. It is argued that the
original RTC decision is already final and executory because of the
defective motion.24

Landex counters for liberal construction. It similarly cites a catena of cases

which held that procedural rules may be relaxed in the interest of
substantial justice. Landex asserts that the procedural defect was cured
when it filed a motion setting a hearing for its motion for reconsideration.
It is claimed that Aneco was properly informed of the pending motion for
reconsideration and it was not deprived of an opportunity to be heard.25

It is true that appeals are mere statutory privileges which should be

exercised only in the manner required by law. Procedural rules serve a vital
function in our judicial system. They promote the orderly resolution of
cases. Without procedure, there will be chaos. It thus behooves upon a
litigant to follow basic procedural rules. Dire consequences may flow from
procedural lapses.

Nonetheless, it is also true that procedural rules are mere tools designed to
facilitate the attainment of justice. Their strict and rigid application should
be relaxed when they hinder rather than promote substantial justice. Public
policy dictates that court cases should, as much as possible, be resolved on
the merits not on mere technicalities. Substantive justice trumps procedural
rules. In Barnes v. Padilla,26 this Court held:

Let it be emphasized that the rules of procedure should be viewed as mere

tools designed to facilitate the attainment of justice. Their strict and rigid
application, which would result in technicalities that tend to frustrate rather
than promote substantial justice, must always be eschewed. Even the
Rules of Court reflect this principle. The power to suspend or even
disregard rules can be so pervasive and compelling as to alter even that
which this Court itself has already declared to be final x x x.lawph!l

The emerging trend in the rulings of this Court is to afford every party
litigant the amplest opportunity for the proper and just determination of his
cause, free from the constraints of technicalities. Time and again, this
Court has consistently held that rules must not be applied rigidly so as not
to override substantial justice.27

Here, We find that the RTC and the CA soundly exercised their discretion in
opting for a liberal rather than a strict application of the rules on notice of
hearing. It must be stressed that there are no vested right to technicalities.
It is within the court’s sound discretion to relax procedural rules in order to
fully adjudicate the merits of a case. This Court will not interfere with the
exercise of that discretion absent grave abuse or palpable error. Section 6,
Rule 1 of the 1997 Rules of Civil Procedure even mandates a liberal
construction of the rules to promote their objectives of securing a just,
speedy, and inexpensive disposition of every action and proceeding.

To be sure, the requirement of a notice of hearing in every contested

motion is part of due process of law. The notice alerts the opposing party
of a pending motion in court and gives him an opportunity to oppose it.
What the rule forbids is not the mere absence of a notice of hearing in a
contested motion but the unfair surprise caused by the lack of notice. It is
the dire consequences which flow from the procedural error which is
proscribed. If the opposing party is given a sufficient opportunity to oppose
a defective motion, the procedural lapse is deemed cured and the intent of
the rule is substantially complied. In E & L Mercantile, Inc. v. Intermediate
Appellate Court,28 this Court held:
Procedural due process is not based solely on a mechanistic and literal
application of a rule such that any deviation is inexorably fatal. Rules of
procedure, and this includes the three (3) days notice requirement, are
liberally construed in order to promote their object and to assist the parties
in obtaining just, speedy, and inexpensive determination of every action
and proceeding (Section 2, Rule 1, Rules of Court). In Case and Nantz v.
Jugo (77 Phil. 517), this Court made it clear that lapses in the literal
observance of a rule of procedure may be overlooked when they have not
prejudiced the adverse party and have not deprived the court of its
authority.

A party cannot ignore a more than sufficient opportunity to exercise its

right to be heard and once the court performs its duty and the outcome
happens to be against that negligent party, suddenly interpose a
procedural violation already cured, insisting that everybody should again go
back to square one. Dilatory tactics cannot be the guiding principle.

The rule in De Borja v. Tan (93 Phil. 167), that "what the law prohibits is
not the absence of previous notice, but the absolute absence thereof and
lack of opportunity to be heard," is the applicable doctrine. (See also
Aguilar v. Tan, 31 SCRA 205; Omico v. Vallejos, 63 SCRA 285; Sumadchat
v. Court of Appeals, 111 SCRA 488.) x x x29

We also find that the procedural lapse committed by Landex was

sufficiently cured when it filed another motion setting a hearing for its
defective motion for reconsideration. Records reveal that the RTC set a
hearing for the motion for reconsideration but Aneco’s counsel failed to
appear. The RTC then gave Aneco additional time to file comment on the
motion for reconsideration.30

Aneco was afforded procedural due process when it was given an

opportunity to oppose the motion for reconsideration. It cannot argue
unfair surprise because it was afforded ample time to file a comment, as it
did comment, on the motion for reconsideration. There being no
substantial injury or unfair prejudice, the RTC and the CA correctly ignored
the procedural defect.
The RTC and the CA did not err in dismissing the complaint for injunction;
factual findings and conclusions of law of the RTC and the CA are afforded
great weight and respect.

Anent the substantive issue, We agree with the RTC and the CA that the
complaint for injunction against Landex should be dismissed for lack of
merit. What is involved here is an undue interference on the property
rights of a landowner to build a concrete wall on his own property. It is a
simple case of a neighbor, petitioner Aneco, seeking to restrain a
landowner, respondent Landex, from fencing his own land.

Article 430 of the Civil Code gives every owner the right to enclose or fence
his land or tenement by means of walls, ditches, hedges or any other
means. The right to fence flows from the right of ownership. As owner of
the land, Landex may fence his property subject only to the limitations and
restrictions provided by law. Absent a clear legal and enforceable right, as
here, We will not interfere with the exercise of an essential attribute of
ownership.

Well-settled is the rule that factual findings and conclusions of law of the
trial court when affirmed by the CA are accorded great weight and respect.
Here, We find no cogent reason to deviate from the factual findings and
conclusion of law of the trial court and the appellate court. We have
meticulously reviewed the records and agree that Aneco failed to prove any
clear legal right to prevent, much less restrain, Landex from fencing its
own property.

Aneco cannot rely on the road lot under the old subdivision project of FHDI
because it knew at the time of the sale that it was buying ordinary lots, not
subdivision lots, from FHDI. This is clear from the deed of sale between
FHDI and Aneco where FHDI manifested that it was no longer interested in
pursuing its own subdivision project. If Aneco wants to transform its own
lots into a subdivision project, it must make its own provision for road lots.
It certainly cannot piggy back on the road lot of the defunct subdivision
project of FHDI to the detriment of the new owner Landex. The RTC and
the CA correctly dismissed the complaint for injunction of Aneco for lack of
merit.

WHEREFORE, the petition is DENIED and the appealed Decision AFFIRMED.

SO ORDERED.

PALALI VS AWISAN

Property; ownership of land. We hold that as between the petitioner and

the respondent, it is the petitioner who has the better claim or title to the
subject property. While the respondent merely relied on her tax
declaration, petitioner was able to prove actual possession of the subject
property coupled with his tax declaration. We have ruled in several cases
that possession, when coupled with a tax declaration, is a weighty
evidence of ownership. It certainly is more weighty and preponderant than
a tax declaration alone. The preponderance of evidence is therefore clearly
in favor of petitioner, particularly considering that, as the actual possessor
under claim of ownership, he enjoys the presumption of ownership.
Moreover, settled is the principle that a party seeking to recover real
property must rely on the strength of her case rather than on the
weakness of the defense. The burden of proof rests on the party who
asserts the affirmative of an issue. For he who relies upon the existence of
a fact should be called upon to prove that fact. Having failed to discharge
her burden to prove her affirmative allegations, we find that the trial court
rightfully dismissed respondent’s complaint. Modesto Palali vs.
Juliet Awisan, represented by her Attorney-in-fact Gregorio Awisan, G.R.
No. 158385, February 12, 2010

NELSON LAGAZO, Petitioner, vs. GERALD B. SORIANO and GALILEO B.

SORIANO, Respondents.

DECISION

PERALTA, J.:

This resolves the Petition for Review on Certiorari under Rule 45 of the
Rules of Court, praying that the Decision1cralaw of the Court of Appeals
(CA) in CA-G.R. SP No. 80709, promulgated on October 28, 2005, granting
herein respondents' petition for review, and the CA Resolution2cralaw
promulgated on December 20, 2005, denying herein petitioner's motion for
reconsideration, be reversed and set aside.
The undisputed facts are as follows.

On January 16, 2001, respondents filed with the Municipal Trial Court of
Tabuk, Kalinga (MTC), a complaint for Forcible Entry with Application for
Termporary Restraining Order and a Writ of Preliminary Injunction and
Damages against petitioner. Respondents claimed they were the owners of
a parcel of land covered by Original Certificate of Title No. P-665, Lot No.
816, Pls-93 with an area of 58,171 square meters. They allegedly acquired
the same by purchase from their grandfather, Arsenio Baac, on September
10, 1998, but even prior thereto, they were already allowed by Arsenio
Baac to cultivate said land. They paid real property taxes for said property
from 1990 to 1998 and had been in actual possession from that time.
However, on January 6, 2001, herein petitioner allegedly unlawfully
entered the property by means of force, stealth, and strategy and began
cultivating the land for himself.

On the other hand, petitioner insisted in his Answer that he, together with
his mother, brothers, and sisters, were the lawful owners of the land in
question, being the legal heirs of Alfredo Lagazo, the registered owner
thereof. They denied that the subject land was sold to Arsenio Baac,
alleging instead that the agreement between Alfredo Lagazo and Arsenio
Baac was merely one of mortgage. Petitioner, likewise maintained that he
and his co-heirs had always been in possession of the disputed land. They
allegedly tried several times to redeem the property, but Baac increased
the redemption price from P10,000.00 to P100,000.00. This prompted
them to bring the matter before the Barangay Lupon of Balong, Tabuk,
Kalinga, but no agreement was reached.

On November 23, 2001, the MTC rendered a Decision, the dispositive

portion of which reads as follows:

WHEREFORE, judgment is hereby rendered as follows:

1. Dismissing the complaint of Forcible Entry filed against defendant

Nelson Lagazo;

2. Ordering the plaintiffs, Gerald B. Soriano and Galileo B. Soriano to

surrender Original Certificate of Title No. P-665 in the name of
Alfredo Lagazo to the heirs of Lagazo which was given to Arsenio
 Baac by Alfredo Lagazo when the Deed of Mortgage was executed
between them;

3. Ordering the heirs of Alfredo Lagazo to execute the deed of

conveyance in favor of the plaintiffs covering the one (1) hectare
portion subject of the mortgage between Alfredo Lagazo and Arsenio
Baac and to segregate the same from property covered by OCT P-
665;

4. Plaintiffs to pay the costs of suit.

SO ORDERED.3cralaw

The foregoing Decision was appealed to the Regional Trial Court (RTC) of
Tabuk, Kalinga. Said appellate court ruled that herein respondents failed to
prove prior physical possession, thus, it reversed the MTC Decision and
dismissed the complaint against herein petitioner.

Respondents then filed with the CA a Petition for Review under Rule 42 of
the Rules of Court and on October 28, 2005, the CA promulgated the
assailed Decision which disposed thus:

WHEREFORE, premises considered, the petition is GRANTED. Physical

possession is hereby ordered returned to the petitioners, without prejudice
to the respondent's right to take recourse to remedies provided for under
the law, if he is so inclined. Actual, moral and exemplary damages cannot
be granted because of lack of substantive evidence to prove the same.
However, we grant the amount of P10,000.00 in attorney's fees plus
P500.00 per appearance of petitioners' counsel, as well as another
P10,000.00 in litigation expenses as prayed for in their complaint,
conformably to par. 11 of Art. 2208 of the Civil Code, i.e. it is just and
equitable under the circumstances, and considering that the award is well
deserved by the petitioners who had shown evident good faith in, and
respect for, the judicial system.

SO ORDERED.4cralaw
Petitioner moved for reconsideration, but the same was denied per CA
Resolution dated December 20, 2005. Hence, this petition where the
following issues are raised:

WHETHER THE TRIAL COURT GRAVELY ERRED IN FINDING THAT THERE

WAS IMPLIED ADMISSION ON THE PART OF THE PETITIONER THAT
RESPONDENTS HAD BEEN IN ACTUAL PHYSICAL POSSESSION OF THE
LOT IN CONTROVERSY SINCE 1979.

WHETHER THE TRIAL COURT GRAVELY ERRED IN NOT GIVING CREDENCE

TO THE EVIDENCE ADDUCED BY PETITIONER SUBSTANTIATING HIS
PRIORITY IN POSSESSION OVER THE LOT IN CONTROVERSY.

WHETHER THE TRIAL COURT GRAVELY ERRED IN FINDING THAT THE

RESPONDENTS HAVE BETTER RIGHT OF POSSESSION OVER THE LOT IN
CONTROVERSY.5cralaw

The Court finds the petition unmeritorious.

Prior physical possession is an indispensable element in forcible entry

cases.6cralaw Thus, the ultimate question here is who had prior physical
possession of the disputed land.

Ordinarily, in a Petition for Review on Certiorari , this Court only considers

questions of law, as it is not a trier of facts. However, there are exceptions
to this general rule, such as, when the findings of fact of the appellate
court are contrary to those of the trial court.7cralaw Such circumstance
exists in this case, hence, the Court is compelled to take a closer look at
the records.

In Sudaria v. Quiambao ,8cralaw the Court held that:

Ejectment proceedings are summary proceedings intended to provide an

expeditious means of protecting actual possession or right to possession of
property. Title is not involved.The sole issue to be resolved is who is
entitled to the physical or material possession of the premises or
possession de facto. On this point, the pronouncements in Pajuyo v. Court
of Appeals are enlightening, thus:
 xxxx

x x x Regardless of the actual condition of the title to the property, the

party in peaceable quiet possession shall not be thrown out by a strong
hand, violence or terror. Neither is the unlawful withholding of property
allowed. Courts will always uphold respect for prior possession.

Thus, a party who can prove prior possession can recover such possession
even against the owner himself.Whatever may be the character of his
possession, if he has in his favor prior possession in time, he has the
security that entitles him to remain on the property until a person with a
better right lawfully ejects him. To repeat, the only issue that the court has
to settle in an ejectment suit is the right to physical possession.9cralaw
(Emphasis supplied.)

Moreover, in De Grano v. Lacaba ,10cralaw it was explained that:

x x x the word "possession," as used in forcible entry and unlawful detainer

cases, means nothing more than physical possession, not legal possession
in the sense contemplated in civil law. When the law speaks of possession,
the reference is to prior physical possession or possession de facto, as
contra-distinguished from possession de jure. Only prior physical
possession, not title, is the issue. Issues as to the right of possession or
ownership are not involved in the action; evidence thereon is not
admissible, except only for the purpose of determining the issue of
possession.11cralaw (Emphasis supplied.)

Bearing the foregoing in mind, a thorough examination of the evidence

revealed that, indeed, the parties in last peaceable quiet possession of the
property in question were herein respondents.

The most important evidence for respondents was the testimony of Brgy.
Capt. Artemio Fontanilla, who stated that he was born and had
continuously resided in Balong, Tabuk, Kalinga; that the disputed land was
only about three kilometers from his house; that for the longest time, he
had always known that it was Arsenio Baac who was cultivating and
occupying said property; and that it was only sometime in January 2001,
when the police asked him to accompany them to the subject land, that he
saw petitioner with some other men working said land. 12cralaw
On the other hand, what petitioner's evidence sought to establish was that
he and his co-heirs continued to be the owners of the land, as his
predecessor never intended to sell the property to Arsenio Baac, the true
agreement being only one of a mortgage. Petitioner never established the
fact of his physical possession over the disputed land. Ironically, the most
telling pieces of evidence that doomed petitioner's case were the
testimonies of petitioner himself and his sister, Marina Niñalga. Their own
admissions on the witness stand proved that respondents were indeed the
ones in physical possession of the subject property. Petitioner Lagazo
himself testified as follows:

Q: So, at that time that you were at Alicia, Isabela and at that time
that you staying thereat, you have no knowledge to what is
happening to the land which is now the subject of this case, Am I
correct?

A: I was only hearing stories from my father and my mother that

they want to regain back the land which was mortgaged, sir.

xxxx

Q: It is when only on January of 2001 that you allegedly claimed over

the parcel of land in question, am I correct Mr. Witness?

A: Was not only during that time but that was only the time we
entered into the land, sir.

Q: So, you are now admitting Mr. Witness, its only on January 6,
2001, you entered the land in question?

A: Yes, sir.

Q: And, prior to January 6 of 2001, you never possessed or cultivated

the land in question, Am I correct?

xxxx

Q: Who was an apparent heir of spouses Alfredo Lagaso, you never

personally cultivated or possessed the land in question prior to
January 6, 2001, am I correct?
 A: No, sir because according to them it was mortgaged, Your Honor.

Q: But you never personally cultivated the land prior to January 6,

2001?

A: No, sir.13cralaw

Meanwhile, Marina Niñalga also recounted that in 1979, they left the
subject property out of fear because Arsenio Baac allegedly wanted to grab
the land for himself. She testified that after they left in 1979, it was already
Arsenio Baac who cultivated said land. Despite such claim that Arsenio
Baac took their land with force and intimidation, Marina said they never
reported the matter to the police, and never filed any criminal action in
court against Arsenio Baac.14cralaw

Verily, the foregoing leaves no doubt in our mind that it was only on
January 6, 2001 that petitioner, believing himself to be the lawful owner of
the disputed land, entered the same, thereby disturbing respondents'
peaceful possession thereof.

IN VIEW OF THE FOREGOING, the instant petition is dismissed. The

Decision and Resolution of the Court of Appeals dated October 28, 2005
and December 20, 2005, respectively, in CA G.R. SP No. 80709 are
AFFIRMED.

SO ORDERED.

HEIRS OF PEDRO LAURORA and LEONORA LAURORA, petitioners, vs.

STERLING TECHNOPARK III and S.P. PROPERTIES, INC., respondents.

DECISION

PANGANIBAN, J.:

The owners of a property have no authority to use force and violence to

eject alleged usurpers who were in prior physical possession of it. They
must file the appropriate action in court and should not take the law into
their own hands.

The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court,
seeking to set aside the June 27, 2000 Decision[2] and the January 22,
2001 Resolution[3] of the Court of Appeals[4] (CA) in CA-GR SP No.
54667. The dispositive part of the Decision reads:

“WHEREFORE, the [P]etition is GRANTED and the RTC [D]ecision dated 06

May 1999 and the RTC [O]rder dated 03 August 1999 are hereby
REVERSED and SET ASIDE, and corollarily, the MCTC [D]ecision is
AFFIRMED.” [5]

The assailed Resolution denied petitoners’ Motion for Reconsideration.

The Facts

The factual antecedents are summarized by the CA as follows:

“In a [C]omplaint for Forcible Entry with Damages filed on 27 September

1997 before the Fifth Municipal Circuit Trial Court of Carmona and Gen.
Mariano Alvarez, plaintiffs therein, x x x Pedro Laurora and Leonora
Laurora [herein petitioners] alleged that they [were] the owners of Lot
1315-G, SWD-40763 of the Yaptinchay Estate with an area of 39,771 sq.
meters and located in Carmona, Cavite. Pedro Laurora planted trees and
has possessed the land up to the present. On 15 September 1997,
[respondents] Sterling Technopark III and S.P. Properties, Inc. x x x
through their Engr. Bernie Gatchalian bulldozed and uprooted the trees and
plants, and with the use of armed men and by means of threats and
intimidation, succeeded in forcibly ejecting [petitioners]. As a result of
their dispossession, [petitioners] suffered actual damages in the amount of
P3,000,000.00 and P10,000.00 as attorney’s fees.

“In their [A]nswer to the [C]omplaint, [respondents] averred that

[petitioners were] not the owners of the land because they disposed of it
sometime in 1976 as shown by legal documents. On 02 April 1969, the
Land Authority issued an order of award in favor of [petitioners], approving
the application of Pedro Laurora to buy the subject Lot 1315-G from the
government. On 01 March 1974, [petitioners] requested the Department
of Agrarian Reform for the transfer of the lot to Juan Manaig. Favorably
acted upon, the DAR issued a permit to transfer dated 03 June 1975
through its Regional Director Benjamin R. Estrellado. On 03 July 1975,
Juan Manaig, as transferee and buyer, paid the required amount of
P10,643.65 under Official Receipt No. 8304707 to the government as full
payment for the transfer of said lot to him. On 26 March 1976, the
[petitioners] as sellers and witnessed by their sons, Efren Laurora and
Dominador Laurora, executed a ‘Kasulatan ng Paglilipatan ng Lupa’
transferring the land to Juan Manaig as buyer. On 11 June 1976, the
[petitioners] again witnessed by their sons, Efren and Dominador, executed
a ‘Kasulatan ng Bilihang Tuluyan’ or Deed of Sale wherein they sold Lot
1315-G including all improvements therein, in favor of Juan Manaig. The
Deed of Absolute Sale was approved by the Department of Agrarian
Reform on 14 June 1976 in ‘DAR Approval of Transfer of Rights’ signed by
DAR Regional Director, Benjamin R. Estrellado. After the approval of the
sale from the [petitioners] to Juan Manaig, the latter paid its real estate
taxes. The tax declarations of the land in the name of its previous owners,
Yaptinchays, were cancelled and transferred in the name of [petitioner]
Pedro Laurora as owner-transferee. Thereupon, the heirs of the late ‘JUAN
MANAIG’ sold the land to Golden Mile Resources Development Corporation
which likewise sold it to [respondent] S. P. Properties, Inc.

“After summary proceedings in the MCTC, x x x, a judgment was rendered

dismissing the complaint. The case was elevated to the Regional Trial
Court. In due course, the said court rendered a decision reversing the
MCTC judgment. x x x”[6]

Ruling of the Court of Appeals

The CA reversed the Regional Trial Court (RTC) and reinstated the Order of
dismissal issued by the Municipal Circuit Trial Court (MCTC). It held that
there was no evidence to support the claim of petitioners to the prior
physical possession of the property. The evidence allegedly showed that
they had already sold the land with the approval of the Department of
Agrarian Reform (DAR). Accordingly, their subsequent entry into and
possession of the land constituted plain usurpation, which could not be the
source of any right to occupy it. Being planters in bad faith, they had no
right to be reimbursed for improvements on the land, in accordance with
Article 449 of the New Civil Code.

Hence, this Petition.[7]

The Issue

In their Memorandum,[8] petitioners raise this sole issue for our

consideration:

“x x x [W]hether [p]rivate [r]espondent[s] ha[ve] a valid and legal right to

forcibly eject petitioners from the premises despite their resistance and
objection, through the use of arm[ed] men and by bulldozing, cutting, and
destroying trees and plants planted by petitioners, without court order, to
the damage and prejudice of the latter.”[9]

The Court’s Ruling

The Petition is meritorious.

Main Issue:

Physical Possession of the Land

The only issue in forcible entry cases is the physical or material possession
of real property -- possession de facto, not possession de jure.[10] Only
prior physical possession, not title, is the issue.[11] If ownership is raised
in the pleadings, the court may pass upon such question, but only to
determine the question of possession.[12]

The ownership claim of respondents upon the land is based on the

evidence they presented. Their evidence, however, did not squarely
address the issue of prior possession. Even if they succeed in proving that
they are the owners of the land,[13] the fact remains that they have not
alleged or proved that they physically possess it by virtue of such
ownership. On the other hand, petitioners’ prior possession of the land
was not disputed by the CA, which merely described it as usurpation.[14]

We stress that the issue of ownership in ejectment cases is to be resolved

only when it is intimately intertwined with the issue of possession,[15] to
such an extent that the question of who had prior possession cannot be
determined without ruling on the question of who the owner of the land
is.[16] No such intertwinement has been shown in the case before us.
Since respondents’ claim of ownership is not being made in order to prove
prior possession, the ejectment court cannot intrude or dwell upon the
issue of ownership.[17]

Notwithstanding the actual condition of the title to the property, a person

in possession cannot be ejected by force, violence or terror -- not even by
the owners.[18] If such illegal manner of ejectment is employed, as it was
in the present case, the party who proves prior possession -- in this case,
petitioners -- can recover possession even from the owners themselves.
[19]

Granting arguendo that petitioners illegally entered into and occupied the
property in question, respondents had no right to take the law into their
own hands and summarily or forcibly eject the occupants therefrom.

Verily, even if petitioners were mere usurpers of the land owned by

respondents, still they are entitled to remain on it until they are lawfully
ejected therefrom. Under appropriate circumstances, respondents may
file, other than an ejectment suit, an accion publiciana -- a plenary action
intended to recover the better right to possess;[20] or an accion
reivindicatoria -- an action to recover ownership of real property.[21]

The availment of the aforementioned remedies is the legal alternative to

prevent breaches of peace and criminal disorder resulting from the use of
force by claimants out to gain possession.[22] The rule of law does not
allow the mighty and the privileged to take the law into their own hands to
enforce their alleged rights. They should go to court and seek judicial
vindication.

WHEREFORE, the Petition is GRANTED and the assailed Decision

REVERSED and SET ASIDE. No costs.

SO ORDERED.

PHILIPPINE NATIONAL BANK, petitioner, vs. THE COURT OF APPEALS and

ERNESTO AUSTRIA and LORETO Q. QUINTANA, respondents.

DECISION

YNARES-SANTIAGO, J.:
Before us is a petition for review under Rule 45 of the Rules of Court,
seeking a reversal of the Court of Appeals’ resolution in CA-G.R. SP No.
48660 dated August 25, 1998, which affirmed the order of the Regional
Trial Court of Makati, Branch 60 in LRC Case No. M-2635.

Sometime during the late 70’s, the spouses Godofredo and Wilma Monsod
obtained a loan in the amount of P120,000.00 from petitioner Philippine
National Bank (PNB). To secure their loan, the Monsods mortgaged to PNB
a parcel of land covered by TCT No. S-84843, located within the Monte
Villa de Monsod Subdivision in Parañaque, Rizal.

Due to Monsods’ failure to pay their loan obligation, PNB extrajudicially

foreclosed the mortgage. At the auction sale of the subject real property,
PNB was declared the highest bidder. On December 21, 1981, a certificate
of sale was issued in favor of PNB, and was registered on July 11,
1984.[1]

Upon expiration of the redemption period on July 12, 1985, ownership of

the property was consolidated in PNB. Thereafter, TCT No. S-84843 was
cancelled and TCT No. 99480 was issued in PNB’s name.[2]

On June 23, 1992, PNB filed an “Ex-Parte Petition for the Issuance of Writ
of Possession” with Branch 60 of the Regional Trial Court of Makati City,
docketed as LRC Case No. M-2635. Pursuant to the provisions of Act No.
3135, as amended, the trial court conducted an ex parte hearing. PNB’s
representative testified that the foreclosed property is occupied by one
Ernesto Austria. According to PNB, Mr. Austria was invited by the bank to a
conference to discuss the ownership of the foreclosed lot, however, he did
not honor the bank’s invitation.[3]

On August 28, 1992, the trial court granted PNB’s petition and a writ of
possession was issued on October 26, 1992.[4]

On December 11, 1992, respondents Ernesto and Loreto Quintana Austria

filed a “Motion for Intervention and to Recall and/or Stop the Enforcement
of the Writ of Possession.” The Austrias alleged that they are the actual
occupants of the subject lot, which they purportedly bought from the
Monsods as early as 1974. They claimed that the foreclosed property was
enclosed within a concrete fence and formed part of their family
compound. PNB allegedly knew of this fact even before it granted the loan
to the Monsods, because the bank’s credit investigators were advised of
the same when they inspected the property in the summer of 1976.
Consequently, the Austrias maintained that the issuance of the possessory
writ ex parte was improper, since it will deprive them of their property
without due process.[5]

Due to the Austrias’ refusal to vacate the premises, the sheriff failed to
enforce the challenged writ.

On July 27, 1993, on motion of PNB, the trial court issued an alias writ of
possession. Again, the writ was not implemented.[6]

On September 17, 1993, the sheriff sought to enforce the first alias writ of
possession for the second time. The Austrias filed a “Second Motion for
Intervention” seeking to restrain the enforcement of the writ of possession
issued on October 26, 1992.[7] PNB then filed an “Urgent Ex-Parte Motion
for Issuance of Break Open Order”[8] and, subsequently, an Opposition to
the Austrias’ Second Motion for Intervention.[9]

On January 31, 1994, the trial court denied the Austrias’ second motion
and granted PNB’s “Motion for Issuance of Break Open Order.” The trial
court ruled that the Austrias can no longer be permitted to intervene in the
case during said stage of the proceedings and that the remedy of the
Austrias was to file an ordinary civil action to assert their claim of
ownership over the property.[10]

In the meantime, the first alias writ of possession lapsed. PNB thus filed
an “Ex-Parte Motion for Issuance of Second Alias Writ of Possession,”[11]
and on November 29, 1994, a second alias writ was issued.[12]

Unfazed, the Austrias filed an Omnibus Motion on January 25, 1995,

seeking a recall of the second alias writ and a reconsideration of the trial
court’s order denying their motion to intervene.[13] Meanwhile, the second
alias writ had likewise expired.

PNB filed a “Manifestation and Motion for Issuance of Third Alias Writ of
Possession,” which the trial court granted anew in an order dated October
10, 1995.[14]
However, on December 12, 1995, the Austrias again filed a motion to set
aside the trial court’s order dated October 10, 1995 and to recall the third
alias writ.[15]

Consequent to the filing of this fourth motion, the sheriff again failed to
implement the third alias writ, which also lapsed. Thus, on February 15,
1996, PNB filed another “Motion for Issuance of a Fourth Alias Writ,”[16]
which was granted on March 26, 1996.

The trial court, after hearing the Austrias’ fourth motion, issued an order
on October 4, 1996, denying the same, on the ground that the issuance of
a possessory writ for a property sold at public auction pursuant to an extra-
judicial foreclosure proceeding was a ministerial duty on its part. The
Austrias failed to establish any legal ground for recalling the writs, even as
they claimed a superior right to the subject property.[17]

On February 19, 1997, the fourth alias writ was issued by the trial court.
The writ was partially implemented with the posting of PNB security guards
within the premises of the foreclosed lot.[18]

On April 17, 1997, the Austrias, for the fifth time, filed a motion to stop the
enforcement of the fourth alias writ and to set aside all prior writs issued
by the trial court.[19]

In the meantime, the Austrias filed before the Regional Trial Court of
Parañaque, an action for cancellation of PNB’s title to the property,
docketed as Civil Case No. 97-0184.[20]

On October 28, 1997, the trial court denied the Austrias’ fifth motion but
ruled that: “any writ of possession that may be issued in this case, is
declared unenforceable against the MOVANTS ERNESTO AUSTRIA and the
HEIRS OF LORETO AUSTRIA, until the Court declares otherwise.”[21]

PNB filed a motion for reconsideration, which was denied on May 20,
1998.[22] A petition for certiorari under Rule 65 of the Rules of Court was
filed by PNB before the Court of Appeals. However, the Court of Appeals
dismissed the petition, stating:
There is no prima facie showing of grave abuse of discretion on the part of
respondent Judge in issuing his assailed Order which the Court finds to be
in accord with law, the pertinent rules and jurisprudence cited therein.

Hence, PNB filed the instant petition, contending that:

THE COURT OF APPEALS COMMITTED A SERIOUS ERROR BY SIMPLY

ADOPTING THE FINDINGS OF THE TRIAL COURT THAT WRIT OF
POSSESSION CANNOT BE ENFORCED AGAINST RESPONDENT AUSTRIA.
SAID FINDINGS ARE UNPROVEN AND UNSUPPORTED BY EVIDENCE.

II

THE COURT OF APPEALS COMMITTED SERIOUS MISAPPREHENSION OF

FACTS IN:

A) SUPPORTING THE JURISPRUDENCE CITED BY THE TRIAL

COURT IN THE OCTOBER 28, 1997 ORDER. THE RULINGS DO NOT
JUSTIFY THE NON-ENFORCEMENT OF THE WRIT OF POSSESSION
AGAINST RESPONDENTS. RESPONDENTS WERE GIVEN THE
OPPORTUNITY TO BE HEARD BUT NO EVIDENCE WAS PRESENTED TO
SUPPORT THEIR CLAIM;

B) NOT GIVING DUE CONSIDERATION TO THE FACT THAT PNB

HAS THE LEGAL RIGHT TO POSSESS THE PROPERTY AS ITS REGISTERED
OWNER;

C) LOSING SIGHT OF THE FACT THAT THE TRIAL COURT

BELATEDLY ISSUED THE OCTOBER 28, 1997 ORDER DIRECTING THAT
THE WRIT OF POSSESSION CANNOT BE ENFORCED AGAINST THE
RESPONDENTS. THE TRIAL COURT HAD EARLIER ISSUED FOUR (4)
POSSESSORY WRITS ALL OF WHICH WERE DIRECTED AGAINST
RESPONDENTS AUSTRIA & QUINTANA.[23]

The basic issue to be resolved in this case is whether or not an ex-parte

writ of possession issued pursuant to Act No. 3135, as amended, can be
enforced against a third person who is in actual possession of the
foreclosed property and who is not in privity with the debtor/
mortgagor.[24]

Petitioner PNB maintains that the trial court’s order was based on the
unproven allegation that respondents had purchased the property from the
Monsods before the latter mortgaged it to PNB. According to petitioner
PNB, respondents did not adduce any proof to support their claim of
ownership, even as they were repeatedly given the opportunity to do so
during the hearings on the numerous motions filed by respondents
themselves.

Petitioner PNB also submits that since it is the registered owner of the
property, it is entitled to a writ of possession as a matter of right. The bank
insists that it could rely on the title of the registered land which does not
have any annotation of respondents’ supposed rights.

Petitioner PNB likewise avers that the trial court could not now belatedly
refuse to enforce the writ of possession against respondents. The trial
court had already issued a total of four possessory writs directing the
ouster of all occupants of the lot, including respondents herein.

On the other hand, respondents assert that the trial court correctly held
that the writ of possession can only be implemented against the
debtor/mortgagor and his successors-in-interest. Since respondents
acquired their rights as owners of the property by virtue of a sale made to
them by the Monsods prior to the bank’s mortgage lien, respondents can
not be dispossessed therefrom without due notice and hearing, through
the simple expedient of an ex-parte possessory writ.

We agree with respondents. Under applicable laws and jurisprudence, they

can not be ejected from the property by means of an ex-parte writ of
possession.

The operative provision under Act No. 3135, as amended,[25] is Section 6,

which states:

Sec. 6. Redemption. – In all cases in which an extrajudicial sale is made

under the special power hereinbefore referred to, the debtor, his
successors in interest or any person having a lien on the property
subsequent to the mortgage or deed of trust under which the property is
sold, may redeem the same at any time within the term of one year from
and after the date of the sale; and such redemption shall be governed by
the provisions of section four hundred and sixty-four to four hundred and
sixty-six, inclusive, of the Code of Civil Procedure, in so far as these are not
inconsistent with the provisions of this Act. (Italics ours)

Despite the evolutionary development of our procedural laws throughout

the years, the pertinent rule in the Code of Civil Procedure[26] remains
practically unchanged. Particularly, Rule 39, Section 33, second paragraph,
which relates to the right of possession of a purchaser of property in an
extrajudicial foreclosure sale:

Sec. 33. x x x

Upon the expiration of the right of redemption, the purchaser or

redemptioner shall be substituted to and acquire all the rights, title,
interest and claim of the judgment obligor to the property at the time of
levy. The possession of the property shall be given to the purchaser or last
redemptioner by the same officer unless a third party is actually holding
the property adversely to the judgment obligor. (Italics ours)

Thus, in Barican v. Intermediate Appellate Court,[27] we held that the

obligation of a court to issue an ex-parte writ of possession in favor of the
purchaser in an extrajudicial foreclosure sale ceases to be ministerial once
it appears that there is a third party in possession of the property who is
claiming a right adverse to that of the debtor/mortgagor. The same
principle was inversely applied in a more recent case,[28] where we ruled
that a writ of possession may be issued in an extrajudicial foreclosure of
real estate mortgage, only if the debtor is in possession and no third party
had intervened. Although the factual nuances of this case may slightly
differ from the aforecited cases, the availing circumstances are
undeniably similar – a party in possession of the foreclosed property is
asserting a right adverse to the debtor/mortgagor and is a stranger to the
foreclosure proceedings in which the ex-parte writ of possession was
applied for.
It should be stressed that the foregoing doctrinal pronouncements are not
without support in substantive law. Notably, the Civil Code protects the
actual possessor of a property, to wit:

Art. 433. Actual possession under claim of ownership raises a disputable

presumption of ownership. The true owner must resort to judicial process
for the recovery of the property.

Under the aforequoted provision, one who claims to be the owner of a

property possessed by another must bring the appropriate judicial action
for its physical recovery. The term “judicial process” could mean no less
than an ejectment suit or reinvindicatory action, in which the ownership
claims of the contending parties may be properly heard and adjudicated.

An ex-parte petition for issuance of a possessory writ under Section 7 of

Act No. 3135 is not, strictly speaking, a “judicial process” as contemplated
above. Even if the same may be considered a judicial proceeding for the
enforcement of one’s right of possession as purchaser in a foreclosure sale,
it is not an ordinary suit filed in court, by which one party “sues another for
the enforcement or protection of a right, or the prevention or redress of a
wrong.”[29]

It should be emphasized that an ex-parte petition for issuance of a writ of

possession is a non-litigious proceeding authorized in an extrajudicial
foreclosure of mortgage pursuant to Act 3135, as amended. Unlike a
judicial foreclosure of real estate mortgage under Rule 68 of the Rules of
Court, any property brought within the ambit of the act is foreclosed by the
filing of a petition, not with any court of justice, but with the office of the
sheriff of the province where the sale is to be made.[30]

As such, a third person in possession of an extrajudicially foreclosed realty,

who claims a right superior to that of the original mortgagor, will have no
opportunity to be heard on his claim in a proceeding of this nature. It
stands to reason, therefore, that such third person may not be
dispossessed on the strength of a mere ex-parte possessory writ, since to
do so would be tantamount to his summary ejectment, in violation of the
basic tenets of due process.
Besides, as earlier stressed, Article 433 of the Civil Code, cited above,
requires nothing less than an action for ejectment to be brought even by
the true owner. After all, the actual possessor of a property enjoys a legal
presumption of just title in his favor,[31] which must be overcome by the
party claiming otherwise.

In the case at bar, petitioner PNB admitted that as early as 1990, it was
aware that the subject lot was occupied by the Austrias. Yet, instead of
bringing an action in court for the ejectment of respondents, it chose to
simply file an ex-parte petition for a writ of possession pursuant to its
alleged right as purchaser in the extra-judicial foreclosure sale. We cannot
sanction this procedural shortcut. To enforce the writ against an unwitting
third party possessor, who took no part in the foreclosure proceedings,
would be tantamount to the taking of real property without the benefit of
proper judicial intervention.

Consequently, it was not a ministerial duty of the trial court under Act No.
3135 to issue a writ of possession for the ouster of respondents from the
lot subject of this instant case. The trial court was without authority to
grant the ex-parte writ, since petitioner PNB’s right of possession under
said Act could be rightfully recognized only against the Monsods and the
latter’s successors-in-interest, but not against respondents who assert a
right adverse to the Monsods. Hence, the trial court cannot be precluded
from correcting itself by refusing to enforce the writs it had previously
issued. Its lack of authority to direct issuance of the writs against
respondents assured that its earlier orders would never attain finality in the
first place.

In the same vein, respondents are not obliged to prove their ownership of
the foreclosed lot in the ex-parte proceedings conducted below. The trial
court has no jurisdiction to determine who between the parties is entitled
to ownership and possession of the foreclosed lot.

Likewise, registration of the lot in petitioner PNB’s name does not

automatically entitle the latter to possession thereof. As discussed earlier,
petitioner PNB must resort to the appropriate judicial process for recovery
of the property and cannot simply invoke its title in an ex-parte proceeding
to justify the ouster of respondents.
WHEREFORE, the instant petition is DENIED and the resolution of the Court
of Appeals in CA G.R. SP No. 48660 is AFFIRMED.

SO ORDERED.

SPS. RONALD HUTCHISON and VALENTINE NAVALLE-HUTCHISON,

Petitioners, vs. ENRIQUE M. BUSCAS, respondent.

DECISION

PUNO, J.:

The case at bar concerns a boundary dispute involving 6,471 square

meters of land in San Juan, Lubao, Pampanga. Petitioner spouses RONALD
and VALENTINE HUTCHISON seek the reversal of the Decision of the Court
of Appeals in CA-G.R. CV No. 66077, dated February 19, 2003, holding that
respondent ENRIQUE M. BUSCAS is entitled to the possession of the
disputed area.

The records show that on October 1, 1987, petitioner spouses purchased

from V.A. Development Enterprises, Inc. a 76,207-sq. m. land (designated
as Lot No. 7216) in San Juan, Lubao, Pampanga. They occupied the land
after a title was issued in their names.

On August 22, 1989, one Juanita Arrastia, the owner of a lot adjacent to
that of petitioner spouses, sold a portion of her land to respondent. The
transaction, covering 7,581 sq. m. (designated as Lot No. 7047-A), was
evidenced by a Quitclaim Deed in favor of respondent. Respondent
occupied 1,100 sq. m. of his land. However, he failed to register the
portion of the lot in his name and title to the property remained in
Arrastia's name.

On January 10, 1995, respondent commissioned geodetic engineer Narciso

Manansala to survey his property. Manansala prepared a sketch/subdivision
plan of respondent's lot. His survey revealed that 6,471 sq. m. thereof was
occupied by petitioner spouses.

Respondent sent a demand letter to petitioner spouses to vacate the

encroached area. Petitioner spouses refused and insisted that it was part of
their land. Thus, respondent filed a complaint for unlawful detainer (Civil
Case No. 1329) against petitioner spouses before the Municipal Trial Court
(MTC) of Lubao, Pampanga. After trial, the MTC ruled in favor of
respondent. However, on appeal, the Regional Trial Court (RTC) dismissed
the case. It ruled that MTC had no jurisdiction over the subject matter as it
is a boundary dispute and the proper action should have been an accion
reinvindicatoria before the RTC.

Consequently, respondent filed a case for accion reinvindicatoria against

petitioner spouses with the RTC of Guagua, Pampanga.[1] At the trial,
respondent adduced in evidence the Quitclaim Deed to prove his title over
the disputed area. He likewise testified on the survey conducted by
Manansala. Another geodetic engineer, Angelito H. Nicdao, testified that in
the unlawful detainer case earlier filed by the respondent, he was directed
by the MTC judge hearing the case to conduct a verification survey of the
parties' lots. In compliance with the order, he surveyed the two (2) lots
using the title of petitioner spouses and the records of the Bureau of
Lands.[2] His survey revealed that petitioner spouses encroached on 6,471
sq. m. of the adjacent land claimed by respondent. Respondent offered in
evidence the verification plan and report of Nicdao relative to his survey.

On the part of petitioner spouses, petitioner Valentine Hutchison testified

that she purchased Lot No. 7216 in Lubao, Pampanga, covering an area of
76,207 sq. m., and title thereto was duly issued in her name and that of
her spouse.

After trial, the RTC dismissed[3] the complaint for lack of merit. It ruled
that respondent's Quitclaim Deed was not sufficient proof of ownership;
that respondent failed to clearly identify the property claimed as it was only
marked with an 'X sign, and; that petitioner spouses, as registered owners,
are entitled to possession of the disputed lot.

On appeal, the Court of Appeals reversed the decision of the trial court. [4]
It ruled that respondent is entitled to possession of the disputed area as he
was able to prove his claim of ownership and the identity of the subject
land.

Hence, this appeal where petitioner spouses assign the following errors:
I

THE COURT OF APPEALS ERRED IN ITS CONCLUSION THAT THE

RESPONDENT SUFFICIENTLY IDENTIFIED THE PROPERTY HE SEEKS TO
RECOVER.

II

THE COURT OF APPEALS ERRED IN ITS LEGAL CONCLUSION OF LAW

THAT THE TITLE OF THE RESPONDENT TO THE SUBJECT PROPERTY IS
THE QUITCLAIM DEED OVER A PORTION OF LAND.

III

THE COURT OF APPEALS ERRED IN ITS LEGAL CONCLUSION THAT THE

RESPONDENT STRENGTHENED HIS 'TITLE BY THE SURVEY HE CAUSED
TO BE PREPARED.

IV

THE COURT OF APPEALS ERRED IN ITS CONCLUSION OF LAW THAT THE

RESPONDENT PROVED BY A PREPONDERANCE OF EVIDENCE THAT HIS
PROPERTY WAS ENCROACHED UPON BY THE PETITIONERS.

THE COURT OF APPEALS ERRED IN ITS CONCLUSION OF LAW THAT THE

RESPONDENT 'IS DECLARED OWNER OF THE 6,471 SQUARE-METERS
DISPUTED LOT, AND THE PETITIONERS ARE THUS ORDERED TO VACATE
THE SAME.

Petitioner spouses contend that there was a gross misapprehension of facts

by the Court of Appeals and its legal conclusions were contrary to law and
jurisprudence. They assert that respondent failed to identify the portion of
land he was claiming and prove his ownership thereof. They allege that:
(a) respondent's identification of his 7,581 sq. m. property with a mere 'X
mark on the Annex 'A of the Quirclaim Deed is insufficient as the attached
Annex 'A was not presented at the trial, and; (b) the surveys conducted by
the geodetic engineers cannot be used to identify respondent's lot as they
were based on the records of the Bureau of Lands and not on the
document of title of respondent.

We find for the petitioner spouses.

In civil cases, the law requires that the party who alleges a fact and
substantially asserts the affirmative of the issue has the burden of proving
it.[5] This evidentiary rule is based on the principle that the suitor who
relies upon the existence of a fact should be called upon to prove
it.[6]chanroblesvirtuallawlibrary

Article 434 of the New Civil Code[7] provides that 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. In the case at bar, we find
that respondent failed to establish these two (2) legal requirements.

The first requisite: the identity of the land. 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.[8] 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.[9]
Respondent sought to prove these legal requisites by anchoring his claim
on the Quitclaim Deed over a portion of land which was executed by
Arrastia in his favor. However, a cursory reading of the Quitclaim Deed
shows that the subject land was described, thus:

x x x a portion of that property situated at San Juan, Lubao, Pampanga

which portion subject of this sale consists of 7,581 square meters more or
less, as indicated particularly in the herein attached plan marked as Annex
'A and made an integral part hereof, and the subject property with an 'X
sign.

Thus, the Quitclaim Deed specified only the extent of the area sold, i.e.,
7,581 sq. m. of Arrastia's land. Annex 'A of the Deed, where the entire lot
of Arrastia was particularly described and where the specific portion of the
property sold to respondent was marked, was not presented by respondent
at the trial. As the Deed itself failed to mention the metes and bounds of
the land subject of the sale, it cannot be successfully used by respondent
to identify the area he was claiming and prove his ownership thereof.
Indeed, the presentation of the Annex 'A is essential as what defines a
piece of land is not the size mentioned in the instrument but the
boundaries thereof which enclose the land and indicate its exact
limits.[10]chanroblesvirtuallawlibrary

Neither can the surveys of the lots of petitioner spouses and respondent
prove the identity of the contested area and respondent's ownership
thereof. The records show that when geodetic engineers Manansala and
Nicdao surveyed the lands, they merely relied on the self-serving statement
of respondent that he owns the portion of the lot adjacent to petitioner
spouses. They were not shown the Deed of Quitclaim and its Annex 'A or
any other document of title which described the specific portion of the land
allegedly conveyed to respondent.[11] Thus, the surveys cannot be given
evidentiary weight to prove the identity of the land sold to respondent and
his ownership thereof.

Moreover, the rules on evidence provide that where the contents of the
document are the facts in issue, the best evidence is the instrument
itself.[12] In the case at bar, the identity of the land claimed and
respondent's ownership thereof are the very facts in issue. The best
evidence to prove these facts is the Quitclaim Deed and its Annex 'A where
respondent derives his title and where the land from which he purchased a
part was described with particularity, indicating the metes and bounds
thereof. Respondent's failure to adduce in evidence Annex 'A of the
Quitclaim Deed or produce secondary evidence, after proof of its loss,
destruction or unavailability,[13] is fatal to his cause.

Finally, it bears stress that in an action to recover real property, the settled
rule is that the plaintiff must rely on the strength of his title, not on the
weakness of the defendant's title.[14] This requirement is based on two (2)
reasons: first, it is possible that neither the plaintiff nor the defendant is
the true owner of the property in dispute,[15] and second, the burden of
proof lies on the party who substantially asserts the affirmative of an issue
for he who relies upon the existence of a fact should be called upon to
prove that fact.[16] In the case at bar, as respondent failed to prove his
title to and identity of the contested land, there exists no legal ground
upon which to turn over the possession of the disputed area to him.

IN VIEW WHEREOF, the petition is GRANTED. The Decision of the Court of

Appeals in CA-G.R. CV No. 66077, dated February 19, 2003, is hereby
reversed and set aside. The Decision of the Regional Trial Court of Guagua,
Pampanga, dismissing the complaint for accion reinvindicatoria in Civil Case
No. G-3183, is reinstated. No pronouncement as to costs.

SO ORDERED.

RUDY LAO, petitioner, vs. JAIME LAO, respondent.

DECISION

CALLEJO, SR., J.:

As early as 1956, the spouses Julian Lao and Anita Lao had constructed a
building on a parcel of land in Balasan, Iloilo City, owned by Alfredo Alava
and covered by Transfer Certificate of Title (TCT) No. 28382. They then
occupied and leased the same without any written agreement thereon.
Anita Lao also put up her business in the premises.

On May 12, 1982, Alfredo Alava, as lessor, and Anita Lao, as lessee,
executed a Contract of Lease[1] over the said property. The parties
agreed that the lease of the property was to be for a period of 35 years, at
an annual rental of P120.00. However, the contract of lease was not filed
with the Office of the Register of Deeds; hence, was not annotated at the
dorsal portion of the said title.

Aside from Anita Lao, petitioner Rudy Lao also leased another portion of
the same property where he put up his business.[2] In fact, Anita Lao’s
building was adjacent to where the petitioner conducted his business. At
that time, the petitioner knew that Anita Lao and her husband were the
owners of the said building. He also knew that she had leased that portion
of the property, and that respondent Jaime Lao, their son, managed and
maintained the building, as well as the business thereon.

In the meantime, on March 21, 1995, the petitioner purchased the property
from Alava, and was later issued TCT No. 152,097 in his name. By then,
the property had been classified as commercial, but the yearly rental of
P120.00 in the contract of lease between Alava and Anita Lao subsisted.

On July 14, 1997, the petitioner filed a Complaint for Unlawful Detainer
against the respondent with the 1st Municipal Circuit Trial Court (MCTC) of
Carles-Balasan, Iloilo City. The petitioner alleged, inter alia, that the
respondent had occupied a portion of his property without any lease
agreement and without paying any rentals therefor, and that the same was
only through his tolerance and generosity. The petitioner prayed that,
after due proceedings, judgment be rendered in his favor as follows:

1. Ordering the defendant, his agents and/or representatives and all

persons claiming under him, to vacate the premises he occupies, remove
all improvements thereon and restore possession thereof to the plaintiff;

2. Directing the defendant, his agents and/or representatives and all

persons claiming under him, when proper, jointly and severally, to pay
plaintiff the sums of: P50,000.00 as attorney’s fees; at least P15,000.00 as
miscellaneous litigation and necessary expenses; such compensation for
use of the portion she (sic) occupies, at the rate of P5,000.00 a month
from January 24, 1997, until the full and complete surrender thereof to the
plaintiff; and

3. The costs of this suit.[3]

In his answer to the complaint, the respondent alleged that the petitioner
had no cause of action against him, the truth being that the lessee of the
property was his mother, Anita Lao, as evidenced by a contract of lease
executed by Alava, the former owner thereof. He further alleged that she
had been paying the annual rentals therefor, the last of which was on July
16, 1997 and evidenced by a receipt.[4] He further alleged that she had
designated him as manager to maintain the building, pay rentals and
operate the business. He then prayed for the dismissal of the complaint.
During the preliminary conference, the respondent admitted that he was in
actual possession of the property. For his part, the petitioner admitted that
he had been renting another portion of the same property from Alava for
years, and that his business establishment and that of Anita Lao’s were
adjacent to each other. He also admitted that Anita Lao had been renting
the said portion of the property for years before he bought it.

The respondent adduced in evidence the contract of lease[5] between his

mother, Anita Lao, and Alava.

On March 4, 1999, the MCTC rendered judgment in favor of the petitioner

and against the respondent. The fallo of the decision reads:

WHEREFORE, based on the foregoing circumstances, JUDGMENT is hereby

rendered in favor of the Plaintiff, Rudy Lao and as against defendant,
Jaime Lao, as follows:

1. Ordering defendant, Jaime Lao, his successors-in-interest, agents,

members of his family, privies or any person or persons claiming under his
name to vacate the portion of Lot No. 3 occupied by him, and to deliver
the physical possession thereof to plaintiff, Rudy Lao;

2. Ordering defendant to pay plaintiff, Rudy Lao, the sum of P3,000.00

representing as the monthly rentals of the premises occupied by defendant
on Lot No. 3 starting the month of January 1997, until the possession
thereof is actually delivered and turned over to the plaintiff;

3. Ordering defendant, Jaime Lao, to pay plaintiff the amount of

P20,000.00 as attorney’s fees;

4. Ordering defendant, Jaime Lao, to pay Plaintiff, Rudy Lao, the sum
of P10,000.00 representing as litigation expenses; and to pay the costs of
this suit.

SO ORDERED.[6]

The respondent appealed the decision to the Regional Trial Court (RTC) of
Barotac Viejo, Iloilo City, Branch 66, which rendered judgment on January
28, 2000 affirming the said decision with modification. The fallo of the
decision reads:

WHEREFORE, the decision appealed from this court is hereby affirmed with
a modification that defendant-appellant Jaime Lao is ordered to pay
plaintiff-appellee Rudy Lao the sum of P1,000.00 per month as reasonable
use of the land subject of the case from January 1997 until possession is
turned over to the plaintiff; to pay Rudy Lao the sum of P10,000.00
attorney’s fees and P5,000.00 litigation expenses.

With cost against the defendant-appellant.

SO ORDERED.[7]

The RTC ruled that under Article 1676 of the New Civil Code, the petitioner
was the purchaser of the property and had the right to terminate the lease
between Alava and Anita Lao, it appearing that the lease contract was not
registered with the Office of the Register of Deeds. Not being the lessee,
the respondent could not invoke the same provision. The trial court also
held that the respondent, not his mother, was the real party as defendant
in the MCTC, since it was he who was in actual possession of the property.
The RTC maintained that if Anita Lao was sued as defendant and was
ordered evicted, the decision would not be binding on the respondent since
he was not impleaded as defendant.

The respondent filed a petition for review with the Court of Appeals (CA),
asserting that –

I. THE HONORABLE REGIONAL TRIAL COURT SERIOUSLY ERRED IN

AFFIRMING THE ERRONEOUS FINDING OF THE MCTC THAT THIS CASE
WAS PROPERLY BROUGHT AGAINST THE DEFENDANT WHEN HE IS ONLY
AN AGENT OF THE REAL PARTY-IN-INTEREST, ANITA LAO.

II. THE HONORABLE REGIONAL TRIAL COURT SERIOUSLY ERRED IN

AFFIRMING THE ERRONEOUS FINDING OF THE MCTC THAT THERE IS NO
AGENCY BETWEEN ANITA LAO AND THE DEFENDANT-APPELLANT
BECAUSE THERE WAS NO DOCUMENTARY EVIDENCE PRESENTED TO
SHOW THE FACT OF AGENCY.
III. THE HONORABLE REGIONAL TRIAL COURT SERIOUSLY ERRED IN
IGNORING THE FACT THAT THE MCTC BLATANTLY DISREGARDING (sic)
THE PRE-TRIAL CONFERENCE ORDER IT ISSUED, ISSUING A DECISION
CONTRARY TO THE FACTS ADMITTED BY [THE] PARTIES THEMSELVES
ESPECIALLY THE ADMISSION OF THE PLAINTIFF-APPELLEE THAT HE
KNOWS OF THE EXISTENCE OF THE LEASE.[8]

On February 27, 2001, the CA rendered judgment setting aside and

reversing the decision of the RTC. The CA ruled that the real party-in-
interest as defendant in the MCTC was Anita Lao, the lessee of the
property, and not the respondent who was merely the
administrator/manager of Anita Lao’s building and the occupant of the
property.

The petitioner’s motion for the reconsideration of the decision having been
denied by the appellate court, he now comes to this Court for relief via a
petition for review on certiorari, claiming that:

The Hon. Court of Appeals committed a reversible error when it converted

petitioner’s cause of action against respondent into a cause of action
against respondent’s mother; and on the basis thereof, dismissed
petitioner’s complaint for ejectment against respondent under the mistaken
finding that said ejectment case should have been filed against
respondent’s mother.[9]

The petitioner avers that the respondent was the real party-in-interest as
defendant in the complaint for unlawful detainer because the respondent’s
possession of the property was in his personal capacity, and not as the
caretaker of the property and the business in the building owned by Anita
Lao, the lessee thereon. The petitioner argues that, in an ejectment suit,
the threshold issue is who has the right to the material or de facto
possession of the subject property as distinguished from the de jure
possession thereof; hence, the defendant in an ejectment case is the
person in actual physical possession of the property.

The petitioner insists that the respondent, having admitted in the MCTC
that he was in actual possession of the property and that in fact, Anita Lao
was no longer staying in the property after her husband died, is the real
party-in-interest, as defendant. He posits that if he filed a complaint for
ejectment against Anita Lao, it would be dismissed because it was the
respondent, and not his mother, who was in actual possession of the
property.

The petition has no merit.

We agree with the petitioner that, in ejectment cases, the word

“possession” means nothing more than actual physical possession, not
legal possession, in the sense contemplated in civil law.[10] The only issue
in such cases is who is entitled to the physical or material possession of the
property involved, independent of any claim of ownership set forth by any
of the party-litigants.[11]

We, likewise, conform to the petitioner’s contention that in an action for

unlawful detainer, the real party-in-interest as party-defendant is the
person who is in possession of the property without the benefit of any
contract of lease and only upon the tolerance and generosity of its owner.
Such occupant is bound by an implied promise that he will vacate the
premises upon demand. This situation is analogous to that of a lessee or
tenant whose term has expired, but whose occupancy continued by mere
tolerance of the owner.[12] He is the real party-in-interest as
defendant.[13]

However, the records in this case show that the respondent has been in
possession of the property subject of the complaint not by mere tolerance
or generosity of the petitioner, but as the manager of his mother, Anita
Lao, who conducted her business in the building/warehouse which stood
on a portion of the property leased from Alava, the former owner.
Contrary to the petitioner’s claim, the respondent’s possession of the
property was in behalf of his mother, the lessee thereof, and not in his own
right, independently of that of his mother.

The petitioner cannot feign ignorance of the existence of the lease of the
subject property by Anita Lao, the existence of the building and her
business thereon, and the fact that the respondent managed his mother’s
building and business. It must be stressed that during the preliminary
conference of the parties before the MCTC, the petitioner admitted his
knowledge of the foregoing facts.
While it is true that the contract of lease between Alava and Anita Lao was
not filed in the Office of the Register of Deeds and annotated at the dorsal
portion of the petitioner’s title over the property, nevertheless, the
petitioner was bound by the terms and conditions of the said contract of
lease. The lease, in effect, became a part of the contract of sale.[14]

Under Section 2, Rule 70 of the Rules of Court, the petitioner, as the

vendee of the property, had the right to file an action for unlawful detainer
against Anita Lao upon demand, but for breach of the contract of lease:

SEC. 2. Lessor to proceed against lessee only after demand. – Unless

otherwise stipulated, such action by the lessor shall be commenced only
after demand to pay or comply with the conditions of the lease and to
vacate is made upon the lessee, or by serving written notice of such
demand upon the person found on the premises, or by posting such notice
on the premises if no person be found thereon, and the lessee fails to
comply therewith after fifteen (15) days in the case of land or five (5) days
in the case of buildings.

If the petitioner had done so and judgment was rendered in his favor,
ordering Anita Lao to vacate the property, the respondent herein, who is in
possession of the property for and in her behalf, would then have to abide
by the decision and vacate the same. This was the ruling of the Court in
Oro Cam Enterprises, Inc. v. Court of Appeals,[15] thus:

… It is well-settled that a judgment in an ejectment suit is binding not only

upon the defendants in the suit but also against those not made parties
thereto, if they are:

a) trespassers, squatters or agents of the defendant fraudulently

occupying the property to frustrate the judgment;
b) guests or other occupants of the premises with the
permission of the defendant;
c) transferees pendente lite;
d) sublessee;
e) co-lessees; or
f) members of the family, relatives and other privies of the
defendant.[16]
Apparently, the petitioner believed that it was unfair for Anita Lao to be
paying an annual rental of only P120.00 for the portion of the property
leased by her, considering that the said lot had already been classified as
commercial property. Moreover, it was not Anita Lao who stayed in the
leased premises; it was her son. The petitioner had no cause of action for
unlawful detainer against Anita Lao because of the subsisting contract of
lease; hence, he could not file the complaint against her. What the
petitioner had no right to do directly, he did indirectly by filing a complaint
for unlawful detainer against her son, the respondent, believing that by so
doing, he will be rid of Anita Lao’s lease contract.

The Court, thus, rules that the CA acted in accord with law when it ordered
the dismissal of the complaint.

IN LIGHT OF ALL THE FOREGOING, the petition is DENIED for lack of

merit. Costs against the petitioner.

SO ORDERED.

RENE GANILA,* EDUARDO DUMADA-OG, SR., RAFAEL GANILA, JOSE

PASTRANA, LOURDES GANILA, FLORENTINO GANILA, SERAFIN GANILA,
LORETO ARELLANO, CONRADO GANILA, VIVENCIO ALVIOR, EDUARDO
GANTALA, AMPARO VILLANUEVA, ELEUTERIO SILVA, ADELINA GANILA,
FELIZARDO GANILA, SR., ENRIQUE GANILA, ABRAHAM TANONG, EMILIO
ALFARAS, JR., BAPTIST CHRISTIAN LEARNING CENTER, petitioners, vs.
HON. COURT OF APPEALS AND VIOLETA C. HERRERA, respondents.

DECISION

QUISUMBING, J.:

For review on certiorari are the Decision[1] dated March 30, 2001 of the
Court of Appeals in CA-G.R. SP No. 58191, and its Resolution[2] dated
October 18, 2001 denying the motion for reconsideration. The assailed
decision denied the petition to set aside the Resolution[3] of the Regional
Trial Court (RTC) of San Miguel, Jordan, Guimaras, Branch 65, affirming
the Order of the Municipal Circuit Trial Court (MCTC) for the 19 petitioners
to vacate the contested parcel of land.
The facts are as follows:

On March 19, 1997, private respondent Violeta Herrera filed 21 ejectment

Complaints[4] before the 16thbarangaycomplaints. MCTC, Jordan-
Buenavista-Nueva Valencia, Jordan, Guimaras. Private respondent alleged
that she owns Lot 1227 of the Cadastral Survey of Jordan, Guimaras, with
an area of 43,210 square meters; that she inherited the lot from her
parents; and that she only tolerated petitioners to construct residential
houses or other improvements on certain portions of the lot without rental.
Sometime in September or October 1996, private respondent demanded
that the petitioners vacate the lot and remove their houses and other
improvements thereon. Petitioners refused, despite offer of money by way
of assistance to them. After the conciliation failed, private respondent filed
the

In their Answers,[5] eight[6] of the petitioners claimed that Lot 1227 was
formerly a shoreline which they developed when they constructed their
respective houses. Another eight[7] maintained that their houses stood on
Lot 1229 of the Cadastral Survey of Jordan, Guimaras. The other three[8]
asserted that Lot 1227 is a social forest area.

At the preliminary conference, the parties agreed to designate two

geodetic engineers as commissioners of the MCTC to conduct a relocation
survey of Lot 1227 and to identify who among the petitioners have houses
within the lot.[9]

The commissioners reported that: (1) the house of Henry Gabasa,

defendant in Civil Case No. 288-J, is almost outside Lot 1227; (2) the
house of Ludovico Amatorio, defendant in Civil Case No. 289-J, diagonally
traversed the boundary; and (3) the houses of the 19 petitioners are inside
Lot 1227.[10]

Eight months after herein petitioners’ failure to comment on the

manifestation of private respondent to terminate the preliminary
conference, the MCTC terminated the preliminary conference.[11]
Thereafter, petitioners’ counsel Atty. Nelia Jesusa L. Gonzales failed to file
her clients’ position papers and affidavits, even after they sought a 30-day
extension to file the same.[12]
Consequently, the MCTC decided the cases as follows:

WHEREFORE, premises considered, judgment is hereby rendered in favor

of the plaintiff whereby each of the twenty-one (21) defendants are hereby
ordered:

1. To vacate Lot 1227 of the Cadastral Survey of Jordan, Guimaras;

2. To pay Two Hundred Pesos (P200.00) per month from October, 1996
as compensation for the use of the property until the same is vacated; and

3. To pay Two Thousand Pesos (P2,000.00) as attorney’s fees and

litigation expenses.

SO ORDERED.[13]

Petitioners appealed to the RTC, Branch 65, at Jordan, Guimaras, which

decided as follows:

WHEREFORE, premises considered, the decision in Civil Cases Nos. 0270-J,

0272-J, 0273-J, 0274-J, 0275-J, 0276-J, 0277-J, 0278-J, 0279-J, 0280-J,
0281-J, 0282-J, 0283-J, 0284-J, 0285-J, 0286-J, 0287-J, 0291-J and 0292-J
are hereby affirmed.

The decision of the court below in Civil Cases Nos. 0288-J and 0289-J are
set aside. Civil Cases Nos. 0288-J and 0289-J are hereby DISMISSED.

SO ORDERED.[14]

The RTC ruled that the evidence showed the better right of private
respondent to possess Lot 1227. Private respondent’s position paper,
affidavit and tax declaration supported her allegations. In addition, the
commissioners’ report and sketch plan showed that indeed petitioners
occupy Lot 1227. On the other hand, according to the RTC, the petitioners
failed to present evidence which would show that they are entitled to
possess the lot.

Based on the sketch plan, the RTC dismissed the cases against Gabasa and
Amatorio since their houses occupy only a small area of Lot 1227. It
declared that Gabasa and Amatorio believed in good faith that the whole
area they occupied was part of the seashore.

The 19 petitioners, who were ordered to vacate the lot, filed a joint petition
for review with the Court of Appeals. The appellate court denied the
petition. Petitioners moved for reconsideration and filed an amended
petition. The Court of Appeals, however, affirmed the factual findings and
conclusions arrived at by the trial courts and denied the amended petition
for lack of merit.[15] It also denied the motion for reconsideration.

Petitioners are now before us, on a petition for review, alleging that:

The Honorable Court of Appeals, with due respect and deference,

committed a reversible error in the interpretation/application of the law in
the instant case and in the appreciation of the facts and evidence
presented. The Court of Appeals gravely abused its discretion when it
denied and dismissed the petition filed by the petitioners.[16]

After considering the parties’ submissions, we find three basic issues: (1)
Did the MCTC err in taking jurisdiction over and deciding the cases? (2) Did
the RTC err in sustaining the MCTC’s judgment? (3) Did the CA err in
denying the petition for review filed by the 19 petitioners ordered to be
ejected?

Petitioners insist that private respondent should have filed an action to

recover possession de jure, not a mere complaint for ejectment, for two
reasons. One, they possessed Lot 1227 in good faith for more than 30
years in the concept of owners. And two, there was no withholding of
possession since private respondent was not in prior possession of the lot.

Private respondent states in her Comment before us that the allegations in

her Complaints make out a clear case of unlawful detainer which is
cognizable by the MCTC. We are in agreement with her stance. There was
no error in the choice of the complainant’s remedy, a matter left to her
determination as the suitor. And the complaint itself is defined by the
allegations therein, not the allegations of the defendants.

At the outset, we note that petitioners question the MCTC’s jurisdiction yet
they admit in their preliminary statement that the Complaints filed are
indeed for unlawful detainer, and that the only issue to be determined is
mere physical possession (possession de facto) and not juridical possession
(possession de jure), much less ownership.[17]

While petitioners assert that this case involves only deprivation of

possession, they confuse the remedy of an action for forcible entry with
that of unlawful detainer. In unlawful detainer, prior physical possession
by the plaintiff is not necessary. It is enough that plaintiff has a better
right of possession. Actual, prior physical possession of a property by a
party is indispensable only in forcible entry cases. In unlawful detainer
cases, the defendant is necessarily in prior lawful possession of the
property but his possession eventually becomes unlawful upon termination
or expiration of his right to possess.[18] Thus, the fact that petitioners are
in possession of the lot does not automatically entitle them to remain in
possession. And the issue of prior lawful possession by the defendants
does not arise at all in a suit for unlawful detainer, simply because prior
lawful possession by virtue of contract or other reasons is given or
admitted. Unlike in forcible entry where defendants, by force, intimidation,
threat, strategy or stealth, deprive the plaintiff or the prior physical
possessor of possession. Here there is no evidence to show that
petitioners entered the lot by any of these acts.

If only to stress the fundamental principles related to present controversy,

jurisdiction over unlawful detainer suits is vested in municipal trial
courts.[19] And in ejectment cases, the jurisdiction of the court is
determined by the allegations of the complaint.[20]

In this case for ejectment, private respondent’s allegations sufficiently

present a case of unlawful detainer. She alleged that (1) she owns Lot
1227; (2) she tolerated petitioners to construct their houses thereon; (3)
she withdrew her tolerance; and (4) petitioners refused to heed her
demand to vacate the lot. The Complaints were also filed within one year
from the date of her demand. The cause of action for unlawful detainer
between the parties springs from the failure of petitioners to vacate the lot
upon lawful demand of the private respondent. When they refused to
vacate the lot after her demand, petitioners’ continued possession became
unlawful. Her complaint for ejectment against respondent, to put it simply,
is not without sufficient basis.
Petitioners’ contention that private respondent should have filed an action
to recover possession de jure with the RTC is not supported by law or
jurisprudence. The distinction between a summary action of ejectment and
a plenary action for recovery of possession and/or ownership of the land is
settled in our jurisprudence.

What really distinguishes an action for unlawful detainer from a possessory

action (accion publiciana) and from a reinvindicatory action (accion
reinvindicatoria) is that the first is limited to the question of possession de
facto. An unlawful detainer suit (accion interdictal) together with forcible
entry are the two forms of an ejectment suit that may be filed to recover
possession of real property. Aside from the summary action of ejectment,
accion publiciana or the plenary action to recover the right of possession
and accion reinvindicatoria[21] or the action to recover ownership which
includes recovery of possession, make up the three kinds of actions to
judicially recover possession.

It is not up to defendants, now petitioners herein, to dictate upon plaintiff,

now the private respondent, what her initial recourse should be. Her
choice of an action for ejectment against so-called squatters is well within
her rights.

Petitioners cite the case of Bayubay v. Court of Appeals,[22] and argue

that the MCTC’s decision was without jurisdictional or legal basis because
the MCTC did not issue a preliminary conference order. They assert that
the 10-day period to file position papers and affidavits only starts after the
parties had received a preliminary conference order. They insist they were
denied due process when the MCTC decided the cases based merely on
private respondent’s Complaints and affidavit, without considering their
Answers.

For her part, private respondent maintains that there was substantial
compliance with the rules in the MCTC’s conduct of the preliminary
conference, hence there was no violation of due process nor disregard of
its proper jurisdiction.

Petitioners’ present contention was first raised only in their appeal to the
RTC. Raising it before the appellate tribunal is barred by estoppel.[23]
They should have raised it in the proceedings before the MCTC. In our
view, this issue is a mere afterthought, when the MCTC decided against
them. Basic rules of fair play, justice and due process require that as a rule
an issue cannot be raised by the petitioners for the first time on
appeal.[24]

Besides, petitioners did not question initially the MCTC’s Order dated
February 19, 1999, when they moved for an extension of time to file their
position papers and affidavits. They wanted another 30 days on top of the
30 days set by the MCTC, which strictly should have been 10 days only. In
this regard, petitioners could not claim that they were denied sufficient
time to file their position papers and affidavits before the trial court.
Further, they cannot validly invoke our ruling[25] in Bayubay, for in that
case there was no order at all terminating the preliminary conference and
requiring the parties to submit position papers and affidavits.

We note with dismay petitioners’ insistence that we order the MCTC “to
conduct the requisite preliminary conference.” The summary character of
ejectment suits will be disregarded if we allow petitioners to further delay
this case by allowing a second preliminary conference. Ejectment by way
of forcible entry and unlawful detainer cases are summary proceedings,
designed to provide an expeditious means of protecting actual possession
or the right to possession over the property involved. It is a timely
procedure designed to remedy the delay in the resolution of such
cases.[26]

Lastly, petitioners aver that private respondent failed to prove her

allegation of ownership of Lot 1227 as it is only based on a tax declaration
which is not an evidence of ownership. They also claim that their
possession of the lot was not and could not be by mere tolerance.
However, this is a factual matter best left to the trial courts.

What we have now is sufficient evidence showing that private respondent

has a better right to possess Lot 1227. The commissioners’ report and
sketch plan show that the 19 petitioners occupy the lot, which corroborate
private respondent’s allegation and disprove petitioners’ defense that Lot
1227 is a shoreline; or that Lot 1227 is a social forest area. While not a
conclusive evidence of ownership, private respondent’s tax declaration
constitutes proof that she has a claim of title over the lot. It has been held
that:
Although tax declarations or realty tax payment of property are not
conclusive evidence of ownership, nevertheless, they are good indicia of
possession in the concept of owner for no one in his right mind would be
paying taxes for a property that is not in his actual or at least constructive
possession. They constitute at least proof that the holder has a claim of
title over the property. The voluntary declaration of a piece of property for
taxation purposes manifests not only one’s sincere and honest desire to
obtain title to the property and announces his adverse claim against the
State and all other interested parties, but also the intention to contribute
needed revenues to the Government. Such an act strengthens one’s bona
fide claim of acquisition of ownership.[27]

The lower courts did not err in adjudicating the issue of possession. Mere
absence of title over the lot is not a ground for the courts to withhold relief
from the parties in an ejectment case. Plainly stated, the trial court has
validly exercised its jurisdiction over the ejectment cases below. The policy
behind ejectment suits is to prevent breaches of the peace and criminal
disorder, and to compel the party out of possession to respect and resort
to the law alone to obtain what she claims is hers. The party deprived of
possession must not take the law into his or her own hands.[28] For their
part, herein petitioners could not be barred from defending themselves
before the court adequately, as a matter of law and right.

However, petitioners in their defense should show that they are entitled to
possess Lot 1227. If they had any evidence to prove their defenses, they
should have presented it to the MCTC with their position papers and
affidavits. But they ignored the court’s order and missed the given
opportunity to have their defenses heard, the very essence of due
process.[29] Their allegations were not only unsubstantiated but were also
disproved by the plaintiff’s evidence.

In sum, we find no reversible error much less any grave abuse of discretion
committed by the Court of Appeals. A person who occupies the land of
another at the latter’s tolerance or permission, without any contract
between them, is necessarily bound by an implied promise that he will
vacate upon demand, failing which a summary action for ejectment is the
proper remedy against him.[30] His status is analogous to that of a lessee
or tenant whose term of lease has expired but whose occupancy continued
by tolerance of the owner. In such a case, the date of unlawful deprivation
or withholding of possession is to be counted from the date of the demand
to vacate.[31]

WHEREFORE, the instant petition is DENIED for lack of merit. The Decision
of the Court of Appeals dated March 30, 2001 and its Resolution dated
October 18, 2001 are AFFIRMED.

Costs against petitioners.

SO ORDERED.

RUBEN SANTOS, petitioner, vs. SPOUSES TONY AYON and MERCY AYON,
respondents.

DECISION

SANDOVAL-GUTIERREZ, J.:

For our resolution is the petition for review on certiorari assailing the
Decision[1] of the Court of Appeals dated October 5, 1998 in CA-G.R. SP
No. 4735 and its Resolution[2] dated December 11, 1998 denying the
motion for reconsideration.

The petition alleges that on November 6, 1996, Ruben Santos, petitioner,

filed with the Municipal Trial Court in Cities (MTCC), Branch 2, Davao City a
complaint for illegal detainer against spouses Tony and Mercy Ayon,
respondents, docketed as Civil Case No. 3506-B-96.

In his complaint, petitioner averred that he is the registered owner of three

lots situated at Lanzona Subdivision, Matina, Davao City, covered by
Transfer Certificates of Title (TCT) Nos. 108174, 108175, and 108176.
Respondent spouses are the registered owners of an adjacent parcel of land
covered by TCT No. T-247792. The previous occupant of this property built
a building which straddled both the lots of the herein parties. Respondents
have been using the building as a warehouse.

Petitioner further alleged in his complaint that in 1985, when he bought the
three lots, he informed respondents that the building occupies a portion of
his land. However, he allowed them to continue using the building. But in
1996, he needed the entire portion of his lot, hence, he demanded that
respondents demolish and remove the part of the building encroaching his
property and turn over to him their possession. But they refused. Instead,
they continued occupying the contested portion and even made
improvements on the building. The dispute was then referred to the
barangay lupon, but the parties failed to reach an amicable settlement.
Accordingly, on March 27, 1996, a certification to file action was issued.

In their answer, respondents sought a dismissal of this case on the ground

that the court has no jurisdiction over it since there is no lessor-lessee
relationship between the parties. Respondents denied they were occupying
petitioner’s property by mere tolerance, claiming they own the contested
portion and have been occupying the same long before petitioner acquired
his lots in 1985.

On July 31, 1997, the MTCC rendered its Decision in favor of petitioner,
thus:

“WHEREFORE, judgment is rendered in favor of the plaintiff and against the

defendants ordering the latter, their successors-in-interest and other
persons acting in their behalf to vacate the portion of the subject properties
and peacefully surrender possession thereof to plaintiff as well as
dismantle/remove the structures found thereon.

Defendants are further ordered to pay reasonable value for the use and
occupation of the encroached area in the amount of One Thousand Pesos
(P1,000.00) a month beginning September 1996 and the subsequent
months thereafter until premises are vacated; to pay attorney’s fees of Ten
Thousand Pesos (P10,000.00); and to pay the costs of suit.

SO ORDERED.”[3]

On appeal, the Regional Trial Court (RTC), Branch 11, Davao City, in its
Decision dated February 12, 1998 in Civil Case No. 25, 654-97, affirmed in
toto the MTCC judgment.[4] The RTC upheld the finding of the MTCC that
respondents’ occupation of the contested portion was by mere tolerance.
Hence, when petitioner needed the same, he has the right to eject them
through court action.
Respondents then elevated the case to the Court of Appeals through a
petition for review. In its Decision dated October 5, 1988 now being
challenged by petitioner, the Court of Appeals held that petitioner’s proper
remedy should have been an accion publiciana before the RTC, not an
action for unlawful detainer, thus:

“In this case, petitioners were already in possession of the premises in

question at the time private respondent bought three (3) lots at the
Lanzona Subdivision in 1985, a portion of which is occupied by a building
being used by the former as a bodega. Apart from private respondent’s
bare claim, no evidence was alluded to show that petitioners’ possession
was tolerated by (his) predecessor-in-interest. The fact that respondent
might have tolerated petitioners’ possession is not decisive. What matters
for purposes of determining the proper cause of action is the nature of
petitioners’ possession from its inception. And in this regard, the Court
notes that the complaint itself merely alleges that defendants-petitioners
have been ‘occupying a portion of the above properties of the plaintiff for
the past several years by virtue of the tolerance of the plaintiff.’ Nowhere is
it alleged that his predecessor likewise tolerated petitioners’ possession of
the premises. x x x.

Consequently, x x x, respondent should present his claim before the

Regional Trial Court in an accion publiciana and not before the Municipal
Trial Court in a summary proceeding of unlawful detainer.

WHEREFORE, the decision under review is hereby REVERSED and SET

ASIDE. Accordingly, the complaint for unlawful detainer is ordered
DISMISSED.”[5]

Petitioner filed a motion for reconsideration, but was denied by the

Appellate Court in its Resolution dated December 11, 1998.

Hence, the instant petition for review on certiorari ascribing to the Court of
Appeals the following errors:

“I

THE HONORABLE COURT OF APPEALS MISAPPLIED THE LAW IN

DISMISSING THE INSTANT CASE ON THE GROUND THAT PETITIONER
SHOULD PRESENT HIS CLAIM BEFORE THE REGIONAL TRIAL COURT IN AN
ACCION PUBLICIANA.

II

THE FINDINGS OF THE HONORABLE COURT OF APPEALS IS NOT IN

CONSONANCE WITH EXISTING LAWS AND JURISPRUDENCE.”

The sole issue here is whether the Court of Appeals committed a reversible
error of law in holding that petitioner’s complaint is within the competence
of the RTC, not the MTCC.

Petitioner contends that it is not necessary that he has prior physical

possession of the questioned property before he could file an action for
unlawful detainer. He stresses that he tolerated respondents’ occupancy of
the portion in controversy until he needed it. After his demand that they
vacate, their continued possession became illegal. Hence, his action for
unlawful detainer before the MTCC is proper.

Respondents, in their comment, insisted that they have been in possession

of the disputed property even before petitioner purchased the same on April
10, 1985. Hence, he cannot claim that they were occupying the property
by mere tolerance because they were ahead in time in physical possession.

We sustain the petition.

It is an elementary rule that the jurisdiction of a court over the subject

matter is determined by the allegations of the complaint and cannot be
made to depend upon the defenses set up in the answer or pleadings filed
by the defendant.[6] This rule is no different in an action for forcible entry
or unlawful detainer.[7] All actions for forcible entry or unlawful detainer
shall be filed with the proper Metropolitan Trial Courts, the Municipal Trial
Courts and the Municipal Circuit Trial Courts, which actions shall include not
only the plea for restoration of possession but also all claims for damages
and costs arising therefrom.[8] The said courts are not divested of
jurisdiction over such cases even if the defendants therein raises the
question of ownership over the litigated property in his pleadings and the
question of possession cannot be resolved without deciding the issue of
ownership.[9]
Section 1, Rule 70 on forcible entry and unlawful detainer of the 1997 Rules
of Civil Procedure, as amended, reads:

“Section 1. Who may institute proceedings, and when. – Subject to the

provisions of the next succeeding section, a person deprived of the
possession of any land or building by force, intimidation, threat, strategy, or
stealth, or a lessor, vendor, vendee, or other person against whom the
possession of any land or building is unlawfully withheld after the expiration
or termination of the right to hold possession, by virtue of any contract,
express or implied, or the legal representatives or assigns of any such
lessor, vendor, vendee or other person may, at any time within one (1) year
after such unlawful deprivation or withholding of possession, bring an
action in the proper Municipal Trial Court against the person or persons
unlawfully withholding or depriving of possession, or any person or persons
claiming under them, for the restitution of such possession, together with
damages and costs.”

Under the above provision, there are two entirely distinct and different
causes of action, to wit: (1) a case for forcible entry, which is an action to
recover possession of a property from the defendant whose occupation
thereof is illegal from the beginning as he acquired possession by force,
intimidation, threat, strategy or stealth; and (2) a case for unlawful
detainer, which is an action for recovery of possession from defendant
whose possession of the property was inceptively lawful by virtue of a
contract (express or implied) with the plaintiff, but became illegal when he
continued his possession despite the termination of his right
thereunder.[10]

Petitioner’s complaint for unlawful detainer in Civil Case No. 3506-B-96 is

properly within the competence of the MTCC. His pertinent allegations in
the complaint read:

“4. That defendants (spouses) have constructed an extension of their

residential house as well as other structures and have been occupying a
portion of the above PROPERTIES of the plaintiff for the past several years
by virtue of the tolerance of the plaintiff since at the time he has no need of
the property;
5. That plaintiff needed the property in the early part of 1996 and
made demands to the defendants to vacate and turn over the premises as
well as the removal (of) their structures found inside the PROPERTIES of
plaintiff; that without any justifiable reasons, defendants refused to vacate
the portion of the PROPERTIES occupied by them to the damage and
prejudice of the plaintiff.

6. Hence, plaintiff referred the matter to the Office of the Barangay

Captain of Matina Crossing 74-A, Davao City for a possible settlement
sometime in the latter part of February 1996. The barangay case reached
the Pangkat but no settlement was had. Thereafter, a ‘Certification To File
Action’ dated March 27, 1996 was issued x x x;

x x x.”[11] (underscoring ours)

Verily, petitioner’s allegations in his complaint clearly make a case for an

unlawful detainer. We find no error in the MTCC assuming jurisdiction over
petitioner’s complaint. A complaint for unlawful detainer is sufficient if it
alleges that the withholding of the possession or the refusal to vacate is
unlawful without necessarily employing the terminology of the law.[12]
Here, there is an allegation in petitioner’s complaint that respondents
occupancy on the portion of his property is by virtue of his tolerance.
Petitioner’s cause of action for unlawful detainer springs from respondents’
failure to vacate the questioned premises upon his demand sometime in
1996. Within one (1) year therefrom, or on November 6, 1996, petitioner
filed the instant complaint.

It bears stressing that possession by tolerance is lawful, but such

possession becomes unlawful when the possessor by tolerance refuses to
vacate upon demand made by the owner. Our ruling in Roxas vs. Court of
Appeals[13] is applicable in this case: “A person who occupies the land of
another at the latter’s tolerance or permission, without any contract
between them, is necessarily bound by an implied promise that he will
vacate upon demand, failing which, a summary action for ejectment is the
proper remedy against him.”

WHEREFORE, the petition is GRANTED. The assailed Decision and

Resolution of the Court of Appeals in CA-G.R. SP No. 47435 are hereby
REVERSED and SET ASIDE. The Decision dated February 12, 1998 of the
Regional Trial Court, Branch 11, Davao City in Civil Case No. 25, 654-97,
affirming the Decision dated July 31, 1997 of the Municipal Trial Court in
Cities, Branch 2, Davao City in Civil Case No. 3506-B-96, is hereby
REINSTATED.

SO ORDERED.

HEIRS OF DEMETRIO MELCHOR, represented by CLETO MELCHOR,

petitioners, vs. JULIO MELCHOR, respondent.

DECISION

PANGANIBAN, J.:

The Municipal Trial Court would not have jurisdiction over a purported
unlawful detainer suit, if the complaint fails to allege jurisdictional facts.

The Case

Before us is a Petition for Review on Certiorari under Rule 45 of the Rules

of Court, seeking to nullify the August 16, 2001 Decision and the October
18, 2001 Resolution of the Court of Appeals (CA) in CA-GR SP No. 63465.
The dispositive portion of the assailed Decision is as follows:

“WHEREFORE, premises considered, the present petition is hereby DENIED

DUE COURSE and accordingly DISMISSED, for lack of merit. The Joint
Decision dated February 5, 2001 of the Regional Trial Court, Branch 20 of
Cauayan, Isabela which embodied the assailed judgment in Civil Case No.
20-1125 and affirmed the Decision dated September 1, 2000 of the
Municipal Trial Court of Cauayan, Isabela, dismissing the complaint for
ejectment of the petitioners in Civil Case No. 2325, entitled ‘Heirs of
Demetrio Melchor represented by Cleto Melchor v. Julio Melchor,’ is hereby
AFFIRMED and REITERATED.

“Costs against the petitioners.”

The assailed Resolution denied petitioners’ Motion for Reconsideration.

The Facts
The facts of the case are narrated by the CA as follows:

“Petitioners, who are the heirs of DEMETRIO MELCHOR, claim to be the

owners, by way of succession, of the subject property allegedly in
possession of respondent JULIO MELCHOR. The subject property is a
portion of the twenty (20) hectares of land registered in the name of
PEDRO MELCHOR, evidenced by Original Certificate of Title No.I-6020 of
the Registry of Deeds for Isabela. The said property was purchased by the
late DEMETRIO MELCHOR from PEDRO MELCHOR, the deceased father of
herein respondent JULIO MELCHOR. During the lifetime of the late
DEMETRIO MELCHOR, a request for the approval of the Deed of Sale dated
February 14, 1947 between DEMETRIO MELCHOR and PEDRO MELCHOR
was made to the Secretary of Agriculture and Natural Resources on
September 4, 1953, which was subsequently approved. Since February 14,
1947 up to the present, petitioners further allege that respondent has been
occupying the subject property and has been harvesting crops thereon and
using it for grassing cows and carabaos.

“A demand letter dated August 21, 1999 was allegedly sent by the
petitioners to the respondent, demanding him to vacate and surrender the
said property, but the latter refused. The disagreement reached the
barangay authorities, which case was not amicably settled, resulting in the
issuance of a certification to file action.

“Petitioners filed against respondent a complaint for ejectment before the

MTC of Cauayan, Isabela which they subsequently refiled in their Second
Amended Complaint, docketed as Civil Case No. 2325 and dated May 31,
2001, to accommodate additional allegations therein.

“For his part, the defendant (now respondent) in Civil Case No. 2325
principally raised the matter of ownership by alleging affirmative/special
defenses, among others, that the parcel of land in possession of the
defendant is registered in the name of ANTONIA QUITERAS, the deceased
mother of the defendant, as per Transfer of Certificate of Title No. T-
274828 of the Registry of Deeds for Isabela, and that the same property is
now owned by the defendant and his three (3) sisters and one (1) brother,
having inherited the same from their late mother, ANTONIA QUITERAS.
“The Decision dated September 1, 2000, which was penned by acting MTC
Judge BERNABE B. MENDOZA, was rendered in favor of the respondent,
the pertinent portions of which read:

‘There is no allegation that plaintiffs have been deprived of the possession

of the land by force, intimidation, threat, strategy or stealth.

‘The dispossession was made in 1947. As such, ejectment is not the

proper remedy.

‘WHEREFORE, a judgment is hereby rendered dismissing the case.

‘No pronouncement as to costs.

‘SO ORDERED.’

“On appeal, the Regional Trial Court, Branch 20 of Cauayan, Isabela,

presided over by Executive Judge HENEDINO P. EDUARTE, rendered,
together with another related complaint for ejectment, i.e., Civil Case No.
20-1126, the Joint Decision dated February 5, 2001, the decretal portion of
which reads:

‘WHEREFORE, judgment is hereby rendered:

‘1. Affirming the decision in Civil Case No. Br. 20-1126 entitled,
‘Heirs of Liberato Lumelay, et al. vs. Heirs of Julio Melchor.’ Costs against
the appellants.

‘2. Affirming the decision in Civil Case No. 201-1125, entitled,

‘Heirs of Demetrio Melchor, et al. vs. Julio Melchor.’ Costs against the
appellants.

‘SO ORDERED.’”

Ruling of the Court of Appeals

Sustaining the Regional Trial Court (RTC), the CA ruled that petitioners had
failed to make a case for unlawful detainer. It opined that the MTC had
never acquired jurisdiction over the case, because there was no allegation
that the parties had entered into a contract -- express or implied -- or that
there was possession by tolerance.

Furthermore, the appellate court held that the proper remedy should have
been a plenary action for recovery of possession, not a summary action for
ejectment.

Hence, this Petition.

The Issue

In their Memorandum, petitioners raised only one alleged error:

“The Court of Appeals committed a grave error when it ruled that the
Second Amended Complaint does not allege a sufficient cause of action for
x x x unlawful detainer.”

The Court’s Ruling

The Petition has no merit.

Lone Issue:
Sufficiency of the Complaint
for Ejectment

Petitioners filed a summary action for ejectment based on Rule 70 of the

Rules of Court. Under Section 1 of the Rule, two separate remedies are
available -- one for forcible entry and another for unlawful detainer.
Petitioners maintain that while the Complaint does not support a cause of
action for forcible entry, the allegations therein certainly indicate one for
unlawful detainer. They add that they did not commit any jurisdictional
infirmity in failing to allege prior physical possession, because that fact is
not an element of unlawful detainer.

We do not agree. Even if petitioners may be correct in saying that prior

physical possession by the plaintiff need not be alleged in an action for
unlawful detainer, the absence of such possession does not ipso facto
make their Complaint sufficient to confer jurisdiction on the MTC.
In ejectment cases, the jurisdiction of the court is determined by the
allegations of the complaint. The test for determining the sufficiency of
those allegations is whether, admitting the facts alleged, the court can
render a valid judgment in accordance with the prayer of the plaintiff.

A review of the Second Amended Complaint of petitioners discloses these

pertinent allegations: the absolute owner of the subject land was their
father, Demetrio Melchor, who bought it on February 14, 1947 from
respondent’s father, Pedro Melchor; being the heirs of Demetrio Melchor,
petitioners became the owners of the property by reason of succession; as
such, they sent a formal demand letter to respondent, who had been using
the property since February 14, 1947, for grazing cows and carabaos and
for planting crops; and in that letter, they asked him to vacate and
surrender the property, but he failed to do so.

Accordingly, petitioners prayed for judgment ordering respondent to vacate

the property and to pay P500,000, which represented the income earned
from February 14, 1947 to the present, as well the costs of the suit.

It is clear from the foregoing that the allegations in the Complaint failed to
constitute a case for either forcible entry or unlawful detainer. These
actions, which deal with physical or de facto possession, may be
distinguished as follows:

“(1) In an action for forcible entry, the plaintiff must allege and prove that
he was in prior physical possession of the premises until deprived thereof,
while in illegal detainer, the plaintiff need not have been in prior physical
possession; and (2) in forcible entry, the possession by the defendant is
unlawful ab initio because he acquires possession by force, intimidation,
threat, strategy, or stealth, while in unlawful detainer, possession is
originally lawful but becomes illegal by reason of the termination of his
right of possession under his contract with the plaintiff. In pleadings filed
in courts of special jurisdiction, the special facts giving the court jurisdiction
must be specially alleged and set out. Otherwise, the complaint is
demurrable.”

As correctly held by the appellate court, “[f]orcible entry must be ruled out
as there was no allegation that the petitioners were denied possession of
the subject property through any of the means stated in Section 1, Rule 70
[of the Rules of Court].”

Neither was unlawful detainer satisfactorily alleged. In determining the

sufficiency of a complaint therefor, it is not necessary to employ the
terminology of the law. Not averred in this case, however, were certain
essential facts such as how entry was effected, or how and when
dispossession started. Petitioners merely alleged their ownership of the
land, which had supposedly been possessed by respondent since 1947.
There was no allegation showing that his possession of it was initially legal
-- by virtue of a contract, express or implied -- and that it became illegal
after the expiration of his right to possess.

Neither did the Complaint claim as a fact any overt act on the part of
petitioners showing that they had permitted or tolerated respondent’s
occupancy of the subject property. It is a settled rule that in order to
justify an action for unlawful detainer, the owner’s permission or tolerance
must be present at the beginning of the possession. Furthermore, the
complaint must aver the facts showing that the inferior court has
jurisdiction to try the case; for example, by describing how defendant’s
possession started or continued.

The prayer of petitioners contradicts, however, the existence of possession

by tolerance. It must be noted that they seek to be paid P500,000 as
payment for the use of the property by respondent from 1947 to the
present. This allegation implies that they never permitted him to possess
the land.

Since the Complaint did not satisfy the jurisdictional requirements of a valid
cause for forcible entry or unlawful detainer, the appellate court was
correct in holding that the MTC had no jurisdiction to hear the case.

Verily, the failure of petitioners to properly allege a case for ejectment does
not leave them without any other remedy. Under the proper
circumstances, what may be filed is a case either for accion publiciana,
which is a plenary action intended to recover the better right to possess; or
an accion reivindicatoria, a suit to recover ownership of real property. This
principle was laid down in Ong v. Parel as follows:
“The jurisdictional facts must appear on the face of the complaint. When
the complaint fails to aver facts constitutive of forcible entry or unlawful
detainer, as where it does not state how entry was effected or how and
when dispossession started, as in the case at bar, the remedy should either
be an accion publiciana or an accion reivindicatoria in the proper regional
trial court.

“If private respondent is indeed the owner of the premises subject of this
suit and she was unlawfully deprived of the real right of possession or the
ownership thereof, she should present her claim before the regional trial
court in an accion publiciana or an accion reivindicatoria, and not before
the municipal trial court in a summary proceeding of unlawful detainer or
forcible entry. For even if one is the owner of the property, the possession
thereof cannot be wrested from another who had been in the physical or
material possession of the same for more than one year by resorting to a
summary action for ejectment. This is especially true where his possession
thereof was not obtained through the means or held under the
circumstances contemplated by the rules on summary ejectment.”

WHEREFORE, the Petition is DENIED, and the assailed Decision

AFFIRMED. Costs against petitioners.

SO ORDERED.

[G.R. No. 176995, July 30, 2008]

PABLO D. ACAYLAR, JR., PETITIONER, VS. DANILO G. HARAYO,

RESPONDENT.

DECISION

CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari[1] under Rule 45 of

the Revised Rules of Court filed by petitioner Pablo D. Acaylar, Jr., seeking
the reversal and the setting aside of the Resolutions[2] dated 28 July 2006
and 30 January 2007 of the Court of Appeals in CA-G.R. SP No. 01077-
MIN. The appellate court, in its assailed Resolution dated 28 July 2006,
dismissed petitioner's Petition for Review on Certiorari therein on technical
grounds; thus, it affirmed the Decision dated 20 January 2006 of the
Regional Trial Court (RTC) of Dipolog City, Branch 9, in Civil Case No.
6087, which, in turn, affirmed the Decision[3] dated 28 March 2005 of the
Municipal Trial Court in Cities (MTCC) of Dapitan City, in Civil Case No. 622,
awarding possession of the subject property to respondent Danilo G.
Harayo on the ground that he is the lawful possessor thereof. In its
assailed Resolution dated 30 January 2007, the Court of Appeals refused to
reconsider its earlier Resolution of 28 July 2006.

The subject property is a parcel of land designated as Lot 741-B-1 situated

in Tolon, Potungan, Dapitan City, with an area of 30,000 square meters,
described and bounded as follows:
Lot 741-B-1 of the Sketch Plan, situated at Tolon, Potungan, Dapitan City,
containing an area of 30,000 square meters, bounded on the N., by Tolon
River; on the South by Lot 741-A; on the E by Lot 741-B-2; and on the
West by the Municipal Road, and embraced in OCT No. - (P-14969)-1119.[4]
In his Complaint filed with the MTCC, and docketed as Civil Case No. 622,
respondent alleged that he acquired the subject property from the spouses
Pablo Acaylar, Sr., and Zoila Dangcalan Acaylar (the spouses Acaylar) by
virtue of a Deed of Sale executed on 14 September 2004. On the same
day, respondent took possession of the subject property. On 19 September
2004, one of the spouses Acaylar's sons, the petitioner, using strategy,
intimidation, threats and stealth, entered the subject property, cut the tall
grasses in the coconut plantation therein, gathered the fallen coconuts and
other fruits, and pastured his cows and other animals thereon.[5]

In his Answer, petitioner countered that the subject property claimed by

respondent is a portion of the entire property owned by petitioner's
parents, the spouses Acaylar, with a total area of 59,775 square meters.
Petitioner is in possession of his parents' entire property since 1979 as
administrator thereof. He built his house on the property and farmed the
land. Respondent cannot definitively claim which portion of the entire
property he was able to buy from the spouses Acaylar since the same was
not clearly delineated.[6] In addition, petitioner, together with his sisters,
Rosario Acaylar Herrera and Asteria Acaylar, already filed against
respondent and his spouse Beatriz Harayo a case for annulment of the
Deed of Sale dated 14 September 2004, with prayer for preliminary
injunction and damages, presently pending before the RTC, Branch 6.
During the Pre-Trial Conference held before the MTCC on 17 February
2005, the parties stipulated that the spouses Acaylar sold to respondent
only a 30,000-square-meter portion of their entire property; and that there
is a pending civil case before the RTC on the validity of the sale of the
subject property.

Among the pieces of evidence presented by respondent before the MTCC

was an Affidavit of Zoila Acaylar (First Affidavit) attesting that she sold the
subject property to respondent for consideration and she did not give
petitioner authority to either administer or remain on her and her
husband's property.

After trial, the MTCC rendered a Decision[7] on 28 March 2005, awarding to

respondent the possession of the subject property. The MTCC gave
credence to respondent's claim that he took immediate possession of the
subject property after the execution of the Deed of Sale but was ousted
therefrom by petitioner who invoked the alleged authority granted to him
by Zoila Acaylar as the administrator of the unsold portion of her and her
husband's property. The MTCC referred to the First Affidavit executed by
Zoila Acaylar wherein she refuted that she gave petitioner authority or
designated him as the administrator of her and her husband's property.
Zoila Acaylar further admitted therein that the subject property was already
sold to respondent. For lack of any legal right to remain on the subject
property, the MTCC adjudged that petitioner's possession of the same was
illegal. The dispositive portion of the MTCC Decision reads:
WHEREFORE, judgment is hereby rendered, by preponderance of evidence
in favor of the [herein respondent] as against the [herein petitioner], and
hereby orders:

(1) For [petitioner] and all other persons who may have derived rights from
him to vacate lot 741-B-1 containing an area of 30,000 square meters as
shown in the sketch plan prepared by Christopher Palpagan and turn over
peaceful possession thereof to [herein respondent];

(2) For [petitioner] to pay [respondent] the amount of P5,000.00 as

attorney's fees and P 1,591.25 as costs of the suit.
All other claims and counterclaims are hereby dismissed for lack of merit.[8]
On appeal, docketed as Civil Case No. 6087, the RTC promulgated its
Decision[9] dated 20 January 2006 affirming the award of possession in
favor of respondent after finding that the appealed MTCC Decision was
based on facts and law on the matter. The RTC declared that the sale of
the subject property by the spouses Acaylar to respondent vested
ownership and possession of said property in the latter. Thus, petitioner's
acts of entering the subject property, cutting the tall grasses and gathering
the agricultural products therein, constitute forcible entry, which gave rise
to an action for ejectment. The RTC decreed:
WHEREFORE, premises considered, [the RTC] finds by preponderance of
evidence that [herein respondent] is in physical possession of the [subject
property] that is on September 14, 2004 prior to the [herein petitioner] on
September 19, 2004 and therefore affirms the decision of the Municipal
Trial Court in the City of Dapitan without modification.[10]
Banking on another Affidavit (Second Affidavit) executed by Zoila Acaylar,
in which she recanted the statements she made in her First Affidavit
denying that she designated petitioner as the administrator of her and her
husband's property, petitioner moved for the reconsideration of the 20
January 2006 Decision of the RTC. The RTC, however, issued a
Resolution[11] dated 18 April 2006 denying petitioner's Motion for
Reconsideration.

Consequently, petitioner filed a Petition for Review on Certiorari[12] with the

Court of Appeals where it was docketed as CA-G.R. SP No. 01077-MIN.
Petitioner argued in his Petition that the RTC gravely erred in ruling that
respondent was in prior possession of the subject property based solely on
the Deed of Sale executed by the spouses Acaylar in respondent's favor.
Petitioner also asserted therein that the RTC gravely abused its discretion
when it did not give credence to the Second Affidavit executed by Zoila
Acaylar.[13]

On 28 July 2006, the Court of Appeals issued a Resolution[14] dismissing

outright CA-G.R. SP No. 01077-MIN for failure of petitioner to avail himself
of the correct remedy under the law. Petitioner should have filed a Petition
for Review under Rule 42 of the Revised Rules of Court, the proper remedy
to appeal the adverse decisions rendered by the RTC in its appellate
capacity. Instead, petitioner erroneously filed a Petition for Review on
Certiorari[15] to assail the 20 January 2006 Decision and 8 April 2006
Resolution of the RTC in Civil Case No. 6087. The Court of Appeals also
noted non-compliance by petitioner and his counsel with several more
requirements for filing a petition with the Court of Appeals, namely: (a)
shortage in the payment of the docket fees; (b) failure of petitioner's
counsel to indicate the place of issue of his Integrated Bar of the
Philippines (IBP) number and his complete address; (3) failure of petitioner
to furnish the appellate court which rendered the assailed decision, in this
case the RTC, a copy of the Petition; and (4) failure of the Petition to state
the material dates.

The Court of Appeals, in a Resolution[16] dated 30 January 2007, denied for

lack of merit the Motion for Reconsideration interposed by petitioner. The
appellate court, however, excused the mistake of petitioner in the
designation of the pleading as a Petition for Review on Certiorari, since it
was clear from petitioner's Motion for Extension to file Petition for Review
that he wished to avail himself of the remedy provided under Rule 42 of
the Revised Rules of Court.

Petitioner is now before this Court via the Petition at bar, making the
following assignment of errors:
I.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN DENYING THE

PETITION DESPITE ADEQUATE EXPLANATION SUBMITTED BY THE
PETITIONER ON THE TECHNICALITIES ASSIGNED TO THE PETITIONER;

II.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN READING

SHORT THE GIST OF THE PETITION WHEN IT RULED THAT SPECIFIC
MATTERS INVOLVED IN THE CASE WERE INDICATED IN THE PETITION;

III.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN RULING THAT

ANNEXES WERE NOT ATTACHED WHEN THEY ARE DULY ATTACHED;
 IV.

THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN FAILING TO

EVALUATE THE PROPRIETY (SIC) FORCIBLE ENTRY CASE WHICH IS THE
ORIGINAL ACTION INVOLVED IN THIS CASE VIS-À-VIS UNLAWFUL
DETAINER.[17]
The Court first addresses the procedural issues involved in the present
case.

The Court of Appeals pointed several procedural defects of petitioner's

Petition for Review therein. Petitioner's payment of docket fees was short
of P500.00. It is also evident after a perusal of the records that petitioner
failed to indicate in his Petition with the Court of Appeals the material dates
to establish when he received notice of the assailed RTC Decision and
when he filed his motion for reconsideration thereof with the RTC, as
required by Section 2, Rule 42[18] of the Revised Rules of Court. Petitioner
further failed to set forth concisely a statement of the matters involved in
the case in accordance with the same provision. Finally, petitioner did not
furnish the RTC, the court which rendered the assailed decision, a copy of
the Petition he filed with the Court of Appeals.[19]

Petitioner, however, submits that he raised meritorious arguments in his

Petition with the Court of Appeals and, thus, the dismissal thereof on a
mere technicality would cause a miscarriage of justice. The petitioner
invokes considerations of substantial justice and prays that this Court give
his Petition due course and set aside the Court of Appeals Resolutions
dated 28 July 2006 and 30 January 2007 in CA-G.R. SP No. 01077-MIN.

Respondent counters that the Court of Appeals did not commit any
reversible error in dismissing the Petition in CA-G.R. SP No. 01077-MIN and
adopted the discussion of the appellate court in his Memorandum.

In appealed cases, failure to pay the docketing fees does not automatically
result in the dismissal of the appeal; the dismissal is discretionary on the
part of the appellate court.[20] Section 5, Rule 141 of the Revised Rules of
Court provides that "If the fees are not paid, the court may refuse to
proceed with the action until they are paid and may dismiss the appeal or
the action or proceedings." Petitioner explained in his Motion for
Reconsideration before the Court of Appeals that he relied in good faith on
the computation provided by the Clerk of Court of Zamboanga with whom
he inquired as regards the amount of docket fees due. He had previously
paid P4,030.00 and was short of only P500.00, which he also immediately
paid upon being informed of the deficiency. Given the circumstances,
petitioner should have been granted leniency by the Court of Appeals on
this matter.

We also agree with the petitioner that failure to state the material dates is
not fatal to his cause of action, provided the date of his receipt, i.e., 9 May
2006, of the RTC Resolution dated 18 April 2006 denying his Motion for
Reconsideration is duly alleged in his Petition.[21] In the recent case of
Great Southern Maritime Services Corporation v. Acuña,[22] we held that
"the failure to comply with the rule on a statement of material dates in the
petition may be excused since the dates are evident from the records." The
more material date for purposes of appeal to the Court of Appeals is the
date of receipt of the trial court's order denying the motion for
reconsideration.[23] The other material dates may be gleaned from the
records of the case if reasonably evident.[24]

Likewise excusable is petitioner's failure to strictly follow the required form

for presenting the facts and law of his case before the Court of Appeals.
His Petition before the appellate court consists of only five pages,
presenting concisely enough the facts and law supporting his case.

With respect to petitioner's failure to furnish the RTC a copy of his Petition
with the Court of Appeals, this Court found upon examination of the
records that petitioner had already complied with such requirement.[25]

Accordingly, the parties are now given the amplest opportunity to fully
ventilate their claims and defenses brushing aside technicalities in order to
truly ascertain the merits of this case. Indeed, judicial cases do not come
and go through the portals of a court of law by the mere mandate of
technicalities.[26] Where a rigid application of the rules will result in a
manifest failure or miscarriage of justice, technicalities should be
disregarded in order to resolve the case. In Aguam v. Court of Appeals,[27]
we ruled that:
The court has [the] discretion to dismiss or not to dismiss an appellant's
appeal. It is a power conferred on the court, not a duty. The "discretion
must be a sound one, to be exercised in accordance with the tenets of
justice and fair play, having in mind the circumstances obtaining in each
case." Technicalities, however, must be avoided. The law abhors
technicalities that impede the cause of justice. The court's primary duty is
to render or dispense justice. "A litigation is not a game of technicalities."
"Law suits, unlike duels, are not to be won by a rapier's thrust.
Technicality, when it deserts its proper office as an aid to justice and
becomes its great hindrance and chief enemy, deserves scant consideration
from courts." Litigations must be decided on their merits and not on
technicality. Every party litigant must be afforded the amplest opportunity
for the proper and just determination of his cause, free from the
unacceptable plea of technicalities. Thus, dismissal of appeals purely on
technical grounds is frowned upon where the policy of the court is to
encourage hearings of appeals on their merits and the rules of procedure
ought not to be applied in a very rigid, technical sense; rules of procedure
are used only to help secure, not override substantial justice. It is a far
better and more prudent course of action for the court to excuse a
technical lapse and afford the parties a review of the case on appeal to
attain the ends of justice rather than dispose of the case on technicality
and cause a grave injustice to the parties, giving a false impression of
speedy disposal of cases while actually resulting in more delay, if not a
miscarriage of justice.
In this case, the Court finds that petitioner's procedural lapses are
forgivable and opts to dispose the instant Petition on its merits rather than
remand the case to the appellate court, a remand not being necessary
where, as in the instant case, the ends of justice would not be served
thereby and we are already in a position to resolve the dispute based on
the records before us.

We now proceed to discuss the merits of the case.

Relevant in the case at bar is Section 1, Rule 70 of the Revised Rules of

Court which provides:
SECTION 1. Who may institute proceedings, and when. - Subject to the
provisions of the next succeeding section, a person deprived of the
possession of any land or building by force, intimidation, threat, strategy,
or stealth, or a lessor, vendor, vendee, or other person against whom the
possession of any land or building is unlawfully withheld after the
expiration or termination of the right to hold possession, by virtue of any
contract, express or implied, or the legal representatives or assigns of any
such lessor, vendor, vendee, or other person, may, at any time within one
(1) year after such unlawful deprivation or withholding of possession, bring
an action in the proper Municipal Trial Court against the person or persons
unlawfully withholding or depriving of possession, or any person or persons
claiming under them, for the restitution of such possession, together with
damages and costs.
Under the above provision, there are two entirely distinct and different
causes of action, to wit: (1) a case for forcible entry, which is an action to
recover possession of a property from the defendant whose occupation
thereof is illegal from the beginning as he acquired possession by force,
intimidation, threat, strategy or stealth; and (2) a case for unlawful
detainer, which is an action for recovery of possession from defendant
whose possession of the property was inceptively lawful by virtue of a
contract (express or implied) with the plaintiff, but became illegal when he
continued his possession despite the termination of his right thereunder.[28]

The distinctions between the two forms of ejectment suits, are: first, in
forcible entry, the plaintiff must prove that he was in prior physical
possession of the premises until he was deprived thereof by the defendant,
whereas, in unlawful detainer, the plaintiff need not have been in prior
physical possession; second, in forcible entry, the possession of the land by
the defendant is unlawful from the beginning as he acquires possession
thereof by force, intimidation, threat, strategy or stealth, while in unlawful
detainer, the possession of the defendant is inceptively lawful but it
becomes illegal by reason of the termination of his right to the possession
of the property under his contract with the plaintiff; third, in forcible entry,
the law does not require a previous demand for the defendant to vacate
the premises, but in unlawful detainer, the plaintiff must first make such
demand, which is jurisdictional in nature.[29]

The above distinctions, more importantly the nature of defendant's entry

into the property, are material to the present case in order to ascertain the
propriety of respondent's action for forcible entry filed before the MTCC. It
bears to stress that it is the nature of defendant's entry into the land which
determines the cause of action, whether it is forcible entry or unlawful
detainer. If the entry is illegal, then the action which may be filed against
the intruder is forcible entry. If, however, the entry is legal but the
possession thereafter becomes illegal, the case is unlawful detainer.[30]

In the case at bar, respondent filed an action for forcible entry before the
MTCC. Respondent alleged that he took possession of the subject property
immediately after the spouses Acaylar executed a Deed of Sale thereof in
his favor on 14 September 2004, but was forcibly deprived thereof by
petitioner. A case for forcible entry, therefore, is proper since petitioner's
entry into the subject property is already illegal at its incipience.

Petitioner, on the other hand, harps on the fact that he was in possession
of the subject property since 1979, having built his house thereon and
farmed the land, and it was impossible for him to wrest possession of the
subject property from respondent, for he was already occupying the same
way before its alleged sale to respondent. Petitioner, thus, maintains that
his possession over the subject property is lawful from the start, as he was
authorized by Zoila Acaylar to administer the same, making respondent's
suit for forcible entry before the MTCC the wrong remedy.

In a long line of cases,[31] this Court reiterated that the fact of prior
physical possession is an indispensable element in forcible entry cases. The
plaintiff must prove that he was in prior physical possession of the
premises long before he was deprived thereof by the defendant.[32] It must
be stressed that plaintiff cannot succeed where it appears that, as between
himself and the defendant, the latter had possession antedating his own.
To ascertain this, it is proper to look at the situation as it existed long
before the first act of spoliation occurred in order to intelligibly determine
whose position is more in accord with the surrounding circumstances of the
case and the applicable legal principles. Such determination in this case
requires a review of factual evidence, generally proscribed in a petition like
this. However, where the factual findings of the courts a quo are contrary
to each other, this Court may intervene to resolve the conflict and settle
the factual issues raised by the parties.[33]

In the instant Petition, the MTCC cited Zoila Acaylar's First Affidavit in
which she attested that she did not appoint or designate petitioner as
administrator of her and her husband's property, and that she gathered the
coconuts and harvested other crops from the property by employing farm
workers. Since petitioner was never in possession of the subject property,
then the MTCC concluded that respondent had taken possession of the
same from the spouses Acaylar right after its purchase. The RTC, on the
other hand, expressly recognized that petitioner possessed the subject
property, but his possession was merely tolerated by his parents, and that
respondent, as purchaser of the subject property from the parents, the
spouses Acaylar, had better right to the possession of the same. Thus, as
to whether petitioner had actual or physical possession of the subject
property prior to respondent is a factual issue which we are called upon to
resolve, considering that the courts below had contradicting findings.

After careful and thorough recalibration and re-examination of the evidence

available on record, we find that petitioner had physical possession of the
subject property prior to and at the time of its sale by the spouses Acaylar
to respondent. It is actually irrelevant whether petitioner possessed the
subject property as the administrator thereof. As the son of the spouses
Acaylar, he could very well enter into possession of the subject property
either with the express permission or at the tolerance of his parents who
owned the property. Petitioner alleged, and respondent did not dispute,
that petitioner had entered into possession of his parents' property as early
as 1979, and he even built his house thereon. Although Zoila Acaylar may
have attested in her First Affidavit that she did not appoint or designate
petitioner as the administrator of her and her husband's property, she
never claimed that petitioner unlawfully or illegally entered her property
when he built his house thereon.

We are not persuaded by respondent's assertion that after he took

possession of the subject property from the Zoila spouses, petitioner
entered the subject property on a whim, for not only does such postulation
lack clear, positive, and convincing evidentiary support, but also because it
is illogical and contrary to common human experience. A person would not,
for a reason so shallow as a whim, encroach upon another's property and
gather fruits and other agricultural products therefrom, thereby risking
criminal prosecution and civil liabilities. The more plausible and logical
scenario would be that petitioner was already occupying the subject
property prior to the sale. Petitioner, in gathering the coconut fruits and
other crops, cutting grasses, and domesticating animals on the subject
property, even after its sale to respondent on 14 September 2004, was
only continuing to exercise acts of possession over the subject property as
he had done in years before.

Moreover, we note that the subject property was sold to respondent and
he supposedly took possession thereof on 14 September 2004; and that
petitioner allegedly forced his way into the property on 19 September
2004. This would mean that respondent, after taking over possession of
the subject property from petitioner's parents, possessed the subject
property for only five days before being deprived thereof by the petitioner.
The very short period when respondent purportedly possessed the subject
property renders said possession suspect. It is not clear to us how
petitioner took actual possession of the subject property on 14 September
2004. Neither are we enlightened on the manner in which respondent
exercised or demonstrated his physical or material possession over the
subject property for the five days before he was reputedly ousted
therefrom by petitioner.

Both the MTCC and the RTC decided in favor of petitioner since they
considered him to have been vested with possession of the subject
property by virtue of the execution of the Deed of Sale on 14 September
2004. However, such a ruling violates one of the most basic doctrines in
resolving ejectment cases. We had long settled that the only question that
the courts must resolve in ejectment proceedings is - who is entitled to the
physical or material possession of the property, that is, possession de
facto; and they should not involve the question of ownership or of
possession de jure, which is to be settled in the proper court and in a
proper action.[34] As we elucidated in the recent case of Sudaria v.
Quiambao[35]:
Regardless of the actual condition of the title to the property, the party in
peaceable quiet possession shall not be thrown out by a strong hand,
violence or terror. Neither is the unlawful withholding of property allowed.
Courts will always uphold respect for prior possession.

Thus, a party who can prove prior possession can recover such possession
even against the owner himself. Whatever may be the character of his
possession, if he has in his favor prior possession in time, he has the
security that entitles him to remain on the property until a person with a
better right lawfully ejects him. To repeat, the only issue that the court has
to settle in an ejectment suit is the right to physical possession.
Hence, the Deed of Sale conferring ownership of the subject property upon
respondent is clearly irrelevant in the case presently before us. The Deed
of Sale did not automatically place respondent in physical possession of the
subject property. It is thus incumbent upon respondent to establish by
evidence that he took physical possession of the subject property from the
spouses Acaylar on 14 September 2004 and he was in actual possession of
the said property when petitioner forcibly entered the same five days later.

The conflicting Affidavits of Zoila Acaylar, notwithstanding, we find that

petitioner was in peaceful possession of the subject property prior to its
sale to respondent. Even if petitioner was not authorized by Zoila Acaylar
to possess the subject property as administrator, his possession was not
opposed and was, thus, tolerated by his parents. As we ruled in Arcal v.
Court of Appeals[36]:
The rule is that possession by tolerance is lawful, but such possession
becomes unlawful upon demand to vacate made by the owner and the
possessor by torelance refuses to comply with such demand. A person who
occupies the land of another at the latter's tolerance or permission, without
any contract between them, is necessarily bound by an implied promise
that he will vacate upon demand, failing which, a summary action for
ejectment is the proper remedy against him. The status of the possessor is
analogous to that of a lessee or tenant whose term of lease has expired
but whose occupancy continued by tolerance of the owner. In such case,
the unlawful deprivation or withholding of possession is to be counted from
the date of the demand to vacate.
In the instant case, there is no showing that either Zoila Acaylar or
respondent made an express demand upon petitioner to vacate the subject
property. In the absence of an oral or written demand, petitioner's
possession of the subject property has yet to become unlawful. The
absence of demand to vacate precludes us from treating this case,
originally instituted as one for forcible entry, as one of unlawful detainer,
since demand to vacate is jurisdictional in an action for unlawful
detainer.[37]

In conclusion, since petitioner was in prior physical possession of the

subject property, respondent has no cause of action against petitioner for
forcible entry. Neither can we treat respondent's case against petitioner as
one for unlawful detainer absent the jurisdictional requirement of demand
to vacate made upon petitioner. However, our dismissal of respondent's
Complaint herein against petitioner is without prejudice to respondent's
filing of the appropriate remedy under the law to acquire possession of the
subject property, as well as to the resolution of the civil case pending with
the RTC, Branch 6, for the annulment of the Deed of Sale dated 14
September 2004.

WHEREFORE, premises considered, the instant Petition is GRANTED. The

Decision dated 28 July 2006 of the Court of Appeals and its Resolution
dated 30 January 2007 in CA-G.R. SP No. 01077-MIN are REVERSED and
SET ASIDE, and the Complaint of respondent Danilo G. Harayo against
petitioner Pablo D. Acaylar before the Municipal Trial Court in Cities of
Dapitan City, in Civil Case No. 622, is DISMISSED, without prejudice. No
costs.

SO ORDERED.
HEIRS OF ANACLETOG.R. No. 150654
B. NIETO, namely, SIXTA
P. NIETO, EULALIO P.Present:
NIETO, GAUDENCIO P.
NIETO, and CORAZON P.YNARES-SANTIAGO,
NIETO-IGNACIO, J.,
represented by
Chairperson,
EULALIO P. NIETO,
AUSTRIA-MARTINEZ,
Petitioners,
CHICO-NAZARIO,
- versus -
NACHURA, and
MUNICIPALITY OF
MEYCAUAYAN, BULACAN,REYES, JJ.
represented by MAYOR
EDUARDO ALARILLA, Promulgated:

December 13, 2007

Respondent.

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

DECISION

NACHURA, J.:

This is a petition for review on certiorari of the Decision[1] of the Court of

Appeals, dated October 30, 2001, which dismissed the petition for review
of the Decision of the Regional Trial Court (RTC) of Malolos, Bulacan. The
latter dismissed a complaint to recover possession of a registered land on
the ground of prescription and laches.

The antecedents are as follows:

Anacleto Nieto was the registered owner of a parcel of land, consisting of

3,882 square meters, situated at Poblacion, Meycauayan, Bulacan and
covered by TCT No. T-24.055 (M). The property is being used by
respondent, Municipality of Meycauayan, Bulacan, which constructed an
extension of the public market therein.

Upon Anacleto’s death on July 26, 1993, his wife, Sixta P. Nieto, and their
three children, namely, Eulalio P. Nieto, Gaudencio Nieto and Corazon
Nieto-Ignacio, herein petitioners, collated all the documents pertaining to
his estate. When petitioners failed to locate the owner’s duplicate copy of
TCT No. T-24.055 (M), they filed a petition for the issuance of a second
owner’s copy with the RTC, Malolos, Bulacan. In that case, petitioners
discovered that the missing copy of the title was in the possession of the
respondent. Consequently, petitioners withdrew the petition and demanded
from respondent the return of property and the certificate of title.

On February 23, 1994, petitioners formally demanded from respondent the

return of the possession and full control of the property, and payment of a
monthly rent with interest from January 1964. Respondent did not comply
with petitioners’ demand.[2]
On December 28, 1994, petitioners filed a complaint[3] for recovery of
possession and damages against respondent alleging that the latter was in
possession of the owner’s copy of TCT No. T-24.055 (M). They averred
that, in 1966, respondent occupied the subject property by making it
appear that it would expropriate the same. Respondent then used the land
as a public market site and leased the stalls therein to several persons
without paying Anacleto Nieto the value of the land or rent therefor.
Petitioners prayed that respondent be ordered to surrender to them the
owner’s copy of TCT No. T-24.055 (M), vacate the property, and pay them
the rents thereon from 1966 until the date of the filing of the complaint for
the total of P1,716,000.00, and P10,000.00 a month thereafter, as well as
P300,000.00 as moral damages, and P100,000.00 as attorney’s fees.

In its Answer,[4] respondent alleged that the property was donated to it

and that the action was already time-barred because 32 years had elapsed
since it possessed the property.

Respondent and counsel failed to appear during the scheduled pre-trial

conference.[5] Upon petitioners’ motion, respondent was declared as in
default and petitioners were allowed to present evidence ex parte.
Respondent filed a motion for reconsideration which the RTC granted.
Respondent was then allowed to cross-examine petitioners’ lone witness
and present its own evidence. However, despite notice, respondent failed
again to appear during the scheduled hearing. Hence, the RTC considered
respondent to have waived its right to cross-examine petitioners’ witness
and present its own evidence. The case was then submitted for decision.

On August 1, 1995, the RTC rendered a Decision dismissing the complaint

as well as respondent’s counterclaims for damages. For lack of proof, the
RTC disregarded respondent’s claim that Anacleto Nieto donated the
property to it in light of the fact that the title remained in the name of
Anacleto. Nonetheless, the RTC did not rule in favor of petitioners because
of its finding that the case was already barred by prescription. It held that
the imprescriptibility of actions to recover land covered by the Torrens
System could only be invoked by the registered owner, Anacleto Nieto, and
that the action was also barred by laches.
Petitioners appealed the case to the Court of Appeals (CA). On October 30,
2001, the CA rendered a Decision dismissing the case for lack of
jurisdiction. According to the CA, the petition involved a pure question of
law; hence, petitioners should have filed a petition directly with this
Court.[6]

Accordingly, petitioners elevated the case to this Court through a petition

for review on certiorari, raising the following issues:

A. Are lands covered by the Torrens System subject to prescription?

B. May the defense of [l]aches be invoked in this specific case?

C. May the defense of imprescriptibility only be invoked by the registered

owner to the exclusion of his legitimate heirs?[7]

The petition is meritorious.

Respondent argues that the action of petitioner to recover possession of

the property is already barred by prescription.

We do not agree.

An action to recover possession of a registered land never prescribes in

view of the provision of Section 44 of Act No. 496 to the effect that no title
to registered land in derogation of that of a registered owner shall be
acquired by prescription or adverse possession.[8] It follows that an action
by the registered owner to recover a real property registered under the
Torrens System does not prescribe.

Despite knowledge of this avowed doctrine, the trial court ruled that
petitioners’ cause of action had already prescribed on the ground that the
imprescriptibility to recover lands registered under the Torrens System can
only be invoked by the person under whose name the land is registered.

Again, we do not agree. It is well settled that the rule on imprescriptibility

of registered lands not only applies to the registered owner but extends to
the heirs of the registered owner as well.[9] Recently in Mateo v. Diaz,[10]
the Court held that prescription is unavailing not only against the registered
owner, but also against his hereditary successors because the latter step
into the shoes of the decedent by operation of law and are the
continuation of the personality of their predecessor-in-interest. Hence,
petitioners, as heirs of Anacleto Nieto, the registered owner, cannot be
barred by prescription from claiming the property.

Aside from finding that petitioners’ cause of action was barred by

prescription, the trial court reinforced its dismissal of the case by holding
that the action was likewise barred by laches.

Laches has been defined as the failure or neglect, for an unreasonable and
unexplained length of time, to do that which, by exercising due diligence
could or should have been done earlier. It is negligence or omission to
assert a right within a reasonable time, warranting the presumption that
the party entitled to assert his right has either abandoned or declined to
assert it.[11]

In a number of cases, the Court has held that an action to recover

registered land covered by the Torrens System may not be barred by
laches.[12] Laches cannot be set up to resist the enforcement of an
imprescriptible legal right.[13] Laches, which is a principle based on equity,
may not prevail against a specific provision of law, because equity, which
has been defined as “justice outside legality,” is applied in the absence of
and not against statutory law or rules of procedure.[14]

In recent cases, [15] however, the Court held that while it is true that a
Torrens title is indefeasible and imprescriptible, the registered landowner
may lose his right to recover possession of his registered property by
reason of laches.

Yet, even if we apply the doctrine of laches to registered lands, it would

still not bar petitioners’ claim. It should be stressed that laches is not
concerned only with the mere lapse of time.[16] The following elements
must be present in order to constitute laches:
(1) conduct on the part of the defendant, or of one under whom he
claims, giving rise to the situation of which complaint is made for which the
complaint seeks a remedy;

(2) delay in asserting the complainant’s rights, the complainant having

had knowledge or notice, of the defendant’s conduct and having been
afforded an opportunity to institute a suit;

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

(4) injury or prejudice to the defendant in the event relief is accorded to

the complainant, or the suit is not held to be barred.[17]

We note that the certificate of title in the name of Anacleto Nieto was
found in respondent’s possession but there was no evidence that
ownership of the property was transferred to the municipality either
through a donation or by expropriation, or that any compensation was paid
by respondent for the use of the property. Anacleto allegedly surrendered
the certificate of title to respondent upon the belief that the property would
be expropriated. Absent any showing that this certificate of title was
fraudulently obtained by respondent, it can be presumed that Anacleto
voluntarily delivered the same to respondent. Anacleto’s delivery of the
certificate of title to respondent could, therefore, be taken to mean
acquiescence to respondent’s plan to expropriate the property, or a tacit
consent to the use of the property pending its expropriation.

This Court has consistently held that those who occupy the land of another
at the latter’s tolerance or permission, without any contract between them,
are necessarily bound by an implied promise that the occupants will vacate
the property upon demand.[18] The status of the possessor is analogous
to that of a lessee or tenant whose term of lease has expired but whose
occupancy continues by tolerance of the owner. In such case, the unlawful
deprivation or withholding of possession is to be counted from the date of
the demand to vacate.[19] Upon the refusal to vacate the property, the
owner’s cause of action accrues.

In this case, the first element of laches occurred the moment respondent
refused to vacate the property, upon petitioners demand, on February 23,
1994. The filing of the complaint on December 28, 1994, after the lapse of
a period of only ten months, cannot be considered as unreasonable delay
amounting to laches.

Moreover, case law teaches that if the claimant’s possession of the land is
merely tolerated by its lawful owner, the latter’s right to recover possession
is never barred by laches. Even if it be supposed that petitioners were
aware of respondent’s occupation of the property, and regardless of the
length of that possession, the lawful owners have a right to demand the
return of their property at any time as long as the possession was
unauthorized or merely tolerated, if at all.[20]

Furthermore, the doctrine of laches cannot be invoked to defeat justice or

to perpetrate fraud and injustice. It is the better rule that courts, under the
principle of equity, will not be guided or bound strictly by the statute of
limitations or the doctrine of laches when by doing so, manifest wrong or
injustice would result.[21]

Finally, we find that the rentals being prayed for by petitioners are
reasonable considering the size and location of the subject property.
Accordingly, the award of rentals is warranted.

WHEREFORE, premises considered, the petition is GRANTED. The Decision

of the Regional Trial Court of Malolos, Bulacan, dated August 1, 1995, is
REVERSED and SET ASIDE. Respondent is ORDERED (a) to vacate and
surrender peaceful possession of the property to petitioners, or pay the
reasonable value of the property; (b) to pay P1,716,000.00 as reasonable
compensation for the use of the property from 1966 until the filing of the
complaint and P10,000.00 monthly rental thereafter until it vacates the
property, with 12% interest from the filing of the complaint until fully paid;
and (c) to return to petitioners the duplicate copy of TCT No. T-24.055 (M).

SO ORDERED.
EQUATORIAL REALTY DEVELOPMENT, INC., petitioner, vs. MAYFAIR
THEATER, INC., respondent.

DECISION

PARDO, J.: Ky-calr

Before us is an appeal from the decision of the Court of Appeals dismissing

the petition for certiorari and prohibition initiated by petitioner and the
resolution modifying the aforementioned decision, thus:

"WHEREFORE, the Decision of this Court of March 24, 1998 is

hereby modified, thus-

"1. Mayfair to deposit with the Clerk of Court of Manila the

amount of P847,000.00 in addition to the P10,452,500.00
already deposited therein, within ten (10) days from receipt
hereof;

"2. The Clerk of Court of Manila, to turn over to petitioner

Equatorial the full amount of P11,300,000.00, within ten (10)
days from completion of said amount by Mayfair.

"SO ORDERED."

The facts are as follows:

On November 21, 1996, the Supreme Court promulgated its decision in

Equatorial Realty Development, Inc. and Carmelo and Bauermann, Inc. vs.
Mayfair Theater, Inc., the decretal portion of which reads:

"WHEREFORE, the petition for review of the decision of the

Court of Appeals, dated June 23, 1992, in CA-G. R. CV No.
32918, is HEREBY DENIED. The Deed of Absolute Sale between
petitioners Equatorial Realty Development, Inc. and Carmelo &
Bauermann, Inc. is hereby deemed rescinded; petitioner
Carmelo and Bauermann is ordered to return to petitioner
Equatorial Realty Development the purchase price. The latter is
directed to execute the deeds and documents necessary to
return ownership to Carmelo & Bauermann of the disputed lots.
 Carmelo & Bauermann is ordered to allow Mayfair Theater, Inc.
to buy the lots for P11,300,000.00.

"SO ORDERED."

In due time, Equatorial filed a motion for reconsideration of the above

decision. On January 28, 1997, the Court denied the motion with finality. A
second motion for reconsideration filed by Equatorial was denied on March
4, 1997. Calr-ky

On March 17, 1997, the decision became final and executory. Equatorial
filed a third motion for reconsideration, and on April 22, 1997, the Court
noted the same without action since the decision had become final and
executory. To stress the finality of the decision, on June 17, 1997, the
Court issued a resolution emphasizing its finality and warning the parties
that no further pleadings or motions regarding the matter would be
entertained.

On April 25, 1997, Mayfair Theater, Inc. (hereinafter Mayfair) filed with the
Regional Trial Court, Manila, Branch 07 a motion for execution.

On May 20, 1997, the trial court granted respondent’s motion for
execution, as follows:

"WHEREFORE, acting on Plaintiff’s Motion dated, April 24, 1997,

let a Writ of Execution be issued –

"1. ORDERING defendant CARMELO and BAUERMANN, INC. to

return within 10 days to Defendant EQUATORIAL REALTY and
DEVELOPMENT the amount of P11,300,000.00 the total
purchase price of properties covered by:

a.......T.C.T. No. 130410, formerly T.C.T. No. 17350;

b.......T.C.T. No. 130407, formerly T.C.T. No. 118612;

c.......T.C.T. No. 130408, formerly T.C.T. No. 60936; and

d.......T.C.T. No. 130409, formerly T.C.T. No. 52571;

 subject of sale date, July 30, 1978 which the Court of Appeals
in CA-GR CV No. 32918 ordered rescinded, and to execute
another Deed of transfer over said properties in favor of
Plaintiff, MAYFAIR THEATER, INC.;

"2. ORDERING MAYFAIR THEATER, INC. to pay Defendant

CARMELO BAUERMANN INC. the amount of Eleven Million
Three Hundred Thousand Pesos (P11,300,000.00), Philippine
Currency upon the latter’s execution of such Deed of Transfer;

"3. ORDERING Defendant EQUATORIAL REALTY

DEVELOPMENT to accept this Eleven Million Three Hundred
Thousand Pesos (P11,300,000.00), Philippine Currency from
defendant CARMELO and BAUERMANN, INC. and to execute
also in 10 days time "the deeds and documents necessary to
return ownership of these properties to CARMELO and
BAUERMANN, INC." Me-sm

"4. ORDERING both Plaintiff and Defendants to submit

thereafter their corresponding manifestations of compliance.

"SO ORDERED."

On the same date, the trial court issued a writ of execution.

On May 21, 1997, Sheriff IV Manuelito P. Viloria of the trial court issued to
Carmelo and Bauermann a notice to comply with the trial court’s order and
writ of execution. However, Carmelo did not receive both the writ and
notice to comply since it could not be located.

On June 9, 1997, Equatorial filed a motion for reconsideration of the order

dated May 20, 1997, the recall and/or quashal of the writ of execution and
the notice to comply, on the ground that the order of execution did not
conform to the dispositive portion of the Supreme Court’s decision dated
November 21, 1996. Equatorial specifically averred the following variance:

"a. The ten (10)- day period given by the Court to defendant
Carmelo & Bauermann, Inc. (Carmelo, for brevity) within which
to return the purchase price to Equatorial, and the same period
 given to Equatorial to execute the documents necessary to
return ownership of the subject properties to Carmelo, do not
appear in the dispositive portion of the Supreme Court
Decision;

"b. The order of execution makes reference to TCT No. 130410,

TCT No. 130407, TCT No. 130408, and TCT No. 130409, which
are not mentioned in the Supreme Court Decision;

"c. The order of execution directs defendant Carmelo to

execute a deed of transfer over the subject properties in favor
of plaintiff, while the Supreme Court decision merely orders
Carmelo to allow plaintiff to buy the same for P11,300,000.00;

"d. The order of execution orders plaintiff to pay Carmelo the

amount of P11,300,000.00 upon the latter’s execution of such
deed of transfer, but no such directive appears in the
dispositive portion of the Supreme Court Decision;

"e. The order of execution directs Equatorial to accept the

amount of P11,300,000.00 from Carmelo, but this directive is
not contained in the dispositive portion of the Supreme Court
Decision; and S-l-x

"f. The dispositive portion of the Supreme Court decision refers

to ‘disputed lots’, while the order of execution refers to
‘properties’."

On August 25, 1997, the trial court denied Equatorial’s motion for
reconsideration, the dispositive portion of the order reads:

"WHEREFORE, the Motion for Reconsideration filed by

defendant Equatorial Realty Development, Inc. is hereby denied
for lack of merit. Pursuant to Section 10 (a), Rule 39 of the
1997 Rules of Civil Procedure, Acting Clerk of Court, Atty.
Jennifer N. dela Cruz-Buendia, who was directed by the Hon.
Roberto A. Barrios, Executive Judge to immediately assume and
perform the duties and functions of Atty. Jesusa Maningas,
Clerk of Court and Ex-Officio Sheriff of the Regional Trial Court
 of Manila in view of the latter’s indefinite leave of absence, is
hereby appointed and directed to execute in behalf of
defendant Equatorial Realty and Development, Inc. all the
deeds and documents necessary to return ownership of the
subject properties to Carmelo & Bauermann, Inc., and
thereupon to execute on behalf of defendant Carmelo &
Bauermann, Inc. a deed of transfer over the same properties in
favor of plaintiff, upon receipt from plaintiff of the purchase
price of P11,300,000.00 which the Office of the Clerk of Court
shall thereafter hold in trust for defendant Carmelo or its order.
All costs incidental to the execution of these conveyances shall
be borne by defendants. Finally, the Register of Deeds for the
City of Manila is hereby ordered to register the aforementioned
deeds and documents of transfer executed by acting Clerk of
Court Atty. Jennifer N. dela Cruz-Buendia of the regional Trial
Court of Manila upon proof of payment of such fees and taxes
as may be due, including documentary stamp and transfer
taxes; to cancel in its registry TCT No. 130410, TCT No.
130407, TCT No. 130408 and TCT No. 130409, as well as the
owner’s duplicates thereof in the possession of defendant
Equatorial; and to issue in lieu thereof corresponding new titles
and owner’s duplicates in the name of plaintiff Mayfair Theater,
Inc."

Thereafter, Mayfair deposited with the Clerk of Court, Regional Trial Court,
Manila its payment to Carmelo, amounting to P10,452,500.00
(P11,300,000.00 less P847,000.00, as withholding tax). Sc-slx

On August 27, 1997, pursuant to the aforesaid order, the acting clerk of
court, Regional Trial Court, Manila executed a deed of re-conveyance of
the subject property in favor of Carmelo, and a deed of absolute sale in
favor of Mayfair.

On August 28, 1997, both the deed of re-conveyance and deed of absolute
sale were submitted to the Register of Deeds of Manila for registration. On
the same date, the Register of Deeds of Manila registered the documents,
cancelled the transfer certificates of title (TCTs) of Equatorial over the
subject property, and issued new TCTs in the name of Mayfair.
On September 5, 1997, Equatorial filed with the trial court an urgent
motion for reconsideration of the denial. Equatorial contended that the trial
court erred in applying Section 10 (a) of Rule 39 since both Carmelo and
Equatorial had not yet failed to comply with the order of execution, hence
it was erroneous to designate the acting clerk of court to execute the deed
of re-conveyance. In fact, Carmelo had not received the notice to comply.
Equatorial maintained that the order of execution should not be
implemented because it varied with the Supreme Court’s November 21,
1996 decision. Equatorial stressed that since Carmelo had not returned the
"purchase price" as ordered by the Court, it could not be compelled to
execute the deed of re-conveyance in favor of Carmelo.

On November 6, 1997, the trial court denied the motion for lack of merit.

On December 16, 1997, Equatorial filed with the Court of Appeals, a

petition for certiorari and prohibition seeking the annulment of the trial
court’s orders dated May 20, August 25, and November 6, 1997, the writ of
execution dated May 20, 1997, the sheriff’s notice to comply dated May 21,
1997, the deeds of re-conveyance and transfer, sale and the certificates of
title in favor of Mayfair.

Equatorial contended that the trial court acted with grave of discretion in
issuing a writ of execution, which was at variance with the dispositive
portion of the Court’s decision.

Equatorial averred that Carmelo’s failure to receive the writ of execution

and notice to comply was tantamount to denial of due process. Equatorial
further stated that the trial court erred in applying Section 10 (a), Rule 39,
1997 Rules of Civil Procedure in issuing the writ of execution, since the
parties did not fail to comply within the time specified.

Equatorial also submitted that it would be grossly and unconscionably

unjust, unfair and inequitable to compel it to accept P11,300,000.00 for
land which was worth more than P400 million, due to the appreciation of
the property or the depreciation of the peso.

On March 24, 1998, the Court of Appeals rendered decision dismissing the
petition, to wit: Sl-xsc
 "WHEREFORE, the petition is hereby DISMISSED for being
dilatory and for lack of merit. The challenged orders and acts of
the public respondents and the questioned notices and
processes, writ of execution, deeds of re-conveyance and
absolute sale, and transfer certificates of title are validated and
AFFIRMED.

"SO ORDERED."

On April 8, 1998, petitioner filed with the Court of Appeals a motion for
reconsideration of the decision.

On November 20, 1998, the Court of Appeals issued a resolution as

follows:

"WHEREFORE, the Decision of this Court of March 24, 1998 is

hereby modified, thus –

"1. Mayfair to deposit with the Clerk of Court of Manila the

amount of P847,000.00 in addition to the P10,452,500.00
already deposited therein, within ten (10) days from receipt
hereof;

"2. The Clerk of Court of Manila, to turn over to petitioner

Equatorial the full amount of P11,300,000.00, within ten (10)
days from completion of said amount by Mayfair.

"SO ORDERED."

The Court of Appeals explained that Mayfair had no right to deduct

P847,000.00 as withholding tax which must be paid by Carmelo, as the
seller. Carmelo must return the amount of P11,300,000.00 to Equatorial as
a consequence of the rescission. However, since Carmelo could not be
located, Mayfair must complete the full amount of P11,300,000.00
deposited with the Clerk of Court, Manila by depositing an additional
P847,000.00. Thereafter, the full amount of P11,300,000.00 must be
turned over to Equatorial. The Court of Appeals explained that the judge
could not stand idly while Carmelo and Bauermann took time accepting the
P11,300,000.00 from Mayfair and returning the amount to Equatorial.
Slxmis

Hence, this petition for review assailing the decision of the Court of
Appeals dated March 24, 1998, and its resolution dated November 20,
1998.

Petitioner Equatorial contends that the Court of Appeals erred in upholding

the applicability of Rule 39, Section 10 (a), 1997 Rules of Civil Procedure,
since it did not fail to comply with the order, as it did not receive the writ
of execution and notice to comply. Petitioner submits that the application
of Rule 39, Section 10 (a) violated Carmelo and Bauermann’s constitutional
right to due process.

Petitioner maintains that the writ of execution varies with the dispositive
portion of the Supreme Court decision and cannot be implemented.
Petitioner stresses that the Register of Deeds erred in cancelling its
certificates of titles and issuing new titles to Mayfair, since Carmelo and
Bauermann has not returned the purchase price. The money deposited by
Mayfair with the Office of the Clerk of Court was for the account of
Carmelo and cannot be considered as a sufficient tender of payment to
Equatorial.

The Supreme Court’s decision in G. R. No. 106063 is clear. Having attained

finality, there is nothing left for the parties to do but adhere to the
mandates of the decision.

It is a fundamental rule that when a judgment becomes final and

executory, it thereby becomes immutable and unalterable and any
amendment or alteration, which substantially affects a final and executory
judgment, is null and void for lack of jurisdiction, including the entire
proceedings held for that purpose.

A writ of execution must conform to the judgment to be executed and

adhere strictly to the very essential particulars. An order of execution,
which varies the tenor of the judgment or exceeds the terms thereof is a
nullity. The writ of execution "may not vary the terms of the judgment it
seeks to enforce. Nor may it go beyond the terms of the judgment sought
to be executed. Where the execution is not in harmony with the judgment
which gives it life, and in fact exceeds it, has pro tanto no validity. To
maintain otherwise would be to ignore the constitutional provision against
depriving a person of his property without due process of law." Having
attained finality, the decision in G. R. No. 106063 is beyond review or
modification even by the Supreme Court. M-issdaa

In issuing the questioned orders, the trial court exceeded its authority by
altering the essential portions of the Supreme Court decision. Thus, the
proceedings held below and the orders issued therein inconsistent with the
Supreme Court decision are null and void for want of jurisdiction.

We agree that Carmelo and Bauermann is obliged to return the entire

amount of eleven million three hundred thousand pesos (P11,300,000.00)
to Equatorial. On the other hand, Mayfair may not deduct from the
purchase price the amount of eight hundred forty-seven thousand pesos (P
847,000.00) as withholding tax. The duty to withhold taxes due, if any, is
imposed on the seller, Carmelo and Bauermann, Inc.

WHEREFORE, the petition is partially GRANTED; decision is hereby

rendered setting aside the decision and resolution of the Court of Appeals
and the orders of execution of the trial court inconsistent and at variance
with the dispositive portion of our decision in G. R. No. 106036.

Let the trial court carry out the execution following strictly the terms of the
aforesaid Supreme Court decision.

No costs.

SO ORDERED. Sd-aad-sc

THIRD DIVISION

ELVIRA T. ARANGOTE, G.R. No. 178906

 Petitioner,

Present:

QUISUMBING, J.,*
- versus - AUSTRIA-MARTINEZ,

Acting Chairperson,

CHICO-NAZARIO,

NACHURA, and
SPS. MARTIN MAGLUNOB and
PERALTA, JJ.
LOURDES S. MAGLUNOB, and
ROMEO SALIDO,

Promulgated:
Respondents.

February 18, 2009

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

DECISION
CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari under Rule 45

of the 1997 Revised Rules of Civil Procedure seeking to reverse and set
aside the Decision dated 27 October 2006 and Resolution dated 29 June
2007 of the Court of Appeals in CA-G.R. SP No. 64970. In its assailed
Decision, the appellate court affirmed the Decision dated 12 September
2000 of the Regional Trial Court (RTC), 6th Judicial Region, Branch 1,
Kalibo, Aklan, in Civil Case No. 5511, which reversed the Decision dated 6
April 1998 of the 7th Municipal Circuit Trial Court (MCTC) of Ibajay-Nabas,
Ibajay, Aklan, in Civil Case No. 156; and declared the herein respondent-
Spouses Martin and Lourdes Maglunob (Spouses Maglunob) and
respondent Romeo Salido (Romeo) as the lawful owners and possessors of
Lot 12897 with an area of 982 square meters, more or less, located in
Maloco, Ibajay, Aklan (subject property). In its assailed Resolution, the
appellate court denied herein petitioner Elvira T. Arangote’s Motion for
Reconsideration.

Elvira T. Arangote, herein petitioner married to Ray Mars E.

Arangote, is the registered owner of the subject property, as evidenced by
Original Certificate of Title (OCT) No. CLOA-1748. Respondents Martin
(Martin II) and Romeo are first cousins and the grandnephews of
Esperanza Maglunob-Dailisan (Esperanza), from whom petitioner acquired
the subject property.

The Petition stems from a Complaint filed by petitioner and her

husband against the respondents for Quieting of Title, Declaration of
Ownership and Possession, Damages with Preliminary Injunction, and
Issuance of Temporary Restraining Order before the MCTC, docketed as
Civil Case No. 156.

The Complaint alleged that Esperanza inherited the subject property

from her uncle Victorino Sorrosa by virtue of a notarized Partition
Agreement dated 29 April 1985, executed by the latter’s heirs. Thereafter,
Esperanza declared the subject property in her name for real property tax
purposes, as evidenced by Tax Declaration No. 16218 (1985).

The Complaint further stated that on 24 June 1985, Esperanza

executed a Last Will and Testament bequeathing the subject property to
petitioner and her husband, but it was never probated. On 9 June 1986,
Esperanza executed another document, an Affidavit, in which she
renounced, relinquished, waived and quitclaimed all her rights, share,
interest and participation whatsoever in the subject property in favor of
petitioner and her husband. On the basis thereof, Tax Declaration No.
16218 in the name of Esperanza was cancelled and Tax Declaration No.
16666 (1987) was issued in the name of the petitioner and her husband.

In 1989, petitioner and her husband constructed a house on the

subject property. On 26 March 1993, OCT No. CLOA-1748 was issued by
the Secretary of the Department of Agrarian Reform (DAR) in the name of
petitioner, married to Ray Mars E. Arangote. However, respondents,
together with some hired persons, entered the subject property on 3 June
1994 and built a hollow block wall behind and in front of petitioner’s house,
which effectively blocked the entrance to its main door.

As a consequence thereof, petitioner and her husband were

compelled to institute Civil Case No. 156.

In their Answer with Counterclaim in Civil Case No. 156,

respondents averred that they co-owned the subject property with
Esperanza. Esperanza and her siblings, Tomas and Inocencia, inherited
the subject property, in equal shares, from their father Martin Maglunob
(Martin I). When Tomas and Inocencia passed away, their shares passed
on by inheritance to respondents Martin II and Romeo, respectively.
Hence, the subject property was co-owned by Esperanza, respondent
Martin II (together with his wife Lourdes), and respondent Romeo, each
holding a one-third pro-indiviso share therein. Thus, Esperanza could not
validly waive her rights and interest over the entire subject property in
favor of the petitioner.

Respondents also asserted in their Counterclaim that petitioner and

her husband, by means of fraud, undue influence and deceit were able to
make Esperanza, who was already old and illiterate, affix her thumbmark
to the Affidavit dated 9 June 1986, wherein she renounced all her rights
and interest over the subject property in favor of petitioner and her
husband. Respondents thus prayed that the OCT issued in petitioner’s
name be declared null and void insofar as their two-thirds shares are
concerned.

After trial, the MCTC rendered its Decision dated 6 April 1998 in Civil
Case No. 156, declaring petitioner and her husband as the true and lawful
owners of the subject property. The decretal portion of the MCTC Decision
reads:

WHEREFORE, judgment is hereby rendered:

A. Declaring the [herein petitioner and her

husband] the true, lawful and exclusive owners and entitled to
the possession of the [subject property] described and referred to
under paragraph 2 of the [C]omplaint and covered by Tax
Declaration No. 16666 in the names of the [petitioner and her
husband];

B. Ordering the [herein respondents] and

anyone hired by, acting or working for them, to cease and
desist from asserting or claiming any right or interest in, or
exercising any act of ownership or possession over the [subject
property];

C. Ordering the [respondents] to pay the

[petitioner and her husband] the amount of P10,000.00 as
attorney’s fee. With cost against the [respondents].

The respondents appealed the aforesaid MCTC Decision to the RTC.

Their appeal was docketed as Civil Case No. 5511.

Respondents argued in their appeal that the MCTC erred in not

dismissing the Complaint filed by the petitioner and her husband for failure
to identify the subject property therein. Respondents further faulted the
MCTC for not declaring Esperanza’s Affidavit dated 9 June 1986 --
relinquishing all her rights and interest over the subject property in favor of
petitioner and her husband -- as null and void insofar as respondents’ two-
thirds share in the subject property is concerned.

On 12 September 2000, the RTC rendered its Decision reversing the

MCTC Decision dated 6 April 1998. The RTC adjudged respondents, as
well as the other heirs of Martin Maglunob, as the lawful owners and
possessors of the entire subject property. The RTC decreed:

WHEREFORE, judgment is hereby rendered as

follows:

1) The appealed [D]ecision is REVERSED;

2) [Herein respondents] and the other heirs of

Martin Maglunob are declared the lawful owners and
possessors of the whole [subject property] as described in
Paragraph 2 of the [C]omplaint, as against the [herein
petitioner and her husband].

3) [Petitioner and her husband] are ordered to

immediately turn over possession of the [subject property] to
the [respondents] and the other heirs of Martin Maglunob; and
 4) [Petitioner and her husband] are ordered to pay
[respondents] attorney’s fees of P5,000.00, other litigation
expenses of P5,000.00, moral damages of P10,000.00 and
exemplary damages of P5,000.00.

Petitioner and her husband filed before the RTC, on 26 September

2000, a Motion for New Trial or Reconsideration on the ground of newly
discovered evidence consisting of a Deed of Acceptance dated 23
September 2000, and notice of the same, which were both made by the
petitioner, for herself and in behalf of her husband, during the lifetime of
Esperanza. In the RTC Order dated 2 May 2001, however, the RTC denied
the aforesaid Motion for New Trial or Reconsideration.

The petitioner and her husband then filed a Petition for Review,
under Rule 42 of the 1997 Revised Rules of Civil Procedure, before the
Court of Appeals, where the Petition was docketed as CA-G.R. SP No.
64970.

In their Petition before the appellate court, petitioner and her

husband raised the following errors committed by the RTC in its 12
September 2000 Decision:
 I. It erred in reversing the [D]ecision
of the [MCTC];

II. It erred in declaring the [herein

respondents] and the other heirs of Martin Maglunob as
the lawful owners and possessors of the whole [subject
property];

III. It erred in declaring [OCT] No. CLOA-

1748 in the name of [herein petitioner] Elvie T. Arangote
as null and void;

IV. It erred in denying [petitioner and her

husband’s] [M]otion for [N]ew [T]rial or [R]econsideration
dated [26 September 2000; and

V. It erred in not declaring the

[petitioner and her husband] as possessors in good faith.

On 27 October 2006, the Court of Appeals rendered a Decision

denying the Petition for Review of petitioner and her husband and
affirming the RTC Decision dated 12 September 2000. Petitioner and her
husband’s subsequent Motion for Reconsideration was similarly denied by
the Court of Appeals in its Resolution dated 29 June 2007.

Hence, petitioner now comes before this Court raising in her Petition
the following issues:

I. Whether the [RTC] acted with grave

abuse of discretion amounting to lack or excess of
jurisdiction when it declared the [petitioner and her
husband’s title to the subject property] null and void;

II. Whether the [RTC] acted with grave

abuse of discretion amounting to lack of jurisdiction when
it declared the Affidavit of Quitclaim null and void; and

III. Whether the [RTC] and the Honorable

Court of Appeals acted with grave abuse of discretion
amounting to lack or excess of jurisdiction when it
rejected petitioner’s claim as possessors (sic) in good
faith, hence, entitled to the rights provided in [Article]
448 and [Article] 546 of the Civil Code.
 Petitioner contends that the aforesaid OCT No. CLOA-1748 was
issued in her name on 26 March 1993 and was registered in the Registry of
Deeds of Aklan on 20 April 1993. From 20 April 1993 until the institution of
Civil Case No. 156 on 10 June 1994 before the MCTC, more than one year
had already elapsed. Considering that a Torrens title can only be attacked
within one year after the date of the issuance of the decree of registration
on the ground of fraud and that such attack must be through a direct
proceeding, it was an error on the part of the RTC and the Court of
Appeals to declare OCT No. CLOA-1748 null and void.

Petitioner additionally posits that both the RTC and the Court of
Appeals committed a mistake in declaring null and void the Affidavit dated
9 June 1986 executed by Esperanza, waiving all her rights and interest
over the subject property in favor of petitioner and her husband.
Esperanza’s Affidavit is a valid and binding proof of the transfer of
ownership of the subject property in petitioner’s name, as it was also
coupled with actual delivery of possession of the subject property to
petitioner and her husband. The Affidavit is also proof of good faith on the
part of petitioner and her husband.

Finally, petitioner argues that, assuming for the sake of argument,

that Esperanza’s Affidavit is null and void, petitioner and her husband had
no knowledge of any flaw in Esperanza’s title when the latter relinquished
her rights to and interest in the subject property in their favor. Hence,
petitioner and her husband can be considered as possessors in good faith
and entitled to the rights provided under Articles 448 and 546 of the Civil
Code.

This present Petition is devoid of merit.

It is a hornbook doctrine that the findings of fact of the trial court

are entitled to great weight on appeal and should not be disturbed except
for strong and valid reasons, because the trial court is in a better position
to examine the demeanor of the witnesses while testifying. It is not a
function of this Court to analyze and weigh evidence by the parties all over
again. This Court’s jurisdiction is, in principle, limited to reviewing errors of
law that might have been committed by the Court of Appeals. This rule,
however, is subject to several exceptions, one of which is present in this
case, i.e., when the factual findings of the Court of Appeals and the trial
court are contradictory.

In this case, the findings of fact of the MCTC as regards the origin
of the subject property are in conflict with the findings of fact of both the
RTC and the Court of Appeals. Hence, this Court will have to examine the
records to determine first the true origin of the subject property and to
settle whether the respondents have the right over the same for being co-
heirs and co-owners, together with their grand aunt, Esperanza, before this
Court can resolve the issues raised by the petitioner in her Petition.

After a careful scrutiny of the records, this Court affirms the findings
of both the RTC and the Court of Appeals as regards the origin of the
subject property and the fact that respondents, with their grand aunt
Esperanza, were co-heirs and co-owners of the subject property.

The records disclosed that the subject property was part of a parcel
of land situated in Maloco, Ibajay, Aklan, consisting of 7,176 square meters
and commonly owned in equal shares by the siblings Pantaleon Maglunob
(Pantaleon) and Placida Maglunob-Sorrosa (Placida). Upon the death of
Pantaleon and Placida, their surviving and legal heirs executed a Deed of
Extrajudicial Settlement and Partition of Estate in July 1981, however, the
Deed was not notarized. Considering that Pantaleon died without issue, his
one-half share in the parcel of land he co-owned with Placida passed on to
his four siblings (or their respective heirs, if already deceased), namely:
Placida, Luis, Martin I, and Victoria, in equal shares.

According to the aforementioned Deed of Extrajudicial Settlement

and Partition of Estate, the surviving and legal heirs of Pantaleon and
Placida agreed to have the parcel of land commonly owned by the siblings
declared for real property tax purposes in the name of Victorino Sorrosa
(Victorino), Placida’s husband. Thus, Tax Declarations No. 5988 (1942),
No. 6200 (1945) and No. 7233 (1953) were all issued in the name of
Victorino.

Since Martin I already passed away when the Deed of Extrajudicial

Settlement and Partition of Estate was executed, his heirs were
represented therein by Esperanza. By virtue of the said Deed, Martin I
received as inheritance a portion of the parcel of land measuring 897
square meters.

After the death of Victorino, his heirs executed another Partition Agreement
on 29 April 1985, which was notarized on the same date. The Partition
Agreement mentioned four parcels of land. The subject property,
consisting of a portion of the consolidated parcels 1, 2, and 3, and
measuring around 982 square meters, was allocated to Esperanza. In
comparison, the property given to Esperanza under the Partition
Agreement is bigger than the one originally allocated to her earlier under
the Deed of Extrajudicial Settlement and Partition of Estate dated July
1981, which had an area of only 897 square meters. It may be reasonably
assumed, however, that the subject property, measuring 982 square
meters, allocated to Esperanza under the Partition Agreement dated 29
April 1985, is already inclusive of the smaller parcel of 897 square meters
assigned to her under the Deed of Extrajudicial Settlement and Partition of
Estate dated July 1981. As explained by the RTC in its 12 September 2000
Decision:
 The [subject property] which is claimed by the [herein
petitioner and her husband] and that which is claimed by the
[herein respondents] are one and the same, the difference in
area and technical description being due to the repartition and
re-allocation of the parcel of land originally co-owned by
Pantaleon Maglunob and his sister Placida Maglunob and
subsequently declared in the name of [Victorino] under Tax
Declaration No. 5988 of 1949.

It is clear from the records that the subject property was not
Esperanza’s exclusive share, but also that of the other heirs of her father,
Martin I. Esperanza expressly affixed her thumbmark to the Deed of
Extrajudicial Settlement of July 1981 not only for herself, but also on behalf
of the other heirs of Martin I. Though in the Partition Agreement dated 29
April 1985 Esperanza affixed her thumbmark without stating that she was
doing so not only for herself, but also on behalf of the other heirs of Martin
I, this does not mean that Esperanza was already the exclusive owner
thereof. The evidence shows that the subject property is the share of the
heirs of Martin I. This is clear from the sketch attached to the Partition
Agreement dated 29 April 1985, which reveals the proportionate areas
given to the heirs of the two siblings, Pantaleon and Placida, who were the
original owners of the whole parcel of land from which the subject property
was taken.
 Further, it bears emphasis that the Partition Agreement was executed
by and among the son, grandsons, granddaughters and cousins of
Victorino. Esperanza was neither the granddaughter nor the cousin of
Victorino, as she was only Victorino’s grandniece. The cousin of Victorino
is Martin I, Esperanza’s father. In effect, therefore, the subject property
allotted to Esperanza in the Partition Agreement was not her exclusive
share, as she holds the same for and on behalf of the other heirs of Martin
I, who was already deceased at the time the Partition Agreement was
made.

To further bolster the truth that the subject property was not
exclusively owned by Esperanza, the Affidavit she executed in favor of
petitioner and her husband on 6 June 1985 was worded as follows:

That I hereby renounce, relinquish, waive and

quitclaim all my rights, share, interest and participation
whatsoever in the [subject property] unto the said Sps. Ray
Mars Arangote and Elvira T. Arangote, their heirs, successors,
and assigns including the improvement found thereon;

Logically, if Esperanza fully owned the subject property, she would

have simply waived her rights to and interest in the subject property,
without mentioning her “share” and “participation” in the same. By
including such words in her Affidavit, Esperanza was aware of and was
limiting her waiver, renunciation, and quitclaim to her one-third share and
participation in the subject property.

Going to the issues raised by the petitioner in this Petition, this Court
will resolve the same concurrently as they are interrelated.

In this case, the petitioner derived her title to the subject property
from the notarized Affidavit executed by Esperanza, wherein the latter
relinquished her rights, share, interest and participation over the same in
favor of the petitioner and her husband.

A careful perusal of the said Affidavit reveals that it is not what it

purports to be. Esperanza’s Affidavit is, in fact, a Donation. Esperanza’s
real intent in executing the said Affidavit was to donate her share in the
subject property to petitioner and her husband.

As no onerous undertaking is required of petitioner and her husband

under the said Affidavit, the donation is regarded as a pure donation of an
interest in a real property covered by Article 749 of the Civil Code.
Article 749 of the Civil Code provides:

Art. 749. In order that the donation of an immovable may

be valid, it must be made in a public document, specifying
therein the property donated and the value of the charges
which the donee must satisfy.

The acceptance may be made in the same deed of

donation or in a separate public document, but it shall not take
effect unless it is done during the lifetime of the donor.

If the acceptance is made in a separate instrument, the

donor shall be notified thereof in an authentic form, and this
step shall be noted in both instruments.

From the aforesaid provision, there are three requisites for the
validity of a simple donation of a real property, to wit: (1) it must be made
in a public instrument; (2) it must be accepted, which acceptance may be
made either in the same Deed of Donation or in a separate public
instrument; and (3) if the acceptance is made in a separate instrument, the
donor must be notified in an authentic form, and the same must be noted
in both instruments.
 This Court agrees with the RTC and the Court of Appeals that the
Affidavit executed by Esperanza relinquishing her rights, share, interest and
participation over the subject property in favor of the petitioner and her
husband suffered from legal infirmities, as it failed to comply with the
aforesaid requisites of the law.

In Sumipat v. Banga, this Court declared that title to immovable

property does not pass from the donor to the donee by virtue of a Deed of
Donation until and unless it has been accepted in a public instrument and
the donor duly notified thereof. The acceptance may be made in the very
same instrument of donation. If the acceptance does not appear in the
same document, it must be made in another. Where the Deed of Donation
fails to show the acceptance, or where the formal notice of the acceptance,
made in a separate instrument, is either not given to the donor or else not
noted in the Deed of Donation and in the separate acceptance, the
donation is null and void.

In the present case, the said Affidavit, which is tantamount to a

Deed of Donation, met the first requisite, as it was notarized; thus, it
became a public instrument. Nevertheless, it failed to meet the aforesaid
second and third requisites. The acceptance of the said donation was not
made by the petitioner and her husband either in the same Affidavit or in a
separate public instrument. As there was no acceptance made of the said
donation, there was also no notice of the said acceptance given to the
donor, Esperanza. Therefore, the Affidavit executed by Esperanza in favor
of petitioner and her husband is null and void.

The subsequent notarized Deed of Acceptance dated 23 September

2000, as well as the notice of such acceptance, executed by the petitioner
did not cure the defect. Moreover, it was only made by the petitioner
several years after the Complaint was filed in court, or when the RTC had
already rendered its Decision dated 12 September 2000, although it was
still during Esperanza’s lifetime. Evidently, its execution was a mere
afterthought, a belated attempt to cure what was a defective donation.

It is true that the acceptance of a donation may be made at any time

during the lifetime of the donor. And granting arguendo that such
acceptance may still be admitted in evidence on appeal, there is still need
for proof that a formal notice of such acceptance was received by the
donor and noted in both the Deed of Donation and the separate instrument
embodying the acceptance. At the very least, this last legal requisite of
annotation in both instruments of donation and acceptance was not fulfilled
by the petitioner. Neither the Affidavit nor the Deed of Acceptance bears
the fact that Esperanza received notice of the acceptance of the donation
by petitioner. For this reason, even Esperanza’s one-third share in the
subject property cannot be adjudicated to the petitioner.
 With the foregoing, this Court holds that the RTC and the Court of
Appeals did not err in declaring null and void Esperanza’s Affidavit.

The next issue to be resolved then is whether the RTC, as well as the
Court of Appeals, erred in declaring OCT No. CLOA-1748 in the name of
petitioner and her husband null and void.

Again, this Court answers the said issue in the negative.

Section 48 of Presidential decree No. 1529 states:

SEC. 48. Certificate not subject to collateral attack. -

A certificate of title shall not be subject to collateral attack. It
cannot be altered, modified, or cancelled except in a direct
proceeding in accordance with law.
 Such proscription has long been enshrined in Philippine
jurisprudence. The judicial action required to challenge the validity of title
is a direct attack, not a collateral attack.

The attack is considered direct when the object of an action is to

annul or set aside such proceeding, or enjoin its enforcement. Conversely,
an attack is indirect or collateral when, in an action to obtain a different
relief, an attack on the proceeding is nevertheless made as an incident
thereof. Such action to attack a certificate of title may be an original action
or a counterclaim, in which a certificate of title is assailed as void.

A counterclaim is considered a new suit in which the defendant is the

plaintiff and the plaintiff in the complaint becomes the defendant. It
stands on the same footing as, and is to be tested by the same rules as if it
were, an independent action.

In their Answer to the Complaint for Quieting of Title filed by the petitioner
and her husband before the MCTC, respondents included therein a
Counterclaim wherein they repleaded all the material allegations in their
affirmative defenses, the most essential of which was their claim that
petitioner and her husband -- by means of fraud, undue influence and
deceit -- were able to make their grand aunt, Esperanza, who was already
old and illiterate, affix her thumbmark to the Affidavit, wherein she
renounced, waived, and quitclaimed all her rights and interest over the
subject property in favor of petitioner and her husband. In addition,
respondents maintained in their Answer that as petitioner and her husband
were not tenants either of Esperanza or of the respondents, the DAR could
not have validly issued in favor of petitioner and her husband OCT No.
CLOA-1748. Thus, the respondents prayed, in their counterclaim in Civil
Case No. 156 before the MCTC, that OCT No. CLOA-1748 issued in the
name of petitioner, married to Ray Mars E. Arangote, be declared null and
void, insofar as their two-thirds shares in the subject property are
concerned.

It is clear, thus, that respondents’ Answer with Counterclaim was a

direct attack on petitioner’s certificate of title. Furthermore, since all the
essential facts of the case for the determination of the validity of the title
are now before this Court, to require respondents to institute a separate
cancellation proceeding would be pointlessly circuitous and against the best
interest of justice.

Esperanza’s Affidavit, which was the sole basis of petitioner’s claim to

the subject property, has been declared null and void. Moreover, petitioner
and her husband were not tenants of the subject property. In fact,
petitioner herself admitted in her Complaint filed before the MCTC that her
husband is out of the country, rendering it impossible for him to work on
the subject property as a tenant. Instead of cultivating the subject
property, petitioner and her husband possessed the same by constructing a
house thereon. Thus, it is highly suspicious how the petitioner was able to
secure from the DAR a Certificate of Land Ownership Award (CLOA) over
the subject property. The DAR awards such certificates to the grantees
only if they fulfill the requirements of Republic Act No. 6657, otherwise
known as the Comprehensive Agrarian Reform Program (CARP). Hence,
the RTC and the Court of Appeals did not err in declaring null and void OCT
No. CLOA-1748 in the name of the petitioner, married to Ray Mars E.
Arangote.

Considering that Esperanza died without any compulsory heirs and

that the supposed donation of her one-third share in the subject property
per her Affidavit dated 9 June 1985 was already declared null and void,
Esperanza’s one-third share in the subject property passed on to her legal
heirs, the respondents.

As petitioner’s last-ditch effort, she claims that she is a possessor in

good faith and, thus, entitled to the rights provided for under Articles 448
and 546 of the Civil Code.

This claim is untenable.

The Civil Code describes a possessor in good faith as follows:

 Art. 526. He is deemed a possessor in good faith who is
not aware that there exists in his title or mode of acquisition
any flaw which invalidates it.

He is deemed a possessor in bad faith who possesses in

any case contrary to the foregoing.

Mistake upon a doubtful or difficult question of law may

be the basis of good faith.

Art. 1127. The good faith of the possessor consists in the

reasonable belief that the person from whom he received the
thing was the owner thereof, and could transmit his ownership.

Possession in good faith ceases from the moment defects in the title
are made known to the possessor by extraneous evidence or by a suit for
recovery of the property by the true owner. Every possessor in good faith
becomes a possessor in bad faith from the moment he becomes aware that
what he believed to be true is not so.

In the present case, when respondents came to know that an OCT

over the subject property was issued and registered in petitioner’s name on
26 March 1993, respondents brought a Complaint on 7 August 1993 before
the Lupon of Barangay Maloco, Ibajay, Aklan, challenging the title of
petitioner to the subject property on the basis that said property
constitutes the inheritance of respondent, together with their grandaunt
Esperanza, so Esperanza had no authority to relinquish the entire subject
property to petitioner. From that moment, the good faith of the petitioner
had ceased.

Petitioner cannot be entitled to the rights under Articles 448 and 546
of the Civil Code, because the rights mentioned therein are applicable only
to builders in good faith and not to possessors in good faith.

Moreover, the petitioner cannot be considered a builder in good faith

of the house on the subject property. In the context that such term is
used in particular reference to Article 448 of the Civil Code, a builder in
good faith is one who, not being the owner of the land, builds on that land,
believing himself to be its owner and unaware of any defect in his title or
mode of acquisition.

The various provisions of the Civil Code, pertinent to the subject,

read:
 Article 448. The owner of the land on which anything has
been built, sown, or planted in good faith, shall have the right
to appropriate as his own the works, sowing or planting, after
payment of the indemnity provided for in Articles 546 and 548,
or to oblige the one who built or planted to pay the price of the
land, and the one who sowed, the proper rent. However, the
builder or planter cannot be obliged to buy the land if its value
is considerably more than that of the building or trees. In such
a case, he shall pay reasonable rent, if the owner of the land
does not choose to appropriate the building or trees after
proper indemnity. The parties shall agree upon the terms of
the lease and in case of disagreement, the court shall fix the
terms thereof.

Article 449. He who builds, plants, or sows in bad faith on

the land of another, loses what is built, planted or sown without
right to indemnity.

Article 450. The owner of the land on which anything has

been built, planted or sown in bad faith may demand the
demolition of the work, or that the planting or sowing be
removed, in order to replace things in their former condition at
the expense of the person who built, planted or sowed; or he
may compel the builder or planter to pay the price of the land,
and the sower the proper rent.

Under the foregoing provisions, the builder in good faith can compel
the landowner to make a choice between appropriating the building by
paying the proper indemnity or obliging the builder to pay the price of the
land. The choice belongs to the owner of the land, a rule that accords with
the principle of accession, i.e., that the accessory follows the principal and
not the other way around. Even as the option lies with the landowner, the
grant to him, nevertheless, is preclusive. He must choose one. He cannot,
for instance, compel the owner of the building to instead remove it from
the land. In order, however, that the builder can invoke that accruing
benefit and enjoy his corresponding right to demand that a choice be made
by the landowner, he should be able to prove good faith on his part.

Good faith, here understood, is an intangible and abstract quality

with no technical meaning or statutory definition, and it encompasses,
among other things, an honest belief, the absence of malice and the
absence of design to defraud or to seek an unconscionable advantage. An
individual’s personal good faith is a concept of his own mind and,
therefore, may not conclusively be determined by his protestations alone.
It implies honesty of intention, and freedom from knowledge of
circumstances which ought to put the holder upon inquiry. The essence of
good faith lies in an honest belief in the validity of one’s right, ignorance of
a superior claim, and absence of intention to overreach another. Applied
to possession, one is considered in good faith if he is not aware that there
exists in his title or mode of acquisition any flaw which invalidates it.
 In this case, the subject property waived and quitclaimed by
Esperanza to the petitioner and her husband in the Affidavit was only
covered by a tax declaration in the name of Esperanza. Petitioner did not
even bother to look into the origin of the subject property and to probe
into the right of Esperanza to relinquish the same. Thus, when petitioner
and her husband built a house thereon in 1989 they cannot be considered
to have acted in good faith as they were fully aware that when Esperanza
executed an Affidavit relinquishing in their favor the subject property the
only proof of Esperanza’s ownership over the same was a mere tax
declaration. This fact or circumstance alone was enough to put the
petitioner and her husband under inquiry. Settled is the rule that a tax
declaration does not prove ownership. It is merely an indicium of a claim
of ownership. Payment of taxes is not proof of ownership; it is, at best, an
indicium of possession in the concept of ownership. Neither tax receipts
nor a declaration of ownership for taxation purposes is evidence of
ownership or of a right to possess realty when not supported by other
effective proofs.

With the foregoing, the petitioner is not entitled to the rights under Article
448 and 546 as the petitioner is not a builder and possessor in good faith.

WHEREFORE, premises considered, the instant Petition is hereby

DENIED. The Decision and Resolution of the Court of Appeals in CA-G.R.
SP No. 64970, dated 27 October 2006 and 29 June 2007, respectively,
affirming the RTC Decision dated 12 September 2000 in Civil Case No.
5511 and declaring the respondents the lawful owners and possessors of
the subject property are hereby AFFIRMED. No costs.

SO ORDERED.

SPOUSES JUAN NUGUID AND ERLINDA T. NUGUID, petitioners, vs. HON.

COURT OF APPEALS AND PEDRO P. PECSON, respondents.

DECISION

QUISUMBING, J.:

This is a petition for review on certiorari of the Decision dated May 21,
2001, of the Court of Appeals in CA-G.R. CV No. 64295, which modified the
Order dated July 31, 1998 of the Regional Trial Court (RTC) of Quezon
City, Branch 101 in Civil Case No. Q-41470. The trial court ordered the
defendants, among them petitioner herein Juan Nuguid, to pay respondent
herein Pedro P. Pecson, the sum of P1,344,000 as reimbursement of
unrealized income for the period beginning November 22, 1993 to
December 1997. The appellate court, however, reduced the trial court’s
award in favor of Pecson from the said P1,344,000 to P280,000. Equally
assailed by the petitioners is the appellate court’s Resolution dated January
10, 2002, denying the motion for reconsideration.

It may be recalled that relatedly in our Decision dated May 26, 1995, in
G.R. No. 115814, entitled Pecson v. Court of Appeals, we set aside the
decision of the Court of Appeals in CA-G.R. SP No. 32679 and the Order
dated November 15, 1993, of the RTC of Quezon City, Branch 101 and
remanded the case to the trial court for the determination of the current
market value of the four-door two-storey apartment building on the 256-
square meter commercial lot.

The antecedent facts in this case are as follows:

Pedro P. Pecson owned a commercial lot located at 27 Kamias Road,

Quezon City, on which he built a four-door two-storey apartment building.
For failure to pay realty taxes, the lot was sold at public auction by the City
Treasurer of Quezon City to Mamerto Nepomuceno, who in turn sold it for
P103,000 to the spouses Juan and Erlinda Nuguid.

Pecson challenged the validity of the auction sale before the RTC of
Quezon City in Civil Case No. Q-41470. In its Decision, dated February 8,
1989, the RTC upheld the spouses’ title but declared that the four-door
two-storey apartment building was not included in the auction sale. This
was affirmed in toto by the Court of Appeals and thereafter by this Court,
in its Decision dated May 25, 1993, in G.R. No. 105360 entitled Pecson v.
Court of Appeals.

On June 23, 1993, by virtue of the Entry of Judgment of the aforesaid

decision in G.R. No. 105360, the Nuguids became the uncontested owners
of the 256-square meter commercial lot.

As a result, the Nuguid spouses moved for delivery of possession of the lot
and the apartment building.

In its Order of November 15, 1993, the trial court, relying upon Article 546
of the Civil Code, ruled that the Spouses Nuguid were to reimburse Pecson
for his construction cost of P53,000, following which, the spouses Nuguid
were entitled to immediate issuance of a writ of possession over the lot
and improvements. In the same order the RTC also directed Pecson to pay
the same amount of monthly rentals to the Nuguids as paid by the tenants
occupying the apartment units or P21,000 per month from June 23, 1993,
and allowed the offset of the amount of P53,000 due from the Nuguids
against the amount of rents collected by Pecson from June 23, 1993 to
September 23, 1993 from the tenants of the apartment.

Pecson duly moved for reconsideration, but on November 8, 1993, the RTC
issued a Writ of Possession, directing the deputy sheriff to put the spouses
Nuguid in possession of the subject property with all the improvements
thereon and to eject all the occupants therein.

Aggrieved, Pecson then filed a special civil action for certiorari and
prohibition docketed as CA-G.R. SP No. 32679 with the Court of Appeals.
In its decision of June 7, 1994, the appellate court, relying upon Article 448
of the Civil Code, affirmed the order of payment of construction costs but
rendered the issue of possession moot on appeal, thus:

WHEREFORE, while it appears that private respondents [spouses Nuguid]

have not yet indemnified petitioner [Pecson] with the cost of the
improvements, since Annex I shows that the Deputy Sheriff has enforced
the Writ of Possession and the premises have been turned over to the
possession of private respondents, the quest of petitioner that he be
restored in possession of the premises is rendered moot and academic,
although it is but fair and just that private respondents pay petitioner the
construction cost of P53,000.00; and that petitioner be ordered to account
for any and all fruits of the improvements received by him starting on June
23, 1993, with the amount of P53,000.00 to be offset therefrom.

IT IS SO ORDERED. [Underscoring supplied.]

Frustrated by this turn of events, Pecson filed a petition for review

docketed as G.R. No. 115814 before this Court.

On May 26, 1995, the Court handed down the decision in G.R. No 115814,
to wit:

WHEREFORE, the decision of the Court of Appeals in CA-G.R. SP No. 32679

and the Order of 15 November 1993 of the Regional Trial Court, Branch
101, Quezon City in Civil Case No. Q-41470 are hereby SET ASIDE.

The case is hereby remanded to the trial court for it to determine the
current market value of the apartment building on the lot. For this
purpose, the parties shall be allowed to adduce evidence on the current
market value of the apartment building. The value so determined shall be
forthwith paid by the private respondents [Spouses Juan and Erlinda
Nuguid] to the petitioner [Pedro Pecson] otherwise the petitioner shall be
restored to the possession of the apartment building until payment of the
required indemnity.

No costs.

SO ORDERED. [Emphasis supplied.]

In so ruling, this Court pointed out that: (1) Article 448 of the Civil Code is
not apposite to the case at bar where the owner of the land is the builder,
sower, or planter who then later lost ownership of the land by sale, but
may, however, be applied by analogy; (2) the current market value of the
improvements should be made as the basis of reimbursement; (3) Pecson
was entitled to retain ownership of the building and, necessarily, the
income therefrom; (4) the Court of Appeals erred not only in upholding the
trial court’s determination of the indemnity, but also in ordering Pecson to
account for the rentals of the apartment building from June 23, 1993 to
September 23, 1993.

On the basis of this Court’s decision in G.R. No. 115814, Pecson filed a
Motion to Restore Possession and a Motion to Render Accounting, praying
respectively for restoration of his possession over the subject 256-square
meter commercial lot and for the spouses Nuguid to be directed to render
an accounting under oath, of the income derived from the subject four-
door apartment from November 22, 1993 until possession of the same was
restored to him.

In an Order dated January 26, 1996, the RTC denied the Motion to Restore
Possession to the plaintiff averring that the current market value of the
building should first be determined. Pending the said determination, the
resolution of the Motion for Accounting was likewise held in abeyance.

With the submission of the parties’ assessment and the reports of the
subject realty, and the reports of the Quezon City Assessor, as well as the
members of the duly constituted assessment committee, the trial court
issued the following Order dated October 7, 1997, to wit:

On November 21, 1996, the parties manifested that they have arrived at a
compromise agreement that the value of the said improvement/building is
P400,000.00 The Court notes that the plaintiff has already received
P300,000.00. However, when defendant was ready to pay the balance of
P100,000.00, the plaintiff now insists that there should be a rental to be
paid by defendants. Whether or not this should be paid by defendants,
incident is hereby scheduled for hearing on November 12, 1997 at 8:30
a.m.
Meantime, defendants are directed to pay plaintiff the balance of
P100,000.00.

SO ORDERED.

On December 1997, after paying the said P100,000 balance to Pedro

Pecson the spouses Nuguid prayed for the closure and termination of the
case, as well as the cancellation of the notice of lis pendens on the title of
the property on the ground that Pedro Pecson’s claim for rentals was
devoid of factual and legal bases.

After conducting a hearing, the lower court issued an Order dated July 31,
1998, directing the spouses to pay the sum of P1,344,000 as
reimbursement of the unrealized income of Pecson for the period beginning
November 22, 1993 up to December 1997. The sum was based on the
computation of P28,000/month rentals of the four-door apartment, thus:

The Court finds plaintiff’s motion valid and meritorious. The decision of the
Supreme Court in the aforesaid case [Pecson vs. Court of Appeals, 244
SCRA 407] which set aside the Order of this Court of November 15, 1993
has in effect upheld plaintiff’s right of possession of the building for as long
as he is not fully paid the value thereof. It follows, as declared by the
Supreme Court in said decision that the plaintiff is entitled to the income
derived therefrom, thus –

. . .

Records show that the plaintiff was dispossessed of the premises on

November 22, 1993 and that he was fully paid the value of his building in
December 1997. Therefore, he is entitled to the income thereof beginning
on November 22, 1993, the time he was dispossessed, up to the time of
said full payment, in December 1997, or a total of 48 months.

The only question left is the determination of income of the four units of
apartments per month. But as correctly pointed out by plaintiff, the
defendants have themselves submitted their affidavits attesting that the
income derived from three of the four units of the apartment building is
P21,000.00 or P7,000.00 each per month, or P28,000.00 per month for the
whole four units. Hence, at P28,000.00 per month, multiplied by 48
months, plaintiff is entitled to be paid by defendants the amount of
P1,344,000.00.

The Nuguid spouses filed a motion for reconsideration but this was denied
for lack of merit.

The Nuguid couple then appealed the trial court’s ruling to the Court of
Appeals, their action docketed as CA-G.R. CV No. 64295.

In the Court of Appeals, the order appealed from in CA-G.R. CV No. 64295,
was modified. The CA reduced the rentals from P1,344,000 to P280,000 in
favor of the appellee. The said amount represents accrued rentals from the
determination of the current market value on January 31, 1997 until its full
payment on December 12, 1997.

Hence, petitioners state the sole assignment of error now before us as

follows:

THE COURT OF APPEALS ERRED IN HOLDING PETITIONERS LIABLE TO

PAY RENT OVER AND ABOVE THE CURRENT MARKET VALUE OF THE
IMPROVEMENT WHEN SUCH WAS NOT PROVIDED FOR IN THE
DISPOSITIVE PORTION OF THE SUPREME COURT’S RULING IN G.R. No.
115814.

Petitioners call our attention to the fact that after reaching an agreed price
of P400,000 for the improvements, they only made a partial payment of
P300,000. Thus, they contend that their failure to pay the full price for the
improvements will, at most, entitle respondent to be restored to
possession, but not to collect any rentals. Petitioners insist that this is the
proper interpretation of the dispositive portion of the decision in G.R. No.
115814, which states in part that “[t]he value so determined shall be
forthwith paid by the private respondents [Spouses Juan and Erlinda
Nuguid] to the petitioner [Pedro Pecson] otherwise the petitioner shall be
restored to the possession of the apartment building until payment of the
required indemnity.”

Now herein respondent, Pecson, disagrees with herein petitioners’

contention. He argues that petitioners are wrong in claiming that
inasmuch as his claim for rentals was not determined in the dispositive
portion of the decision in G.R. No. 115814, it could not be the subject of
execution. He points out that in moving for an accounting, all he asked
was that the value of the fruits of the property during the period he was
dispossessed be accounted for, since this Court explicitly recognized in G.R.
No. 115814, he was entitled to the property. He points out that this Court
ruled that “[t]he petitioner [Pecson] not having been so paid, he was
entitled to retain ownership of the building and, necessarily, the income
therefrom.” In other words, says respondent, accounting was necessary.
For accordingly, he was entitled to rental income from the property. This
should be given effect. The Court could have very well specifically included
rent (as fruit or income of the property), but could not have done so at the
time the Court pronounced judgment because its value had yet to be
determined, according to him. Additionally, he faults the appellate court
for modifying the order of the RTC, thus defeating his right as a builder in
good faith entitled to rental from the period of his dispossession to full
payment of the price of his improvements, which spans from November 22,
1993 to December 1997, or a period of more than four years.

It is not disputed that the construction of the four-door two-storey

apartment, subject of this dispute, was undertaken at the time when
Pecson was still the owner of the lot. When the Nuguids became the
uncontested owner of the lot on June 23, 1993, by virtue of entry of
judgment of the Court’s decision, dated May 25, 1993, in G.R. No. 105360,
the apartment building was already in existence and occupied by tenants.
In its decision dated May 26, 1995 in G.R. No. 115814, the Court declared
the rights and obligations of the litigants in accordance with Articles 448
and 546 of the Civil Code. These provisions of the Code are directly
applicable to the instant case.

Under Article 448, the landowner is given the option, either to appropriate
the improvement as his own upon payment of the proper amount of
indemnity or to sell the land to the possessor in good faith. Relatedly,
Article 546 provides that a builder in good faith is entitled to full
reimbursement for all the necessary and useful expenses incurred; it also
gives him right of retention until full reimbursement is made.

While the law aims to concentrate in one person the ownership of the land
and the improvements thereon in view of the impracticability of creating a
state of forced co-ownership, it guards against unjust enrichment insofar
as the good-faith builder’s improvements are concerned. The right of
retention is considered as one of the measures devised by the law for the
protection of builders in good faith. Its object is to guarantee full and
prompt reimbursement as it permits the actual possessor to remain in
possession while he has not been reimbursed (by the person who defeated
him in the case for possession of the property) for those necessary
expenses and useful improvements made by him on the thing possessed.
Accordingly, a builder in good faith cannot be compelled to pay rentals
during the period of retention nor be disturbed in his possession by
ordering him to vacate. In addition, as in this case, the owner of the land
is prohibited from offsetting or compensating the necessary and useful
expenses with the fruits received by the builder-possessor in good faith.
Otherwise, the security provided by law would be impaired. This is so
because the right to the expenses and the right to the fruits both pertain to
the possessor, making compensation juridically impossible; and one cannot
be used to reduce the other.

As we earlier held, since petitioners opted to appropriate the improvement

for themselves as early as June 1993, when they applied for a writ of
execution despite knowledge that the auction sale did not include the
apartment building, they could not benefit from the lot’s improvement,
until they reimbursed the improver in full, based on the current market
value of the property.

Despite the Court’s recognition of Pecson’s right of ownership over the

apartment building, the petitioners still insisted on dispossessing Pecson by
filing for a Writ of Possession to cover both the lot and the building.
Clearly, this resulted in a violation of respondent’s right of retention.
Worse, petitioners took advantage of the situation to benefit from the
highly valued, income-yielding, four-unit apartment building by collecting
rentals thereon, before they paid for the cost of the apartment building. It
was only four years later that they finally paid its full value to the
respondent.

Petitioners’ interpretation of our holding in G.R. No. 115814 has neither

factual nor legal basis. The decision of May 26, 1995, should be construed
in connection with the legal principles which form the basis of the decision,
guided by the precept that judgments are to have a reasonable intendment
to do justice and avoid wrong.

The text of the decision in G.R. No. 115814 expressly exempted Pecson
from liability to pay rentals, for we found that the Court of Appeals erred
not only in upholding the trial court’s determination of the indemnity, but
also in ordering him to account for the rentals of the apartment building
from June 23, 1993 to September 23, 1993, the period from entry of
judgment until Pecson’s dispossession. As pointed out by Pecson, the
dispositive portion of our decision in G.R. No. 115814 need not specifically
include the income derived from the improvement in order to entitle him,
as a builder in good faith, to such income. The right of retention, which
entitles the builder in good faith to the possession as well as the income
derived therefrom, is already provided for under Article 546 of the Civil
Code.

Given the circumstances of the instant case where the builder in good faith
has been clearly denied his right of retention for almost half a decade, we
find that the increased award of rentals by the RTC was reasonable and
equitable. The petitioners had reaped all the benefits from the
improvement introduced by the respondent during said period, without
paying any amount to the latter as reimbursement for his construction
costs and expenses. They should account and pay for such benefits.

We need not belabor now the appellate court’s recognition of herein

respondent’s entitlement to rentals from the date of the determination of
the current market value until its full payment. Respondent is clearly
entitled to payment by virtue of his right of retention over the said
improvement.

WHEREFORE, the instant petition is DENIED for lack of merit. The Decision
dated May 21, 2001 of the Court of Appeals in CA-G.R. CV No. 64295 is
SET ASIDE and the Order dated July 31, 1998, of the Regional Trial Court,
Branch 101, Quezon City, in Civil Case No. Q-41470 ordering the herein
petitioners, Spouses Juan and Erlinda Nuguid, to account for the rental
income of the four-door two-storey apartment building from November
1993 until December 1997, in the amount of P1,344,000, computed on the
basis of Twenty-eight Thousand (P28,000.00) pesos monthly, for a period
of 48 months, is hereby REINSTATED. Until fully paid, said amount of
rentals should bear the legal rate of interest set at six percent (6%) per
annum computed from the date of RTC judgment. If any portion thereof
shall thereafter remain unpaid, despite notice of finality of this Court’s
judgment, said remaining unpaid amount shall bear the rate of interest set
at twelve percent (12%) per annum computed from the date of said
notice. Costs against petitioners.

SO ORDERED.

PHILIPPINE NATIONAL BANK, petitioner, vs. GENEROSO DE JESUS,

represented by his Attorney-in-Fact, CHRISTIAN DE JESUS, respondent.

DECISION

VITUG, J.:

Petitioner Philippine National Bank disputes the decision handed down by

the Court of Appeals promulgated on 23 March 2001 in CA-G.R. CV No.
56001, entitled “Generoso De Jesus, represented by his Attorney-in-Fact,
Christian De Jesus, versus Philippine National Bank.” The assailed decision
has affirmed the judgment rendered by the Regional Trial Court, Branch
44, of Mamburao, Occidental Mindoro, declaring respondent Generoso de
Jesus as being the true and lawful owner of the 124-square-meter portion
of the land covered by Transfer Certificate of Title (TCT) No. T-17197 and
ordering petitioner bank to vacate the premises, to deliver possession
thereof to respondent, and to remove the improvement thereon.

It would appear that on 10 June 1995, respondent filed a complaint against

petitioner before the Regional Trial Court of Occidental Mindoro for
recovery of ownership and possession, with damages, over the questioned
property. In his complaint, respondent stated that he had acquired a
parcel of land situated in Mamburao, Occidental Mindoro, with an area of
1,144 square meters covered by TCT No. T-17197, and that on 26 March
1993, he had caused a verification survey of the property and discovered
that the northern portion of the lot was being encroached upon by a
building of petitioner to the extent of 124 square meters. Despite two
letters of demand sent by respondent, petitioner failed and refused to
vacate the area.

Petitioner, in its answer, asserted that when it acquired the lot and the
building sometime in 1981 from then Mayor Bienvenido Ignacio, the
encroachment already was in existence and to remedy the situation, Mayor
Ignacio offered to sell the area in question (which then also belonged to
Ignacio) to petitioner at P100.00 per square meter which offer the latter
claimed to have accepted. The sale, however, did not materialize when,
without the knowledge and consent of petitioner, Mayor Ignacio later
mortgaged the lot to the Development Bank of the Philippines.

The trial court decided the case in favor of respondent declaring him to be
the rightful owner of the disputed 124-square-meter portion of the lot and
ordering petitioner to surrender possession of the property to respondent
and to cause, at its expense, the removal of any improvement thereon.

The Court of Appeals, on appeal, sustained the trial court but it ordered to
be deleted the award to respondent of attorney’s fees, as well as moral
and exemplary damages, and litigation expenses.

Petitioner went to this Court, via a petition for review, after the appellate
court had denied the bank’s motion for reconsideration, here now
contending that -

“1. THE COURT OF APPEALS GRAVELY ERRED IN LAW IN ADJUDGING PNB

A BUILDER IN BAD FAITH OVER THE ENCROACHED PROPERTY IN
QUESTION;

“2. THE COURT OF APPEALS GRAVELY ERRED IN LAW IN NOT APPLYING

IN FAVOR OF PNB THE PROVISION OF ARTICLE 448 OF THE CIVIL CODE
AND THE RULING IN TECNOGAS PHILIPPINES MANUFACTURING CORP.
VS. COURT OF APPEALS, G.R. No. 108894, February 10, 1997, 268 SCRA
7.”

The Regional Trial Court and the Court of Appeals have both rejected the
idea that petitioner can be considered a builder in good faith. In the
context that such term is used in particular reference to Article 448, et
seq., of the Civil Code, a builder in good faith is one who, not being the
owner of the land, builds on that land believing himself to be its owner and
unaware of any defect in his title or mode of acquisition.

The various provisions of the Civil Code, pertinent to the subject, read:

“Article 448. The owner of the land on which anything has been built,
sown, or planted in good faith, shall have the right to appropriate as his
own the works, sowing or planting, after payment of the indemnity
provided for in Articles 546 and 548, or to oblige the one who built or
planted to pay the price of the land, and the one who sowed, the proper
rent. However, the builder or planter cannot be obliged to buy the land if
its value is considerably more than that of the building or trees. In such a
case, he shall pay reasonable rent, if the owner of the land does not
choose to appropriate the building or trees after proper indemnity. The
parties shall agree upon the terms of the lease and in case of
disagreement, the court shall fix the terms thereof.”

“Article 449. He who builds, plants, or sows in bad faith on the land of
another, loses what is built, planted or sown without right to indemnity.”

“Article 450. The owner of the land on which anything has been built,
planted or sown in bad faith may demand the demolition of the work, or
that the planting or sowing be removed, in order to replace things in their
former condition at the expense of the person who built, planted or sowed;
or he may compel the builder or planter to pay the price of the land, and
the sower the proper rent.”

A builder in good faith can, under the foregoing provisions, compel the
landowner to make a choice between appropriating the building by paying
the proper indemnity or obliging the builder to pay the price of the land.
The choice belongs to the owner of the land, a rule that accords with the
principle of accession, i.e., that the accessory follows the principal and not
the other way around. Even as the option lies with the landowner, the
grant to him, nevertheless, is preclusive. He much choose one. He
cannot, for instance, compel the owner of the building to instead remove it
from the land. In order, however, that the builder can invoke that accruing
benefit and enjoy his corresponding right to demand that a choice be made
by the landowner, he should be able to prove good faith on his part.
Good faith, here understood, is an intangible and abstract quality with no
technical meaning or statutory definition, and it encompasses, among other
things, an honest belief, the absence of malice and the absence of design
to defraud or to seek an unconscionable advantage. An individual’s
personal good faith is a concept of his own mind and, therefore, may not
conclusively be determined by his protestations alone. It implies honesty
of intention, and freedom from knowledge of circumstances which ought to
put the holder upon inquiry. The essence of good faith lies in an honest
belief in the validity of one’s right, ignorance of a superior claim, and
absence of intention to overreach another. Applied to possession, one is
considered in good faith if he is not aware that there exists in his title or
mode of acquisition any flaw which invalidates it.

Given the findings of both the trial court and the appellate court, it should
be evident enough that petitioner would fall much too short from its claim
of good faith. Evidently, petitioner was quite aware, and indeed advised,
prior to its acquisition of the land and building from Ignacio that a part of
the building sold to it stood on the land not covered by the land conveyed
to it.

Equally significant is the fact that the building, constructed on the land by
Ignacio, has in actuality been part of the property transferred to
petitioner. Article 448, of the Civil Code refers to a piece of land whose
ownership is claimed by two or more parties, one of whom has built some
works (or sown or planted something) and not to a case where the owner
of the land is the builder, sower, or planter who then later loses ownership
of the land by sale or otherwise for, elsewise stated, “where the true owner
himself is the builder of works on his own land, the issue of good faith or
bad faith is entirely irrelevant.”

In fine, petitioner is not in a valid position to invoke the provisions of

Article 448 of the Civil Code. The Court commiserates with petitioner in its
present predicament; upon the other hand, respondent, too, is entitled to
his rights under the law, particularly after having long been deprived of the
enjoyment of his property. Nevertheless, the Court expresses hope that
the parties will still be able to come up with an arrangement that can be
mutually suitable and acceptable to them.
WHEREFORE, the decision of the Court of Appeals in CA-G.R. CV No. 56001
is AFFIRMED. No costs.

SO ORDERED.

Pleasantville Development v. CA
[G.R. No. 79688. February 1, 1996.]
Third Division, Panganiban (J): 4 concur, 1 took no part

Facts: Edith Robillo purchased from Pleasantville Development Corporation

a parcel of land designated as Lot 9, Phase II and located at Taculing
Road, Pleasantville Subdivision, Bacolod City. Eldred Jardinico bought the
rights to the lot from Robillo. At that time, Lot 9 was vacant. On the other
hand, on 26 March 1974, Kee bought on installment Lot 8 of the same
subdivision from C.T. Torres Enterprises, Inc. (CTTEI), the exclusive real
estate agent of Pleasantville Development. Under the Contract to Sell on
Installment, Kee could possess the lot even before the completion of all
installment payments. On 20 January 1975, Kee paid CTTEI the relocation
fee of P50.00 and another P50.00 on 27 January 1975, for the preparation
of the lot plan. These amounts were paid prior to Kee's taking actual
possession of Lot 8. After the preparation of the lot plan and a copy
thereof to Kee, CTTEI through its employee, Zenaida Octaviano,
accompanied Kee's wife, Donabelle Kee, to inspect Lot 8. Unfortunately,
the parcel of land pointed by Octaviano was Lot 9. Thereafter, Kee
proceeded to construct his residence, a store, an auto repair shop and
other improvements on the lot.

Upon completing all payments, Jardinico secured on 19 December 1978

from the Register of Deeds of Bacolod City TCT 106367 in his name. It was
then that he discovered that improvements had been introduced on Lot 9
by Wilson Kee, who had taken possession thereof. After the discovery,
Jardinico confronted Kee. The parties tried to reach an amicable
settlement, but failed.

On 30 January 1981, Jardinico's lawyer wrote Kee, demanding that the

latter remove all improvements and vacate Lot 9. When Kee refused to
vacate, Jardinico filed with the MTCC a complaint for ejectment with
damages against Kee. Kee, in turn, filed a third-party complaint against
Pleasantville and CTTEI. The MTCC held that the erroneous delivery of Lot
9 to Kee was attributable to CTTEI. The MTCC also found that Pleasantville
had already rescinded its contract with Kee over Lot 8 for the latter's failure
to pay the installments due, and that Kee had not contested the rescission.
The rescission was effected in 1979, before the complaint was instituted.
The MTCC concluded that Kee no longer had any right over the lot subject
of the contract between him and Pleasantville. Consequently, Kee must pay
reasonable rentals for the use of Lot 9, and, furthermore, he cannot claim
reimbursement for the improvements he introduced on said lot. The MTCC
thus ordered Kee to vacate Lot 9, to remove all structures and
improvements he introduced thereon, and to pay the Jardinico rentals of
P15.00 a day computed from the time the suit was filed on 12 March 1981
until he vacateds the premises; such amount bearing an interest of 12%
per annum. The MTCC also ordered CTTI and Pleasantville to pay Jardinico
in solidum for the amount of P3,000 as attorney’s fees and P700 as cost
and litigation expenses.

On appeal, the RTC Bacolod City (Branch 48) ruled that Pleasantville and
CTTEI were not at fault or were not negligent and found Kee a builder in
bad faith. Thus, the appellate court affirmed the decision with respect to
the order to vacate the premises of Lot 9, the removal of the structure and
improvements introduced thereon at Kee’s expense, and to pay a rental of
P15.00 a day until he vacates the premises, with an interest of 12% per
annum. The Court further rendered judgment against Kee to pay Jardinico
the sum of P3,000.00 as attorney's fees, plus costs of litigation; dismissed
the third-party complaint against Pleasantville CTTEI, and reversed the
order Pleasantville and CTTEI to pay Jardinico attorney's fees and costs of
litigation. Following the denial of his motion for reconsideration on 20
October 1986, Kee appealed directly to the Supreme Court, which referred
the matter to the Court of Appeals.

Pending resolution of the case before the Court of Appeals, Jardinico and
Kee on 24 July 1987 entered into a deed of sale, wherein the former sold
Lot 9 to Kee. Jardinico and Kee did not inform the Court of Appeals of such
deal.

The appellate court ruled that Kee was a builder in good faith (entitled to
rights under Articles 448, 546 and 548 of the Civil Code), as he was
unaware of the "mix-up" when he began construction of the improvements
on Lot 8. It further ruled that the erroneous delivery was due to the
negligence of CTTEI, and that such wrong delivery was likewise imputable
to its principal, Pleasantville; and thus ordered the CTTEI and Pleasantville
to be solidarily liable for the demolition expenses and value of
improvements destroyed or rendered useless in case Jardinico decides to
appropriate the improvements and thereafter remove the structures; or for
the amount representing the value of Lot 9 that Kee should pay to
Jardinico if Jardinico chose to sell the land to Kee. The appellate court
ordered CTTEI and Pleasantville to pay in solidum the amount of P3,000.00
to Jardinico as attorney's fees, as well as litigation expenses; and ruled that
the award of rentals was without basis. Further, the appellate court
remanded the case to the court of origin for the determination of the
actual value of the improvements and the property (Lot 9). Pleasantville
filed the petition for review on certiorari.

The Supreme Court partially granted the petition, and modified the decision
of the Court of Appeals by declaring Wilson Kee a builder in good faith; and
that Pleasantville Development and C.T. Torres Enterprises solidarily liable
for damages due to negligence (however, since the amount and/or extent
of such damages was proven during the trial, the same cannot now be
quantified and awarded). The Court also ordered Pleasantville
Development and C.T. Torres Enterprises to pay in solidum the amount of
P3,000.00 to Jardinico as attorney's fees, as well as litigation expenses.
The Court dispensed with the award of rentals to Jardinico.

1. Kee a builder in good faith; Prudent acts to ascertain land to build on

Under the Torrens system of land registration, Kee is presumed to have
knowledge of the metes and bounds of the property with which he is
dealing. But as Kee is a layman not versed in the technical description of
his property, he had to find a way to ascertain that what was described in
TCT 69561 matched Lot 8. Thus, he went to the subdivision developer's
agent and applied and paid for the relocation of the lot, as well as for the
production of a lot plan by CTTEI's geodetic engineer. Upon Kee's receipt
of the map, his wife went to the subdivision site accompanied by CTTEI's
employee, Octaviano, who authoritatively declared that the land she was
pointing to was indeed Lot 8. Having full faith and confidence in the
reputation of CTTEI, and because of the company's positive identification
of the property, Kee saw no reason to suspect that there had been a
misdelivery. The steps Kee had taken to protect his interests were
reasonable. There was no need for him to have acted ex-abundantia
cautela. such as being present during the geodetic engineer's relocation
survey or hiring an independent geodetic engineer to countercheck for
errors, for the final delivery of subdivision lots to their owners is part of the
regular course of everyday business of CTTEI. Because of CTTEI's blunder,
what Kee had hoped to forestall did in fact transpire. Kee had acted in the
manner of a prudent man in ascertaining the identity of his property.

2. Scenario of bad faith improbable; Good faith presumed

It is thus highly improbable that a purchaser of a lot would knowingly and
willingly build his residence on a lot owned by another, deliberately
exposing himself and his family to the risk of being ejected from the land
and losing all improvements thereon, not to mention the social humiliation
that would follow. Good faith consists in the belief of the builder that the
land he is building on is his and his ignorance of any defect or flaw in his
title. And as good faith is presumed, the one alleging bad faith has the
burden of proving bad faith.

3. Contractual breach cannot be the basis to negate the presumption of

builder in good faith
Violations of paragraphs 22 and 26 of the Contract of Sale on Installment
have no bearing whatsoever on whether Kee was a builder in good faith,
i.e. on his state of mind at the time he built the improvements on Lot 9.
These alleged violations may give rise to Pleasantville's cause of action
against Kee under the said contract (contractual breach), but may not be
bases to negate the presumption that Kee was a builder in good faith.

4. Rescission does not negate the negligence of CTTEI

The Contract of Sale on Installment covering Lot 8 between Pleasantville
and Kee, which was rescinded long before the present action was
instituted, has no relevance on the liability of Pleasantville, as such fact
does not negate the negligence of its agent in pointing out the wrong lot to
Kee. Such circumstance is relevant only as it gives Jardinico a cause of
action for unlawful detainer against Kee.

5. Recovery of damages not waived

Kee did not contracted away his right to recover damages resulting from
Pleasantville's negligence. Such waiver would be contrary to public policy
and cannot be allowed. "Rights may be waived, unless the waiver is
contrary to law, public order, public policy, morals, or good customs, or
prejudicial to a third person with a right recognized by law."

6. Principal responsible for acts of agent if damaged caused to third

persons; Agent is personally liable for damages if he exceeds his authority
The principal is responsible for the acts of the agent, done within the scope
of his authority, and should bear the damage caused to third persons. On
the other hand, the agent who exceeds his authority is personally liable for
the damages. In the present case, CTTEI was acting within its authority as
the sole real estate representative of Pleasantville when it made the
delivery to Kee. In acting within its scope of authority, it was, however,
negligent. It is this negligence that is the basis of Pleasantville's liability, as
principal of CTTEI, per Articles 1909 and 1910 of the Civil Code.

7. Deed of Sale between Kee and Jardinico merely regulates the reciprocal
rights of the parties and has no effect on the liability of Pleasantville
The deed of sale regulates the reciprocal rights of Kee and Jardinico; it
stressed that they had reached an agreement independent of the outcome
of the case. The "terms and conditions in the said deed of sale are strictly
for the parties thereto" and that "there is no waiver made by either of the
parties in said deed of whatever favorable judgment or award the Court of
Appeals may make in Kee’s and Jardinico’s favor against Pleasantville and
CTTEI.” The deed of sale can have no effect on the liability of Pleasantville.
Pleasantville's liability is grounded on the negligence of its agent.

8. Pleasantville supposedly liable for damages due to agents negligence;

Due to lack of evidence, no damages due
Pleasantville’s liability lies in the negligence of its agent CTTEI. For such
negligence, Pleasantville’s should be held liable for damages. The extent
and/or amount of damages to be awarded is a factual issue which should
be determined after evidence is adduced. However, there is no showing
that such evidence was actually presented in the trial court; hence no
damages could be awarded.

9. Appellate court erred in modification of the application of the law on

ground of equity
The rights of Kee and Jardinico vis-a-vis each other, as builder in good
faith and owner in good faith, respectively, are regulated by law (i.e., Arts.
448, 546 and 548 of the Civil Code). It was error for the Court of Appeals
to make a "slight modification" in the application of such law, on the
ground of "equity". At any rate, Kee and Jardinico have amicably settled
through their deed of sale their rights and obligations with regards to Lot
9. Thus, the Court deleted the dispositive portion of the Court of Appeals'
Decision holding Pleasantville and CTTEI solidarily liable for demolition
expenses or the amount pertaining to the value of the lot, whichever is
applicable in the exercise of the landowner’s options.

10. Award of attorney’s fees lies with the discretion of the court depending
on the case’s circumstances
The award of attorney's fees lies within the discretion of the court and
depends upon the circumstances of each case. The Supreme Court shall
not interfere with the discretion of the Court of Appeals. Jardinico was
compelled to litigate for the protection of his interests and for the recovery
of damages sustained as a result of the negligence of Pleasantvile's agent.

11. No need to remand the case for the determination of the value and the
land
In view of the deed of sale entered into by Kee and Jardinico, which deed
governs the rights of Jardinico and Kee as to each other, there is also no
further need to remand the case to the court of origin "for determination of
the actual value of the improvements and the property (Lot 9), as well as
for further proceedings in conformity with Article 448 of the New Civil
Code."

[G.R. No. 144291. April 20, 2001]

EVADEL REALTY and DEVELOPMENT CORPORATION, petitioners, vs.

SPOUSES ANTERO AND VIRGINIA SORIANO, respondents.

DECISION

KAPUNAN, J.:
This is an appeal by certiorari under Rule 45 of the Rules of Court of the
decision of the Court of Appeals dated August 3, 2000 in CA-G.R. CV No.
60292 affirming the summary judgment rendered by the Regional Trial
Court, Branch 88, Cavite City, in the case for accion reinvidicatoria filed by
herein respondents Antero and Virginia Soriano against petitioner Evadel
Realty and Development Corporation.

The pertinent facts from which the present petition proceeds are as
follows:

On April 12, 1996, the spouses Antero and Virginia Soriano (respondent
spouses), as sellers, entered into a “Contract to Sell “ with Evadel Realty
and Development Corporation (petitioner), as buyer, over a parcel of land
denominated as Lot 5536-C of the Subdivision Plan of Lot 5536 covered by
Transfer Certificate of Title No. 125062 which was part of a huge tract of
land known as the Imus Estate.

The pertinent portions of the Contract read:

xxx

WHEREAS : It is the desire of Party “B” to purchase a portion of a parcel

of land owned by Party “A” and which portion consist of 28,958 sq.m. and
specifically described as lot 5536-C of the Subdivision Plan of Lot 5536 of
Imus Estate as surveyed for Antero Q. Soriano and covered by TCT 125062
issued by the Register of Deeds of the Province of Cavite and which portion
is shown in Annex “A” hereof.

xxx

I. SUBJECT

The subject of this agreement is the intended sale of 28,958 sq.m. which is
a portion of TCT No. 125062 in the name of Party “A” to Party “B” and
which portion is herewith shown in Annex “A” hereof.

xxx

III. Conditions to Govern “Contract to Sell”

1] The amount of Twenty Eight Million Nine Hundred Fifty Eight Thousand
Pesos (P28,958,000.00) representing the first installment of the purchase
price of the property shall be delivered by Party “B” to Party “A” upon the
signing of this agreement.

2] The second and last installment of Twenty Eight Million Nine Hundred
Fifty Eight Thousand Pesos (P28,958,000.00) shall be delivered by Party
“B” to Party “A” simultaneously with the delivery of Party "A" to Party "B"
of the Torrens Title to the lot specifically described as Lot No. 5536-C
containing an area of 28,958 sq. m. and herewith shown in Annex “A”
hereof; still in the name of Party “A” and the delivery of Party “A” to Party
“B” of the “Deed of Absolute Sale” to the property in favor of Party “B”.
Responsibility of the transfer of the Torrens Title from the name of Party
“A” to Party “B” shall be the sole responsibility of Party “B”. Moreover, the
balance in the amount of Twenty Eight Million Nine Hundred Fifty Eight
Thousand Pesos(P28,958,000.00) shall be due and demandable
immediately from the time Party “B”, thru its President or Vice-President
receives either verbal or written notice that the Torrens Title to the
segregated property and the “Deed of Absolute Sale” are already available
for delivery to Party “B”. In the event of delay, however, Party “B” shall be
charged with interest and penalty in the amount of 6% per month,
compounded, for every month of delay or a fraction thereof in the event
the delay does not exceed one month.

xxx[1]

Upon payment of the first installment, petitioner introduced improvements

thereon and fenced off the property with concrete walls. Later, respondent
spouses discovered that the area fenced off by petitioner exceeded the
area subject of the contract to sell by 2,450 square meters. Upon
verification by representatives of both parties, the area encroached upon
was denominated as Lot 5536-D-1 of the subdivision plan of Lot 5536-D of
Psd-04-092419 and was later on segregated from the mother title and
issued a new transfer certificate of title, TCT No. 769166, in the name of
respondent spouses.

Respondent spouses successively sent demand letters to petitioner on

February 14, March 7, and April 24, 1997, to vacate the encroached area.
Petitioner admitted receiving the demand letters but refused to vacate the
said area.

Thus, on May 23, 1997, a complaint for accion reinvindicatoria was filed by
respondent spouses against petitioner with the Regional Trial Court, Branch
88 of Cavite City.

In its Answer, petitioner admitted the encroachment but claimed that it

was a builder in good faith since it merely relied on the boundaries pointed
out by the representatives of respondent spouses. Petitioner also argued
that there was a novation of contract because of the encroachment made
by the national road on the property subject of the contract by 1,647
square meters.

On March 19, 1998, respondents filed a Motion for Summary Judgment,

alleging that there existed no genuine issue as to the material facts of the
case due to the admissions made by petitioner in its Answer.

The trial court granted the motion on June 11, 1998 and rendered
judgment in favor of respondent spouses, the dispositive portion of which
reads:

WHEREFORE, in the light of the foregoing, this court hereby orders the
defendant to remove without right of indemnity and at its expense, any or
all improvements that it has introduced on the parcel of land covered by
TCT No. T-769166 issued by the Register of Deeds of the Province of
Cavite with an area of 2,450 square meters, more or less, in the name of
plaintiffs spouses and to return to the plaintiffs the physical possession of
the above-described parcel of land.

Plaintiffs' and defendant’s claim and counter-claim for damages and

attorney’s fees are dismissed. No pronouncement as to costs.

SO ORDERED.[2]

This prompted petitioner to appeal the matter to the Court of Appeals. On

August 3, 2000, the Court of Appeals affirmed the order for summary
judgment of the trial court. Hence, this petition ascribing the following
errors:
I. XXX, THE HON. COURT OF APPEALS COMMITTED AN ERROR OF LAW IN
AFFIRMING THAT UNDER THE FACTUAL CIRCUMSTANCES, A SUMMARY
JUDGMENT COULD BE RENDERED BY THE COURT A QUO.

II. XXX, THE HON. COURT OF APPEALS COMMITTED AN ERROR OF LAW

IN ITS APPLICATION OF THE JURISPRUDENCE LAID DOWN IN THE CASE
OF TERNATE v. COURT OF APPEALS (241 SCRA 254) AND NATIONAL
IRRIGATION ADMINISTRATION v. GAMIT (215 SCRA 436) UNDER THE
FACTUAL CONTENT OF THE CASE AT BAR.

III. XXX, THE HON. COURT OF APPEALS COMMITTED AN ERROR OF LAW

IN ITS APPLICATION OF THE JURISPRUDENCE LAID DOWN IN THE CASE
OF J.M. TUASON & CO. INC. v. VDA. DE LUMANLAN (23 SCRA 230) UNDER
THE FACTUAL CONTENT OF THE CASE AT BAR.

IV. XXX, THE HON. COURT OF APPEALS COMMITTED AN ERROR OF LAW

IN ITS APPLICATION OF THE JURISPRUDENCE LAID DOWN IN THE CASES
OF MANILA BAY CLUB CORPORATION v. COURT OF APPEALS (245 SCRA
715) AND THE MARINE CULTURE INC. v. COURT OF APPEALS (219 SCRA
148) UNDER THE FACTUAL CONTENT OF THE CASE AT BAR.

V. XXX, THE HON. COURT OF APPEALS COMMITTED AN ERROR OF LAW

IN AFFIRMING THE DECISION OF THE COURT A QUO, THUS DEPRIVING
THE PETITIONER OF ITS DAY IN COURT AND ITS CONSTITUTIONAL
RIGHT TO DUE PROCESS OF LAW.

Summarizing the aforecited issues, the basic issue posed for resolution is
whether or not the trial court was in error in rendering summary judgment
on the case.

Petitioner claims that a summary judgment cannot be rendered on the case

as there are genuine issues of fact which have to be threshed out during
trial. It is alleged that in the original and amended complaint, private
respondent spouses sought recovery of two thousand four hundred sixty
two (2,462) square meters of land. This was, however, changed to 2,450
square meters in the second amended complaint. It is also argued that
when petitioner entered upon the property in 1996, it relied on the metes
and boundaries pointed out by respondents themselves and their
surveyors. Moreover, title over the said area was obtained only after the
commencement of the complaint so petitioner could not have possibly
disputed such title earlier. Therefore, petitioner maintains, the question of
the exact area of the land allegedly encroached, whether 2,462 or 2,450
square meters; and the determination of whether its possession of the
subject property was in good or bad faith, are genuine triable issues.

Respondent spouses, on the other hand, maintain that there are no

genuine issues of fact in the present case in view of the admission by
petitioner of (1) the existence of the title over the subject property in the
name of respondent spouses; and (2) its encroachment on the northern
side of sold Lot 5536-C which is the area in dispute. It is claimed that such
admissions are tantamount to an admission that respondents have a
rightful claim of ownership to the subject property warranting a summary
judgment in their favor.

Prompt and expeditious resolution of cases have always been an

underlying policy of the Court. For this reason, certain rules under the
Rules of Court are designed to shorten the procedure in order to allow the
speedy disposition of a case. Some of these are Rule 33 on Demurrer to
Evidence, Rule 34 on Judgment on the Pleadings and Rule 35 on Summary
Judgments. In all these instances, full-blown trial of a case is dispensed
with and judgment is rendered on the basis of the pleadings, supporting
affidavits, depositions and admissions of the parties.

Under Rule 35 of the 1997 Rules of Civil Procedure, except as to the

amount of damages, when there is no genuine issue as to any material fact
and the moving party is entitled to a judgment as a matter of law,
summary judgment may be allowed.[3] Summary or accelerated judgment
is a procedural technique aimed at weeding out sham claims or defenses at
an early stage of the litigation thereby avoiding the expense and loss of
time involved in a trial.[4]

The law itself determines when a summary judgment is proper. Under the
rules, summary judgment is appropriate when there are no genuine issues
of fact which call for the presentation of evidence in a full-blown trial.
Even if on their face the pleadings appear to raise issues, when the
affidavits, depositions and admissions show that such issues are not
genuine, then summary judgment as prescribed by the rules must ensue as
a matter of law. What is crucial for determination, therefore, is the
presence or absence of a genuine issue as to any material fact.[5]

A “genuine issue” is an issue of fact which require the presentation of

evidence as distinguished from a sham, fictitious, contrived or false claim.
When the facts as pleaded appear uncontested or undisputed, then there is
no real or genuine issue or question as to the facts, and summary
judgment is called for. The party who moves for summary judgment has
the burden of demonstrating clearly the absence of any genuine issue of
fact, or that the issue posed in the complaint is patently unsubstantial so as
not to constitute a genuine issue for trial.[6] Trial courts have limited
authority to render summary judgments and may do so only when there is
clearly no genuine issue as to any material fact. When the facts as
pleaded by the parties are disputed or contested, proceedings for summary
judgment cannot take the place of trial.[7]

Applying these principles to the present case, we hold that the CA did not
commit any reversible error in affirming the summary judgment rendered
by the trial court. Hence, the instant petition must be denied.

The case at bar is one for accion reinvindicatoria which is an action to

recover ownership over real property. Respondent spouses (plaintiffs
below) seek to recover a certain portion of land with a total area of 2,450
square meters from petitioner which portion was allegedly in excess of the
total area of the property actually sold by them to the latter. In a
reinvindicatory action, the basic issue for resolution is that of ownership
and in the present case, the determination of ownership of the subject
property is hinged on the following questions of fact - first, what was the
total area of the lot sold to petitioner by respondent spouses as agreed
upon and embodied in the contract to sell; and second, whether or not the
area being occupied by the petitioner is in excess of the land which it
actually bought from respondent spouses under the said contract.

In its Answer to the Amended Complaint, petitioner admitted the existence

and due execution of the Contract to Sell which contained the specific
description of the property it bought from respondent spouses, to wit:

xxx
WHEREAS : It is the desire of Party “B” to purchase a portion of a parcel
of land owned by Party “A” and which portion consist of 28,958 sq.m. and
specifically described as lot 5536-C of the Subdivision Plan of Lot 5536 of
Imus Estate as surveyed for Antero Q. Soriano and covered by TCT 125062
issued by the Register of Deeds of the Province of Cavite and which portion
is shown in Annex “A” hereof.

xxx

Equally significant is the fact that in the same Answer, petitioner likewise
admitted that the relocation survey conducted by geodetic engineers of
both parties disclosed that indeed there were two encroachments, i.e.

1) encroachment at the eastern frontage of Lot 5536-C by the national

road; and

2) encroachment by defendant (petitioner) EVADEL on the northern side of

sold Lot 5536-C. [8]

and that the second area encroached upon was denominated as Lot 5536-
D-1 of the subdivision plan of Lot 5536-D of Psd-04-092419 and later on
segregated from the mother title and issued a new transfer certificate of
title, TCT No. 769166, during the pendency of the case before the trial
court.

With the foregoing admissions by petitioner, clearly, there is no genuine

issue of fact as to ownership of the subject property because the said
admissions made by petitioner in its Answer are tantamount to an
admission that respondent spouses owned the property in question. The
CA thus correctly affirmed the trial court as it summarily resolved the issue
of ownership of the subject property in favor of respondent spouses.

Petitioner, however, maintains that the issue of whether or not it was a

builder in good faith should not have been peremptorily disposed of by the
trial court. Petitioner decries the fact that it was not given an opportunity
to submit evidence to establish good faith as regards the improvements it
introduced on respondent spouses’ property.
Petitioner’s contention is untenable. As correctly pointed out by the trial
court and the CA, petitioner already admitted in its Amended Answer that
the lot in dispute is covered by TCT No. T-769166 of respondent spouses.
With this admission, petitioner can no longer claim that it was a builder in
good faith. Good faith consists in the belief of the builder that the land he
is building on is his and his ignorance of any defect or flaw in his title.[9] In
this case, since petitioner, by its own admission, had knowledge of
respondent spouses’ title over the subject lot, it was clearly in bad faith
when it introduced improvements thereon.

Further, the contract to sell[10] between petitioner and respondent

spouses, the genuineness and due execution thereof was admitted by
petitioner, clearly delineated the metes and bounds of the lot subject
thereof. Attached to the said contract was a graphic illustration of the lot
purchased by petitioner including a technical description thereof.
Petitioner, as a real estate developer, is presumed to be experienced in its
business and ought to have sufficient technical expertise to correctly
determine the metes and bounds of the lands it acquires. Despite this,
petitioner still introduced improvements on the lot not covered by the
contract to sell. Petitioner’s bad faith had been duly established by the
pleadings and there was thus no need to further conduct any trial on the
matter. Our ruling in Congregation of the Religious of the Virgin Mary vs.
Court of Appeals[11]is particularly instructive:

x x x As discussed earlier, petitioner has no right whatsoever to possess

and construct permanent structures on the questioned land owned by
respondents-spouses. Petitioner admits in its answer to the complaint that
it introduced improvements on the subject lot without the consent and
knowledge of respondents-spouses. It is thus a builder in bad faith.
Again, we find no reversible error in the following ruling of the respondent
court:

"Which leads us to a discussion of whether or not appellant was in bad

faith in introducing improvements on the subject land. It cannot be denied
that appellant never gained title to the subject land as it admits to not
having purchased the said lot (TSN, p. 81, November 9, 1992). Neither
has appellant successfully shown any right to introduce improvements on
the said land (its claim of grant of perpetual use of the same as a road lot
and its right to build on a right of way both having been rejected above).
This being so, it follows that appellant was a builder in bad faith in that,
knowing that the land did not belong to it and that it had no right to build
thereon, it nevertheless caused the improvements in question to be
erected."[12]

Finally, petitioner’s claim that there was a novation of contract because

there was a “second” agreement between the parties due to the
encroachment made by the national road on the property subject of the
contract by 1,647 square meters, is unavailing. Novation, one of the
modes of extinguishing an obligation, requires the concurrence of the
following: (1) there is a valid previous obligation; (2) the parties concerned
agree to a new contract; (3) the old contract is extinguished; and (4) there
is valid new contract.[13] Novation may be express or implied. In order
that an obligation may be extinguished by another which substitutes the
same, it is imperative that it be so declared in unequivocal terms (express
novation) or that the old and the new obligations be on every point
incompatible with each other (implied novation).[14]

In the instant case, there was no express novation because the “second”
agreement was not even put in writing.[15] Neither was there implied
novation since it was not shown that the two agreements were materially
and substantially incompatible with each other. We quote with approval
the following findings of the trial court:

Since the alleged agreement between the plaintiffs [herein respondents]

and defendant [herein petitioner] is not in writing and the alleged
agreement pertains to the novation of the conditions of the contract to sell
of the parcel of land subject of the instant litigation, ipso facto, novation is
not applicable in this case since, as stated above, novation must be clearly
proven by the proponent thereof and the defendant in this case is clearly
barred by the Statute of Frauds from proving its claim.[16]

In fine, the CA correctly affirmed the summary judgment rendered by the

trial court. Considering the parties’ allegations and admissions in their
respective pleadings filed with the court a quo, there existed no genuine
issue as to any material fact so that respondent spouses as movants
therein were entitled to a judgment as a matter of law.
WHEREFORE, premises considered, the instant Petition is hereby DENIED
for lack of merit. The assailed Decision, dated August 3, 2000, of the Court
of Appeals is AFFIRMED in toto.

SO ORDERED.

TECHNOGAS PHIL. V. CA

268 SCRA 5

FACTS:
The parties in this case are owners of adjoining lots in Parañaque, Metro
Manila. It was discovered in a survey, that a portion of a building of
petitioner, which was presumably constructed by its predecessor-in-
interest, encroached on a portion of the lot owned by private
respondent.Technogas owned property with buildings and walls. Uy
bought an adjacent property. There was an agreement for
Technogas to demolish the wall. Uy filed a complained but the
case was dismissed. This prompted him to dig a hole along the
wall, which led to the partial collapse of the wall. A case for
malicious mischief was filed against Uy.

ISSUE: Is petitioner considered a builder in bad faith because, as held by

respondent Court, he is "presumed to know the metes and bounds of his
property as described in his certificate of title"? Does petitioner succeed
into the good faith or bad faith of his predecessor-in-interest which
presumably constructed the building?
HELD:

1. Unless one is versed in the science of surveying, no one can

determine the precise extent or location of the property by merely
examining his proper title.

2. The supervening awareness of the encroachment by petitioner

doesn't militate against its right to claim the status of builder in
good faith.

3. Bad faith isn’t imputable to a registered owner of a land when a part

of his building encroaches upon a builder’s land

G.R. No. 140357 September 24, 2004

SPOUSES REYNALDO and EDITHA LOPEZ, petitioners,

vs.
MARGARITA SARABIA, respondent.

DECISION

CALLEJO, SR., J.:

This is a petition for review on certiorari of the Decision1 of the Court of

Appeals (CA) dated June 11, 1999 and the Resolution dated October 5,
1999 denying the motion for reconsideration thereof in CA-G.R. CV No.
50656 which affirmed with modification the Decision2 of the Regional Trial
Court (RTC) of Kalibo, Aklan, Branch 6.

Case for the Respondent

Margarita Sarabia owned two (2) lots with a residential house built on one
of the lots in Poblacion, Kalibo, Aklan. Spouses Reynaldo and Editha Lopez
were renting the second floor of the house for P300.00 per month. On the
other lot was a building rented by Dr. Nilda Tambong for P600.00 a month,
with two (2) boarders upstairs paying P440.00 a month.3 Sometime in
March 1984, the Spouses Lopez approached Margarita and asked her if
they could construct additional rooms for their growing children. Margarita
told them that she did not have the money for such construction project.
They then proposed that they could apply for a Pag-ibig Housing Loan from
the Development Bank of the Philippines (DBP) and use Margarita’s
property as collateral. Margarita, however, informed them that her property
had already been mortgaged to the Philippine National Bank (PNB) in 1978
in the amount of P20,000.00,4 and was, in fact, in danger of being
foreclosed for non-payment of amortization. Her outstanding loan balance
as of March 1984 had already ballooned to about P63,000.00.

The Spouses Lopez tried to convince Margarita that it was better to

transfer the mortgage to the DBP where interest rates were lower; Editha
Lopez was a public school teacher and the monthly amortization could
easily be deducted from her salary. They told Margarita that the PNB loan
balance could be paid off from the proceeds of the loan from the DBP, and
the excess could be used for the construction of the rooms. In order to
facilitate the loan, it was, however, necessary that the property be in the
name of the Spouses Lopez.

Relying on the couple’s good faith and assurances that they would
religiously pay the amortization, Margarita agreed to their proposition. A
document was thus executed denominated as "Assumption of Mortgage
with Quitclaim."5 In said document, the Register of Deeds was authorized
to cancel TCT No. T-4471 and TCT No. T-4474 over the two (2) parcels of
land and issue new TCT’s6 under the name of the Spouses Lopez covering
the two lots. The Spouses Lopez then mortgaged the properties to DBP
where they obtained a loan in the amount of P163,000.00. They paid the
PNB, which then released the mortgage of Margarita. The Spouses Lopez
ceased paying rentals to Margarita and even collected the rentals from the
other lot as part of the payment of the monthly amortization.

Sometime in October 1987, Reynaldo Lopez approached Margarita and

informed her that he needed P30,000.00 to update their loan payments.
Margarita gave him the amount as part of the refund to the payment of the
PNB loan. She expected Reynaldo to give her an official receipt from the
DBP, but did not receive any. Sensing something irregular, she went to the
DBP to inquire about the status of the loan. She was aghast to find out that
the loan amortization had not been paid and that her property was again in
danger of being foreclosed.
Margarita was constrained to file an action with the RTC against the
Spouses Lopez for annulment of document, specific performance and
reconveyance with damages. The DBP was included as party-defendant. In
her complaint, Margarita prayed for the following:

a. Declaring the Assumption of Mortgage with Quitclaim null and

void;

b. Ordering the defendants Lopezes to redeem the parcels of land

and residential house presently mortgaged to the Development Bank
of the Philippines;

c. Ordering the defendants to reconvey the certificates of title as well

as the tax declarations of the said parcels of land and the house in
favor of plaintiff;

d. Ordering the defendants to pay the plaintiff the amount of

P10,000.00 as attorney’s fee; litigation expenses in the amount of
P10,000.00, and as actual damage to the value of the property
mentioned above to be determined by this Honorable Court, and
monthly rental of P300.00 from 1984 up to actual payment.7

Case for the Petitioners

In their Answer8 to the Complaint, the Spouses Lopez averred that it was
Margarita who approached them to help her redeem her property from the
PNB because it was going to be foreclosed. She was aware that the couple
wanted to buy a house and lot of their own, and offered her property to
them instead. The Spouses Lopez told her that they did not have the
money to redeem the property, but if Margarita was certain in selling her
house to them, they could arrange for a loan from the DBP, the proceeds
of which the PNB loan could be paid in full and would form part of the
purchase price. The balance would also be taken from the proceeds of the
DBP loan. Pursuant to their mutual and verbal agreement, Margarita
executed a Deed of Assumption of Mortgage with Quitclaim,9 authorizing
the couple to assume her loan with the PNB over the two lots, together
with all the improvements thereon and renouncing all her rights over the
property. The same document authorized the Register of Deeds of Aklan to
cancel TCT Nos. T-4471 and T-4474 and issue two (2) new certificates of
title in the name of the Spouses Reynaldo and Editha Lopez. In April 1984,
Margarita asked for partial payment from the Spouses Lopez and was given
the amount of P6,700.00 which the former acknowledged.10 On May 8,
1984, Margarita executed a Special Power of Attorney11 appointing the DBP
to be her attorney-in-fact, where the latter would issue a check in favor of
the PNB covering the amount of P63,307.34 as payment of the outstanding
loan balance. Another check in the amount of P89,992.66 was also issued
in the name of Margarita, as per the Distribution of Proceeds and Release
Guide of the DBP.12 The couple has introduced improvements on the land
since then, which cost them about P300,000.00. The Spouses Lopez claim
and assert ownership over the subject properties, as evidenced by the
TCTs issued in their names.

On the part of DBP, it alleged in its answer with cross-claim that it had no
knowledge of the agreement between Margarita and the Spouses Lopez. It
granted a loan to the spouses in the amount of P163,500.00 and accepted
the certificates of title presented to it by the Spouses Lopez over the two
parcels of land as security/collateral. It had the right to rely on the
certificates of title presented to it, which were free from all liens and
encumbrances. The DBP was an innocent mortgagee for value. As cross-
claim, DBP demanded payment from the Spouses Lopez the amount of the
loan granted to them, plus damages for misrepresenting to the bank that
they were the owners in fee simple of the subject properties which they
mortgaged to the bank.13

The Findings of the RTC

On November 29, 1994, the RTC rendered judgment in favor of Margarita.

The trial court found that it was Margarita who sought the help of the
Spouses Lopez so that she could redeem her property which was on the
verge of being foreclosed by the PNB for non-payment of the loan
amortization. By virtue of the documents executed by Margarita in favor of
the Spouses Lopez, viz, Deed of Assumption and Quitclaim dated March 6,
1984,14 Offer to Sell dated March 20, 1984,15 and Release of Real Estate
Mortgage dated May 9, 1984,16 the titles to the land were transferred and
registered in the names of the latter. The Spouses Lopez applied for a Pag-
ibig Housing Loan from the DBP using Margarita’s property as security, and
was granted thereof in the amount of P163,500.00. The PNB loan was paid
pursuant to the special power of attorney. Although another check in the
amount of P87,000.00 was issued to Margarita and later endorsed by her
for encashment, she testified that she never received the money.17 The
Spouses Lopez ceased paying rentals and even collected the rentals of the
other tenants which were supposed to be applied to the monthly
amortization.

The trial court found that the true intentions of the parties were not really
embodied in the documents/instruments. The documentary, as well as
parol evidence, clearly showed that Margarita did not really intend to
convey her property to the petitioners. She merely agreed to lend her titles
so that the Spouses Lopez could procure a bigger loan which she could not
possibly obtain, considering her age and meager salary as Supervising
Accounting Clerk in the Municipality of Kalibo. She agreed to sign the
pertinent documents with the understanding that they were requirements
of the bank in processing the loan applied for by the Spouses Lopez. The
trial court continued to rule that the Spouses Lopez were in bad faith, so
whatever improvements were made on the land were forfeited in favor of
Margarita.18

The dispositive portion of the decision reads as follows:

WHEREFORE, premises considered, judgment is hereby rendered as

follows:

1. Declaring the Deed of Assumption and Quitclaim executed by

the plaintiff in favor of the defendant spouses, Exhibit "G" of
the plaintiff and Exhibit "4" of defendants a relatively simulated
contract;

2. Declaring the conveyance of title in favor of the defendant

spouses under TCT No. T-13472 and TCT No. T-13473, as a
simulated or fictitious transfer, and therefore void; and that
said spouses merely hold legal title in trust and for the benefit
of the plaintiff;

3. Declaring the assumption by the defendant spouses of

plaintiff’s loan valid;
 4. Declaring the loan obtained by the defendant spouses from
the defendant bank valid and subsisting, but declaring the
mortgage, giving the properties in question as a security for the
payment thereof, null and void;

5. Ordering that the properties in question with all the existing

improvements thereon, covered by TCT No. T-13472 and TCT
No. T-13473 in the names of the defendant spouses, be
conveyed in the name of the plaintiff upon payment of proper
fees; and for the purpose, ordering the defendant bank to
return the owner’s duplicate of said certificates of title to the
plaintiff;

6. Ordering the defendant spouses to vacate the premises and

return possession over the same to the plaintiff;

7. Ordering the defendant spouses to pay Ten Thousand Pesos

(P10,000.00) as attorney’s fees, and litigation expenses, and to
pay the costs.19

The Spouses Lopez appealed to the Court of Appeals. The CA affirmed the
RTC finding that the nature of the transaction between Margarita and the
Spouses Lopez was, verily, an equitable mortgage and not a sale. The CA,
however, declared that the petitioners were builders in good faith.
According to the CA, Margarita was aware and approved the
construction/improvements undertaken by the Spouses Lopez; thus,
forfeiture of the improvements in favor of Margarita was unwarranted. The
fallo of the decision reads:

WHEREFORE, the decision appealed from is AFFIRMED with the

modification that, defendant-appellant Lopez spouses being
considered builders in good faith, the improvements they introduced
after the transaction in question be either purchased by plaintiff-
appellee Margarita Sarabia or removed at defendant-appellants’ own
expense.20

The Spouses Lopez are now before the Court raising the following:
 (1) THAT WHILE THE COURT OF APPEALS HAS CORRECTLY
REVERSED THE FINDING OF THE TRIAL COURT THAT THE
DEFENDANTS-APPELLANTS (HEREIN PETITIONERS) WERE NOT
BUILDERS IN BAD FAITH AND CATEGORICALLY DECLARED THEM TO
BE BUILDERS IN GOOD FAITH, IT FAILED TO APPLY CORRECTLY
THE RULES ON BUILDER IN GOOD FAITH UNDER ART. 448 OF THE
NEW CIVIL CODE ON THE OPTIONS OF THE OWNER OF THE LAND
AND THE RIGHTS OF THE BUILDER IN GOOD FAITH; and

(2) THAT WHILE THE HONORABLE COURT OF APPEALS HAS

AFFIRMED THE RULING OF THE TRIAL COURT THAT THE REAL
AGREEMENT BETWEEN THE PARTIES WAS A FORM OF EQUITABLE
MORTGAGE AND NOT A SALE, IT FAILED TO DEFINE AND
ADJUDICATE WITH CERTAINTY THE RELATIVE RIGHTS AND
RECIPROCAL OBLIGATIONS OF THE PARTIES UNDER ART. 1616 OF
THE NEW CIVIL CODE.21

Ruling of the Court

There is no dispute that the transaction between the parties is one of

equitable mortgage and not a sale as maintained by the petitioners. This
was a finding correctly made by the trial court and the appellate court,
which we find no cogent reason to disturb.

No matter what nomenclature is given to a document, Article 1602 of the

New Civil Code provides that the contract is presumed to be an equitable
mortgage in any of the following cases:

1) When the price of a sale with right to repurchase is usually

inadequate;

2) When the vendor remains in possession as lessee or otherwise;

3) When upon the expiration of the right to repurchase another

instrument extending the period of redemption or granting a new
period is executed;

4) When the purchaser retains for himself a part of the purchase

price;
 5) When the vendor binds himself to pay the taxes on the thing sold;

6) In any other case where it may be fairly inferred that the real
intention of the parties is that the transaction shall secure the
payment of a debt or the performance of any other obligation;

In any of the foregoing cases, any money, fruits or other benefit to be

received by the vendee as rent or otherwise shall be considered as interest
which shall be subject to the usury laws.

The pertinent document which is subject to scrutiny in this case is the

Deed of Assumption of Mortgage with Quitclaim22 executed by Margarita in
favor of the Spouses Lopez. The said document empowered the Spouses
Lopez to assume the loan of Margarita with the PNB. And in consideration
for such assumption of indebtedness, Margarita was considered to have
waived all her rights and participation over the two parcels of land,
together with all the improvements thereon, and that such titles were
transferred to the Spouses Lopez. This document was followed by a Deed
of Offer to Sell signed by Margarita bearing the value of the subject
property which was P160,000.00, since the Deed of Assumption of
Mortgage did not contain the amount of the purchase price of the
property.23 In line with the basic requirement in our laws that the
mortgagor be the absolute owner of the property sought to be
mortgaged,24 it was, thus, made to appear that Margarita sold her property
to the Spouses Lopez so that they could declare the same as collateral for
the housing loan. While under the Deed of Assumption of Mortgage,
Margarita allowed the transfer of title over the subject property in the
name of the Spouses Lopez, the evidence showed that ownership thereof
was not intended to be conveyed to them. Margarita was firm in her
testimony that she merely allowed the Spouses Lopez to apply for a loan
using her titles as collateral, so that the couple could help her redeem her
property from PNB. She never made any offer to sell and never thought of
such.25 Unfortunately, she signed the Deed of Assumption of Mortgage with
Quitclaim and the Offer to Sell without actually reading and understanding
the contents thereof.26 The real agreement was for the Spouses Lopez to
apply for a loan in order to pay Margarita’s indebtedness with the PNB.
Margarita, in turn, would pay the Spouses Lopez by installment.27 The trial
court correctly found that the Deed of Assumption of Mortgage did not
actually contain all the matters agreed upon by the parties prior to its
execution.28

In the case of Lorbes v. Court of Appeals,29 the Court held that:

The decisive factor in evaluating such agreement is the intention of

the parties, as shown not necessarily by the terminology used in the
contract but by all the surrounding circumstances, such as the
relative situation of the parties at that time, the attitude, acts,
conduct, declarations of the parties, the negotiations between them
leading to the deed, and generally, all pertinent facts having a
tendency to fix and determine the real nature of their design and
understanding. As such, documentary and parol evidence may be
submitted and admitted to prove the intention of the parties.30

The trial and appellate courts did not find the version of the petitioners
credible, considering that the subsequent acts and conditions of the parties
were more leaning to the presumption of an equitable mortgage and not of
sale.

First. The owner, Margarita, remained in possession of the house. If she

really intended to sell her house, then she would have looked for another
place to live.

Second. It was inconceivable that Margarita would sell her house and the
two lots just to pay the PNB loan. She would have necessarily retained one
parcel of land which she could have called her own.

Third. The acknowledgement receipt31 signed by Reynaldo Lopez showing

that they were paid by Margarita the sum of P30,000.00 is quite telling.
The said receipt states:

This is to acknowledge from MISS MARGARITA SARABIA, of Mabini

Street, Kalibo, Aklan, the amount of THIRTY THOUSAND PESOS
(P30,000.00) as partial refund of the previous loan assumed by Engr.
Reynaldo L. Lopez from the Philippine National Bank to be paid to the
Development Bank of the Philippines.32
If it were a sale in favor of the couple, it behooved the Spouses Lopez to
show why Margarita should pay them the amount, when it should be the
other way around.

Fourth. The Spouses Lopez never paid the monthly amortization. If they
were truly the owner, then they would have protected their own property
from being foreclosed.

It bears stressing that the law favors the least transmission of rights and
interests over a property in controversy. The purpose of the law is to
prevent circumvention of the law on usury and the prohibition against a
creditor appropriating the mortgaged property. Additionally, it is aimed to
end unjust or oppressive transactions or violations in connection with the
sale of the property. The wisdom of these provisions cannot be doubted,
considering many cases of unlettered persons or even those with average
intelligence invariably finding themselves in no position whatsoever to
bargain fairly with their creditors.33

No doubt in this case, the Spouses Lopez took advantage of Margarita’s

advanced age and urgent necessity for money, which explains why she
agreed to sign the documents without being fully aware of their meaning
and contents. "Necessitous men are not, truly speaking, free men; but to
answer a present emergency, will submit to any terms that the crafty may
impose upon them."34 What was intended to be a mere loan so as to enjoin
the foreclosure by the bank of her property, ended up as a transfer of
property to the Spouses Lopez, which was not the real intention and
agreement of the parties in the first place. This is a fact which the Spouses
Lopez cannot deny. From all indications, the Spouses Lopez were quite
dishonest in attempting to appropriate the property as their own when this
was not their agreement with Margarita.

Conceding that the transaction was not really a sale of the subject
property, the Spouses Lopez now demand their rights for reimbursement
for expenses and improvements made on the land under Articles 448 and
1616 of the Civil Code. This leads us to the pivotal question: Can the
Spouses Lopez invoke Article 448 and claim the benefits of this provision as
builders in good faith when they constructed improvements on the subject
property?
The trial court found the Spouses Lopez in bad faith and ordered the
forfeiture of the improvements in Margarita’s favor. The CA disagreed with
the trial court as it ruled:

… Construction of the improvements went on without the objections

of Margarita. It can thus be safely concluded that, absent any
objections, the Lopez spouses sincerely believed that as lessees, they
had Margarita’s approval to construct such improvements. Forfeiture
of the improvements in Margarita’s favor is thus not warranted.35

The petitioners allege that Article 448 applies in this case because they
constructed the building on one of the lots in the concept of owner, after
the title over the two lots had already been transferred in their names and
out of the proceeds of their Pag-ibig loan. They believed that they have a
right to build because they thought that they owned the land or believed
themselves to have claim or title.36

The contention is untenable.

Articles 44837 and 54638 of the New Civil Code, which allow full
reimbursement of useful improvements and retention of the premises until
reimbursement is made, apply only to a possessor in good faith, i.e., one
who builds on land with the belief that he is the owner thereof. A builder in
good faith is one who is unaware of any flaw in his title to the land at the
time he builds on it.39 In this case, the petitioners cannot claim that they
were not aware of any flaw in their title or were under the belief that they
were owners of the subject properties. It was the agreement and intention
that Margarita’s titles would only be lent to them in order to secure the
Pag-ibig Housing Loan, in which Margarita had a direct interest since the
proceeds thereof were to be immediately applied to her mortgage
obligation with the PNB. There was no agreement or intention to transfer
ownership of the subject properties. The petitioners cannot claim to be
owners. Hence, they cannot be considered builders in good faith. Article
448 is not applicable.

More importantly, however, it must be remembered that the Spouses

Lopez were lessees of Margarita who were renting the place for P300.00 a
month. Such fact was never controverted. The CA unmistakably did not
overlook this relationship but apparently erred in defining the rights of the
lessor and/or lessee with regard to indemnity for improvements made on
the land. Article 448 does not apply to a case where one builds, plants, or
sows on land where the only interest of the builder, planter, or sower is
that of a holder, such as a tenant or a lessee.40 Thus, whether or not
Margarita gave her consent to the construction so as to be considered
builders in good faith, as ruled by the CA, is of no moment. As lessees,
their right for reimbursement viz-a-viz the improvements made on the land
is governed by Article 1678 of the New Civil Code which reads:

Art. 1678. If the lessee makes, in good faith, useful improvements

which are suitable to the use for which the lease is intended, without
altering the form or substance of the property leased, the lessor upon
the termination of the lease, shall pay the lessee one-half of the
value of the improvements at that time. Should the lessor refuse to
reimburse said amount, the lessee may remove the improvements,
even though the principal thing may suffer damage thereby. He shall
not, however, cause any more impairment upon the property leased
than is necessary.

With regard to ornamental expenses, the lessee shall not be entitled to any
reimbursement, but he may remove the ornamental objects, provided no
damage is caused to the principal thing, and the lessor does not choose to
retain them by paying their value at the time the lease is extinguished.

The petitioners’ reliance on Article 448 is, therefore, misplaced. Being mere
lessees, the petitioners knew that their occupation of the premises would
continue only for the life of the lease. Plainly, they cannot be considered as
possessors nor builders in good faith.41 In the case of Sia v. Court of
Appeals,42 we explained that:

In the 1991 case of Cabangis v. Court of Appeals where the subject

of the lease contract was also a parcel of land and the lessee’s father
constructed a family residential house thereon, and the lessee
subsequently demanded indemnity for the improvements built on the
lessor’s land based on Articles 448 and 546 of the New Civil Code, we
pointed out that reliance on said legal provisions was misplaced.

"The reliance by the respondent Court of Appeals on Articles

448 and 546 of the Civil Code of the Philippines is misplaced.
 These provisions have no application to a contract of lease
which is the subject matter of this controversy. Instead, Article
1678 of the Civil Code applies. We quote:

"‘Art. 1678. If the lessee makes, in good faith, useful

improvements which are suitable to the use for which the
lease is intended, without altering the form or substance
of the property leased, the lessor upon termination of the
lease, shall pay the lessee one-half of the value of the
improvements at that time. Should the lessor refuse to
reimburse said amount, the lessee may remove the
improvements, even though the principal thing may suffer
damage thereby. He shall not, however, cause any more
impairment upon the property leased than is necessary.’"

On the other hand, Article 448 governs the right of accession while
Article 546 pertains to effects of possession. The very language of
these two provisions clearly manifest their inapplicability to lease
contracts. They provide:

The petitioners do not dispute the contention of the private

respondent that her father Gaspar Devis, filled the leased
parcel of land with truck loads of big stones or rocks
(escumbro), and enclosed or walled the same with hollow
blocks before constructing a residential house thereon. All
these, being in the nature of expenses which augmented the
value of the land, (Manresa, 270 cited in 2, A. Tolentino, Civil
Code 110 [2nd ed., 1972) or increased the income from it, or
improved its productivity, are useful improvements within the
purview of the law (Alburo v. Villanueva, 7 Phil. 277 [1907];
Valencia v. Roxas, 13 Phil. 45 [1909]).

But, it must be remembered, as in fact it is not controverted,

that Gaspar Devis was a lessee by virtue of a lease contract
between him and the City of Manila. As a mere lessee, he knew
that the parcel of land in question was not his but belonged to
the latter. Even the respondent court conceded this fact when it
stated that the private respondent was "not claiming prior
possession much less ownership of the land as heir of her
father." (Rollo, p. 16).

Thus, the improvements that the private respondent’s father

had introduced in the leased premises were done at his own
risk as lessee. The right to indemnity equivalent to one-half of
the value of the said improvements – the house, the filling
materials, and the hollow block fence or wall – is governed, as
earlier adverted to, by the provisions of Art. 1678, first
paragraph of the Civil Code above quoted. But this right to
indemnity exists only if the lessor opts to appropriate the
improvements (Alburo v. Villanueva, supra, note 10 at 279-280;
Valencia v. Ayala de Roxas, supra, note 10 at 46). The refusal
of the lessor to pay the lessee one-half of the value of the
useful improvements gives rise to the right of removal. On this
score, the commentary of Justice Paras is enlightening.

"Note that under the 1st paragraph of Art. 1678, the law on the
right of REMOVAL says that ‘should the lessor refuse to
reimburse said amount, the lessee may remove the
improvements, even though the principal thing may suffer
thereby.’ While the phrase ‘even though’ implies that Art. 1678
always applies regardless of whether or not the improvements
can be removed without injury to the leased premises, it is
believed that application of the Article cannot always be done.
The rule is evidently intended for cases where a true accession
takes place as when part of the land leased is, say, converted
into a fishpond; and certainly not where as easily removable
thing (such as a wooden fence) has been introduced. There is
no doubt that in a case involving such a detachable fence, the
lessee can take the same away with him when the lease
expires (5 E. Paras, Civil code of the Philippines Annotated 345
[11th ed., 1986])."43
The petitioners have made substantial improvements on the land for which
they seek indemnity. Petitioner Reynaldo Lopez testified that there are now
three buildings standing on the two parcels of land: the first building is
where Margarita and they are presently residing, constructed wayback in
1970; the second building, with an estimated cost of P300,000.00, is the
one the couple constructed after obtaining the loan from DBP, with an
office at the ground floor and the second floor with three rooms also
occupied by the Lopezes; and the third building is the old house where the
first floor is being rented by Dr. Nilda Tambong with boarders on the
second floor.44

It must be stressed that the right to indemnity under Article 1678 arises
only if the lessor opts to appropriate the improvements. The respondent
(Margarita) would become the owner of the building constructed by the
petitioners by reimbursing to the couple one-half (1/2) of the value of the
building at the time it was built. This option to pay such indemnity is given
to herein respondent. On the other hand, the petitioners do not actually
have the right to demand that they be paid therefor.45 Neither do they
have the right to retain in the premises until reimbursement is made. If
Margarita refuses to pay indemnity, the petitioners’ sole right then is to
remove the improvements without causing anymore impairment upon the
lot than is necessary.46

Notwithstanding the finding that the nature of the transaction is an

equitable mortgage, the petitioners have no basis to invoke Article 1616.47
The petitioners’ attempt to seek reimbursement for whatever expenses
have been incurred or resulted from this transaction with Margarita cannot
prosper. It must be noted that after the transfer of title in the name of the
petitioners, the latter ceased paying rentals to Margarita since 1984 and, in
fact, collected the rentals from the other tenants. We find that the
petitioners have benefited more than enough, having stayed in the
premises without paying rentals therefor. On the other hand, Margarita
was deprived of the fruits and enjoyment of her property. Thus, the
petition has no merit.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals

is AFFIRMED with the modification that respondent Margarita Sarabia is
DIRECTED to exercise, within thirty (30) days from the finality of this
decision, her option of either paying one-half of the value of the
improvements made on the land at that time they were made, or to
demand the removal by the petitioners of the improvements made on the
subject property at their expense. No costs.

SO ORDERED.

PROGRAMME INCORPORATED, Petitioner,

vs.
PROVINCE OF BATAAN,1 Respondent.

DECISION

CORONA, J.:

In this petition filed under Rule 45 of the Rules of Court, petitioner

Programme Incorporated contests the Court of Appeals (CA) decision2 and
resolution3 upholding respondent Province of Bataan’s ownership of Piazza
Hotel and the land on which it stands. The assailed decision in CA-G.R. CV
No. 49135 affirmed the decision of the Regional Trial Court (RTC), Branch
4, Balanga, Bataan in a suit for preliminary injunction and sum of money
filed by petitioner against Bataan Shipyard and Engineering Co., Inc.
(BASECO). The case was docketed as Civil Case No. 129-ML. The
dispositive portion of the trial court decision read:

WHEREFORE, in view of all the foregoing considerations, judgment is

hereby rendered dismissing the complaint, without pronouncement as to
costs.

Similarly, [BASECO’s] counterclaim is dismissed.

On the complaint in intervention, judgment is hereby rendered ordering

[petitioner] to pay [respondent] the rentals for the leased premises in
question, namely, the Piazza Hotel and the Mariveles Lodge, situated at the
Bataan Export Processing Zone (BEPZ) Compound in Mariveles, Bataan, at
the rate of six thousand five hundred pesos (P6,500.00) per month for
both establishments, starting in August 1989 with legal interest at 6% per
annum, up to and until the legal arrearages shall have been fully paid, and
to pay the succeeding rentals therefor at the same rate.
SO ORDERED.4

The controversy arose from the following facts.

BASECO was the owner of Piazza Hotel and Mariveles Lodge, both located
in Mariveles, Bataan.

On May 14, 1986, BASECO granted petitioner a contract of lease over

Piazza Hotel at a monthly rental of P6,500 for three years, i.e., from
January 1, 1986 to January 1, 1989, subject to renewal by mutual
agreement of the parties. After the expiration of the three-year lease
period, petitioner was allowed to continue operating the hotel on monthly
extensions of the lease.

In April 1989, however, the Presidential Commission on Good Government

(PCGG) issued a sequestration order against BASECO pursuant to Executive
Order No. 1 of former President Corazon C. Aquino.5 Among the properties
provisionally seized and taken over was the lot on which Piazza Hotel
stood.

On July 19, 1989, however, Piazza Hotel was sold at a public auction for
non-payment of taxes to respondent Province of Bataan. The title of the
property was transferred to respondent. BASECO’s Transfer Certificate of
Title (TCT) No. T-59631 was cancelled and a new one, TCT No. T-128456,
was issued to the Province of Bataan.

On July 21, 1989, petitioner filed a complaint for preliminary injunction and
collection of sum of money against BASECO (Civil Case No. 129-ML).6
Respondent, as the new owner of the property, filed a motion for leave to
intervene on November 22, 1990. After its motion was granted, respondent
filed a complaint-in-intervention praying, inter alia, that petitioner be
ordered to vacate Piazza Hotel and Mariveles Lodge for lack of legal
interest.

During the pre-trial of the complaint-in-intervention, the parties agreed

that the case7 be tried on the sole issue of whether respondent province,
as complainant-intervenor, was the legitimate owner of the Piazza Hotel
and Mariveles Lodge.
On February 3, 1995, after trial on the merits, the trial court rendered
judgment in favor of respondent.1avvphil.net

On appeal, the CA addressed the issue of ownership of Piazza Hotel and

Mariveles Lodge as follows:

[W]e affirm the trial court’s ruling that [respondent] Province of Bataan has
established by preponderance of evidence its claim of ownership of Piazza
Hotel and Mariveles Lodge. In fact, [petitioner] has not presented evidence
proving its ownership of the said buildings[, whereas respondent
presented] a tax declaration and certificate of title over the same
properties, over which it now exercises full control and dominion. The fact
that the subject properties were placed under sequestration is of no
moment for the PCGG is not an owner but a conservator who can exercise
only powers of administration over property sequestered, frozen or
provisionally taken over. As the owner of said properties, [respondent-
intervenor] is entitled to the payment of the monthly rental in the sum of
P6,500.00 as ruled by the trial court.8 (emphasis ours)

We agree with the appellate court.

Time and again, we have ruled that factual matters are best evaluated by
trial courts which can scrutinize evidence and hear testimony presented
and offered by the parties (in this case, on the issue of ownership of the
subject property). All the more does this principle ring true in this petition
since such factual determination by the RTC was upheld by the CA.9 Only
questions of law are the proper subject of a petition for review on certiorari
in this Court, unless any of the known exceptions is extant in this case.10
There is none.

The evidence clearly established respondent’s ownership of Piazza Hotel.11

First, the title of the land on which Piazza Hotel stands was in the name of
respondent.12 Second, Tax Declaration No. 12782 was in the name of
respondent as owner of Piazza Hotel.13 A note at the back of the tax
declaration read:

Transferred by virtue of a final bill of sale executed by the Provincial

[Treasurer] of Bataan in favor of the Provincial Government on Feb. 13,
1989[, a] year after the expiration of the redemption period from date of
auction sale held on Feb. 12, 1988 of all real property declared in the name
of [BASECO].14 (emphasis ours)

Third, petitioner was doubtlessly just a lessee. In the lease contract

annexed to the complaint, petitioner in fact admitted BASECO’s
(respondent’s predecessor-in-interest) ownership then of the subject
property. A stipulation in the contract read:

WHEREAS, the lessor (BASECO) is the owner of the building PIAZZA HOTEL
and its outlet MARIVELES LODGE located at BASECO, Mariveles, Bataan
xxx15 (emphasis ours)

The Rules of Court states that "[a]n admission, verbal or written, made by
a party in the course of the proceedings in the same case, does not require
proof. The admission may be contradicted only by showing that it was
made through palpable mistake or that no such admission was made."16

[Such admissions] may be made in (a) the pleadings filed by the parties,
(b) in the course of the trial either by verbal or written manifestations or
stipulations, or (c) in other stages of the judicial proceeding, as in the pre-
trial of the case. Admissions obtained through depositions, written
interrogatories or requests for admission are also considered judicial
admissions.17 (emphasis ours)

"To be considered as a judicial admission, the same must be made in the

same case in which it is offered."18

In its own complaint19 for preliminary injunction and sum of money,

petitioner acknowledged that it was not the owner of the property when it
stated that "[BASECO] lease[d] to [petitioner] the building Piazza Hotel and
its outlet Mariveles Lodge xxx for monthly rentals of P6,500.00."20
Petitioner could not possibly be the owner of a building merely leased to
it.21

Furthermore, petitioner’s reference to Article 44822 of the

Civil Code to justify its supposed rights as "possessor in good faith" was
erroneous.
The benefits granted to a possessor in good faith cannot be maintained by
the lessee against the lessor because, such benefits are intended to apply
only to a case where one builds or sows or plants on land which he
believes himself to have a claim of title and not to lands wherein one’s only
interest is that of a tenant under a rental contract, otherwise, it would
always be in the power of a tenant to improve his landlord out of his
property. Besides, as between lessor and lessee, the Code applies specific
provisions designed to cover their rights.

Hence, the lessee cannot claim reimbursement, as a matter of right, for

useful improvements he has made on the property, nor can he assert a
right of retention until reimbursed. His only remedy is to remove the
improvement if the lessor does not choose to pay its value; but the court
cannot give him the right to buy the land.23

Petitioner’s assertion that Piazza Hotel was constructed "at (its) expense"
found no support in the records. Neither did any document or testimony
prove this claim. At best, what was confirmed was that petitioner managed
and operated the hotel. There was no evidence that petitioner was the one
which spent for the construction or renovation of the property. And since
petitioner’s alleged expenditures were never proven, it could not even seek
reimbursement of one-half of the value of the improvements upon
termination of the lease under Article 167824 of the Civil Code.

Finally, both the trial and appellate courts declared that the land as well as
the improvement thereon (Piazza Hotel) belonged to respondent. We find
no reason to overturn this factual conclusion.

Since this petition for review on certiorari was clearly without legal and
factual basis, petitioner’s counsel should not have even filed this appeal. It
is obvious that the intention was merely to delay the disposition of the
case.

WHEREFORE, the petition is hereby DENIED. The decision and resolution

of the Court of Appeals in CA-G.R. CV No. 49135 are AFFIRMED.

Costs against petitioner. Same costs against Atty. Benito R. Cuesta I,

petitioner’s counsel, for filing this flimsy appeal, payable within ten (10)
days from finality of this decision.
SO ORDERED.

Geminiano v. CA
[G.R. No. 120303. July 24, 1996.]
Third Division, Davide Jr (J): 4 concur

Facts: Lot 3765-B-1 (314 sq. m.) was originally owned by Paulina Amado
vda. de Geminiano, the mother of Federico, Maria, Ernesto, Asuncion, Larry
and Marlyn Geminiano. On a 12-sq. m. portion of that lot stood the
Geminianos' unfinished bungalow, which the Geminianos sold in November
1978 to Dominador and Mary Nicolas for the sum of P6,000.00, with an
alleged promise to sell to the latter that portion of the lot occupied by the
house. Subsequently, Paulina Amado-Geminiano executed a contract of
lease over a 126 sq. m. portion of the lot, including that portion on which
the house stood, in favor of the Nicolas spouse for P40 per month for a
period of 7 years commencing on 15 November 1978. The Nicolas spouses
then introduced additional improvements and registered the house in their
names. After the expiration of the lease contract in November 1985,
however, the Paulina refused to accept the monthly rentals.

It turned out that the lot in question was the subject of a suit, which
resulted in its acquisition by one Maria Lee in 1972. In 1982, Lee sold the
lot to Lily Salcedo, who in turn sold it in 1984 to the spouses Agustin and
Ester Dionisio. On 14 February 1992, the Dionisio spouses executed a Deed
of Quitclaim over the said property in favor of the Geminianos. As such, the
lot was registered in the latter's names.

On 9 February 1993, the Geminianos sent, via registered mail, a letter

addressed to Mary Nicolas demanding that she vacate the premises and
pay the rentals in arrears within 20 days from notice. Upon failure of the
Nicolas spouses to heed the demand, the Geminianos filed with the MTCC
of Dagupan City a complaint for unlawful detainer and damages.

The trial court held that there was no lease to speak of to be renewed as
the lot was acquired by Maria Lee in 1972, and that if indeed there is a
legal lease existing, its renewal can only be made on a month-to-month
pursuant to Article 1687 of the Civil Code; that the lessees were not
builders in good faith and the reimbursement as such are governed by
Article 1678; and that the value of the house and improvements was
P180,000 as there was controverting evidence presented. The Court thus
ordered the Nicolas spouses to vacate the premises, to pay the Geminianos
P40 a month as reasonable compensation for their stay thereon from the
filing of the complaint on 14 April 1993 until they vacated, and to pay the
sum of P1,000 as attorney's fees, plus costs.

On appeal by the Nicolas spouses, the RTC Dagupan City reversed the trial
court's decision and rendered a new judgment: (1) ordering the
Geminianos to reimburse the Nicolas spouses for the value of the house
and improvements in the amount of P180,000.00 and to pay the latter
P10,000.00 as attorney's fees and P2,000.00 as litigation expenses; and (2)
allowing the Nicolas spouses to remain in possession of the premises until
they were fully reimbursed for the value of the house. It ruled that since
the Nicolas spouses were assured by the Geminianos that the lot they
leased would eventually be sold to them, they could be considered builders
in good faith, and as such, were entitled to reimbursement of the value of
the house and improvements with the right of retention until
reimbursement had been made.

On appeal, this time by Geminianos, the Court of Appeals affirmed the

decision of the RTC and denied the Geminianos' motion for reconsideration.
Hence, the petition for review on certiorari.

The Supreme Court granted the petition; reversing and setting aside the
decision of the Court of Appeals of 27 January 1995 in CA-GR SP 34337;
and reinstating the decision of Branch 3 of the Municipal Trial Court in
Cities of Dagupan City in Civil Case 9214; with costs against the Nicolas
spouses.

1. Non-owner of the premises may lease property

While the right to lease property is an incident of title and possession, a
person may be a lessor and occupy the position of a landlord to the tenant
although he is not the owner of the premises leased. After all, ownership of
the property is not being transferred, only the temporary use and
enjoyment thereof.
2. Nicolas spouses estopped; Estoppel applies even if lessor has no title,
may be asserted not only by original lessor but also those who succeed to
his title
The Nicolas spouses came into possession of a 126 sq. m. portion of the
said lot by virtue of a contract of lease executed by the Geminianos'
mother in their favor. The juridical relation between the Geminianos'
mother as lessor, and the Nicolas spouses as lessees, is therefore well-
established, and carries with it a recognition of the lessor's title. The
lessees who had undisturbed possession for the entire term under the
lease, are then estopped to deny their landlord's title, or to assert a better
title not only in themselves, but also in some third person while they
remain in possession of the leased premises and until they surrender
possession to the landlord. This estoppel applies even though the lessor
had no title at the time the relation of lessor and lessee was created, and
may be asserted not only by the original lessor, but also by those who
succeed to his title.

3. Lessees not possessors not builders in good faith

Being mere lessees, the Nicolas spouses knew that their occupation of the
premises would continue only for the life of the lease. Plainly, they cannot
be considered as possessors nor builders in good faith.

4. Article 448 in relation to Article 546 applies only to a possessor in good

faith; does not apply to lessee
Article 448 of the Civil Code, in relation to Article 546 of the same Code,
which allows full reimbursement of useful improvements and retention of
the premises until reimbursement is made, applies only to a possessor in
good faith, i.e., one who builds on land with the belief that he is the owner
thereof. It does not apply where one's only interest is that of a lessee
under a rental contract; otherwise, it would always be in the power of the
tenant to "improve" his landlord out of his property.

5. Alleged option to buy not supported by evidence; Promise unenforceable

unless option is in writing
Neither the deed of sale over the house nor the contract of lease contained
an option in favor of the Nicolas spouses to purchase the said lot. The first
thing that the spouses should have done was to reduce the alleged
promise into writing, because under Article 1403 of the Civil Code, an
agreement for the sale of real property or an interest therein is
unenforceable, unless some note or memorandum thereof be produced.
Not having taken any steps in order that the alleged promise to sell may be
enforced, the private respondents cannot bank on that promise and profess
any claim nor color of title over the lot in question.

6. Option does not render the Nicolas spouses builders in good faith
Even if the Germinianos indeed promised to sell, it would not make the
spouses possessors or builders in good faith so as to be covered by the
provisions of Article 448 of the Civil Code. The latter cannot raise the mere
expectancy of ownership of the lot because the alleged promise to sell was
not fulfilled nor its existence even proven.

7. Pecson v. CA does not apply; No forced co-ownership

There is no need to apply by analogy the provisions of Article 448 on
indemnity as was done in Pecson vs. Court of Appeals, because the
situation sought to be avoided and which would justify the application of
that provision, is not present in the present case. "A state of forced co-
ownership" would not be created between the Germinianos and the Nicolas
spouses.

8. Lessees governed by Article 1678

The rights of the lessees are governed by Article 1678 of the Civil Code
which allows reimbursement to the extent of one-half of the value of the
useful improvements. The right to indemnity under Article 1678 of the Civil
Code, however, arises only if the lessor opts to appropriate the
improvements. Since the Germinianos refused to exercise that option, the
Nicolas spouses cannot compel them to reimburse the one-half value of the
house and improvements. Neither can they retain the premises until
reimbursement is made. The spouses’ sole right then is to remove the
improvements without causing any more impairment upon the property
leased than is necessary.
SULO SA NAYON, INC. and/or G.R. No. 170923

PHILIPPINE VILLAGE HOTEL, INC. and

JOSE MARCEL E. PANLILIO,
Present:
Petitioners, PUNO, C.J., Chairperson,

CARPIO,

CORONA,

AZCUNA, and
- versus - LEONARDO-DE CASTRO, JJ.

Promulgated:

January 20, 2009

NAYONG PILIPINO FOUNDATION,

Respondent.

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

DECISION

PUNO, C.J.:

On appeal are the Court of Appeals’ (CA’s) October 4, 2005 Decision

in CA-G.R. SP No. 74631 and December 22, 2005 Resolution, reversing the
November 29, 2002 Decision of the Regional Trial Court (RTC) of Pasay
City in Civil Case No. 02-0133. The RTC modified the Decision of the
Metropolitan Trial Court (MeTC) of Pasay City which ruled against
petitioners and ordered them to vacate the premises and pay their arrears.
The RTC declared petitioners as builders in good faith and upheld their
right to indemnity.

The facts are as follows:

Respondent Nayong Pilipino Foundation, a government-owned and

controlled corporation, is the owner of a parcel of land in Pasay City,
known as the Nayong Pilipino Complex. Petitioner Philippine Village Hotel,
Inc. (PVHI), formerly called Sulo sa Nayon, Inc., is a domestic corporation
duly organized and existing under Philippine laws. Petitioner Jose Marcel
E. Panlilio is its Senior Executive Vice President.

On June 1, 1975, respondent leased a portion of the Nayong Pilipino

Complex, consisting of 36,289 square meters, to petitioner Sulo sa Nayon,
Inc. for the construction and operation of a hotel building, to be known as
the Philippine Village Hotel. The lease was for an initial period of 21 years,
or until May 1996. It is renewable for a period of 25 years under the same
terms and conditions upon due notice in writing to respondent of the
intention to renew at least 6 months before its expiration. Thus, on March
7, 1995, petitioners sent respondent a letter notifying the latter of their
intention to renew the contract for another 25 years. On July 4, 1995, the
parties executed a Voluntary Addendum to the Lease Agreement. The
addendum was signed by petitioner Jose Marcel E. Panlilio in his official
capacity as Senior Executive Vice President of the PVHI and by Chairman
Alberto A. Lim of the Nayong Pilipino Foundation. They agreed to the
renewal of the contract for another 25 years, or until 2021. Under the new
agreement, petitioner PVHI was bound to pay the monthly rental on a per
square meter basis at the rate of P20.00 per square meter, which shall be
subject to an increase of 20% at the end of every 3-year period. At the
time of the renewal of the lease contract, the monthly rental amounted to
P725,780.00.

Beginning January 2001, petitioners defaulted in the payment of their

monthly rental. Respondent repeatedly demanded petitioners to pay the
arrears and vacate the premises. The last demand letter was sent on
March 26, 2001.

On September 5, 2001, respondent filed a complaint for unlawful

detainer before the MeTC of Pasay City. The complaint was docketed as
Civil Case No. 708-01. Respondent computed the arrears of petitioners in
the amount of twenty-six million one hundred eighty-three thousand two
hundred twenty-five pesos and fourteen centavos (P26,183,225.14), as of
July 31, 2001.

On February 26, 2002, the MeTC rendered its decision in favor of

respondent. It ruled, thus:

. . . . The court is convinced by the evidence that indeed,

defendants defaulted in the payment of their rentals. It is basic
that the lessee is obliged to pay the price of the lease according
to the terms stipulated (Art. 1657, Civil Code). Upon the failure
of the lessee to pay the stipulated rentals, the lessor may eject
(sic) and treat the lease as rescinded and sue to eject the
lessee (C. Vda[.] De Pamintuan v. Tiglao, 53 Phil. 1). For non-
payment of rentals, the lessor may rescind the lease, recover
the back rentals and recover possession of the leased premises.
..

xxx

. . . . Improvements made by a lessee such as the

defendants herein on leased premises are not valid reasons for
their retention thereof. The Supreme Court has occasion to
address a similar issue in which it ruled that: “The fact that
petitioners allegedly made repairs on the premises in question
is not a reason for them to retain the possession of the
premises. There is no provision of law which grants the lessee
a right of retention over the leased premises on that ground.
Article 448 of the Civil Code, in relation to Article 546, which
provides for full reimbursement of useful improvements and
retention of the premises until reimbursement is made, applies
only to a possessor in good faith, i.e., one who builds on a land
in the belief that he is the owner thereof. This right of
retention does not apply to a mere lessee, like the petitioners,
otherwise, it would always be in his power to “improve” his
landlord out of the latter’s property (Jose L. Chua and Co Sio
Eng vs. Court of Appeals and Ramon Ibarra, G.R. No. 109840,
January 21, 1999).”

Although the Contract of Lease stipulates that the

building and all the improvements in the leased premises
belong to the defendants herein, such will not defeat the right
of the plaintiff to its property as the defendants failed to pay
their rentals in violation of the terms of the contract. At most,
defendants can only invoke [their] right under Article 1678 of
the New Civil Code which grants them the right to be
reimbursed one-half of the value of the building upon the
termination of the lease, or, in the alternative, to remove the
improvements if the lessor refuses to make reimbursement.
The dispositive portion of the decision reads as follows:

WHEREFORE, premises considered, judgment is hereby

rendered in favor of Nayong Pilipino Foundation, and against
the defendant Philippine Village Hotel, Inc[.], and all persons
claiming rights under it, ordering the latter to:

1. VACATE the subject premises and

surrender possession thereof to plaintiff;

2. PAY plaintiff its rental arrearages in the

sum of TWENTY SIX MILLION ONE HUNDRED
EIGHTY THREE THOUSAND TWO HUNDRED
TWENTY FIVE PESOS AND 14/100
(P26,183,225.14) incurred as of July 31, 2001;

3. PAY plaintiff the sum of SEVEN HUNDRED

TWENTY FIVE THOUSAND SEVEN HUNDRED
EIGHTY PESOS (P725,780.00) per month starting
from August 2001 and every month thereafter by
way of reasonable compensation for the use and
occupation of the premises;

4. PAY plaintiff the sum of FIFTY THOUSAND

PESOS (P50,000.00) by way of attorney’s fees[;
and]

5. PAY the costs of suit.

The complaint against defendant Jose Marcel E. Panlilio is

hereby dismissed for lack of cause of action. The said
defendant’s counterclaim however is likewise dismissed as the
complaint does not appear to be frivolous or maliciously
instituted.
 SO ORDERED.

Petitioners appealed to the RTC which modified the ruling of the

MeTC. It held that:

. . . it is clear and undisputed that appellants-lessees

were expressly required to construct a first-class hotel with
complete facilities. The appellants were also unequivocally
declared in the Lease Agreement as the owner of the
improvements so constructed. They were even explicitly
allowed to use the improvements and building as security or
collateral on loans and credit accommodations that the Lessee
may secure for the purpose of financing the construction of the
building and other improvements (Section 2; pars. “A” to “B,”
Lease Agreement). Moreover, a time frame was setforth (sic)
with respect to the duration of the lease initially for 21 years
and renewable for another 25 years in order to enable the
appellants-lessees to recoup their huge money investments
relative to the construction and maintenance of the
improvements.

xxx

Considering therefore, the elements of permanency of the

construction and substantial value of the improvements as well
as the undispute[d] ownership over the land improvements,
these, immensely engender the application of Art. 448 of the
Civil Code. The only remaining and most crucial issue to be
resolved is whether or not the appellants as builders have acted
in good faith in order for Art. 448 in relation to Art. 546 of the
Civil Code may apply with respect to their rights over
improvements.

xxx
 . . . it is undeniable that the improvement of the hotel
building of appellants (sic) PVHI was constructed with the
written consent and knowledge of appellee. In fact, it was
precisely the primary purpose for which they entered into an
agreement. Thus, it could not be denied that appellants were
builders in good faith.
Accordingly, and pursuant to Article 448 in relation to Art.
546 of the Civil Code, plaintiff-appellee has the sole option or
choice, either to appropriate the building, upon payment of
proper indemnity consonant to Art. 546 or compel the
appellants to purchase the land whereon the building was
erected. Until such time that plaintiff-appellee has elected an
option or choice, it has no right of removal or demolition
against appellants unless after having selected a compulsory
sale, appellants fail to pay for the land (Ignacio vs. Hilario; 76
Phil. 605). This, however, is without prejudice from the parties
agreeing to adjust their rights in some other way as they may
mutually deem fit and proper.

The dispositive portion of the decision of the RTC reads as follows:

WHEREFORE, and in view of the foregoing, judgment is

hereby rendered modifying the decision of [the] MTC, Branch
45 of Pasay City rendered on February 26, 2002 as follows:

1. Ordering plaintiff-appellee to submit within thirty

(30) days from receipt of a copy of this decision a
written manifestation of the option or choice it
selected, i.e., to appropriate the improvements upon
payment of proper indemnity or compulsory sale of the
land whereon the hotel building of PVHI and related
improvements or facilities were erected;
 2. Directing the plaintiff-appellee to desist and/or
refrain from doing acts in the furtherance or exercise
of its rights and demolition against appellants unless
and after having selected the option of compulsory
sale and appellants failed to pay [and] purchase the
land within a reasonable time or at such time as this
court will direct;

3. Ordering defendants-appellants to pay plaintiff-

appellee [their] arrears in rent incurred as of July 31,
2001 in the amount of P26,183,225.14;

4. Ordering defendants-appellants to pay to plaintiff-

appellee the unpaid monthly rentals for the use and
occupation of the premises pending this appeal from
July to November 2002 only at P725,780.00 per
month;

5. The fourth and fifth directives in the dispositive

portion of the trial court’s decision including that the
last paragraph thereof JME Panlilio’s complaint is
hereby affirmed;

6. The parties are directed to adjust their respective

rights in the interest of justice as they may deem fit
and proper if necessary.

SO ORDERED.

Respondent appealed to the CA which held that the RTC erroneously

applied the rules on accession, as found in Articles 448 and 546 of the Civil
Code when it held that petitioners were builders in good faith and, thus,
have the right to indemnity. The CA held:
 By and large, respondents are admittedly mere lessees of
the subject premises and as such, cannot validly claim that they
are builders in good faith in order to solicit the application of
Articles 448 and 546 of the Civil Code in their favor. As it is, it
is glaring error on the part of the RTC to apply the aforesaid
legal provisions on the supposition that the improvements,
which are of substantial value, had been introduced on the
leased premises with the permission of the petitioner. To grant
the respondents the right of retention and reimbursement as
builders in good faith merely because of the valuable and
substantial improvements that they introduced to the leased
premises plainly contravenes the law and settled jurisprudential
doctrines and would, as stated, allow the lessee to easily
“improve” the lessor out of its property.

. . . . Introduction of valuable improvements on the

leased premises does not strip the petitioner of its right to avail
of recourses under the law and the lease contract itself in case
of breach thereof. Neither does it deprive the petitioner of its
right under Article 1678 to exercise its option to acquire the
improvements or to let the respondents remove the same.

Petitioners’ Motion for Reconsideration was denied.

Hence, this appeal.

Petitioners assign the following errors:

THE HONORABLE COURT OF APPEALS COMMITTED A

GRAVE REVERSIBLE ERROR IN NOT HOLDING THAT
PETITIONERS WERE BUILDERS IN GOOD FAITH OVER THE
SUBSTANTIAL AND VALUABLE IMPROVEMENTS WHICH THEY
HAD INTRODUCED ON THE SUBJECT PROPERTY, THUS
COMPELLING THE APPLICATION OF ARTICLE 448 OF THE
CIVIL CODE IN RELATION TO ARTICLE 546 OF THE SAME
CODE, INSTEAD OF ARTICLE 1678 OF THE CIVIL CODE.

II

THE HONORABLE COURT OF APPEALS COMMITTED A

SERIOUS REVERSIBLE ERROR WHEN IT DISREGARDED THE
FACT THAT THE LEASE CONTRACT GOVERNS THE
RELATIONSHIP OF THE PARTIES AND CONSEQUENTLY THE
PARTIES MAY BE CONSIDERED TO HAVE IMPLIEDLY WAIVED
THE APPLICATION OF ARTICLE 1678 OF THE CIVIL CODE TO
THE INSTANT CASE.

III

ASSUMING ARGUENDO THAT THE PETITIONERS ARE

NOT BUILDERS IN GOOD FAITH, THE HONORABLE COURT OF
APPEALS COMMITTED A GRAVE REVERSIBLE ERROR WHEN IT
OVERLOOKED THE FACT THAT RESPONDENT ALSO ACTED IN
BAD FAITH WHEN IT DID NOT HONOR AND INSTEAD
BREACHED THE LEASE CONTRACT BETWEEN THE PARTIES,
THUS BOTH PARTIES ACTED AS IF THEY ARE IN GOOD FAITH.

IV

TO SANCTION THE APPLICATION OF ARTICLE 1678 OF

THE CIVIL CODE INSTEAD OF ARTICLE 448 OF THE CIVIL
CODE IN RELATION TO ARTICLE 546 OF THE SAME CODE
WOULD NOT ONLY WREAK HAVOC AND CAUSE SUBSTANTIAL
INJURY TO THE RIGHTS AND INTERESTS OF PETITIONER
PHILIPPINE VILLAGE HOTEL, INC. WHILE RESPONDENT
NAYONG PILIPINO FOUNDATION, IN COMPARISON THERETO,
WOULD SUFFER ONLY SLIGHT OR INCONSEQUENTIAL INJURY
 OR LOSS, BUT ALSO WOULD CONSTITUTE UNJUST
ENRICHMENT ON THE PART OF RESPONDENT AT GREAT
EXPENSE AND GRAVE PREJUDICE OF PETITIONERS.

THE HONORABLE COURT OF APPEALS COMMITTED A

GRAVE REVERSIBLE ERROR IN NOT HOLDING THAT THE
COURTS A QUO DID NOT ACQUIRE JURISDICTION OVER THE
UNLAWFUL DETAINER CASE FOR NON-COMPLIANCE WITH
JURISDICTIONAL REQUIREMENTS DUE TO THE ABSENCE OF A
NOTICE TO VACATE UPON PETITIONERS.

First, we settle the issue of jurisdiction. Petitioners argue that the

MeTC did not acquire jurisdiction to hear and decide the ejectment case
because they never received any demand from respondent to pay rentals
and vacate the premises, since such demand is a jurisdictional requisite.
We reiterate the ruling of the MeTC, RTC and CA. Contrary to the claim of
petitioners, documentary evidence proved that a demand letter dated
March 26, 2001 was sent by respondent through registered mail to
petitioners, requesting them “to pay the rental arrears or else it will be
constrained to file the appropriate legal action and possess the leased
premises.”

Further, petitioners’ argument that the demand letter is “inadequate”

because it contained no demand to vacate the leased premises does not
persuade. We have ruled that:

. . . . The word “vacate” is not a talismanic word that

must be employed in all notices. The alternatives in this case
 are clear cut. The tenants must pay rentals which are fixed
and which became payable in the past, failing which they must
move out. There can be no other interpretation of the notice
given to them. Hence, when the petitioners demanded that
either he pays P18,000 in five days or a case of ejectment
would be filed against him, he was placed on notice to move
out if he does not pay. There was, in effect, a notice or
demand to vacate.

In the case at bar, the language of the demand letter is plain and
simple: respondent demanded payment of the rental arrears amounting to
P26,183,225.14 within ten days from receipt by petitioners, or respondent
will be constrained to file an appropriate legal action against petitioners to
recover the said amount. The demand letter further stated that
respondent will possess the leased premises in case of petitioners’ failure
to pay the rental arrears within ten days. Thus, it is clear that the demand
letter is intended as a notice to petitioners to pay the rental arrears, and a
notice to vacate the premises in case of failure of petitioners to perform
their obligation to pay.

Second, we resolve the main issue of whether the rules on accession,

as found in Articles 448 and 546 of the Civil Code, apply to the instant
case.

Article 448 and Article 546 provide:

 Art. 448. The owner of the land on which anything has
been built, sown or planted in good faith, shall have the right to
appropriate as his own the works, sowing or planting, after
payment of the indemnity provided for in Articles 546 and 548,
or to oblige the one who built or planted to pay the price of the
land, and the one who sowed, the proper rent. However, the
builder or planter cannot be obliged to buy the land if its value
is considerably more than that of the building or trees. In such
case, he shall pay reasonable rent, if the owner of the land
does not choose to appropriate the building or trees after
proper indemnity. The parties shall agree upon the terms of the
lease and in case of disagreement, the court shall fix the terms
thereof.

Art. 546. Necessary expenses shall be refunded to every

possessor; but only the possessor in good faith may retain the
thing until he has been reimbursed therefor.
Useful expenses shall be refunded only to the possessor
in good faith with the same right of retention, the person who
has defeated him in the possession having the option of
refunding the amount of the expenses or of paying the increase
in value which the thing may have acquired by reason thereof.

We uphold the ruling of the CA.

The late Senator Arturo M. Tolentino, a leading expert in Civil Law,

explains:

This article [Article 448] is manifestly intended to apply

only to a case where one builds, plants, or sows on land in
which he believes himself to have a claim of title, and not to
 lands where the only interest of the builder, planter or sower is
that of a holder, such as a tenant.

In the case at bar, petitioners have no adverse claim or title to the

land. In fact, as lessees, they recognize that the respondent is the owner
of the land. What petitioners insist is that because of the improvements,
which are of substantial value, that they have introduced on the leased
premises with the permission of respondent, they should be considered
builders in good faith who have the right to retain possession of the
property until reimbursement by respondent.

We affirm the ruling of the CA that introduction of valuable

improvements on the leased premises does not give the petitioners the
right of retention and reimbursement which rightfully belongs to a builder
in good faith. Otherwise, such a situation would allow the lessee to easily
“improve” the lessor out of its property. We reiterate the doctrine that a
lessee is neither a builder in good faith nor in bad faith that would call for
the application of Articles 448 and 546 of the Civil Code. His rights are
governed by Article 1678 of the Civil Code, which reads:

Art. 1678. If the lessee makes, in good faith, useful

improvements which are suitable to the use for which the lease
is intended, without altering the form or substance of the
property leased, the lessor upon the termination of the lease
shall pay the lessee one-half of the value of the improvements
at that time. Should the lessor refuse to reimburse said
amount, the lessee may remove the improvements, even
though the principal thing may suffer damage thereby. He shall
not, however, cause any more impairment upon the property
leased than is necessary.
 With regard to ornamental expenses, the lessee shall not
be entitled to any reimbursement, but he may remove the
ornamental objects, provided no damage is caused to the
principal thing, and the lessor does not choose to retain them
by paying their value at the time the lease is extinguished.

Under Article 1678, the lessor has the option of paying one-half of the
value of the improvements which the lessee made in good faith, which are
suitable for the use for which the lease is intended, and which have not
altered the form and substance of the land. On the other hand, the lessee
may remove the improvements should the lessor refuse to reimburse.

Petitioners argue that to apply Article 1678 to their case would result
to sheer injustice, as it would amount to giving away the hotel and its
other structures at virtually bargain prices. They allege that the value of
the hotel and its appurtenant facilities amounts to more than two billion
pesos, while the monetary claim of respondent against them only amounts
to a little more than twenty six-million pesos. Thus, they contend that it is
the lease contract that governs the relationship of the parties, and
consequently, the parties may be considered to have impliedly waived the
application of Article 1678.

We cannot sustain this line of argument by petitioners. Basic is the

doctrine that laws are deemed incorporated in each and every contract.
Existing laws always form part of any contract. Further, the lease contract
in
the case at bar shows no special kind of agreement between the parties as
to how to proceed in cases of default or breach of the contract. Petitioners
maintain that the lease contract contains a default provision which does
not give respondent the right to appropriate the improvements nor evict
petitioners in cases of cancellation or termination of the contract due to
default or breach of its terms. They cite paragraph 10 of the lease
contract, which provides that:

10. DEFAULT. - . . . Default shall automatically take place

upon the failure of the LESSEE to pay or perform its obligation
during the time fixed herein for such obligations without
necessity of demand, or, if no time is fixed, after 90 days from
the receipt of notice or demand from the LESSOR. . .

In case of cancellation or termination of this contract due

to the default or breach of its terms, the LESSEE will pay all
reasonable attorney’s fees, costs and expenses of litigation that
may be incurred by the LESSOR in enforcing its rights under
this contract or any of its provisions, as well as all unpaid rents,
fees, charges, taxes, assessment and others which the LESSOR
may be entitled to.

Petitioners assert that respondent committed a breach of the lease contract

when it filed the ejectment suit against them. However, we find nothing in
the above quoted provision that prohibits respondent to proceed the way it
did in enforcing its rights as lessor. It can rightfully file for ejectment to
evict petitioners, as it did before the court a quo.

IN VIEW WHEREOF, petitioners’ appeal is DENIED. The October 4, 2005

Decision of the Court of Appeals in CA-G.R. SP No. 74631 and its December
22, 2005 Resolution are AFFIRMED. Costs against petitioners.
SO ORDERED.

G.R. No. 167017 June 22, 2009

SERAFIN CHENG, Petitioner,

vs.
SPOUSES VITTORIO and MA. HELEN DONINI, Respondents.

DECISION

CORONA,J.:

The subject of this petition is an oral lease agreement that went sour.
Petitioner Serafin Cheng agreed to lease his property located at 479 Shaw
Blvd., Mandaluyong City to respondents, Spouses Vittorio and Ma. Helen
Donini, who intended to put up a restaurant thereon. They agreed to a
monthly rental of P17,000, to commence in December 1990.

Bearing an Interim Grant of Authority executed by petitioner, respondents

proceeded to introduce improvements in the premises. The authority read:

I, Serafin Cheng, of legal age and with office address at Room 310
Federation Center Building Muelle de Binondo, Manila, owner of the
building/structure located at 479 Shaw Boulevard, Mandaluyong, Metro
Manila, pursuant to a lease agreement now being finalized and to take
effect December 1, 1990, hereby grants VITTORIO DONINI (Prospective
Lessee) and all those acting under his orders to make all the necessary
improvements on the prospective leased premises located at 479 Shaw
Blvd., Mandaluyong, Metro Manila, and for this purpose, to enter said
premises and perform, all such works and activities to make the leased
premises operational as a restaurant or similar purpose.

Manila, 31 October 1990.1

However, before respondents’ business could take off and before any final
lease agreement could be drafted and signed, the parties began to have
serious disagreements regarding its terms and conditions. Petitioner thus
wrote respondents on January 28, 1991, demanding payment of the
deposit and rentals, and signifying that he had no intention to continue
with the agreement should respondents fail to pay. Respondents, however,
ignoring petitioner’s demand, continued to occupy the premises until April
17, 1991 when their caretaker voluntarily surrendered the property to
petitioner.

Respondents then filed an action for specific performance and damages

with a prayer for the issuance of a writ of preliminary injunction in the
Regional Trial Court (RTC) of Pasig City, Branch 67, docketed as Civil Case
No. 60769. Respondents prayed that petitioner be ordered to execute a
written lease contract for five years, deducting from the deposit and rent
the cost of repairs in the amount of P445,000, or to order petitioner to
return their investment in the amount of P964,000 and compensate for
their unearned net income of P200,000 with interest, plus attorney’s fees.2

Petitioner, in his answer, denied respondents’ claims and sought the award
of moral and exemplary damages, and attorney’s fees.3

After trial, the RTC rendered its decision in favor of petitioner, the
dispositive portion of which provided:

WHEREFORE, in view of all the foregoing, this Court finds the

preponderance of evidence in favor of the [petitioner] and hereby renders
judgment as follows:

1. The Complaint is dismissed.

2. On the counterclaim, [respondents] are ordered, jointly and

severally, to pay the [petitioner] P500,000.00 as moral damages;
P100,000.00 as exemplary damages; and P50,000.00 as attorney’s
fees.

3. [Respondents] are likewise ordered to pay the costs.

SO ORDERED.4

Respondents appealed to the Court of Appeals (CA) which, in its decision5

dated March 31, 2004, recalled and set aside the RTC decision, and
entered a new one ordering petitioner to pay respondents the amount of
P964,000 representing the latter’s expenses incurred for the repairs and
improvements of the premises.6

Petitioner filed a motion for reconsideration on the ground that the award
of reimbursement had no factual and legal bases,7 but this was denied by
the CA in its resolution dated February 21, 2005.8

Hence, this petition for certiorari under Rule 45 of the Rules of Court, with
petitioner arguing that:

THE COURT OF APPEALS DECIDED THIS CASE NOT IN ACCORD WITH

LAW AND WITH APPLICABLE DECISIONS OF THIS HONORABLE COURT.
PUT OTHERWISE:

A. BY ORDERING PETITIONER TO REIMBURSE RESPONDENTS THE

FULL VALUE OF EXPENSES FOR THEIR ALLEGED REPAIRS AND
IMPROVEMENTS OF THE LEASED PREMISES, THE COURT OF
APPEALS ERRONEOUSLY CONSIDERED RESPONDENTS NOT AS
MERE LESSEES BUT POSSESSORS IN GOOD FAITH UNDER ARTICLES
448 AND 546 OF THE CIVIL CODE.

B. THE COURT OF APPEALS DECIDED THIS CASE NOT IN ACCORD

WITH ARTICLE 1678 OF THE CIVIL CODE WHICH GIVES THE
LESSOR THE OPTION TO REIMBURSE THE LESSEE ONE-HALF OF
THE VALUE OF USEFUL IMPROVEMENTS OR, IF HE DOES NOT WANT
TO, ALLOW THE LESSEE TO REMOVE THE IMPROVEMENTS.

C. LIKEWISE, BY ORDERING PETITIONER TO REIMBURSE THE

VALUE OF ORNAMENTAL EXPENSES, THE COURT OF APPEALS
CONTRAVENED THE SECOND PARAGRAPH OF ARTICLE 1678.

D. THE COURT OF APPEALS ERRED IN APPLYING THE PRINCIPLE OF

EQUITY IN FAVOR OF THE RESPONDENTS.

E. THE COURT OF APPEALS ERRED IN NOT AFFIRMING THE

DECISION OF THE TRIAL COURT AWARDING DAMAGES TO
PETITIONER.
 F. THE COURT OF APPEALS SERIOUSLY ERRED AND/OR GRAVELY
ABUSED ITS DISCRETION IN FIXING THE AMOUNT OF P961,000.009
CONTRARY TO RESPONDENTS’ OWN REPRESENTATION AND
EVIDENCE.10

Respondents were required to file their comment on the petition but their
counsel manifested that he could not file one since his clients’ whereabouts
were unknown to him.11 Counsel also urged the Court to render a decision
on the basis of the available records and documents.12 Per resolution dated
August 30, 2006, copies of the resolutions requiring respondents to file
their comment were sent to their last known address and were deemed
served. The order requiring respondents’ counsel to file a comment in their
behalf was reiterated.13

In their comment, respondents argued that they were possessors in good

faith, hence, Articles 448 and 546 of the Civil Code applied and they should
be indemnified for the improvements introduced on the leased premises.
Respondents bewailed the fact that petitioner was going to benefit from
these improvements, the cost of which amounted to P1.409 million, in
contrast to respondents’ rental/deposit obligation amounting to only
P34,000. Respondents also contended that petitioner’s rescission of the
agreement was in bad faith and they were thus entitled to a refund.14

In settling the appeal before it, the CA made the following findings and
conclusions:

1. there was no agreement that the deposit and rentals accruing to

petitioner would be deducted from the costs of repairs and
renovation incurred by respondents;

2. respondents committed a breach in the terms and conditions of

the agreement when they failed to pay the rentals;

3. there was no valid rescission on the part of petitioner;

4. respondents were entitled to reimbursement for the cost of

improvements under the principle of equity and unjust enrichment;
and
 5. the award of damages in favor of petitioner had no basis in fact
and law.15

As the correctness of the CA’s ruling regarding (1) the lack of agreement
on the deposit and rentals; (2) respondents’ breach of the terms of the
verbal agreement and (3) the lack of valid rescission by petitioner was
never put in issue, this decision will be confined only to the issues raised by
petitioner, that is, the award of reimbursement and the deletion of the
award of damages. It need not be stressed that an appellate court will not
review errors that are not assigned before it, save in certain exceptional
circumstances and those affecting jurisdiction over the subject matter as
well as plain and clerical errors, none of which is present in this case.16

Remarkably, in ruling that respondents were entitled to reimbursement, the

CA did not provide any statutory basis therefor and instead applied the
principles of equity and unjust enrichment, stating:

It would be inequitable to allow the defendant-appellee, as owner of the

property to enjoy perpetually the improvements introduced by the
plaintiffs-appellants without reimbursing them for the value of the said
improvements. Well-settled is the rule that no one shall be unjustly
enriched or benefitted at the expense of another.17

Petitioner, however, correctly argued that the principle of equity did not
apply in this case. Equity, which has been aptly described as "justice
outside legality," is applied only in the absence of, and never against,
statutory law or judicial rules of procedure.18 Positive rules prevail over all
abstract arguments based on equity contra legem.19 Neither is the principle
of unjust enrichment applicable since petitioner (who was to benefit from
it) had a valid claim.20

The relationship between petitioner and respondents was explicitly

governed by the Civil Code provisions on lease, which clearly provide for
the rule on reimbursement of useful improvements and ornamental
expenses after termination of a lease agreement. Article 1678 states:

If the lessee makes, in good faith, useful improvements which are suitable
to the use for which the lease is intended, without altering the form or
substance of the property leased, the lessor upon the termination of the
lease shall pay the lessee one-half of the value of the improvements at that
time. Should the lessor refuse to reimburse said amount, the lessee may
remove the improvements, even though the principal thing may suffer
damage thereby. He shall not, however, cause any more impairment upon
the property leased than is necessary.

With regard to ornamental expenses, the lessee shall not be entitled to any
reimbursement, but he may remove the ornamental objects, provided no
damage is caused to the principal thing, and the lessor does not choose to
retain them by paying their value at the time the lease is extinguished.

Article 1678 modified the (old) Civil Code provision on reimbursement

where the lessee had no right at all to be reimbursed for the improvements
introduced on the leased property, he being entitled merely to the rights of
a usufructuary – the right of removal and set-off but not to
reimbursement.21

Contrary to respondents’ position, Articles 448 and 546 of the Civil Code
did not apply. Under these provisions, to be entitled to reimbursement for
useful improvements introduced on the property, respondents must be
considered builders in good faith. Articles 448 and 546, which allow full
reimbursement of useful improvements and retention of the premises until
reimbursement is made, apply only to a possessor in good faith or one who
builds on land in the belief that he is the owner thereof. A builder in good
faith is one who is unaware of any flaw in his title to the land at the time
he builds on it. 22

But respondents cannot be considered possessors or builders in good faith.

As early as 1956, in Lopez v. Philippine & Eastern Trading Co., Inc.,23 the
Court clarified that a lessee is neither a builder nor a possessor in good
faith –

x x x This principle of possessor in good faith naturally cannot apply to a

lessee because as such lessee he knows that he is not the owner of the
leased property. Neither can he deny the ownership or title of his lessor.
Knowing that his occupation of the premises continues only during the life
of the lease contract and that he must vacate the property upon
termination of the lease or upon the violation by him of any of its terms, he
introduces improvements on said property at his own risk in the sense that
he cannot recover their value from the lessor, much less retain the
premises until such reimbursement. (Emphasis supplied)

Being mere lessees, respondents knew that their right to occupy the
premises existed only for the duration of the lease.24 Cortez v. Manimbo25
went further to state that:

If the rule were otherwise, ‘it would always be in the power of the tenant
to improve his landlord out of his property.

These principles have been consistently adhered to and applied by the

Court in many cases.26

Under Article 1678 of the Civil Code, the lessor has the primary right (or
the first move) to reimburse the lessee for 50% of the value of the
improvements at the end of the lease. If the lessor refuses to make the
reimbursement, the subsidiary right of the lessee to remove the
improvements, even though the principal thing suffers damage, arises.
Consequently, on petitioner rests the primary option to pay for one-half of
the value of the useful improvements. It is only when petitioner as lessor
refuses to make the reimbursement that respondents, as lessees, may
remove the improvements. Should petitioner refuse to exercise the option
of paying for one-half of the value of the improvements, he cannot be
compelled to do so. It then lies on respondents to insist on their subsidiary
right to remove the improvements even though the principal thing suffers
damage but without causing any more impairment on the property leased
than is necessary.

As regards the ornamental expenses, respondents are not entitled to

reimbursement. Article 1678 gives respondents the right to remove the
ornaments without damage to the principal thing. But if petitioner
appropriates and retains said ornaments, he shall pay for their value upon
the termination of the lease.

The fact that petitioner will benefit from the improvements introduced by
respondents is beside the point. In the first place, respondents introduced
these improvements at their own risk as lessees. Respondents were not
forced or obliged to splurge on the leased premises as it was a matter of
necessity as well as a business strategy.27 In fact, had respondents only
complied with their obligation to pay the deposit/rent, there would have
been no dispute to begin with. If they were able to shell out more than a
million pesos to improve the property, the measly P34,000 deposit
demanded by petitioner was a mere "drop in the bucket," so to speak.
More importantly, the unequivocal terms of Article 1678 of the Civil Code
should be the foremost consideration.

The Court notes that the CA pegged the total value of the improvements
made on the leased premises at P964,000, which was apparently based on
the allegation in respondents’ complaint that it was their total investment
cost.28 The CA lumped together all of respondents’ expenses, which was a
blatant error. A qualification should have been made as to how much was
spent for useful improvements (or those which were suitable to the use for
which the lease was intended) and how much was for ornamental
expenses. Respondent Vittorio Donini testified that he spent P450,000 for
necessary repairs, while P500,000 was spent for adornments.29 The
evidence on record, however, showed respondents’ expenses for useful
improvements to be as follows:

Expense Amount

Electrical P31,893.65 Exh. "F", et seq. 30

Roofing P14,856.00 Exhibit "O"31

Labor P19,909.75 Exh. "P", et seq.32
Ceiling P65,712.00 Exh. "Q", et seq.33
Labor P38,689.20 Exh. "R", et seq.34
Electrical (phase 2) P76,539.10 Exh. "S", et seq.35
Door P41,371.75 Exh. "T", et seq.36
Labor P25,126.00 Exh. "U", et seq.37
Water P 8,031.00 Exhs. "W" & "W-1"38
 Gutters P 35,550.05 Exhs. "X" & "X-1"39
Outside Wall P 24,744.00 Exh. "X-2"40
Inside Wall P 22,186.10 Exh. "X-3"41
Electrical (phase 3) P 88,698.30 Exhs. "X-8" to "X-11"42
Labor P 19,995.00 Exhibit "Y"43
Total P513,301.90

Accordingly, the 50% value of the useful improvements to be reimbursed

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

The reality on the ground ought to be recognized. For one, as disclosed by

respondents’ counsel, he no longer knows the exact whereabouts of his
clients, only that they are now in Europe and he has no communication
with them at all.44 For another, it appears that as soon as respondents
vacated the premises, petitioner immediately reclaimed the property and
barred respondents from entering it. Respondents also alleged, and
petitioner did not deny, that the property subject of this case had already
been leased to another entity since 1991.45 This is where considerations of
equity should come into play. It is obviously no longer feasible for
respondents to remove the improvements from the property, if they still
exist. The only equitable alternative then, given the circumstances, is to
order petitioner to pay respondents one-half of the value of the useful
improvements (50% of P513,301.90) introduced on the property, or
P256,650.95. To be off-set against this amount are respondents’ unpaid
P17,000 monthly rentals for the period of December 1990 to April 1991,46
or P85,000. Petitioner should, therefore, indemnify respondents the
amount of P171,650.95. This is in accord with the law’s intent of
preventing unjust enrichment of a lessor who now has to pay one-half of
the value of the useful improvements at the end of the lease because the
lessee has already enjoyed the same, whereas the lessor can enjoy them
indefinitely thereafter.47

Respondents are not entitled to reimbursement for the ornamental

expenses under the express provision of Article 1678. Moreover, since they
failed to remove these ornaments despite the opportunity to do so when
they vacated the property, then they were deemed to have waived or
abandoned their right of removal.

The CA also erred when it deleted the awards of moral and exemplary
damages and attorney’s fees.

Petitioner is entitled to moral damages but not in the amount of P500,000

awarded by the RTC, which the Court finds to be excessive. While trial
courts are given discretion to determine` the amount of moral damages, it
"should not be palpably and scandalously excessive."48 Moral damages are
not meant to enrich a person at the expense of the other but are awarded
only to allow the former to obtain means, diversion or amusements that
will serve to alleviate the moral suffering he has undergone due to the
other person’s culpable action.49 It must always reasonably approximate
the extent of injury and be proportional to the wrong committed.50 The
award of P100,000 as moral damages is sufficient and reasonable under
the circumstances.

The award of P100,000 as exemplary damages is likewise excessive.

Exemplary damages are imposed not to enrich one party or impoverish
another but to serve as a deterrent against or as a negative incentive to
curb socially deleterious actions.51 We think P50,000 is reasonable in this
case.1avvphi1

Finally, Article 2208 of the Civil Code allows recovery of attorney's fees
when exemplary damages are awarded or when the defendant's act or
omission has compelled the plaintiff to litigate with third persons or to incur
expenses to protect his interest.52 Petitioner is entitled to it since exemplary
damages were awarded in this case and respondents’ act in filing Civil Case
No. 60769 compelled him to litigate. The amount of P25,000 is in accord
with prevailing jurisprudence.53
WHEREFORE, the petition is PARTIALLY GRANTED. The decision dated
March 31, 2004 rendered by the Court of Appeals in CA-G.R. CV No. 54430
is hereby MODIFIED in that –

(1) petitioner Serafin Cheng is ORDERED to pay respondents,

spouses Vittorio and Ma. Helen Donini, the amount of P171,650.95 as
indemnity for the useful improvements; and

(2) respondents, spouses Vittorio and Ma. Helen Donini, are

ORDERED to pay petitioner Serafin Cheng the following sums:

a) P100,000.00 moral damages;

b) P50,000.00 exemplary damages and

c) P25,000.00 attorney’s fees.

Let copies of this decision be furnished respondents, spouses Vittorio and

Ma. Helen Donini, at their last known address, and their counsel of record.

SO ORDERED.

SPOUSES VIRGILIO and JOSIE JIMENEZ, petitioners, vs. PATRICIA, INC.,

respondent.

DECISION

BELLOSILLO, J.:

The Joint Decision of the Court of Appeals (dismissing the petition for
review filed by spouses Virgilio and Josie Jimenez in CA-G.R. SP No. 43185
and giving due course to the petition for review filed by Patricia, Inc., in
CA-G.R. SP No. 43179), in effect reversing the decision of the Regional
Trial Court and reinstating that of the Metropolitan Trial Court, is assailed
in the instant petition.

Petitioners Virgilio and Josie Jimenez, spouses, are sublessees of a lot and
building located at 2853 Juan Luna Street, Tondo, Manila, owned by
respondent Patricia Inc. (PATRICIA for brevity), a domestic corporation
duly organized and existing under Philippine laws. The Jimenez spouses
subleased the property in 1980 from a certain Purisima Salazar who had
been leasing the property from PATRICIA since 1970.

Sometime in 1995 Purisima Salazar abandoned the property thus incurring

back rentals dating back to January 1992. Hence, by reason of her non-
payment of the monthly rentals, her contract of lease with PATRICIA was
terminated.

On 29 March 1995 PATRICIA sent a letter to the Jimenez spouses

informing them of the termination of the lease and demanding that they
vacate the premises within fifteen (15) days from notice since they had no
existing lease contract with it. But the spouses refused to leave.

Thus, on 5 May 1995 PATRICIA filed a complaint for unlawful detainer

against the Jimenez spouses alleging, among others, that the lessee
Purisima Salazar subleased the premises to the Jimenezes; that Purisima
Salazar no longer occupied the premises; that this notwithstanding, the
Jimenez spouses continued to occupy the premises without any contract
with PATRICIA, its owner, hence, their stay was merely being tolerated by
the latter; and, that despite demands made upon them, they refused to
vacate the premises thereby unlawfully and illegally withholding the
property to the damage and prejudice of PATRICIA.

In their Answer, the Jimenez spouses claimed that they occupied the
premises as sublessees of Purisima Salazar with the knowledge of
PATRICIA; that the building originally found on the lot was owned by
Purisima Salazar which she sold to them in 1984 with notice and without
any objection from PATRICIA; that, when the building was gutted by fire in
1987 they constructed a new house on the lot worth P1,500,000.00 with
the knowledge and without any objection from PATRICIA; and, that
PATRICIA never collected any rental for the land but they nevertheless
voluntarily paid the amount of P23,537.25 as rent corresponding to the
period of September 1979 to 31 December 1991.

The MeTC ruled in favor of PATRICIA and ordered the Jimenez spouses to
vacate the premises, to pay PATRICIA the sum of P3,000.00 a month as
reasonable rental and/or compensation for the use of the premises
beginning April 1995 until they finally vacated the premises, and to pay
PATRICIA the sum of P5,000.00 as reasonable attorney's fees, plus costs of
suit.

The Jimenez spouses appealed the MeTC decision to the RTC. On 2

January 1997 the RTC modified the decision in favor of the spouses holding
that an implied new lease contract existed between the Jimenez spouses
and PATRICIA in view of the latter's acceptance of rentals from the former.
Thus the RTC extended the term of the lease between the parties for a
period of one (1) year from date of decision, and ordered PATRICIA to
reimburse the Jimenez spouses the expenses incurred in the construction
of the house built on the property and/or for the Jimenez spouses to
remove the improvements thereon.

On 20 January 1997 PATRICIA filed a Motion for Clarificatory Judgment

and later added a Supplement to the Motion for Clarificatory Judgment.

On 27 January 1997 PATRICIA, without waiting for the resolution of its

Motion for Clarificatory Judgment as well as its supplement thereto, filed a
Petition for Review of the RTC decision with the Court of Appeals, docketed
as CA-G.R. SP No. 43179.

On 13 February 1997 the Jimenez spouses filed their own Petition for
Review, docketed as CA-G.R. SP No. 43185. Subsequently, this petition
was consolidated with PATRICIA's Petition for Review since it involved the
same parties, facts, and issues.

The Court of Appeals in due course rendered a Joint Decision dismissing

the Petition for Review filed by the Jimenez spouses while giving due
course to the petition of PATRICIA. The Court of Appeals held that there
was no implied renewal of the lease contract between the parties since, to
begin with, there was no lease contract between them; hence, the Jimenez
spouses could not have tendered payment of rentals to PATRICIA. Instead,
it declared the status of the Jimenez spouses as being analogous to that of
a lessee or tenant whose lease has expired but whose occupancy has been
continued by mere tolerance of the owner, and hence, bound by an implied
promise that he would vacate the premises upon demand. Thus, the
appellate court reversed and set aside the decision of the RTC and
reinstated the decision of the MeTC which, among others, ordered the
Jimenez spouses to vacate the premises.
Petitioners now assail the jurisdiction of the MeTC contending that the
failure of the complaint to allege the character of the sublease or entry of
the Jimenez spouses into the property, whether legal or illegal,
automatically classified it into an accion publiciana or reinvindicatoria
cognizable by the RTC and not by the MeTC; thus, the action should have
been dismissed.

The rule is settled that a question of jurisdiction may be raised at any time,
even on appeal, provided that its application does not result in a mockery
of the tenets of fair play. In the instant case, the jurisdictional issue was
raised by petitioners for the first time only in the instant Petition for
Review. However, it should be noted that they did so only after an adverse
decision was rendered by the Court of Appeals. Despite several
opportunities in the RTC, which ruled in their favor, and in the Court of
Appeals, petitioners never advanced the question of jurisdiction of the
MeTC. Additionally, petitioners participated actively in the proceedings
before the MeTC and invoked its jurisdiction with the filing of their answer,
in seeking affirmative relief from it, in subsequently filing a notice of appeal
before the RTC, and later, a Petition for Review with the Court of Appeals.
Upon these premises, petitioners cannot now be allowed belatedly to adopt
an inconsistent posture by attacking the jurisdiction of the court to which
they had submitted themselves voluntarily. Laches now bars them from
doing so.

Be that as it may, we find no error in the MeTC assuming jurisdiction over

the subject matter. A complaint for unlawful detainer is sufficient if it
alleges that the withholding of possession or the refusal to vacate is
unlawful without necessarily employing the terminology of the law. As
correctly found by the appellate court, to which we agree, the allegations
in the complaint sufficiently established a cause of action for unlawful
detainer. The complaint clearly stated how entry was effected and how and
when dispossession started - petitioners were able to enter the subject
premises as sublessees of Purisima Salazar who, despite the termination of
her lease with respondent, continued to occupy the subject premises
without any contract with it; thus, their stay was by tolerance of
respondent.
The fact that the complaint failed to state that respondent was in prior
possession of the property before it was unlawfully withheld by petitioner
spouses is of no moment. Prior physical possession is indispensable only in
actions for forcible entry but not in unlawful detainer.

Petitioner spouses, as mere sublessees of Purisima Salazar, derive their

right from the sublessor whose termination of contract with the lessor
necessarily also ends the sublease contract. Thus, when the contract of
lease of Purisima Salazar with respondent was terminated the contract of
sublease of petitioners with the former also necessarily ended and
petitioners cannot insist on staying on the premises. Petitioners can invoke
no right superior to that of their sublessor.

It is not correct to say that petitioners could not have occupied the
property by tolerance of respondent as their entry into the premises was
inceptively illegal, the sublease being entered into without the consent of
the owner. Petitioners argue that tolerance is only available in cases where
entry was lawful from the start and cannot be asserted where entry was
illegal from the start. It appears however that respondent did not expressly
and equivocally prohibit the subleasing of the property. Although the
attached contracts of lease state that the lessee cannot sublease the
property, none of those contracts pertain to the contract of lease between
Purisima Salazar and respondent PATRICIA. In any event, the fact that
PATRICIA sent a letter to the Jimenez spouses informing them of the
termination of the lease of Purisima Salazar shows that they recognize and
acknowledge their stay in the premises as sublessees of Salazar. However,
after the termination of the contract of lease of Purisima Salazar with
PATRICIA, any right of the Jimenez spouses to stay in the premises,
although previously recognized, then and there ended. After the
termination of the contract of lease of Salazar the continued stay of the
Jimenez spouses thereat was merely by tolerance of PATRICIA and it
became unlawful after they ignored the lessor's demand to leave.

The status of petitioner spouses is akin to that of a lessee or a tenant

whose term of lease has expired but whose occupancy has continued by
tolerance of the owner. A person who occupies the land of another at the
latter's forbearance or permission without any contract between them is
necessarily bound by an implied promise that he will vacate upon demand
failing which a summary action for ejectment is the proper remedy against
him. The present action being for unlawful detainer, it is well within the
exclusive original jurisdiction of the metropolitan trial courts.

Petitioners contend that respondent has no cause of action against them

since, as proved by Transfer Certificate of Title No. T-44247, the property
is in the name of the City of Manila and not of respondent PATRICIA.

Records however show that this issue has not been raised in the
proceedings below, hence, will not be ruled upon by this Court. Any issue
raised for the first time on appeal and not timely raised in the proceedings
in the lower court is barred by estoppel. Moreover, being mere sublessees
of the property in question, petitioners cannot in an action involving
possession of the leased premises controvert the title of PATRICIA, or
assert any right adverse to its title. It is the Manila City Government, not
the Jimenez spouses, that is the proper party to dispute the ownership of
PATRICIA.

Petitioners argue that the Petition for Review of respondent should have
been dismissed for being premature in view of the pendency of its Motion
for Clarificatory Judgment and Supplement to the Motion for Clarificatory
Judgment which remained unresolved by the RTC. They assert that
because of the pendency of its motion, there was no final judgment or
decision that could properly be the subject of a petition for review before
the Court of Appeals.

We do not agree. The Petition for Review filed by respondent with the
Court of Appeals was not prematurely filed. It should be borne in mind that
a Motion for Clarificatory Judgment not being in the character of a motion
for reconsideration does not toll the reglementary period for filing a
petition for review with the Court of Appeals. Its filing will not bar the
judgment from attaining finality, nor will its resolution amend the decision
to be reviewed. Thus, when respondent filed a Petition for Review before
the Court of Appeals, there was already a final judgment that could
properly be the subject of a petition for review.

Moreover, under the Rules on Summary Procedure, the decision of the RTC
in civil cases governed by this Rule, including forcible entry and unlawful
detainer, is immediately executory without prejudice to a further appeal
that may be taken therefrom. The judgment of the RTC being final and
executory the filing of the Petition for Review was proper.

As to the house built by petitioners on the property, this Court has

previously ruled that lessees, much less, sublessees, are not possessors or
builders in good faith over rented land because they know that their
occupancy of the premises continues only during the life of the lease, or
sublease as the case may be; and, they cannot as a matter of right recover
the value of their improvements from the lessor, much less retain the
premises until they are reimbursed. Instead, their rights are governed by
Art. 1678 of the Civil Code which allows reimbursement of lessees up to
one-half (1/2) of the value of their improvements if the lessor so elects:

Art. 1678. If the lessee makes, in good faith, useful improvements which
are suitable to the use for which the lease is intended, without altering the
form or substance of the property leased, the lessor upon the termination
of the lease shall pay the lessee one-half of the value of the improvements
at that time. Should the lessor refuse to reimburse said amount, the lessee
may remove the improvements, even though the principal thing may suffer
damage thereby. He shall not, however, cause any more impairment upon
the property leased than is necessary xxx (New Civil Code).

Thus, applying the above rule, petitioners cannot recover full

reimbursement of the value spent for the construction of the house, but is
limited only to one-half (1/2) of its value at the election of the lessor.
However, as PATRICIA has manifested its lack of intention to do so, the
Jimenez spouses have no recourse but to remove the house at their own
expense.

WHEREFORE, the assailed Joint Decision of the Court of Appeals reversing

and setting aside the decision of the Regional Trial Court and reinstating
the decision of the Metropolitan Trial Court is AFFIRMED, with the
MODIFICATION that petitioner spouses Virgilio and Josie Jimenez should
also remove the house they have constructed on the lot at their own
expense. Thus, petitioner spouses and all persons claiming title under them
are ordered: (a) to vacate the premises described in the complaint located
at 2853 Juan Luna Street, Tondo, Manila; (b) to remove at their own
expense within sixty (60) days from finality of this Decision the house they
have constructed thereon; (c) to pay respondent Patricia, Inc., the sum of
P3,000.00 a month as reasonable rental/compensation for the use of the
premises beginning April 1995 until they finally vacate the premises; and,
(d) to pay respondent Patricia, Inc., the sum of P5,000.00 as attorney's
fees, plus costs of suit.

SO ORDERED.

G.R. No. 156437 March 1, 2004

NATIONAL HOUSING AUTHORITY, petitioner,

vs.
GRACE BAPTIST CHURCH and the COURT OF APPEALS, respondents.

DECISION

YNARES-SANTIAGO, J.:

This is a petition for review under Rule 45 of the Rules of Court, seeking to
reverse the Decision of the Court of Appeals dated February 26, 2001,1 and
its Resolution dated November 8, 2002,2 which modified the decision of the
Regional Trial Court of Quezon City, Branch 90, dated February 25, 1997.3

On June 13, 1986, respondent Grace Baptist Church (hereinafter, the

Church) wrote a letter to petitioner National Housing Authority (NHA),
manifesting its interest in acquiring Lots 4 and 17 of the General Mariano
Alvarez Resettlement Project in Cavite.4 In its letter-reply dated July 9,
1986, petitioner informed respondent:

In reference to your request letter dated 13 June 1986, regarding

your application for Lots 4 and 17, Block C-3-CL, we are glad to
inform you that your request was granted and you may now visit our
Project Office at General Mariano Alvarez for processing of your
application to purchase said lots.

We hereby advise you also that prior to approval of such application and in
accordance with our existing policies and guidelines, your other accounts
with us shall be maintained in good standing.5

Respondent entered into possession of the lots and introduced

improvements thereon.6
On February 22, 1991, the NHA’s Board of Directors passed Resolution No.
2126, approving the sale of the subject lots to respondent Church at the
price of P700.00 per square meter, or a total price of P430,500.00.7 The
Church was duly informed of this Resolution through a letter sent by the
NHA.8

On April 8, 1991, the Church tendered to the NHA a manager’s check in the
amount of P55,350.00, purportedly in full payment of the subject
properties.9 The Church insisted that this was the price quoted to them by
the NHA Field Office, as shown by an unsigned piece of paper with a
handwritten computation scribbled thereon.10 Petitioner NHA returned the
check, stating that the amount was insufficient considering that the price of
the properties have changed. The Church made several demands on the
NHA to accept their tender of payment, but the latter refused. Thus, the
Church instituted a complaint for specific performance and damages
against the NHA with the Regional Trial Court of Quezon City,11 where it
was docketed as Civil Case No. Q-91-9148.

On February 25, 1997, the trial court rendered its decision, the dispositive
portion of which reads:

WHEREFORE, premises considered, judgment is hereby rendered as

follows:

1. Ordering the defendant to reimburse to the plaintiff the

amount of P4,290.00 representing the overpayment made for
Lots 1, 2, 3, 18, 19 and 20;

2. Declaring that there was no perfected contract of sale with

respect to Lots 4 and 17 and ordering the plaintiff to return
possession of the property to the defendant and to pay the
latter reasonable rental for the use of the property at P200.00
per month computed from the time it took possession thereof
until finally vacated. Costs against defendant.

SO ORDERED.12

On appeal, the Court of Appeals, affirmed the trial court’s finding that there
was indeed no contract of sale between the parties. However, petitioner
was ordered to execute the sale of the lots to Grace Baptist Church at the
price of P700.00 per square meter, with 6% interest per annum from
March 1991. The dispositive portion of the Court of Appeals’ decision,
dated February 26, 2001, reads:

WHEREFORE, the appealed Decision is hereby AFFIRMED with the

MODIFICATION that defendant-appellee NHA is hereby ordered to
sell to plaintiff-appellant Grace Baptist Church Lots 4 and 17 at the
price of P700.00 per square meter, or a total cost P430,000.00 with
6% interest per annum from March, 1991 until full payment in cash.

SO ORDERED.13

The appellate court ruled that the NHA’s Resolution No. 2126, which earlier
approved the sale of the subject lots to Grace Baptist Church at the price of
P700.00 per square meter, has not been revoked at any time and was
therefore still in effect. As a result, the NHA was estopped from fixing a
different price for the subject properties. Considering further that the
Church had been occupying the subject lots and even introduced
improvements thereon, the Court of Appeals ruled that, in the interest of
equity, it should be allowed to purchase the subject properties.14

Petitioner NHA filed a Motion for Reconsideration which was denied in a

Resolution dated November 8, 2002. Hence, the instant petition for review
on the sole issue of: Can the NHA be compelled to sell the subject lots to
Grace Baptist Church in the absence of any perfected contract of sale
between the parties?

Petitioner submits that the Court cannot compel it to sell the subject
property to Grace Baptist Church without violating its freedom to
contract.15 Moreover, it contends that equity should be applied only in the
absence of any law governing the relationship between the parties, and
that the law on sales and the law on contracts in general apply to the
present case.16

We find merit in petitioner’s submission.

Petitioner NHA is not estopped from selling the subject lots at a price equal
to their fair market value, even if it failed to expressly revoke Resolution
No. 2126. It is, after all, hornbook law that the principle of estoppel does
not operate against the Government for the act of its agents,17 or, as in
this case, their inaction.

On the application of equity, it appears that the crux of the controversy

involves the characterization of equity in the context of contract law.
Preliminarily, we reiterate that this Court, while aware of its equity
jurisdiction, is first and foremost, a court of law. While equity might tilt on
the side of one party, the same cannot be enforced so as to overrule
positive provisions of law in favor of the other.18 Thus, before we can pass
upon the propriety of an application of equitable principles in the case at
bar, we must first determine whether or not positive provisions of law
govern.

It is a fundamental rule that contracts, once perfected, bind both

contracting parties, and obligations arising therefrom have the force of law
between the parties and should be complied with in good faith.19 However,
it must be understood that contracts are not the only source of law that
govern the rights and obligations between the parties. More specifically, no
contractual stipulation may contradict law, morals, good customs, public
order or public policy.20 Verily, the mere inexistence of a contract, which
would ordinarily serve as the law between the parties, does not
automatically authorize disposing of a controversy based on equitable
principles alone. Notwithstanding the absence of a perfected contract
between the parties, their relationship may be governed by other existing
laws which provide for their reciprocal rights and obligations.

It must be remembered that contracts in which the Government is a party

are subject to the same rules of contract law which govern the validity and
sufficiency of contract between individuals. All the essential elements and
characteristics of a contract in general must be present in order to create a
binding and enforceable Government contract.21

It appearing that there is no dispute that this case involves an unperfected

contract, the Civil Law principles governing contracts should apply. In Vda.
de Urbano v. Government Service Insurance System,22 it was ruled that a
qualified acceptance constitutes a counter-offer as expressly stated by
Article 1319 of the Civil Code. In said case, petitioners offered to redeem
mortgaged property and requested for an extension of the period of
redemption. However, the offer was not accepted by the GSIS. Instead, it
made a counter-offer, which petitioners did not accept. Petitioners again
offer to pay the redemption price on staggered basis. In deciding said case,
it was held that when there is absolutely no acceptance of an offer or if the
offer is expressly rejected, there is no meeting of the minds. Since
petitioners’ offer was denied twice by GSIS, it was held that there was
clearly no meeting of the minds and, thus, no perfected contract. All that is
established was a counter-offer.23

In the case at bar, the offer of the NHA to sell the subject property, as
embodied in Resolution No. 2126, was similarly not accepted by the
respondent.24 Thus, the alleged contract involved in this case should be
more accurately denominated as inexistent. There being no concurrence of
the offer and acceptance, it did not pass the stage of generation to the
point of perfection.25 As such, it is without force and effect from the very
beginning or from its incipiency, as if it had never been entered into, and
hence, cannot be validated either by lapse of time or ratification.26 Equity
can not give validity to a void contract,27 and this rule should apply with
equal force to inexistent contracts.

We note from the records, however, that the Church, despite knowledge
that its intended contract of sale with the NHA had not been perfected,
proceeded to introduce improvements on the disputed land. On the other
hand, the NHA knowingly granted the Church temporary use of the subject
properties and did not prevent the Church from making improvements
thereon. Thus, the Church and the NHA, who both acted in bad faith, shall
be treated as if they were both in good faith.28 In this connection, Article
448 of the Civil Code provides:

The owner of the land on which anything has been built, sown or
planted in good faith, shall have the right to appropriate as his own
the works, sowing or planting, after payment of the indemnity
provided for in articles 546 and 548, or to oblige the one who built or
planted to pay the price of the land, and the one who sowed, the
proper rent. However, the builder or planter cannot be obliged to buy
the land and if its value is considerably more than that of the building
or trees. In such case, he shall pay reasonable rent, if the owner of
the land does not choose to appropriate the building or trees after
 proper indemnity. The parties shall agree upon the terms of the lease
and in case of disagreement, the court shall fix the terms thereof.

Pursuant to our ruling in Depra v. Dumlao,29 there is a need to remand this

case to the trial court, which shall conduct the appropriate proceedings to
assess the respective values of the improvements and of the land, as well
as the amounts of reasonable rentals and indemnity, fix the terms of the
lease if the parties so agree, and to determine other matters necessary for
the proper application of Article 448, in relation to Articles 546 and 548, of
the Civil Code.

WHEREFORE, in view of the foregoing, the petition is GRANTED. The Court

of Appeals’ Decision dated February 26, 2001 and Resolution dated
November 8, 2002 are REVERSED and SET ASIDE. The Decision of the
Regional Trial Court of Quezon City-Branch 90, dated February 25, 1997, is
REINSTATED. This case is REMANDED to the Regional Trial Court of
Quezon City, Branch 90, for further proceedings consistent with Articles
448 and 546 of the Civil Code.

No costs.

SO ORDERED.

DIONISIA P. BAGAIPO, petitioner, vs. THE HON. COURT OF APPEALS and

LEONOR LOZANO, respondents.

QUISUMBING, J.:

This petition assails the decision dated June 30, 1994 of the Court of
Appeals affirming the dismissal by the Regional Trial Court of Davao City,
Branch 8, in Civil Case No. 555-89, of petitioner’s complaint for recovery of
possession with prayer for preliminary mandatory injunction and damages.

The undisputed facts of the case are as follows:

Petitioner Dionisia P. Bagaipo is the registered owner of Lot No. 415, a

146,900 square meter agricultural land situated in Ma-a, Davao City under
Transfer Certificate of Title No. T-15757 particularly described as follows:
…Bounded on the NE., by Lots Nos. 419 and 416; on the SE by the Davao
River; on the SE., (sic) by Lots Nos. 1092 and 1091; and on the NW., by
Lots Nos. 413 and 418…

Respondent Leonor Lozano is the owner of a registered parcel of land

located across and opposite the southeast portion of petitioner’s lot facing
the Davao River. Lozano acquired and occupied her property in 1962 when
his wife inherited the land from her father who died that year.

On May 26, 1989, Bagaipo filed a complaint for Recovery of Possession

with Mandatory Writ of Preliminary Injunction and Damages against Lozano
for: (1) the surrender of possession by Lozano of a certain portion of land
measuring 29,162 square meters which is supposedly included in the area
belonging to Bagaipo under TCT No. T-15757; and (2) the recovery of a
land area measuring 37,901 square meters which Bagaipo allegedly lost
when the Davao River traversed her property. Bagaipo contended that as
a result of a change in course of the said river, her property became
divided into three lots, namely: Lots 415-A, 415-B and 415-C.

In January 1988, Bagaipo commissioned a resurvey of Lot 415 and

presented before the trial court a survey plan prepared by Geodetic
Engineer Gersacio A. Magno. The survey plan allegedly showed that: a)
the area presently occupied by Bagaipo, identified as Lot 415-A, now had
an area of only 79,843 square meters; b) Lot 415-B, with an area
measuring 37,901 square meters, which cut across Bagaipo’s land was
taken up by the new course of the Davao River; and c) an area of 29,162
square meters designated as Lot 415-C was illegally occupied by
respondent Lozano. The combined area of the lots described by Engineer
Magno in the survey plan tallied with the technical description of Bagaipo’s
land under TCT No. T-15757. Magno concluded that the land presently
located across the river and parallel to Bagaipo’s property still belonged to
the latter and not to Lozano, who planted some 350 fruit-bearing trees on
Lot 415-C and the old abandoned river bed.

Bagaipo also presented Godofredo Corias, a former barangay captain and

long-time resident of Ma-a to prove her claim that the Davao River had
indeed changed its course. Corias testified that the occurrence was caused
by a big flood in 1968 and a bamboo grove which used to indicate the
position of the river was washed away. The river which flowed previously
in front of a chapel located 15 meters away from the riverbank within
Bagaipo’s property now flowed behind it. Corias was also present when
Magno conducted the relocation survey in 1988.

For his part, Lozano insisted that the land claimed by Bagaipo is actually an
accretion to their titled property. He asserted that the Davao River did not
change its course and that the reduction in Bagaipo’s domain was caused
by gradual erosion due to the current of the Davao River. Lozano added
that it is also because of the river’s natural action that silt slowly deposited
and added to his land over a long period of time. He further averred that
this accretion continues up to the present and that registration proceedings
instituted by him over the alluvial formation could not be concluded
precisely because it continued to increase in size.

Lozano presented three witnesses: Atty. Pedro Castillo, his brother-in-law;

Cabitunga Pasanday, a tenant of Atty. Castillo; and Alamin Catucag, a
tenant of the Lozanos.

Atty. Castillo testified that the land occupied by the Lozanos was
transferred to his sister, Ramona when they extra-judicially partitioned
their parents’ property upon his father’s death. On September 9, 1973,
Atty. Castillo filed a land registration case involving the accretion which
formed on the property and submitted for this purpose, a survey plan
approved by the Bureau of Lands as well as tax declarations covering the
said accretion. An Order of General Default was already issued in the land
registration case on November 5, 1975, but the case itself remained
pending since the petition had to be amended to include the continuing
addition to the land area.

Mr. Cabitunga Pasanday testified that he has continuously worked on the

land as tenant of the Castillos since 1925, tilling an area of about 3
hectares. However, the land he tilled located opposite the land of the
Lozanos and adjacent to the Davao River has decreased over the years to
its present size of about 1 hectare. He said the soil on the bank of the
river, as well as coconut trees he planted would be carried away each time
there was a flood. This similar erosion occurs on the properties of Bagaipo
and a certain Dr. Rodriguez, since the elevation of the riverbank on their
properties is higher than the elevation on Lozano’s side.
Alamin Catucag testified that he has been a tenant of the Castillos since
1939 and that the portion he occupies was given to Ramona, Lozano’s
wife. It was only 1 hectare in 1939 but has increased to 3 hectares due to
soil deposits from the mountains and river. Catucag said that Bagaipo’s
property was reduced to half since it is in the curve of the river and its soil
erodes and gets carried away by river water.

On April 5, 1991, the trial court conducted an ocular inspection. It

concluded that the applicable law is Article 457. To the owners of lands
adjoining the banks of rivers belong the accretion which they gradually
receive from the effects of the current of the waters.7 of the New Civil
Code and not Art. 461 The reduction in the land area of plaintiff was
caused by erosion and not by a change in course of the Davao River.
Conformably then, the trial court dismissed the complaint.

On appeal, the Court of Appeals affirmed the decision of the trial court and
decreed as follows:

WHEREFORE, the decision appealed from is hereby affirmed, with costs

against the plaintiff-appellant.

Hence, this appeal.

Petitioner asserts that the Court of Appeals erred in:

....NOT GIVING PROBATIVE VALUE TO THE RELOCATION SURVEY

(EXHIBIT “B”) PREPARED BY LICENSED GEODETIC ENGINEER
GERSACIO MAGNO. THE CASE OF “DIRECTOR OF LANDS VS. HEIRS
OF JUANA CAROLINA” 140 SCRA 396 CITED BY THE RESPONDENT
COURT IN DISREGARDING EXHIBIT “B” IS NOT APPLICABLE TO THE
CASE AT BAR.

....NOT FINDING THAT ASSUMING WITHOUT ADMITTING THAT THE

QUESTIONED LOT 415-C (EXHIBIT “B-1”) OCCUPIED BY RESPONDENT
LEONOR LOZANO WAS THE RESULT OF AN ACCRETION, THE
PRINCIPLE OF ACCRETION CANNOT AND DOES NOT APPLY IN THE
INSTANT CASE TO FAVOR SAID RESPONDENT BECAUSE SAID LOT
415-C IS WITHIN AND FORM PART OF PETITIONER’S LAND
DESCRIBED IN TCT NO. 15757 (EXHIBIT “A”)
 ....FINDING PETITIONER GUILTY OF LACHES WHEN SHE INSTITUTED
THE SUIT.

....NOT ORDERING RESPONDENT LEONOR LOZANO TO VACATE AND

SURRENDER LOT 415-C IN FAVOR OF PETITIONER AND FOR HIM TO
PAY PETITIONER DAMAGES FOR ITS UNLAWFUL OCCUPATION
THEREOF.

....NOT HOLDING PETITIONER ENTITLED TO THE ABANDONED RIVER

BED.

For this Court’s resolution are the following issues: Did the trial court err in
holding that there was no change in course of the Davao River such that
petitioner owns the abandoned river bed pursuant to Article 461 of the Civil
Code? Did private respondent own Lot 415-C in accordance with the
principle of accretion under Article 457? Should the relocation survey
prepared by a licensed geodetic engineer be disregarded since it was not
approved by the Director of Lands? Is petitioner’s claim barred by laches?

On the first issue. The trial court and the appellate court both found that
the decrease in land area was brought about by erosion and not a change
in the river’s course. This conclusion was reached after the trial judge
observed during ocular inspection that the banks located on petitioner’s
land are sharp, craggy and very much higher than the land on the other
side of the river. Additionally, the riverbank on respondent’s side is lower
and gently sloping. The lower land therefore naturally received the alluvial
soil carried by the river current. These findings are factual, thus conclusive
on this Court, unless there are strong and exceptional reasons, or they are
unsupported by the evidence on record, or the judgment itself is based on
a misapprehension of facts. These factual findings are based on an ocular
inspection of the judge and convincing testimonies, and we find no
convincing reason to disregard or disbelieve them.

The decrease in petitioner’s land area and the corresponding expansion of

respondent’s property were the combined effect of erosion and accretion
respectively. Art. 461 of the Civil Code is inapplicable. Petitioner cannot
claim ownership over the old abandoned riverbed because the same is
inexistent. The riverbed’s former location cannot even be pinpointed with
particularity since the movement of the Davao River took place gradually
over an unspecified period of time, up to the present.

The rule is well-settled that accretion benefits a riparian owner when the
following requisites are present: 1) That the deposit be gradual and
imperceptible; 2) That it resulted from the effects of the current of the
water; and 3) That the land where accretion takes place is adjacent to the
bank of the river. These requisites were sufficiently proven in favor of
respondents. In the absence of evidence that the change in the course of
the river was sudden or that it occurred through avulsion, the presumption
is that the change was gradual and was caused by alluvium and erosion.

As to Lot 415-C, which petitioner insists forms part of her property under
TCT No. T-15757, it is well to recall our holding in C.N. Hodges vs. Garcia,
109 Phil. 133, 135:

… The fact that the accretion to his land used to pertain to plaintiff’s
estate, which is covered by a Torrens certificate of title, cannot preclude
him (defendant) from being the owner thereof. Registration does not
protect the riparian owner against the diminution of the area of his land
through gradual changes in the course of the adjoining stream. Accretions
which the banks of rivers may gradually receive from the effect of the
current become the property of the owners of the banks (Art. 366 of the
old Civil Code; Art. 457 of the new). Such accretions are natural incidents
to land bordering on running streams and the provisions of the Civil Code
in that respect are not affected by the Land Registration Act.

Petitioner did not demonstrate that Lot 415-C allegedly comprising 29,162
square meters was within the boundaries of her titled property. The
survey plan commissioned by petitioner which was not approved by the
Director of Lands was properly discounted by the appellate court. In
Titong vs. Court of Appeals we affirmed the trial court’s refusal to give
probative value to a private survey plan and held thus:

…the plan was not verified and approved by the Bureau of Lands in
accordance with Sec. 28, paragraph 5 of Act No. 2259, the Cadastral Act,
as amended by Sec. 1862 of Act No. 2711. Said law ordains that private
surveyors send their original field notes, computations, reports, surveys,
maps and plots regarding a piece of property to the Bureau of Lands for
verification and approval. A survey plan not verified and approved by said
Bureau is nothing more than a private writing, the due execution and
authenticity of which must be proven in accordance with Sec. 20 of Rule
132 of the Rules of Court. The circumstance that the plan was admitted in
evidence without any objection as to its due execution and authenticity
does not signify that the courts shall give probative value therefor. To
admit evidence and not to believe it subsequently are not contradictory to
each other…

In view of the foregoing, it is no longer necessary now to discuss the

defense of laches. It is mooted by the disquisition on the foregoing issues.

WHEREFORE, the assailed decision dated June 30, 1994, of the Court of
Appeals in C.A.-G. R. CV No. 37615, sustaining the judgment of the court a
quo, is AFFIRMED. Costs against petitioner.

SO ORDERED.

G.R. No. 68166 February 12, 1997

HEIRS OF EMILIANO NAVARRO, petitioner,

vs.
INTERMEDIATE APPELLATE COURT & HEIRS OF SINFOROSO PASCUAL,
respondents.

HERMOSISIMA, JR., J.:

Unique is the legal question visited upon the claim of an applicant in a

Land Registration case by oppositors thereto, the Government and a
Government lessee, involving as it does ownership of land formed by
alluvium.

The applicant owns the property immediately adjoining the land sought to
be registered. His registered property is bounded on the east by the Talisay
River, on the west by the Bulacan River, and on the north by the Manila
Bay. The Talisay River and the Bulacan River flow down towards the Manila
Bay and act as boundaries of the applicant's registered land on the east
and on the west.

The land sought to be registered was formed at the northern tip of the
applicant's land. Applicant's registered property is bounded on the north by
the Manila Bay.

The issue: May the land sought to be registered be deemed an accretion in

the sense that it naturally accrues in favor of the riparian owner or should
the land be considered as foreshore land?

Before us is a petition for review of: (1) the decision 1 and (2) two
subsequent resolutions 2 of the Intermediate Appellate Court 3 (now the
Court of Appeals) in Land Registration Case No. N-84, 4 the application
over which was filed by private respondents' predecessor-in-interest,
Sinforoso Pascual, now deceased, before the Court of First Instance 5 (now
the Regional Trial Court) of Balanga, Bataan.

There is no dispute as to the following facts:

On October 3, 1946, Sinforoso Pascual, now deceased, filed an application

for foreshore lease covering a tract of foreshore land in Sibocon, Balanga,
Bataan, having an area of approximately seventeen (17) hectares. This
application was denied on January 15, 1953. So was his motion for
reconsideration.

Subsequently, petitioners' predecessor-in-interest, also now deceased,

Emiliano Navarro, filed a fishpond application with the Bureau of Fisheries
covering twenty five (25) hectares of foreshore land also in Sibocon,
Balanga, Bataan. Initially, such application was denied by the Director of
Fisheries on the ground that the property formed part of the public
domain. Upon motion for reconsideration, the Director of Fisheries, on May
27, 1958, gave due course to his application but only to the extent of
seven (7) hectares of the property as may be certified by the Bureau of
Forestry as suitable for fishpond purposes.

The Municipal Council of Balanga, Bataan, had opposed Emiliano Navarro's

application. Aggrieved by the decision of the Director of Fisheries, it
appealed to the Secretary of Natural Resources who, however, affirmed the
grant. The then Executive Secretary, acting in behalf of the President of
the Philippines, similarly affirmed the grant.

On the other hand, sometime in the early part of 1960, Sinforoso Pascual
flied an application to register and confirm his title to a parcel of land,
situated in Sibocon, Balanga, Bataan, described in Plan Psu-175181 and
said to have an area of 146,611 square meters. Pascual claimed that this
land is an accretion to his property, situated in Barrio Puerto Rivas,
Balanga, Bataan, and covered by Original Certificate of Title No. 6830. It is
bounded on the eastern side by the Talisay River, on the western side by
the Bulacan River, and on the northern side by the Manila Bay. The Talisay
River as well as the Bulacan River flow downstream and meet at the Manila
Bay thereby depositing sand and silt on Pascual's property resulting in an
accretion thereon. Sinforoso Pascual claimed the accretion as the riparian
owner.

On March 25, 1960, the Director of Lands, represented by the Assistant

Solicitor General, filed an opposition thereto stating that neither Pascual
nor his predecessors-in-interest possessed sufficient title to the subject
property, the same being a portion of the public domain and, therefore, it
belongs to the Republic of the Philippines. The Director of Forestry,
through the Provincial Fiscal, similarly opposed Pascual's application for the
same reason as that advanced by the Director of Lands. Later on, however,
the Director of Lands withdrew his opposition. The Director of Forestry
become the sole oppositor.

On June 2, 1960, the court a quo issued an order of general default

excepting the Director of Lands and the Director of Forestry.

Upon motion of Emiliano Navarro, however, the order of general default

was lifted and, on February 13, 1961, Navarro thereupon filed an
opposition to Pascual's application. Navarro claimed that the land sought to
be registered has always been part of the public domain, it being a part of
the foreshore of Manila Bay; that he was a lessee and in possession of a
part of the subject property by virtue of a fishpond permit issued by the
Bureau of Fisheries and confirmed by the Office of the President; and that
be bad already converted the area covered by the lease into a fishpond.
During the pendency of the land registration case, that is, on November 6,
1960, Sinforoso Pascual filed a complaint for ejectment against Emiliano
Navarro, one Marcelo Lopez and their privies, alleged by Pascual to have
unlawfully claimed and possessed, through stealth, force and strategy, a
portion of the subject property covered by Plan Psu-175181. The
defendants in the case were alleged to have built a provisional dike
thereon: thus they have thereby deprived Pascual of the premises sought
to be registered. This, notwithstanding repeated demands for defendants
to vacate the property.

The case was decided adversely against Pascual. Thus, Pascual appealed to
the Court of First Instance (now Regional Trial Court) of Balanga, Bataan,
the appeal having been docketed as Civil Case No. 2873. Because of the
similarity of the parties and the subject matter, the appealed case for
ejectment was consolidated with the land registration case and was jointly
tried by the court a quo.

During the pendency of the trial of the consolidated cases, Emiliano

Navarro died on November 1, 1961 and was substituted by his heirs, the
herein petitioners.

Subsequently, on August 26, 1962, Pascual died and was substituted by his
heirs, the herein private respondents.

On November 10, 1975, the court a quo rendered judgment finding the
subject property to be foreshore land and, being a part of the public
domain, it cannot be the subject of land registration proceedings.

The decision's dispositive portion reads:

WHEREFORE, judgment is rendered:

(1) Dismissing plaintiff [private respondent] Sinforoso Pascual's

complaint for ejectment in Civil Case No. 2873;

(2) Denying the application of Sinforoso Pascual for land

registration over the land in question; and
 (3) Directing said Sinforoso Pascual, through his heirs, as
plaintiff in Civil Case No. 2873 and as applicant in Land
Registration Case No. N-84 to pay costs in both instances." 6

The heirs of Pascual appealed and, before the respondent appellate court,
assisted the following errors:

1. The lower court erred in not finding the land in question as

an accretion by the action of the Talisay and Bulacan Rivers to
the land admittedly owned by applicants-appellants [private
respondents].

2. The lower court erred in holding that the land in question is

foreshore land.

3. The lower court erred in not ordering the registration of the

land in controversy in favor of applicants-appellants [private
respondents].

4. The lower court erred in not finding that the applicants-

appellants [private respondents] are entitled to eject the
oppositor-appellee [petitioners]. 7

On appeal, the respondent court reversed the findings of the court a quo
and granted the petition for registration of the subject property but
excluding therefrom fifty (50) meters from corner 2 towards corner 1; and
fifty meters (50) meters from corner 5 towards corner 6 of the Psu-175181.

The respondent appellate court explained the reversal in this wise:

The paramount issue to be resolved in this appeal as set forth

by the parties in their respective briefs is — whether or not the
land sought to be registered is accretion or foreshore land, or,
whether or not said land was formed by the action of the two
rivers of Talisay and Bulacan or by the action of the Manila Bay.
If formed by the action of the Talisay and Bulacan rivers, the
subject land is accretion but if formed by the action of the
Manila Bay then it is foreshore land.
 xxx xxx xxx

It is undisputed that applicants-appellants [private

respondents] owned the land immediately adjoining the land
sought to be registered. Their property which is covered by
OCT No. 6830 is bounded on the east by the Talisay River, on
the west by the Bulacan River, and on the north by the Manila
Bay. The Talisay and Bulacan rivers come from inland flowing
downstream towards the Manila Bay. In other words, between
the Talisay River and the Bulacan River is the property of
applicants with both rivers acting as the boundary to said land
and the flow of both rivers meeting and emptying into the
Manila Bay. The subject land was formed at the tip or apex of
appellants' [private respondents'] land adding thereto the land
now sought to be registered.

This makes this case quite unique because while it is

undisputed that the subject land is immediately attached to
appellants' [private respondents'] land and forms the tip
thereof, at the same time, said land immediately faces the
Manila Bay which is part of the sea. We can understand
therefore the confusion this case might have caused the lower
court, faced as it was with the uneasy problem of deciding
whether or not the subject land was formed by the action of
the two rivers or by the action of the sea. Since the subject
land is found at the shore of the Manila Bay facing appellants'
[private respondents'] land, it would be quite easy to conclude
that it is foreshore and therefore part of the patrimonial
property of the State as the lower court did in fact rule . . . .

xxx xxx xxx

It is however undisputed that appellants' [private respondents']

land lies between these two rivers and it is precisely appellants'
[private respondents'] land which acts as a barricade
preventing these two rivers to meet. Thus, since the flow of the
two rivers is downwards to the Manila Bay the sediments of
sand and silt are deposited at their mouths.
It is, therefore, difficult to see how the Manila Bay could have
been the cause of the deposit thereat for in the natural course
of things, the waves of the sea eat the land on the shore, as
they suge [sic] inland. It would not therefore add anything to
the land but instead subtract from it due to the action of the
waves and the wind. It is then more logical to believe that the
two rivers flowing towards the bay emptied their cargo of sand,
silt and clay at their mouths, thus causing appellants' [private
respondents'] land to accumulate therein.

However, our distinguished colleage [sic], Mr. Justice Serrano,

do [sic] not seem to accept this theory and stated that the
subject land arose only when . . . . Pascual planted "palapat"
and "bakawan" trees thereat to serve as a boundary or strainer.
But we do not see how this act of planting trees by Pascual
would explain how the land mass came into being. Much less
will it prove that the same came from the sea. Following Mr.
Justice Serrano's argument that it were the few trees that acted
as strainers or blocks, then the land that grew would have
stopped at the place where the said trees were planted. But
this is not so because the land mass went far beyond the
boundary, or where the trees were planted.

On the other hand, the picture-exhibits of appellants [private

respondents] clearly show that the land that accumulated
beyond the so- called boundary, as well as the entire area
being applied for is dry land, above sea level, and bearing
innumerable trees . . . The existence of vegetation on the land
could only confirm that the soil thereat came from inland rather
than from the sea, for what could the sea bring to the shore
but sand, pebbles, stones, rocks and corrals? On the other
hand, the two rivers would be bringing soil on their downward
flow which they brought along from the eroded mountains, the
lands along their path, and dumped them all on the northern
portion of appellants' [private respondents'] land.

In view of the foregoing, we have to deviate from the lower

court's finding. While it is true that the subject land is found at
the shore of the Manila Bay fronting appellants' [private
respondents'] land, said land is not foreshore but an accretion
from the action of the Talisay and Bulacan rivers. In fact, this is
exactly what the Bureau of Lands found out, as shown in the
following report of the Acting Provincial Officer, Jesus M.
Orozco, to wit:

"Upon ocular inspection of the land subject of this

registration made on June 11, 1960, it was found
out that the said land is . . . . sandwitched [sic] by
two big rivers . . . . These two rivers bring down
considerable amount of soil and sediments during
floods every year thus raising the soil of the land
adjoining the private property of the applicant
[private respondents]. About four-fifth [sic] of the
area applied for is now dry land whereon are
planted palapat trees thickly growing thereon. It is
the natural action of these two rivers that has
caused the formation of said land . . . . subject of
this registration case. It has been formed,
therefore, by accretion. And having been formed by
accretion, the said land may be considered the
private property of the riparian owner who is the
applicant herein [private respondents] . . . .

In view of the above, the opposition hereto filed by

the government should be withdrawn, except for
the portion recommended by the land investigator
in his report dated May 2, 1960, to be excluded and
considered foreshore. . . ."

Because of this report, no less than the Solicitor General

representing the Bureau of Lands withdrew his opposition
dated March 25, 1960, and limited "the same to the northern
portion of the land applied for, compromising a strip 50 meters
wide along the Manila Bay, which should be declared public
land as part of the foreshore" . . . . 8
 Pursuant to the aforecited decision, the respondent appellate court
ordered the issuance of the corresponding decree of registration in
the name of private respondents and the reversion to private
respondents of the possession of the portion of the subject property
included in Navarro's fishpond permit.

On December 20, 1978, petitioners filed a motion for reconsideration of the

aforecited decision. The Director of Forestry also moved for the
reconsideration of the same decision. Both motions were opposed by
private respondents on January 27, 1979.

On November 21, 1980, respondent appellate court promulgated a

resolution denying the motion for reconsideration filed by the Director of
Forestry. It, however, modified its decision, to read, viz:

(3). Ordering private oppositors Heirs of Emiliano Navarro to

vacate that portion included in their fishpond permit covered by
Plan Psu-175181 and hand over possession of said portion to
applicants-appellants, if the said portion is not within the strip
of land fifty (50) meters wide along Manila Bay on the northern
portion of the land subject of the registration proceedings and
which area is more particularly referred to as fifty (50) meters
from corner 2 towards corner 1; and fifty (50) meters from
corner 5 towards corner 6 of Plan Psu-175181. . . . 9

On December 15, 1980, we granted the Solicitor General, acting as counsel

for the Director of Forestry, an extension of time within which to file in this
court, a petition for review of the decision dated November 29, 1978 of the
respondent appellate court and of the aforecited resolution dated
November 21, 1980.

Thereafter, the Solicitor General, in behalf of the Director of Forestry, filed

a petition for review entitled, "The Director of Forestry vs. the Court of
Appeals." 10 We, however, denied the same in a minute resolution dated
July 20, 1981, such petition having been prematurely filed at a time when
the Court of Appeals was yet to resolve petitioners' pending motion to set
aside the resolution dated November 21, 1980.
On October 9, 1981, respondent appellate court denied petitioners' motion
for reconsideration of the decision dated November 29, 1978.

On October 17, 1981, respondent appellate court made an entry of

judgment stating that the decision dated November 29, 1978 had become
final and executory as against herein petitioners as oppositors in L.R.C.
Case No. N-84 and Civil Case No. 2873 of the Court of First Instance (now
the Regional Trial Court) of Balanga, Bataan.

On October 26, 1981, a second motion for reconsideration of the decision

dated November 29, 1978 was filed by petitioners' new counsel.

On March 26, 1982, respondent appellate court issued a resolution

granting petitioners' request for leave to file a second motion for
reconsideration.

On July 13, 1984, after hearing, respondent appellate court denied

petitioners' second motion for reconsideration on the ground that the same
was filed out of time, citing Rule 52, Section 1 of the Rules of Court which
provides that a motion for reconsideration shall be made ex-parte and filed
within fifteen (15) days from the notice of the final order or judgment.

Hence this petition where the respondent appellate court is imputed to

have palpably erred in appreciating the fact of the case and to have
gravely misapplied statutory and case law relating to accretion, specifically,
Article 457 of the Civil Code.

We find no merit in the petition.

The disputed property was brought forth by both the withdrawal of

the waters of Manila Bay and the accretion formed on the exposed
foreshore land by the action of the sea which brought soil and sand
sediments in turn trapped by the palapat and bakawan trees planted
thereon by petitioner Sulpicio Pascual in 1948

Anchoring their claim of ownership on Article 457 of the Civil Code,

petitioners vigorously argue that the disputed 14-hectare land is an
accretion caused by the joint action of the Talisay and Bulacan Rivers
which run their course on the eastern and western boundaries,
respectively, of petitioners' own tract of land.

Accretion as a mode of acquiring property under said Article 457, requires

the concurrence of the following requisites: (1) that the accumulation of
soil or sediment be gradual and imperceptible; (2) that it be the result of
the action of the waters of the river; and (3) that the land where the
accretion takes place is adjacent to the bank of the river. 11 Accretion is the
process whereby the soil is deposited, while alluvium is the soil deposited
on the estate fronting the river bank 12; the owner of such estate is called
the riparian owner. Riparian owners are, strictly speaking, distinct from
littoral owners, the latter being owners of lands bordering the shore of the
sea or lake or other tidal waters. 13 The alluvium, by mandate of Article 457
of the Civil Code, is automatically owned by the riparian owner from the
moment the soil deposit can be seen 14 but is not automatically registered
property, hence, subject to acquisition through prescription by third
persons 15.

Petitioners' claim of ownership over the disputed property under the

principle of accretion, is misplaced.

First, the title of petitioners' own tract of land reveals its northeastern
boundary to be Manila Bay. Petitioners' land, therefore, used to adjoin,
border or front the Manila Bay and not any of the two rivers whose
torrential action, petitioners insist, is to account for the accretion on their
land. In fact, one of the petitioners, Sulpicio Pascual, testified in open court
that the waves of Manila Bay used to hit the disputed land being part of
the bay's foreshore but, after he had planted palapat and bakawan trees
thereon in 1948, the land began to
rise. 16

Moreover, there is no dispute as to the location of: (a) the disputed land;
(b) petitioners' own tract of land; (c) the Manila Bay; and, (d) the Talisay
and Bulacan Rivers. Petitioners' own land lies between the Talisay and
Bulacan Rivers; in front of their land on the northern side lies now the
disputed land where before 1948, there lay the Manila Bay. If the accretion
were to be attributed to the action of either or both of the Talisay and
Bulacan Rivers, the alluvium should have been deposited on either or both
of the eastern and western boundaries of petitioners' own tract of land, not
on the northern portion thereof which is adjacent to the Manila Bay. Clearly
lacking, thus, is the third requisite of accretion, which is, that the alluvium
is deposited on the portion of claimant's land which is adjacent to the river
bank.

Second, there is no dispute as to the fact that petitioners' own tract of land
adjoins the Manila Bay. Manila Bay is obviously not a river, and
jurisprudence is already settled as to what kind of body of water the Manila
Bay is. It is to be remembered that we held that:

Appellant next contends that . . . . Manila Bay cannot be

considered as a sea. We find said contention untenable. A bay
is part of the sea, being a mere indentatiom of the same:

"Bay. — An opening into the land where the water

is shut in on all sides except at the entrance; an
inlet of the sea; an arm of the sea, distinct from a
river, a bending or curbing of the shore of the sea
or of a lake. " 7 C.J. 1013-1014." 17

The disputed land, thus, is an accretion not on a river bank but on a sea
bank, or on what used to be the foreshore of Manila Bay which adjoined
petitioners' own tract of land on the northern side. As such, the applicable
law is not Article 457 of to Civil Code but Article 4 of the Spanish Law of
Waters of 1866.

The process by which the disputed land was formed, is not difficult to
discern from the facts of the case. As the trial court correctly observed:

A perusal of the survey plan . . . . of the land subject matter of

these cases shows that on the eastern side, the property is
bounded by Talisay River, on the western side by Bulacan
River, on the southern side by Lot 1436 and on the northern
side by Manila Bay. It is not correct to state that the Talisay
and Bulacan Rivers meet a certain portion because the two
rivers both flow towards Manila Bay. The Talisay River is
straight while the Bulacan River is a little bit meandering and
there is no portion where the two rivers meet before they end
up at Manila Bay. The land which is adjacent to the property
 belonging to Pascual cannot be considered an accretion
[caused by the action of the two rivers].

Applicant Pascual . . . . has not presented proofs to convince

the Court that the land he has applied for registration is the
result of the settling down on his registered land of soil, earth
or other deposits so as to be rightfully be considered as an
accretion [caused by the action of the two rivers]. Said Art. 457
finds no applicability where the accretion must have been
caused by action of the bay. 18

The conclusion formed by the trial court on the basis of the aforegoing
observation is that the disputed land is part of the foreshore of Manila Bay
and therefore, part of the public domain. The respondent appellate court,
however, perceived the fact that petitioners' own land lies between the
Talisay and Bulacan Rivers, to be basis to conclude that the disputed land
must be an accretion formed by the action of the two rivers because
petitioners' own land acted as a barricade preventing the two rivers to
meet and that the current of the two rivers carried sediments of sand and
silt downwards to the Manila Bay which accumulated somehow to a 14-
hectare land. These conclusions, however, are fatally incongruous in the
light of the one undisputed critical fact: the accretion was deposited, not
on either the eastern or western portion of petitioners' land where a river
each runs, but on the northern portion of petitioners' land which adjoins
the Manila Bay. Worse, such conclusions are further eroded of their
practical logic and consonance with natural experience in the light of
Sulpicio Pascual's admission as to having planted palapat and bakawan
trees on the northern boundary of their own land. In amplification of this,
plainly more reasonable and valid are Justice Mariano Serrano's
observations in his dissenting opinion when he stated that:

As appellants' (titled) land . . . . acts as a barricade that

prevents the two rivers to meet, and considering the wide
expanse of the boundary between said land and the Manila
Bay, measuring some 593.00 meters . . . . it is believed rather
farfetched for the land in question to have been formed
through "sediments of sand and salt [sic] . . . . deposited at
their [rivers'] mouths." Moreover, if "since the flow of the two
rivers is downwards to the Manila Bay the sediments of sand
and silt are deposited at their mouths," why then would the
alleged cargo of sand, silt and clay accumulate at the northern
portion of appellants' titled land facing Manila Bay instead of
merely at the mouths and banks of these two rivers? That
being the case, the accretion formed at said portion of
appellants' titled [land] was not caused by the current of the
two rivers but by the action of the sea (Manila Bay) into which
the rivers empty.

The conclusion . . . . is not supported by any reference to the

evidence which, on the contrary, shows that the disputed land
was formed by the action of the sea. Thus, no less than
Sulpicio Pascual, one of the heirs of the original applicant,
testified on cross-examination that the land in dispute was part
of the shore and it was only in 1948 that he noticed that the
land was beginning to get higher after he had planted trees
thereon in
1948. . . . .

. . . . it is established that before 1948 sea water from the

Manila Bay at high tide could reach as far as the dike of
appellants' fishpond within their titled property, which dike now
separates this titled property from the land in question. Even in
1948 when appellants had already planted palapat and
bakawan trees in the land involved, inasmuch as these trees
were yet small, the waves of the sea could still reach the dike.
This must be so because in . . . . the survey plan of the titled
property approved in 1918, said titled land was bounded on the
north by Manila Bay. So Manila Bay was adjacent to it on the
north. It was only after the planting of the aforesaid trees in
1948 that the land in question began to rise or to get higher in
elevation.

The trees planted by appellants in 1948 became a sort of

strainer of the sea water and at the same time a kind of block
to the strained sediments from being carried back to the sea by
the very waves that brought them to the former shore at the
 end of the dike, which must have caused the shoreline to
recede and dry up eventually raising the former shore leading
to the formation of the land in question." 19

In other words, the combined and interactive effect of the planting of

palapat and bakawan trees, the withdrawal of the waters of Manila
Bay eventually resulting in the drying up of its former foreshore, and
the regular torrential action of the waters of Manila Bay, is the
formation of the disputed land on the northern boundary of
petitioners' own tract of land.

The disputed property is an accretion on a sea bank, Manila Bay

being an inlet or an arm of the sea; as such, the disputed property is,
under Article 4 of the Spanish Law of Waters of 1866, part of the
public domain

At the outset, there is a need to distinguish between Manila Bay and

Laguna de Bay.

While we held in the case of Ignacio v. Director of Lands and

Valeriano 20 that Manila Bay is considered a sea for purposes of
determining which law on accretion is to be applied in multifarious
situations, we have ruled differently insofar as accretions on lands
adjoining the Laguna de Bay are concerned.

In the cases of Government of the P.I v. Colegio de San Jose 21, Republic
v. Court of Appeals 22, Republic v. Alagad 23, and Meneses v. Court of
Appeals 24, we categorically ruled that Laguna de Bay is a lake the
accretion on which, by the mandate of Article 84 of the Spanish Law of
Waters of 1866, belongs to the owner of the land contiguous thereto.

The instant controversy, however, brings a situation calling for the

application of Article 4 of the Spanish Law of Waters of 1866, the disputed
land being an accretion on the foreshore of Manila Bay which is, for all
legal purposes, considered a sea.

Article 4 of the Spanish Law of Waters of August 3, 1866 provides as

follows:
 Lands added to the shores by accretions and alluvial deposits
caused by the action of the sea, form part of the public domain.
When they are no longer washed by the waters of the sea and
are not necessary for purposes of public utility, or for the
establishment of special industries, or for the coast-guard
service, the Government shall declare them to be the property
of the owners of the estates adjacent thereto and as increment
thereof.

In the light of the aforecited vintage but still valid law, unequivocal is the
public nature of the disputed land in this controversy, the same being an
accretion on a sea bank which, for all legal purposes, the foreshore of
Manila Bay is. As part of the public domain, the herein disputed land is
intended for public uses, and "so long as the land in litigation belongs to
the national domain and is reserved for public uses, it is not capable of
being appropriated by any private person, except through express
authorization granted in due form by a competent authority." 25 Only the
executive and possibly the legislative departments have the right and the
power to make the declaration that the lands so gained by action of the
sea is no longer necessary for purposes of public utility or for the cause of
establishment of special industries or for coast guard services. 26 Petitioners
utterly fail to show that either the executive or legislative department has
already declared the disputed land as qualified, under Article 4 of the
Spanish Law of Waters of 1866, to be the property of petitioners as owners
of the estates adjacent thereto.

WHEREFORE, the instant Petition for Review is hereby DENIED and

DISMISSED.

Costs against petitioners.

SO ORDERED.

[G.R. No. 98045. June 26, 1996]

DESAMPARADO VDA. DE NAZARENO and LETICIA NAZARENO TAPIA,

petitioners, vs. THE COURT OF APPEALS, MR. & MRS. JOSE SALASALAN,
MR. & MRS. LEO RABAYA, AVELINO LABIS, HON. ROBERTO G. HILARIO,
ROLLEO I. IGNACIO, ALBERTO M. GILLERA and HON. ABELARDO G.
PALAD, JR., in their official and/or private capacities, respondents.

SYLLABUS

1. CIVIL LAW; OWNERSHIP; RIGHTS OF ACCESSION WITH RESPECT TO

IMMOVABLE PROPERTY; ARTICLE 457; REQUISITES.- In the case of
Meneses vs. CA, this Court held that accretion, as a mode of acquiring
property under Art. 457 of the Civil Code, requires the concurrence of
these requisites: (1) that the deposition of soil or sediment be gradual and
imperceptible; (2) that it be the result of the action of the waters of the
river (or sea); and (3) that the land where accretion takes place is adjacent
to the banks of rivers (or the sea coast). These are called the rules on
alluvion which if present in a case, give to the owners of lands adjoining
the banks of rivers or streams any accretion gradually received from the
effects of the current of waters.

2. ID.; ID.; ID.; ID.; ID.; NOT PRESENT IN CASE AT BAR.- Where the
accretion was formed by the dumping of boulders, soil and other filling
materials on portions of the Balacanas Creek and the Cagayan River
bounding petitioner's land, it cannot be claimed that the accumulation was
gradual and imperceptible, resulting from the action of the waters or the
current of the creek and the river. In Hilario vs. City of Manila, this Court
held that the word “current” indicates the participation of the body of
water in the ebb and flow of waters due to high and low tide. Not having
met the first and second requirements of the rules of alluvion, petitioners
cannot claim the rights of a riparian owner.

3. ID.; ID.; ID.; ID.; ID.; THAT DEPOSIT IS DUE TO THE CURRENT OF
THE RIVER, MANDATORY.- In Republic vs. CA, this Court ruled that the
requirement that the deposit should be due to the effect of the current of
the river is indispensable. This excludes from Art. 457 of the Civil Code all
deposits caused by human intervention. Putting it differently, alluvion
must be the exclusive work of nature. Thus, in Tiongco vs. Director of
Lands, et al., where the land was not formed solely by the natural effect of
the water current of the river bordering said land but is also the
consequence of the direct and deliberate intervention of man, it was
deemed a man-made accretion and, as such, part of the public domain. In
the case at bar, the subject land was the direct result of the dumping of
sawdust by the Sun Valley Lumber Co. consequent to its sawmill
operations.

4. ID.; PUBLIC LANDS; FINDINGS AS SUCH BY THE BUREAU OF LANDS,

RESPECTED.- The mere filing of the Miscellaneous Sales Application
constituted an admission that the land being applied for was public land,
having been the subject of a Survey Plan wherein said land was described
as an orchard. Furthermore, the Bureau of Lands classified the subject
land as an accretion area which was formed by deposits of sawdust in the
Balacanas Creek and the Cagayan river, in accordance with the ocular
inspection conducted by the Bureau of Lands. This Court has often enough
held that findings of administrative agencies which have acquired expertise
because their jurisdiction is confined to specific matters are generally
accorded not only respect but even finality. Again, when said factual
findings are affirmed by the Court of Appeals, the same are conclusive on
the parties and not reviewable by this Court.

5. ID.; PUBLIC LAND LAW; JURISDICTION OVER PUBLIC LANDS.- Having

determined that the subject land is public land, a fortiori, the Bureau of
Lands, as well as the Office of the Secretary of Agriculture and Natural
Resources have jurisdiction over the same in accordance with the Public
Land Law. Under Sections 3 and 4 thereof, the Director of Lands has
jurisdiction, authority and control over public lands. Here respondent Palad
as Director of Lands, is authorized to exercise executive control over any
form of concession, disposition and management of the lands of the public
domain. He may issue decisions and orders as he may see fit under the
circumstances as long as they are based on the findings of fact. In the
case of Calibo vs. Ballesteros, this Court held that where, in the disposition
of public lands, the Director of Lands bases his decision on the evidence
thus presented, he clearly acts within his jurisdiction, and if he errs in
appraising the evidence, the error is one of judgment, but not an act of
grave abuse of discretion annullable by certiorari.

6. ADMINISTRATIVE LAW; ADMINISTRATIVE REMEDIES; EXHAUSTED IN

CASE AT BAR.- The administrative remedies have been exhausted.
Petitioners could not have intended to appeal to respondent Ignacio as an
Officer-In-Charge of the Bureau of Lands. The decision being appealed
from was the decision of respondent Hilario who was the Regional Director
of the Bureau of Lands. Said decision was made "for and by authority of
the Director of Lands." It would be incongruous to appeal the decision of
the Regional Director of the Bureau of Lands acting for the Director of the
Bureau of Lands to an Officer-In-Charge of the Bureau of Lands. In any
case, respondent Ignacio's official designation was "Undersecretary of the
Department of Agriculture and Natural Resources." He was only an
"Officer-In-Charge" of the Bureau of Lands. When he acted on the late
Antonio Nazareno's motion for reconsideration by affirming or adopting
respondent Hilario's decision, he was acting on said motion as an
Undersecretary on behalf of the Secretary of the Department. In the case
of Hamoy vs. Secretary of Agriculture and Natural Resources, this Court
held that the Undersecretary of Agriculture and Natural Resources may
modify, adopt, or set aside the orders or decisions of the Director of Lands
with respect to questions involving public lands under the administration
and control of the Bureau of Lands and the Department of Agriculture and
Natural Resources. He cannot, therefore, be said to have acted beyond
the bounds of his jurisdiction under Sections 3, 4 and 5 of Commonwealth
Act No. 141.

APPEARANCES OF COUNSEL

Manolo L. Tagarda, Sr. for petitioners.

Arturo R. Legaspi for private respondents.

DECISION

ROMERO, J.:

Petitioners Desamparado Vda. de Nazareno and Leticia Nazareno Tapia

challenge the decision of the Court of Appeals which affirmed the dismissal
of petitioners' complaint by the Regional Trial Court of Misamis Oriental,
Branch 22. The complaint was for annulment of the verification, report
and recommendation, decision and order of the Bureau of Lands regarding
a parcel of public land.

The only issue involved in this petition is whether or not petitioners

exhausted administrative remedies before having recourse to the courts.
The subject of this controversy is a parcel of land situated in Telegrapo,
Puntod, Cagayan de Oro City. Said land was formed as a result of sawdust
dumped into the dried-up Balacanas Creek and along the banks of the
Cagayan river.

Sometime in 1979, private respondents Jose Salasalan and Leo Rabaya

leased the subject lots on which their houses stood from one Antonio
Nazareno, petitioners' predecessor-in-interest. In the latter part of 1982,
private respondents allegedly stopped paying rentals. As a result, Antonio
Nazareno and petitioners filed a case for ejectment with the Municipal Trial
Court of Cagayan de Oro City, Branch 4. A decision was rendered against
private respondents, which decision was affirmed by the Regional Trial
Court of Misamis Oriental, Branch 20.

The case was remanded to the municipal trial court for execution of
judgment after the same became final and executory. Private respondents
filed a case for annulment of judgment before the Regional Trial Court of
Misamis Oriental, Branch 24 which dismissed the same. Antonio Nazareno
and petitioners again moved for execution of judgment but private
respondents filed another case for certiorari with prayer for restraining
order and/or writ of preliminary injunction with the Regional Trial Court of
Misamis Oriental, Branch 25 which was likewise dismissed. The decision of
the lower court was finally enforced with the private respondents being
ejected from portions of the subject lots they occupied.

Before he died, Antonio Nazareno caused the approval by the Bureau of

Lands of the survey plan designated as Plan Csd-106-00571 with a view to
perfecting his title over the accretion area being claimed by him. Before
the approved survey plan could be released to the applicant, however, it
was protested by private respondents before the Bureau of Lands.

In compliance with the order of respondent District Land Officer Alberto M.

Gillera, respondent Land Investigator Avelino G. Labis conducted an
investigation and rendered a report to the Regional Director recommending
that Survey Plan No. MSI-10-06-000571-D (equivalent to Lot No. 36302,
Cad. 237) in the name of Antonio Nazareno, be cancelled and that private
respondents be directed to file appropriate public land applications.
Based on said report, respondent Regional Director of the Bureau of Lands
Roberto Hilario rendered a decision ordering the amendment of the survey
plan in the name of Antonio Nazareno by segregating therefrom the areas
occupied by the private respondents who, if qualified, may file public land
applications covering their respective portions.

Antonio Nazareno filed a motion for reconsideration with respondent Rolleo

Ignacio, Undersecretary of the Department of Natural Resources and
Officer-in-Charge of the Bureau of Lands who denied the motion.
Respondent Director of Lands Abelardo Palad then ordered him to vacate
the portions adjudicated to private respondents and remove whatever
improvements they have introduced thereon. He also ordered that private
respondents be placed in possession thereof.

Upon the denial of the late Antonio Nazareno's motion for reconsideration,
petitioners Desamparado Vda. de Nazareno and Leticia Tapia Nazareno,
filed a case before the RTC, Branch 22 for annulment of the following:
order of investigation by respondent Gillera, report and recommendation by
respondent Labis, decision by respondent Hilario, order by respondent
Ignacio affirming the decision of respondent Hilario and order of execution
by respondent Palad. The RTC dismissed the complaint for failure to
exhaust administrative remedies which resulted in the finality of the
administrative decision of the Bureau of Lands.

On appeal, the Court of Appeals affirmed the decision of the RTC

dismissing the complaint. Applying Section 4 of C.A. No. 141, as amended,
it contended that the approval of the survey plan belongs exclusively to the
Director of Lands. Hence, factual findings made by the Metropolitan Trial
Court respecting the subject land cannot be held to be controlling as the
preparation and approval of said survey plans belong to the Director of
Lands and the same shall be conclusive when approved by the Secretary of
Agriculture and Natural Resources.[1]

Furthermore, the appellate court contended that the motion for

reconsideration filed by Antonio Nazareno cannot be considered as an
appeal to the Office of the Secretary of Agriculture and Natural Resources,
as mandated by C.A. No. 141 inasmuch as the same had been acted upon
by respondent Undersecretary Ignacio in his capacity as Officer-in-Charge
of the Bureau of Lands and not as Undersecretary acting for the Secretary
of Agriculture and Natural Resources. For the failure of Antonio Nazareno
to appeal to the Secretary of Agriculture and Natural Resources, the
present case does not fall within the exception to the doctrine of
exhaustion of administrative remedies. It also held that there was no
showing of oppressiveness in the manner in which the orders were issued
and executed.

Hence, this petition.

Petitioners assign the following errors:

I. PUBLIC RESPONDENT COURT OF APPEALS IN A WHIMSICAL,

ARBITRARY AND CAPRICIOUS MANNER AFFIRMED THE DECISION OF THE
LOWER COURT WHICH IS CONTRARY TO THE PREVAILING FACTS AND
THE LAW ON THE MATTER;

II. PUBLIC RESPONDENT COURT OF APPEALS IN A WHIMSICAL,

ARBITRARY AND CAPRICIOUS MANNER AFFIRMED THE DECISION OF THE
LOWER COURT DISMISSING THE ORIGINAL CASE WHICH FAILED TO
CONSIDER THAT THE EXECUTION ORDER OF PUBLIC RESPONDENT
ABELARDO G. PALAD, JR., DIRECTOR OF LANDS, MANILA, PRACTICALLY
CHANGED THE DECISION OF PUBLIC RESPONDENT ROBERTO HILARIO,
REGIONAL DIRECTOR, BUREAU OF LANDS, REGION 10, THUS MAKING
THE CASE PROPER SUBJECT FOR ANNULMENT WELL WITHIN THE
JURISDICTION OF THE LOWER COURT.

The resolution of the above issues, however, hinges on the question of

whether or not the subject land is public land. Petitioners claim that the
subject land is private land being an accretion to his titled property,
applying Article 457 of the Civil Code which provides:

"To the owners of lands adjoining the banks of rivers belong the accretion
which they gradually receive from the effects of the current of the waters."

In the case of Meneses v. CA,[2] this Court held that accretion, as a mode
of acquiring property under Art. 457 of the Civil Code, requires the
concurrence of these requisites: (1) that the deposition of soil or sediment
be gradual and imperceptible; (2) that it be the result of the action of the
waters of the river (or sea); and (3) that the land where accretion takes
place is adjacent to the banks or rivers (or the sea coast). These are called
the rules on alluvion which if present in a case, give to the owners of lands
adjoining the banks of rivers or streams any accretion gradually received
from the effects of the current of waters.

For petitioners to insist on the application of these rules on alluvion to their

case, the above-mentioned requisites must be present. However, they
admit that the accretion was formed by the dumping of boulders, soil and
other filling materials on portions of the Balacanas Creek and the Cagayan
River bounding their land.[3] It cannot be claimed, therefore, that the
accumulation of such boulders, soil and other filling materials was gradual
and imperceptible, resulting from the action of the waters or the current of
the Balacanas Creek and the Cagayan River. In Hilario v. City of Manila,[4]
this Court held that the word "current" indicates the participation of the
body of water in the ebb and flow of waters due to high and low tide.
Petitioners' submission not having met the first and second requirements of
the rules on alluvion, they cannot claim the rights of a riparian owner.

In any case, this court agrees with private respondents that petitioners are
estopped from denying the public character of the subject land, as well as
the jurisdiction of the Bureau of Lands when the late Antonio Nazareno
filed his Miscellaneous Sales Application MSA (G-6) 571.[5] The mere filing
of said Application constituted an admission that the land being applied for
was public land, having been the subject of Survey Plan No. MSI-10-06-
000571-D (Equivalent to Lot No. 36302, Cad-237) which was conducted as
a consequence of Antonio Nazareno's Miscellaneous Sales Application
wherein said land was described as an orchard. Said description by
Antonio Nazareno was, however, controverted by respondent Labis in his
investigation report to respondent Hilario based on the findings of his
ocular inspection that said land actually covers a dry portion of Balacanas
Creek and a swampy portion of Cagayan River. The investigation report
also states that except for the swampy portion which is fully planted to
nipa palms, the whole area is fully occupied by a part of a big concrete
bodega of petitioners and several residential houses made of light
materials, including those of private respondents which were erected by
themselves sometime in the early part of 1978.[6]
Furthermore, the Bureau of Lands classified the subject land as an
accretion area which was formed by deposits of sawdust in the Balacanas
Creek and the Cagayan river, in accordance with the ocular inspection
conducted by the Bureau of Lands.[7] This Court has often enough held
that findings of administrative agencies which have acquired expertise
because their jurisdiction is confined to specific matters are generally
accorded not only respect but even finality.[8] Again, when said factual
findings are affirmed by the Court of Appeals, the same are conclusive on
the parties and not reviewable by this Court.[9]

It is this Court's irresistible conclusion, therefore, that the accretion was

man-made or artificial. In Republic v. CA,[10] this Court ruled that the
requirement that the deposit should be due to the effect of the current of
the river is indispensable. This excludes from Art. 457 of the Civil Code all
deposits caused by human intervention. Putting it differently, alluvion
must be the exclusive work of nature. Thus, in Tiongco v. Director of
Lands, et al.,[11] where the land was not formed solely by the natural
effect of the water current of the river bordering said land but is also the
consequence of the direct and deliberate intervention of man, it was
deemed a man-made accretion and, as such, part of the public domain.

In the case at bar, the subject land was the direct result of the dumping of
sawdust by the Sun Valley Lumber Co. consequent to its sawmill
operations.[12] Even if this Court were to take into consideration
petitioners' submission that the accretion site was the result of the late
Antonio Nazareno's labor consisting in the dumping of boulders, soil and
other filling materials into the Balacanas Creek and Cagayan River
bounding his land,[13] the same would still be part of the public domain.

Having determined that the subject land is public land, a fortiori, the
Bureau of Lands, as well as the Office of the Secretary of Agriculture and
Natural Resources have Jurisdiction over the same in accordance with the
Public Land Law. Accordingly, the court a quo dismissed petitioners'
complaint for non-exhaustion of administrative remedies which ruling the
Court of Appeals affirmed.

However, this Court agrees with petitioners that administrative remedies

have been exhausted. Petitioners could not have intended to appeal to
respondent Ignacio as an Officer-in-Charge of the Bureau of Lands. The
decision being appealed from was the decision of respondent Hilario who
was the Regional Director of The Bureau of Lands. Said decision was made
"for and by authority of the Director of Lands."[14] It would be
incongruous to appeal the decision of the Regional Director of the Bureau
of Lands acting for the Director of the Bureau of Lands to an Officer-In-
Charge of the Bureau of Lands.

In any case, respondent Rolleo Ignacio's official designation was

"Undersecretary of the Department of Agriculture and Natural Resources."
He was only an "Officer-In-Charge" of the Bureau of Lands. When he
acted on the late Antonio Nazareno's motion for reconsideration by
affirming or adopting respondent's Hilario's decision, he was acting on said
motion as an Undersecretary on behalf of the Secretary of the
Department. In the case of Hamoy v. Secretary of Agriculture and Natural
Resources,[15] This Court held that the Undersecretary of Agriculture and
Natural Resources may modify, adopt, or set aside the orders or decisions
of the Director of Lands with respect to questions involving public lands
under the administration and control of the Bureau of Lands and the
Department of Agriculture and Natural Resources. He cannot therefore, be
said to have acted beyond the bounds of his jurisdiction under Sections 3,
4 and 5 of Commonwealth Act No. 141.[16]

As borne out by the administrative findings, the controverted land is public

land, being an artificial accretion of sawdust. As such, the Director of
Lands has jurisdiction, authority and control over the same, as mandated
under Sections 3 and 4 of the Public Land Law (C.A. No. 141) which states,
thus:

"Sec. 3. The Secretary of Agriculture and Natural Resources shall be the

exclusive officer charged with carrying out the provisions of this Act
through the Director of Lands who shall act under his immediate control.

Sec. 4. Subject to said control, the Director of Lands shall have direct
executive control of the survey, classification, lease, sale or any other form
of concession or disposition and management of the lands of the public
domain, and his decisions as to questions of fact shall be conclusive when
approved by the Secretary of Agriculture and Natural Resources."
In connection with the second issue, petitioners ascribe whim, arbitrariness
or capriciousness in the execution order of public respondent Abelardo G.
Palad, the Director of Lands. This Court finds otherwise since said decision
was based on the conclusive finding that the subject land was public land.
Thus, this Court agrees with the Court of Appeals that the Director of
Lands acted within his rights when he issued the assailed execution order,
as mandated by the aforecited provisions.

Petitioners' allegation that respondent Palad's execution order directing

them to vacate the subject land practically changed respondent Hilario's
decision is baseless. It is incorrect for petitioners to assume that
respondent Palad awarded portions of the subject land to private
respondents Salasalans and Rayabas as they had not yet been issued
patents or titles over the subject land. The execution order merely
directed the segregation of petitioners' titled lot from the subject land
which was actually being occupied by private respondents before they were
ejected from it. Based on the finding that private respondents were
actually in possession or were actually occupying the subject land instead
of petitioners, respondent Palad, being the Director of Lands and in the
exercise of this administrative discretion, directed petitioners to vacate the
subject land on the ground that private respondents have a preferential
right, being the occupants thereof.

While private respondents may not have filed their application over the
land occupied by them, they nevertheless filed their protest or opposition
to petitioners' Miscellaneous Sales Application, the same being preparatory
to the filing of an application as they were in fact directed to do so. In any
case, respondent Palad's execution order merely implements respondent
Hilario's order. It should be noted that petitioners' own application still has
to be given due course.[17]

As Director of lands, respondent Palad is authorized to exercise executive

control over any form of concession, disposition and management of the
lands of the public domain.[18] He may issue decisions and orders as he
may see fit under the circumstances as long as they are based on the
findings of fact.

In the case of Calibo v. Ballesteros,[19] this Court held that where, in the
disposition of public lands, the Director of Lands bases his decision on the
evidence thus presented, he clearly acts within his jurisdiction, and if he
errs in appraising the evidence, the error is one of judgment, but not an
act or grave abuse of discretion annullable by certiorari. Thus, except for
the issue of non-exhaustion of administrative remedies, this Court finds no
reversible error nor grave abuse of discretion in the decision of the Court of
Appeals.

WHEREFORE, the petition is DISMISSED for lack of merit.

SO ORDERED

JAGUALING V. CA

194 SCRA 607

FACTS:
Eduave owned a parcel of land which later was eroded due to a
typhoon and through the movement of land deposit. Eduave granted
defendants to plant corn and bananas. She also hired a surveyor
to put monuments.
She also paid taxes. Here comes petitioner who opposes the claim
of ownership claiming the typhoon caused the formation of island, the
same they occupied for 15 years now.

HELD:

The island formed belongs to the owner of the land with the
nearest margin.

If the riparian owner fails to assert his claim, it could be open to adverse
possession.
agualing v. CA
[G.R. No. 94283. March 4, 1991.]
First Division, Gancayco (J): 4 concur

Facts: A certain parcel of land is located in Sta. Cruz, Tagoloan, Misamis

Oriental with an area of 16,452 sq. m., forming part of an island in a non-
navigable river, bounded by the Tagoloan river on the north, south, and
east and by the portion belonging to Vicente Neri on the west. Janita
Eduave claims that she inherited the land from her father, Felomino
Factura, together with his co-heirs, Reneiro Factura and Aldenora Factura,
and acquired sole ownership of the property by virtue of a Deed of Extra
Judicial Partition with sale. The land is declared for tax purposes under Tax
Declaration 26137 with an area of 16,452 sq. m. Since the death of her
father on 5 May 1949, Eduave had been in possession of the property
although the tax declaration remains in the name of the deceased father.
The entire land had an area of 16,452 sq. m. appearing in the deed of
extrajudicial partition, while in tax declaration the area is only 4,937 sq. m.,
and she reasoned out that she included the land that was under water. The
land was eroded sometime in November 1964 due to typhoon Ineng,
destroying the bigger portion and the improvements leaving only a coconut
tree. In 1966 due to the movement of the river deposits on the land that
was not eroded increased the area to almost half a hectare and in 1970
Eduave started to plant banana trees. In 1973, Maximo and Anuncita
Jagualing asked her permission to plant corn and bananas provided that
they prevent squatters to come to the area. Eduave engaged the services
of a surveyor who conducted a survey and placed concrete monuments
over the land. Eduave also paid taxes on the land in litigation, and
mortgaged the land to the Luzon Surety and Co., for a consideration of
P6,000.00. The land was the subject of a reconveyance case, in the CFI
Misamis Oriental (Branch V, Cagayan de Oro City, Civil Case 5892),
between Janita Eduave vs. Heirs of Antonio Factura, which was the subject
of judgment by compromise in view of the amicable settlement of the
parties, dated 31 May 1979. The heirs of Antonio Factura had ceded a
portion of the land with an area of 1,289 sq. m., to Janita Eduave in a
notarial document of conveyance, pursuant to the decision of the CFI, after
a subdivision of the lot 62 Pls-799, and containing 1,289 sq. m. was
designated as Lot 62-A, and the subdivision plan was approved as Pls-799-
Psd-10-001782. Eduave also applied for concession with the Bureau of
Mines to extract 200 m3 of grave, and after an ocular inspection the permit
was granted. Eduave, after permit was granted, entered into an agreement
with Tagoloan Aggregates to extract sand and gravel, which agreement
was registered in the office of the Register of Deeds. Maximo and Anuncita
Jagualing assert that they are the real owners of the land in litigation
containing an area of 18,000 sq. m. During the typhoon Ineng in 1964 the
river control was washed away causing the formation of an island.
Jagualing started occupying the land in 1969, paid land taxes as evidenced
by tax declaration 26380 and tax receipts, and tax clearances. Actual
occupation of the land by Jagualing included improvements and the house.

Rudygondo and Janita Eduave filed with the RTC Misamis Oriental an
action to quiet title and/or remove a cloud over the property in question
against Jagualing. On 17 July 1987 the trial court dismissed the complaint
for failure of Eduave to establish by preponderance of evidence their claim
of ownership over the land in litigation. The court found that the island is a
delta forming part of the river bed which the government may use to
reroute, redirect or control the course of the Tagoloan River. Accordingly, it
held that it was outside the commerce of man and part of the public
domain, citing Article 420 of the Civil Code. As such it cannot be registered
under the land registration law or be acquired by prescription. The trial
court, however, recognized the validity of Jagualing's possession and gave
them preferential rights to use and enjoy the property. The trial court
added that should the State allow the island to be the subject of private
ownership, the Jagualings have rights better than that of Eduave.

On appeal to the Court of Appeals, the court found that the island was
formed by the branching off of the Tagoloan River and subsequent thereto
the accumulation of alluvial deposits. Basing its ruling on Articles 463 and
465 of the Civil Code, the Court of Appeals reversed the decision of the trial
court, declared Eduave as the lawful and true owners of the land subject of
the case and ordered Jagualing to vacate the premises and deliver
possession of the land to Eduave. Hence, the present petition.

The Supreme Court found no error committed by the appellate court,

denied the petition for lack of sufficient merit, and affirmed the decision of
the Court of Appeals; without pronouncement as to costs.

1. Evidence not properly appreciated by trial court; CA properly applied

Article 463
The appellate court reversed the decision of the trial court because it did
not take into account the other pieces of evidence in favor of the private
respondents. The complaint was dismissed by the trial court because it did
not accept Eduave’s explanation regarding the initial discrepancy as to the
area they claimed (4937sq.m. v. 16452 sq.m.); because it favored the
theory that Eduave became interested in the land only in 1979 not for
agricultural purposes but in order to extract gravel and sand, which is
belied by other circumstances tantamount to acts of ownership exercised
by Eduave over the property prior to said year (e.g. the payment of land
taxes thereon, the monuments placed by the surveyor whose services were
engaged by Eduave, the agreement entered into by Eduave and Tagoloan
Aggregates to extract gravel and sand, which agreement was duly
registered with the Register of Deeds); because it disregarded the
testimony of 2 disinterested witnesses (Gergorio Neri, as to metes and
bounds of the property and the effect of the typhoon; and Candida Ehem,
as to the caretaker agreement between her and Eduave) without
explaining why it doubted their credibility. From the evidence thus
submitted, the appellate court had sufficient basis for the finding that the
property of Eduave actually existed and was identified prior to the
branching off or division of the river. The Court of Appeals, therefore,
properly applied Article 463 of the Civil Code which allows the ownership
over a portion of land separated or isolated by river movement to be
retained by the owner thereof prior to such separation or isolation.

2. Island formed in a non-navigable and non-floatable river; Article 465

The parcel of land is part of an island that formed in a non-navigable and
non-flotable river; from a small mass of eroded or segregated outcrop of
land, it increased to its present size due to the gradual and successive
accumulation of alluvial deposits. The Court of Appeals did not err in
applying Article 465 of the Civil Code. Under this provision, the island
belongs to the owner of the land along the nearer margin as sole owner
thereof; or more accurately, because the island is longer than the property
of Eduave, they are deemed ipso jure to be the owners of that portion
which corresponds to the length of their property along the margin of the
river.

3. Land formed by accretion belongs to riparian owner, even without a

specific act of possession over it; Land however may yield to adverse
possession of third party if riparian owner fails to assert claim
Lands formed by accretion belong to the riparian owner. This preferential
right is, under Article 465, also granted the owners of the land located in
the margin nearest the formed island for the reason that they are in the
best position to cultivate and attend to the exploitation of the same. In
fact, no specific act of possession over the accretion is required. If,
however, the riparian owner fails to assert his claim thereof, the same may
yield to the adverse possession of third parties, as indeed even accretion to
land titled under the torrens system must itself still be registered.

4. Doctrine of acquisitive prescription

The property may be acquired by adverse possession for the required
number of years under the doctrine of acquisitive prescription. Jagualing’s
possession cannot be considered in good faith, however, because they are
presumed to have notice of the status of Eduave as riparian owners who
have the preferential right to the island as recognized and accorded by
law; they may claim ignorance of the law, specifically Article 465 of the
Civil Code, but such is not, under Articles 3 and 526 of the same code, an
adequate and valid defense to support their claim of good faith. Hence, not
qualifying as possessors in good faith, they may acquire ownership over
the island only through uninterrupted adverse possession for a period of
thirty years. By their own admission, Jagualing have been in possession of
the property for only about 15 years, and thus, the island cannot be
adjudicated in their favor.

5. Origin of island not tackled as case is not between opposing riparian

owners but between a riparian owner and one in possession of the land
There is no need to make a final determination regarding the origins of the
island, i.e., whether the island was initially formed by the branching off or
division of the river and covered by Article 463 of the Civil Code, in which
case there is strictly no accession because the original owner retains
ownership, or whether it was due to the action of the river under Article
465, or whether it was caused by the abrupt segregation and washing
away of the stockpile of the river control, which makes it a case of avulsion
under Article 459, as the case is not between parties as opposing riparian
owners contesting ownership over an accession but rather between a
riparian owner and the one in possession of the island.
6. Quasi in Rem; Judgment conclusive upon the parties and does not bind
the State and other riparian owners
The Court is not prepared to concede that the island is a delta which
should be outside the commerce of man and that it belongs to the State as
property of the public domain in the absence of any showing that the legal
requirements to establish such a status have been satisfied, which duty
properly pertains to the State. Since the petition is an upshot of the action
to quiet title brought by Eduave against Jagualing, it is thus not technically
an action in rem or an action in personam, but characterized as quasi in
rem, which is an action in personam concerning real property. Thus, the
judgment in proceedings of this nature is conclusive only between the
parties and does not bind the State or the other riparian owners who may
have an interest over the island involved herein.

G.R. No. 147340 December 13, 2007

CYNTHIA CRUZ KHEMANI and SHANKER N. KHEMANI, petitioners,

vs.
THE HEIRS OF ANASTACIO TRINIDAD, represented by NAPOLEON and
ROLANDO TRINIDAD, respondents.

DECISION

YNARES-SANTIAGO, J.:

This petition for review on certiorari1 assails the July 31, 2000 Decision2 of
the Court of Appeals in CA-G.R. SP No. 55581, which affirmed the May 24,
1999 Order3 of the Regional Trial Court, Branch 24, Koronadal, South
Cotabato in Civil Case No. 1122, entitled "Heirs of Anastacio and Francisca
Trinidad, et al. v. Heirs of Jose Peña, et al." Also assailed is the January 8,
2001 Resolution4 denying the motion for reconsideration.

The factual antecedents are as follows:

Petitioner Cynthia Cruz Khemani is the registered owner of Lot No. 107, Ts-
1032 (Lot No. 107), which is covered by Transfer Certificate of Title (TCT)
No. 58976 issued on March 10, 1994.5 Khemani purchased the lot from the
heirs of Jose B. Peña (the Peña Heirs) on February 17, 1994. Shanker N.
Khemani is her brother-in-law and duly authorized representative.

Subject of the instant case is a 340 square meter portion (the Disputed
Property) of Lot No. 107 over which respondents Heirs of Anastacio
Trinidad, represented by Napoleon and Rolando Trinidad, are claiming
ownership. Respondents allege that they and their predecessors-in-
interest, Spouses Anastacio and Francisca Trinidad, have openly,
peacefully, publicly and adversely possessed the Disputed Property in the
concept of owner since 1950.

Lot No. 107 and Lot Nos. 108 and 109, constitute Lot No. 355 which was
part of the public domain. On July 10, 1950, Lot No. 355 with an original
area of 1,500 square meters was awarded to Jesus M. Larrabaster by the
National Land Settlement Administration (NLSA) who subsequently sold his
rights and interests over the said property to Jose B. Peña (Peña) on June
29, 1956.

Thereafter, the original area of Lot No. 355 which was 1,500 square meters
increased to 3,616.93 square meters due to accretion. Peña then requested
the Bureau of Lands (BOL) to adjust the area of the lot awarded to him but
the BOL denied the request on the ground that the accretion belonged to
the government.

Aggrieved, Peña appealed to the Office of the President. The BOL

recommended that Lot No. 355 be subdivided into three parts, to wit, Lot
Nos. 107, 108 and 109, and that Lot No. 108 with an area of 1,500 square
meters, be awarded to Peña, instead of the whole of Lot No. 355.
Meanwhile, Lot Nos. 107 and 109 would be allocated to Basilio Mendoza
(Mendoza) and Arturo Roxas, respectively.

The Office of the President initially adopted the recommendation of the

BOL. Upon reconsideration, however, it modified its decision and held that
the entire area of Lot No. 355, including the accretion, belonged to Peña
and not to the government. Thus, Lot Nos. 107, 108, and 109 were
awarded to him.

On January 27, 1970, Mendoza filed a special civil action for certiorari
against the Assistant Executive Secretary for Legal Affairs of the Office of
the President, the BOL, the Director of Lands, and Peña before Branch 24
of the Court of First Instance of South Cotabato, which was docketed as
Civil Case No. 98. Claiming that he was denied due process, Mendoza
assailed the decision of the Office of the President awarding the entire area
of Lot No. 355 to Peña. He asserted ownership over Lot No. 107 on the
strength of a Miscellaneous Sales Application he allegedly filed with the
BOL on November 6, 1962.

On May 10, 1985, the trial court rendered a decision dismissing Mendoza’s
petition for certiorari but the same was reversed by the Court of Appeals
on appeal. Hence, Mendoza filed a petition for review on certiorari before
the Supreme Court.

In the case of Assistant Executive Secretary for Legal Affairs of the Office
of the President v. Court of Appeals6 which was decided on January 9,
1989, the Supreme Court rejected Mendoza’s claim over Lot No. 107 and
found the Miscellaneous Sales Application without legal force and effect
since the object thereof was no longer public land. Thus, Peña’s right of
ownership over the entire area of Lot No. 355, which consists of Lot Nos.
107, 108 and 109, was affirmed.

On September 20, 1993, the Peña Heirs were awarded a patent by the
Department of Environment and Natural Resources (DENR), and on
September 21, 1993, Original Certificate of Title No. P-336587 covering Lot
No. 107 was issued in their name.

On January 27, 1994, respondents filed with the Regional Trial Court,
Branch 24, Koronadal, South Cotabato a verified complaint8 against the
Peña Heirs,9 the DENR Region IX Office, and the BOL for "Review of
Decree of Registration and/or Reconveyance with Prayer for Issuance of
Writ of Preliminary Prohibitory Injunction and Temporary Restraining
Order," which was docketed as Civil Case No. 1122. Respondents filed the
complaint on the strength of their own and their predecessors’ open,
peaceful, public and adverse possession of the Disputed Property in the
concept of owner since 1950.

Respondents also claimed that on July 16, 1976, their predecessor-in-

interest, Anastacio, applied for a Miscellaneous Sales Application over the
Disputed Property which was designated as a portion of Lot No. 107, Ts-
1032.10 On March 2, 1979, the BOL allegedly issued Certification No. 3445
certifying that the Disputed Property was awarded to Anastacio and that
the transfer had been duly investigated and approved per Board Resolution
No. 133, Series of 1979.

Instead of an answer, the Peña Heirs filed a Motion to Dismiss11 alleging

that the Regional Trial Court lacks jurisdiction over the nature of the action
or the suit; that respondents have no legal capacity to sue as only the
government may seek nullification of the land grant in their favor; and that
the cause of action is barred by prior judgment or the statute of limitations.
They asserted that the issue of ownership over the Disputed Property has
long been settled in the Assistant Executive Secretary case. Further, they
argued that respondents’ predecessor-in-interest, Anastacio, was a mere
squatter who had been allowed by Mendoza to occupy a portion of Lot No.
107 sometime in 1960.

In respondents’ Comment/Opposition,12 they claimed that the Disputed

Property had long ceased to be public land by virtue of their open, public,
continuous, adverse and exclusive possession in the concept of owner for
more than 40 years, and that they were never parties in the Assistant
Executive Secretary case involving Mendoza.

On September 3, 1997, Judge Rodolfo C. Soledad (Judge Soledad) granted

petitioner’s motion to dismiss and held that respondents are bound by the
ruling of this Court in the Assistant Executive Secretary case.13

Respondents filed a motion for reconsideration14 alleging that res judicata

does not apply and that their action is not barred by the Assistant
Executive Secretary case. They argued that neither they, nor Anastacio,
were parties in the said case and that there is no identity of causes of
action.

In 1998, Judge Soledad died without resolving the motion for

reconsideration filed by respondents. Judge Francisco S. Ampig (Judge
Ampig) was designated Acting Judge. On May 24, 1999, Judge Ampig
granted the motion for reconsideration, reinstated Civil Case No. 1122, and
directed the Peña Heirs to file an answer.
The Peña Heirs, together with herein petitioner as the new owner of Lot
No. 107, filed a petition for certiorari15 before the Court of Appeals which
was docketed as CA-G.R. SP No. 55581.

On July 31, 2000, the Court of Appeals rendered the assailed decision
dismissing the petition. It ruled that a petition for certiorari is not the
proper remedy against an order denying a motion to dismiss. Further, it
held that there is no res judicata. Thus:

Moreover, petitioners have plain, speedy and adequate remedy in the

ordinary course of law. The remedy against an adverse interlocutory
order, such as the assailed orders, is not certiorari but to continue
with the case in due course and, when an unfavorable verdict is
handed down, to take an appeal in the manner authorized by law. x x
x

With the denial of the motion to dismiss and reinstatement of the

case, petitioners will still answer the complaint. Upon joinder of
issues, the parties will enter into trial, after which, the lower court
will render a verdict. And if adverse to them, petitioners may appeal
the decision together with the assailed orders. The case at bench
does not fall under any of the exceptional circumstances where the
extraordinary writ of certiorari may be resorted to despite availability
of appeal.

xxxx

Private respondents are not parties in the first action. Neither are
they the successors-in-interest of any of the parties therein. The first
action is in personam. The final judgment in said action is only
binding and conclusive upon the parties therein and their successors-
in-interest.

xxxx

Mendoza, the petitioner in the first action, laid claim in Lot 107 on
the basis of his possession thereof and Miscellaneous Sales
Application. On the other hand, private respondents’ interest in the
contested property is anchored on their own possession and
 Miscellaneous Sales Application. In other words, private respondents
are not asserting rights under Mendoza. Consequently, they have no
community of interests in the contested property; in fact, their
interests are antagonistic to each other.

On the other hand, "the test often used in determining whether

causes of action are identical is to ascertain whether the same
evidence which is necessary to sustain the second action would have
been sufficient to authorize recovery in the first, even if the forms or
nature of the two actions be different" (Carlet vs. Court of Appeals,
275 SCRA 97). Considering that the foundation of private
respondents’ action is different from that of Mendoza, the evidence
necessary to sustain the latter’s claim in the first action would be
separate and distinct from that required to establish private
respondents’ cause of action.

Since not all requisites of res judicata are present, respondent judge
acted rightly in issuing the assailed orders. In short, he committed no
abuse of discretion.

WHEREFORE, the petition is DISMISSED for lack of merit.

SO ORDERED.16

The motion for reconsideration of the foregoing decision was denied hence,
this petition.

Petitioner claims that the case of Assistant Executive Secretary bars the
filing of Civil Case No. 1122, and that a petition for certiorari under Rule 65
of the Rules of Court is the proper remedy in assailing the order of the
Regional Trial Court denying the motion to dismiss.

Respondents argue that they have been in open, peaceful, public and
adverse possession of the Disputed Property in the concept of owner since
1950; that the patent and original certificate of title were fraudulently
issued in favor of the Peña Heirs; and that their action for review of decree
of registration and/or reconveyance is not barred by the Court’s ruling in
Assistant Executive Secretary.
The issues for resolution are as follows: 1) whether a petition for certiorari
under Rule 65 is the proper remedy in assailing an order denying a motion
to dismiss; and 2) whether Judge Ampig committed grave abuse of
discretion in denying petitioner’s motion to dismiss and reinstating Civil
Case No. 1122.

The petition lacks merit.

It has long been settled that an order denying a motion to dismiss is an

interlocutory order. It neither terminates nor finally disposes of a case, as it
leaves something to be done by the court before the case is finally decided
on the merits. As such, the general rule is that the denial of a motion to
dismiss cannot be questioned in a special civil action for certiorari.17

However, there are exceptions to the general rule. In Velarde v. Lopez,

Jr.,18 the Court held that resort to a special civil action for certiorari is
allowed when the ground for the motion to dismiss is improper venue, lack
of jurisdiction, or res judicata as in the case at bar.19 Thus, petitioner did
not commit a procedural error in filing a petition for certiorari before the
Court of Appeals.

Nevertheless, as to the substantive issue raised herein, the petition must

fail. We find that Judge Ampig did not commit grave abuse of discretion in
denying petitioner’s motion to dismiss and reinstating Civil Case No. 1122.

In Oropeza Marketing Corp. v. Allied Banking Corp.,20 we held that res

judicata literally means "a matter adjudged; a thing judicially acted upon or
decided; a thing or matter settled by judgment." It lays the rule that an
existing final judgment or decree rendered on the merits, and without
fraud or collusion, by a court of competent jurisdiction, upon any matter
within its jurisdiction, is conclusive of the rights of the parties or their
privies, in all other actions or suits in the same or any other judicial tribunal
of concurrent jurisdiction on the points and matters in issue in the first
suit.21

A case is barred by prior judgment or res judicata when the following

requisites concur: (1) the former judgment is final; (2) it is rendered by a
court having jurisdiction over the subject matter and the parties; (3) it is a
judgment or an order on the merits; and (4) there is – between the first
and the second actions – identity of parties, subject matter, and causes of
action.22

In this case, it is not disputed that the first three elements are present.
Likewise, there is no controversy regarding the identity of the subject
matter. The question, therefore, is whether there is identity of parties and
causes of action. We find that there is none.

Civil Case No. 98 was a special civil action for certiorari filed by Mendoza
against the Assistant Executive Secretary for Legal Affairs of the Office of
the President, the BOL, the Director of Lands, and Peña. On the other
hand, Civil Case No. 1122 is an action for review of decree of registration
and/or reconveyance. The parties are respondents Trinidad, the Peña
Heirs, the DENR Region IX Office, and the BOL.

Mendoza’s action in Civil Case No. 98 was based on alleged grave abuse of
discretion of the Office of the President in awarding the entire area of Lot
No. 355 to Peña. He claimed ownership over Lot No. 7 and in support
thereof, presented the Miscellaneous Sales Application he filed with the
BOL on November 6, 1962. Meanwhile, respondents’ action in Civil Case
No. 1122 was based on their continued possession of the Disputed
Property in the concept of owner for over 40 years, and the alleged
fraudulent issuance of a patent and certificate of title to the Peña Heirs.

True, res judicata does not require absolute but only substantial identity of
parties. However, there is substantial identity only when the "additional"
party acts in the same capacity or is in privity with the parties in the former
action.23 This is not so in the present case. It must be emphasized that
respondents are not asserting rights under Mendoza. Indeed, the records
will show that the parties in the two cases have their own rights and
interests in relation to the subject matter in litigation.

Moreover, as correctly found by the Court of Appeals, the basis of

respondents’ action was different from that of Mendoza; the evidence
necessary to sustain the latter’s claim is separate and distinct from that
required to establish respondents’ cause of action.24 While Mendoza relied
on the Miscellaneous Sales Application as evidence to support his claim,
herein respondents would have to present proof of their alleged continuous
possession of the Disputed Property as well as fraud in the issuance of the
patent and title in favor of the Peña Heirs. In Morato v. Court of Appeals,25
we held that the test of identity of causes of action lies not in the form of
action but in whether the same facts or evidence would support and
establish the former and present causes of action.26

Thus, res judicata does not apply in the instant case there being no identity
of parties and causes of action. Nevertheless, the public policy underlying
the principle of res judicata must be considered together with the policy
that a party shall not be deprived of a fair adversary proceeding wherein to
present his case.27 It bears stressing that respondents’ action for review of
decree of registration is sanctioned under Section 32 of Presidential Decree
No. 1529,28 which provides that a person deprived of his land through
actual fraud may institute an action to reopen or review a decree of
registration within one year from entry of such decree. It states:

Section 32. Review of decree of registration; Innocent purchaser for

value. The decree of registration shall not be reopened or revised by
reason of absence, minority, or other disability of any person
adversely affected thereby, nor by any proceeding in any court for
reversing judgments, subject, however, to the right of any person,
including the government and the branches thereof, deprived of land
or of any estate or interest therein by such adjudication or
confirmation of title obtained by actual fraud, to file in the proper
Court of First Instance a petition for reopening and review of the
decree of registration not later than one year from and after the date
of the entry of such decree of registration, but in no case shall such
petition be entertained by the court where an innocent purchaser for
value has acquired the land or an interest therein, whose rights may
be prejudiced. Whenever the phrase "innocent purchaser for value"
or an equivalent phrase occurs in this Decree, it shall be deemed to
include an innocent lessee, mortgagee, or other encumbrancer for
value.

The Court has repeatedly applied the foregoing provision of law to a patent
issued by the Director of Lands, approved by the Secretary of Natural
Resources, under the signature of the President of the Philippines. The
date of the issuance of the patent corresponds to the date of the issuance
of the decree in ordinary cases.29
In this case, the patent was issued in favor of the Peña Heirs on
September 20, 1993. Respondents filed Civil Case No. 1122 for "Review of
Decree of Registration and/or Reconveyance with Prayer for Issuance of
Writ of Preliminary Prohibitory Injunction and Temporary Restraining
Order" on January 27, 1994, or well within the prescribed one-year period.
Likewise, records show that TCT No. 58976 under petitioner’s name bears
a Notice of Lis Pendens.30 Thus, it cannot be said that petitioner is an
innocent purchaser for value as she was well aware of respondents’ claim
over the Disputed Property.

Further, even assuming arguendo that respondents filed their action after
one year, they may still be entitled to relief. An aggrieved party may file an
action for reconveyance based on implied or constructive trust, which
prescribes in ten years from the date of the issuance of the certificate of
title over the property provided that the property has not been acquired by
an innocent purchaser for value.31

Respondents clearly asserted in their complaint that they and their

predecessors-in-interest have long been the owners of the Disputed
Property and that they were fraudulently deprived of ownership thereof
when the Peña Heirs obtained a patent and certificate of title in their favor.
These allegations certainly measure up to the requisite statement of facts
to constitute an action for reconveyance.32

A final note. It appears from the records that after our ruling in the
Assistant Executive Secretary case in 1989, the BOL issued a Patent on
September 20, 1993 in favor of the Peña Heirs which became the basis for
the issuance of OCT No. P-33658 covering Lot No. 107. However, as held
in the Assistant Executive Secretary case, Lot No. 107 – as accretions to
the original lot (Lot No. 355) awarded to Larrabaster on July 10, 1950 –
"no longer belonged to the Government[,] the subdivision thereof by the
Bureau of Lands into three lots (Lot No. 107, Lot No. 108 and Lot No. 109),
as well as the allocation of said lots to two other individuals, was beyond
the scope of its authority."33 As a result, while Lot No. 107 may no longer
be acquired under the provisions of the Public Land Act, it does not
absolutely foreclose the possibility that, as a private property, a portion
thereof (the Disputed Property) may have been acquired by respondents
through acquisitive prescription under the Civil Code. These matters,
however, are the proper subject of a separate action should one be filed
subject, of course, to such claims and defenses that either party may have
under relevant laws.

All told, it would be premature to order the dismissal of respondents’

complaint as they have yet to be given an opportunity to substantiate their
claims. We note that respondents are in actual physical possession of the
Disputed Property up to this date, and the fact of their physical possession
over many years is not disputed by petitioner. 34 Under the circumstances,
it would be more in keeping with the standards of fairness to have a full-
blown trial where the evidentiary matters are threshed out.

WHEREFORE, the petition is DENIED. The July 31, 2000 Decision, and the
January 8, 2001 Resolution of the Court of Appeals in CA-G.R. SP No.
55581 are AFFIRMED. The trial court is ORDERED to resume trial in Civil
Case No. 1122 and to resolve the same with dispatch.

SO ORDERED.

Agustin v. IAC
[G.R. Nos. 66075-76. July 5, 1990.]
First Division, Grino-Aquino (J): 4 concur

Facts: The Cagayan River separates the towns of Solana on the west and
Tuguegarao on the east in the province of Cagayan. In 1919 the lands east
of the river were covered by the Tuguegarao Cadastre. In 1925, OCT 5472
was issued for land east of the Cagayan River owned by Eulogio Agustin.
As the years went by, the Cagayan River moved gradually eastward,
depositing silt on the western bank. The shifting of the river and the
siltation continued until 1968. In 1950, all lands west of the river were
included in the Solana Cadastre. Among these occupying lands covered by
the Solana Cadastre were Pablo Binayug and Maria Melad. Binayug was in
possession since 1947 of Lots 3349, 7875 to 7879, 7881 to 7885, 7891 and
7892. It is has an area of 8 hectares planted to tobacco and corn and
another 12 hectares overgrown with talahib. Binayug's Homestead
Application W-79055 over this land was approved in 1959 and his
possession recognized in the decision in Civil Case 101. On the other hand,
as a result of Civil Case 343-T, Macario Melad, the predecessor-in-interest
of Maria Melad and Timoteo Melad, was issued OCT P-5026 for Lot 3351 of
Cad. 293 on 1 June 1956. Through the years, the Cagayan River eroded
lands of the Tuguegarao Cadastre on its eastern bank among which was
Agustin's Lot 8457, depositing the alluvium as accretion on the land
possessed by Binayug on the western bank. However, in 1968, after a big
flood, the Cagayan River changed its course, returned to its 1919 bed, and,
in the process, cut across the lands of Maria Melad, Timoteo Melad, and
the spouses Pablo Binayug and Geronima Ubina whose lands were
transferred on the eastern, or Tuguegarao, side of the river. To cultivate
those lots they had to cross the river. In April 1969, while the Melads,
Binayug, Urbina and their tenants were planting corn on their lots located
on the eastern side of the Cagayan River, Agustin, the Heirs of Baldomero
Langcay, Juan Langcay, and Arturo Balisi, accompanied by the mayor and
some policemen of Tuguegarao, claimed the same lands as their own and
drove away the Melads, Binayug and Urbina from the premises.

On 21 April 1970, Maria and Timoteo Melad filed a complaint (Civil Case
343-T) to recover Lot 3351 with an area of 5 hectares and its 6.6-hectare
accretion. On 24 April 1970, Pablo Binayug filed a separate complaint (Civil
Case 344-T) to recover his lots and their accretions. On 16 June 1975, the
trial court rendered a decision in Civil Case 343-T, ordering Eulogio
Agustin, Gregorio Tuliao, Jacinto Buquel and Octavio Bancud, their
representatives or agents to vacate Lot 3351 of Solana Cadastre together
with its accretion consisting of portions of Lots 9463, 9462 and 9461 of
Tuguegarao Cadastre and to restore ownership in favor of Maria Melad and
Timoteo Melad who are the only interested heirs of Macario Melad. The
trial court likewise ordered, in Civil Case 344-T, Justo Adduru, Andres
Pastor, Teofilo Tagacay, Vicente Camilan, Nicanor Mora, Baldomero
Cagurangan, Domingo Quilang, Cesar Cabalza, Elias Macababbad, Titong
Macababbad, Arturo Balisi, Jose Allabun, Eulogio Agustin, Banong Aquino,
Junior Cambri and Juan Langoay, their representatives or agents to vacate
Lots 3349, 7875 to 7879, 7881 to 7885, 7891 and 7892, together with its
accretion and to restore possession to Pablo Binayug and Geronimo Urbina.
Without pronouncement as to damages which were not properly proven
and to costs.

Eulogio Agustin appealed the decision in Civil Case 343-T, while Eulogio
Agustin, Baldomero Cagurangan (substituted by his heir), Arturo Balisi and
Juan Langcay appealed the decision in Civil Case 344-T. But upon motion
of the Melads, Binayug and Urbina, the trial court ordered on 15 August
1975 the execution pending appeal of the judgment in Civil Case 344-T
against Cagurangan, Balisi and Langcay on the ground that their appeal
was dilatory as they had not presented evidence at the trial. On 29
November 1983, the Intermediate Appellate Court rendered a decision
affirming in toto the judgment of the trial court, with costs against the
Agustin, Cagurangan, Balisi and Langcay. Hence, the petition for review.

The Supreme Court denied the petition for lack of merit, and affirmed the
decision of the IAC, now CA; with costs against Agustin, et.al.

1. Findings of fact of the Court of Appeal conclusive with the Supreme

Court
The finding of the Court of Appeals that there had been accretions to the
lots of the Melads, Binauyg and Urbina who did not lose the ownership of
such accretions even after they were separated from the principal lots by
the sudden change of course of the river, is a finding of fact which is
conclusive on this Court. That finding is supported by Art. 457 of the New
Civil Code which provides that "to the owners of lands adjoining the banks
of rivers belong the accretion which they gradually receive from the effects
of the current of the waters. (366)"

2. Conditions for accretion to benefit a riparian owner

Accretion benefits a riparian owner when the following requisites are
present: (1) that the deposit be gradual and imperceptible; (2) that it
resulted from the effects of the current of the water; and (3) that the land
where accretion takes place is adjacent to the bank of a river (Republic vs.
CA, 132 SCRA 514). In the present case, the accretion on the western bank
of the Cagayan River had been going on from 1919 up to 1968 or for a
period of 49 years. It was gradual and imperceptible. Only when Lot 3351,
with an original area of 5 hectares described in the free patent that was
issued to Macario Melad in June 1956, was resurveyed in 1968 did it
become known that 6.6 hectares had been added to it. Lot 3351, covered
by a homestead patent issued in June 1950 to Pablo Binayug, grew from
its original area of 18 hectares, by an additional 50 hectares through
alluvium as the Cagayan River gradually moved to the east. These
accretions belong to riparian owners upon whose lands the alluvial deposits
were made (Roxas vs. Tuason, 9 Phil. 408; Director of Lands vs. Rizal, 87
Phil. 806).

3. Reason for the principle of accretion benefiting a riparian owner

The reason for the principle is because, if lands bordering on streams are
exposed to floods and other damage due to the destructive force of the
waters, and if by virtue of law they are subject to encumbrances and
various kinds of easements, it is only just that such risks or dangers as may
prejudice the owners thereof should in some way be compensated by the
right of accretion (Cortes vs. City of Manila, 10 Phil. 567).

4. Ownership of accretion not lost upon sudden and abrupt change of the
river
The' ownership of the accretion to the lands was not lost upon the sudden
and abrupt change of the course of the river (Cagayan River in 1968 or
1969 when it reverted to its old 1919 bed), and separated or transferred
said accretions to the other side (or eastern bank) of the river. Articles 459
and 463 of the New Civil Code apply to this situation. Article 459 provides
that “whenever the current of a river, creek or torrent segregates from an
estate on its bank a known portion of land and transfers it to another
estate, the owner of the land to which the segregated portion belonged
retains the ownership of it, provided that he removes the same within two
years." Article 463 provides that “ whenever the current of a river divides
itself into branches, leaving a piece of land or part thereof isolated, the
owner of the land retains his ownership. He also retains it if a portion of
land is separated from the estate by the current.”

Haystack: Ronquillo v. Court of Appeals (GR 43346, 20 March 1991)

Ronquillo v. CA
[G.R. No. 43346. March 20, 1991.]
Second Division, Regalado (J): 4 concur

Facts: Rosendo del Rosario was a registered owner of a parcel of land

known as Lot 34, Block 9, Sulucan Subdivision, situated at Sampaloc,
Manila and covered by TCT 34797 of the Registry of Deeds of Manila.
Florencia and Amparo del Rosario were daughters of said Rosendo del
Rosario. Adjoining said lot is a dried-up portion of the old Estero Calubcub
occupied by Mario C. Ronquillo since 1945. Both del Rosario and Ronquillo
have filed with the Bureau of Lands miscellaneous sales application for the
purchase of the abandoned river bed known as Estero Calubcub and their
sales applications, dated 5 August 1958 and 13 October 1959, respectively,
are still pending action before the Bureau of Lands. Del Rosario claims that
long before 1930, when TCT 34797 over Lot 34 was issued in the name of
Rosendo del Rosario, the latter had been in possession of said lot including
the adjoining dried-up portion of the old Estero Calubcub, having bought
the same from Arsenio Arzaga. Sometime in 1935, said titled lot was
occupied by Isabel Roldan with the tolerance and consent of del Rosario on
condition that the former will make improvements on the adjoining dried-
up portion of the Estero Calubcub. In the early part of 1945 defendant
occupied the eastern portion of said titled lot as well as the dried-up
portion of the old Estero Calubcub which abuts del Rosario's titled lot. After
a relocation survey of the land in question sometime in 1960, del Rosario
learned that Ronquillo was occupying a portion of their land and thus
demanded Ronquillo to vacate said land when the latter refused to pay the
reasonable rent for its occupancy. However, despite said demand Ronquillo
refused to vacate. On the other hand, Ronquillo claims that sometime
before 1945 he was living with his sister who was then residing or renting
Del Rosario's titled lot. In 1945 he built his house on the disputed dried-up
portion of the Estero Calubcub with a small portion thereof on the titled lot
of del Rosario. Later in 1961, said house was destroyed by a fire which
prompted him to rebuild the same but, this time it was built only on the
dried-up portion of the old Estero Calubcub without touching any part of
del Rosario’s titled land. He further claims that said dried-up portion is a
land of public domain.

Rosendo, Amparo and Florencia del Rosario lodged a complaint with the
CFI Manila praying, among others, that they be declared the rightful
owners of the dried-up portion of Estero Calubcub. Ronquillo filed a motion
to dismiss the complaint on the ground that the trial court had no
jurisdiction over the case since the dried-up portion of Estero Calubcub is
public land and, thus, subject to the disposition of the Director of Lands.
The Del Rosarios opposed the motion arguing that since they are claiming
title to the dried-up portion of Estero Calubcub as riparian owners, the trial
court has jurisdiction. The resolution of the motion to dismiss was deferred
until after trial on the merits. On 26 December 1962, the trial court
rendered judgment ordering Ronquillo to deliver to del Rosario the portion
of the land covered by TCT 34797 which is occupied by him and to pay for
the use and occupation of said portion of land at the rate of P5 a month
from the date of the filing of the complaint until such time as he surrenders
the same to del Rosario and declaring Del Rosario to be the owners of the
dried-up portion of estero Calubcub which is abutting del Rosario' property;
with costs against Ronquillo.

On appeal (CA-GR 32479-R), the Court of Appeals affirmed the decision of

the trial court on 25 September 1975 and declared that since Estero
Calubcub had already dried-up way back in 1930 due to the natural change
in the course of the waters, under Article 370 of the old Civil Code which it
considers applicable to the present case, the abandoned river bed belongs
to the Del Rosarios as riparian owners. Consequently, respondent court
opines, the dried-up river bed is private land and does not form part of the
land of the public domain. It stated further that even assuming for the sake
of argument that said estero did not change its course but merely dried up
or disappeared, said dried-up estero would still belong to the riparian
owner, citing its ruling in the case of Pinzon vs. Rama. Upon motion of
Ronquillo, respondent court modified its decision on 28 January 1976 by
setting aside the first portion of the trial court's decision ordering Ronquillo
to surrender to the Del Rosarios that portion of land covered by TCT 34797
occupied by the former, based on the former's representation that he had
already vacated the same prior to the commencement of this case.
However, the appellate court upheld its declaration that the Del Rosarios
are the rightful owners of the dried-up river bed. Hence, the petition for
review.

On 17 May 1976, the Supreme Court issued a resolution requiring the

Solicitor General to comment on the petition in behalf of the Director of
Lands as an indispensable party in representation of the Republic of the
Philippines, and who, not having been impleaded, was subsequently
considered impleaded as such in the Court’s resolution of 10 September
1976.

In his Motion to Admit Comment, the Solicitor General manifested that

pursuant to a request made by this office with the Bureau of Lands to
conduct an investigation, the Chief of the Legal Division of the Bureau sent
a communication informing him that the records of his office do not show
that Mario Ronquillo, Rosendo del Rosario, Amparo del Rosario or Florencia
del Rosario has filed any public land application covering parcels of land
situated at Estero Calubcub, Manila as verified by its Records Division. The
position taken by the Director of Lands (in his comment on 3 September
1978, in the 4 May 1989 reply, and 17 August 1989 comment) explicates
that Article 370 of the old Code does not apply as the abandoned riverbed
as such was abandoned not by the natural change in the course of the
river but by the drying up of the bed caused by human activity. The
Director of Lands also added that the del Rosario and Ronquillo have
claimed pending sales applications over the dried portion of the estero
(admitting thus that it is public land under the authority of the Bureau of
Lands), which were rejected as the Manila City Engineer’s Office needed
the dried portion of the estero for drainage purposes. On 29 June 1979,
Florencia del Rosario manifested to this Court that Rosendo, Amparo and
Casiano del Rosario have all died, and that she is the only one still alive
among the private respondents in the case. In a resolution dated 20
January 1988, the Court required Ronquillo to implead one Benjamin Diaz
pursuant to the former's manifestation that the land adjacent to the dried-
up river bed has already been sold to the latter, and the Solicitor General
was also required to inquire into the status of the investigation being
conducted by the Bureau of Lands. In compliance therewith, the Solicitor
General presented a letter from the Director of Lands to the effect that
neither of the parties involved in the present case has filed any public land
application. On 3 April 1989, Ronquillo filed an Amended Petition for
Certiorari, this time impleading the Development Bank of the Philippines
(DBP) which subsequently bought the property adjacent to the dried-up
river bed from Benjamin Diaz. In its resolution dated 10 January 1990, the
Court ordered that DBP be impleaded as a party respondent. On 13
September 1990, DBP filed a Manifestation/ Compliance stating that DBP's
interest over TCT 139215 issued in its name (formerly TCT 34797 of the
Del Rosarios and TCT 135170 of Benjamin Diaz) has been transferred to
Spouses Victoriano and Pacita A. Tolentino pursuant to a Deed of Sale
dated 11 September 1990.

The Supreme Court reversed and set aside the remaining effective portion
of the appealed decision which declares Del Rosario as riparian owner of
the dried-up portion of Estero Calubcub.
1. Findings of appellate court conclusive to the Supreme Court; Exceptions
The jurisdiction of the Supreme Court in cases brought to it from the Court
of Appeals in a petition for certiorari under Rule 45 of the Rules of Court is
limited to the review of errors of law, and that said appellate court's finding
of fact is conclusive upon this Court. However, there are certain
exceptions, such as (1) when the conclusion is a finding grounded entirely
on speculation, surmises or conjectures; (2) when the inference made is
manifestly absurd, mistaken or impossible; (3) when there is grave abuse
of discretion in the appreciation of facts; (4) when the judgment is
premised on a misapprehension of facts; (5) when the findings of fact are
conflicting; and (6) when the Court of Appeals in making its findings went
beyond the issues of the case and the same is contrary to the admissions
of both appellant and appellee.

2. Evidence reveal change in the course of river not caused by natural

forces
A careful perusal of the evidence presented by both parties in the case at
bar will reveal that the change in the course of Estero Calubcub was
caused, not by natural forces, but due to the dumping of garbage therein
by the people of the surrounding neighborhood. There is nothing in the
testimony of lone witness Florencia del Rosario nor in said relocation plan
which would indicate that the change in the course of the estero was due
to the ebb and flow of the waters. On the contrary, the testimony of the
witness belies such fact, while the relocation plan is absolutely silent on the
matter. The inescapable conclusion is that the dried-up portion of Estero
Calubcub was occasioned, not by a natural change in the course of the
waters, but through the active intervention of man.

3. Article 370 of the old Civil Code applies only to natural change in the
course of the waters; Law clear, no room for interpretation
Article 370 of the old Civil Code which provides that "the beds of rivers,
which are abandoned because of a natural change in the course of the
waters, belong to the owners of the riparian lands throughout the
respective length of each. If the abandoned bed divided tenements
belonging to different owners the new dividing line shall be equidistant
from one and the other." The law is clear and unambiguous; and leaves no
room for interpretation. Article 370 applies only if there is a natural change
in the course of the waters. The rules on alluvion do not apply to man-
made or artificial accretions 23 nor to accretions to lands that adjoin canals
or esteros or artificial drainage systems. Considering the finding that the
dried-up portion of Estero Calubcub was actually caused by the active
intervention of man, it follows that Article 370 does not apply to the
present case and, hence, the Del Rosarios cannot be entitled thereto
supposedly as riparian owners.

4. Dried up portion of Estero Calubcub belongs to public domain; Land

used for drainage purposes cannot be subject of a miscellaneous sales
application
The dried-up portion of Estero Calubcub should thus be considered as
forming part of the land of the public domain which cannot be subject to
acquisition by private ownership. This is made more evident in the letter,
dated 28 April 1989, of the Chief of the Legal Division of the Bureau of
Lands, stating that the alleged application filed by Ronquillo no longer
exists in its records as it must have already been disposed of as a rejected
application for the reason that other applications covering Estero Calubcub,
Sampaloc, Manila for areas other than that contested in the presented
case, were all rejected by the office because of the objection interposed by
the City Engineer's office that they need the same land for drainage
purposes. Since the land is to be used for drainage purposes the same
cannot be the subject of a miscellaneous sales application.

5. Del Rosario and Ronquillo estopped from claiming land is not public land
The fact that Ronquillo and del Rosario filed their sales applications with
the Bureau of Lands covering the subject dried-up portion of Estero
Calubcub cannot but be deemed as outright admissions by them that the
same is public land. They are now estopped from claiming otherwise.

Hilario v. City of Manila

[GR No. L-19570 April 27, 1967]
Bengzon JP (J): 8 concur

Facts: Dr. Jose Hilario was the registered owner of a large tract of land
around 49 hectares in area (Barrio Guinayang, San Mateo, Rizal). Upon his
death this property was inherited by his son, Jose Hilario, Jr., to whom a
new certificate of title was issued. During the lifetime of plaintiff's father,
the Hilario estate was bounded on the western side by the San Mateo
River.3 To prevent its entry into the land, a bamboo and lumber post dike
or ditch was constructed on the northwestern side. This was further
fortified by a stonewall built on the northern side. For years, these
safeguards served their purpose. However, in 1937, a great and
extraordinary flood occurred which inundated the entire place including the
neighboring barrios and municipalities. The River destroyed the dike on the
northwest, left its original bed and meandered into the Hilario estate,
segregating from the rest thereof a lenticular piece of land. The disputed
area is on the eastern side of this lenticular strip which now stands
between the old riverbed site and the new course. In 1945, the US Army
opened a sand and gravel plant within the premises, and started scraping,
excavating and extracting soil, gravel and sand from the nearby areas
along the River. The operations eventually extended northward into the
strip of land. Consequently, a claim for damages was filed with the US War
Department by Luis Hidalgo, the then administrator of Dr. Hilario's estate.
The US Army paid. In 1947, the plant was turned over to herein
defendants-appellants and appellee who took over its operations.

On 22 October 22, 1949, plaintiff filed his complaint for injunction and
damages against the defendants City Engineer of Manila, District Engineer
of Rizal, the Director of Public Works, and Engr. Busuego, the Engineer-in-
charge of the plant. Subsequently, the Bureau of Mines and Atty. Maximo
Calalang were respectively allowed to join the litigation as intervenors; as
per issue of fees and penalties for materials (sand and gravel) extracted.
On 14 March 1954, defendants filed a petition for injunction against
plaintiff and intervenor Calalang in the same case, alleging that the latter
have fenced off the disputed area in contravention of an agreement had
between the latter and the Director of Public Works wherein the
defendants were allowed to continue their operations but subject to the
final outcome of the pending suit. On 13 May 1954, plaintiff amended his
complaint and impleaded as additional defendants the City of Manila, the
Provincial Treasurer of Rizal, and Engr. Eulogio Sese, the new Engineer-in-
charge of the plant. Plaintiff also converted his claim to one purely for
damages directed against the City of Manila and the Director of Public
Works, solidarily, in the amount of P1,000,000.00, as the cost of materials
taken since 1949, as well as those to be extracted therefrom until
defendants stop their operations.
On 21 December 1956, the lower court rendered its decision, ordering the
City of Manila and Director of Public Works to pay Hilario in solidum the
sum of P376,989.60 as cost of gravel and sand extracted from the
plaintiff’s land, plus costs; and ordering the Provincial Treasurer of Rizal to
reimburse intervenor Calalang of P36.80 representing gravel fees illegally
collected. None of the parties litigants seemed satisfied with this decision
and they all sought a reconsideration of the same. On August 30, 1957, the
lower court resolved the motions to reconsider with an order, holding that
the 2/5 portion of the area in controversy to Hilario, and dismissing the
case against the Bureau of Public Works insofar as money claims are
concerned without prejudice to Hilario taking action against proper party in
such claim. Hilario and Calalang filed a second motion for reconsideration,
which the lower court denied. Hence, the appeal.

The Supreme Court set aside the decision and orders appealed from, and
entered another judgment to the effect that the City of Manila and the
Director of Public Works, and his agent and employees, are absolved of
liability from extracting materials from subject property (of public domain);
and the portion within the strip of land question declared not part of public
domain and confirmed as part of Hilario’s private property. No Costs.

1. Old Civil Code and Law of Waters of 1866 controlling law

Since the change in the course of the River took place in 1937, long before
the present Civil Code took effect, the question should be determined in
accordance with the provisions of the old Civil Code and those of the Law
of Waters of 3 August 1866.

2. All riverbanks, as part of the riverbeds, are of public ownership

Under the old Civil Law and the Law of Waters, all riverbanks are of public
ownership, including those formed when a river leaves its old bed and
opens a new course through a private estate. Artcile 339 of the old Civil
Code is very clear. Without any qualifications, it provides that “that devoted
to public use, such as roads, canals, rivers, torrents, ports and bridges
constructed by the State, riverbanks, shores, roadsteads, and that of a
similar character” are property of public ownership. Further, the riverbank
is part of the riverbed. Article 73 of the Law of Waters which provides that
the phrase "banks of a river" is understood those lateral strips of zones of
its beds which are washed by the stream only during such high floods as
do not cause inundations. The use of the words "of its bed [de sus alveos]
" clearly indicates the intent of the law to consider the banks for all legal
purposes, as part of the riverbed. Thus, the banks of the River are part of
its bed. Since undeniably all beds of river are of public ownership, it follows
that the banks, which form part of them, are also of public ownership.

3. Natural bed or channel of a creek or river defined

The natural bed or channel of a creek or river is the ground covered by its
waters during the highest [ordinary] floods (Article 70 of the Law of the
Waters).

4. New bed, when river changes course, is of public ownership; Means to

recover
Article 372 of the old Civil Code which provides that "whenever a navigable
or floatable river changes its course from natural causes and opens a new
bed through a private estate, the new bed shall be of public ownership, but
the owner of the estate shall recover it in the event that the waters leave it
dry again either naturally or as the result of any work legally authorized for
this purpose." Banks are not mentioned in the provision, as the nature of
banks follows that of the bed and the running water of the river.

5. A river is a compound concept consisting of running waters, bed, and

banks
A river is a compound concept consisting of three elements; (1) the
running waters, (2) the bed and (3) the banks. All these constitute the
river. American authorities are in accord with this view, as that "' River'
consists of water, bed and banks"; and that "A 'river' consists of water, a
bed and banks, these several parts constituting the river, the whole river.
It is a compound idea; it cannot exist without all its parts. Evaporate the
water, and you have a dry hollow. If you could sink the bed, instead of a
river you would have a fathomless gulf. Remove the banks, and you have,
a boundless flood"

6. River is of public ownership, elements follow same nature of ownership;

Law explicit
Since a river is but one compound concept, it should have only one nature,
i.e., it should either be totally public or completely private. Since rivers are
of public ownership, it is implicit that all the three component elements be
of the same nature also. Still, the law expressly makes all three elements
public. Thus, riverbanks and beds are public under Artciles 339 and 407,
respectively, of the Code, while the flowing waters are declared so under
Articles 33, par. 2 of the Law of Waters of 1866.

7. Natural is not synonymous to original or prior condition

"Natural" is not made synonymous to "original" or "prior condition". On the
contrary, even if a river should leave its original bed so long as it is due to
the force of nature, the new course would still fall within the scope of the
definition provided by the Diccionario de La Real Academia Española.
Hence, the law must have used the word "natural" only because it is in
keeping with the ordinary nature and concept of a river always to have a
bed and banks.
Diccionario De La Real Academia Española: "NATURAL-perteneciente a la
naturaleza o conforme a la calidad o propriedad de las cosas; -nativa,
origivario de un pueblo o imcio'n; hecho con verdad, ni artificio, mezela ni
compocision alguna, ingenuo y sin doblez en su modo de proceder; di cese
tambien de las cosas que imitar a, la naturaleza con propiedad; regular y
que comumnente sucede, y par eso, facilmente creible; que se produce por
solas las fuerzas de la naturaleza, canio contraVuesto a sobre natural y
milagroso."

8. Article 553 of the old Civil Code does not intend to authorize private
acquisition of river banks but recognizes vested rights of riparian owners;
History of ownership of River Banks
Article 553 was never intended to authorize the private acquisition of river
banks, as this would conflict with clear legislative policy enunciated in
Article 339 of the Code that all riverbanks were of public ownership. The
article merely recognized and preserved the vested rights of riparian
owners who, because of prior law or custom, were able to acquire
ownership over the banks.

This was possible under the Siete Partidas which was promulgated in 1834.
Under Law 6, Title 28, Partida 3, the banks of rivers belonged to the
riparian owners, following the Roman Law rule. But subsequent legislation
radically changed this rule. By the Law of Waters of 3 August 1866,
riverbanks became of public ownership, albeit impliedly only because
considered part of the bed which was public, by statutory definition. This
law, while expressly repealing all prior inconsistent laws, left undisturbed
all vested rights then existing. Article 73 of the Law of Waters of 1866 is
the reconciliation effected between the private ownership of the banks and
the policy of the law to devote all banks to public Use. The easement
would preserve the private ownership of the banks and still effectuate the
policy of the law. So, the easement in Article 73 only recognized and
preserved existing privately owned banks; it did not authorize future
private appropriation of riverbanks. Subsequently, the Law of Waters of 13
June 1879 reenacted Article 73 of the Law of Waters of 1866 and affirmed
the public ownership of rivers and their beds and the treatment of the
banks as part of the bed. But nowhere in the law was there any provision
authorizing the private appropriation of the banks. The public nature of
riverbanks are obtained only by implication until the promulgation of the
Civil Code of 1899, which was explicit in Article 339 that riverbanks were
declared public property since they were destined for public use. Since the
first paragraph of Article 36 of the Law of Waters if 1879 was reenacted in
Article 553 of the Code, this article must also be understood not as
authorizing the private acquisition of riverbanks but only as recognizing the
vested titles of riparian owners who already owned the banks.

In the present case, since the new banks were formed when the river
changed its course in 1937, the banks cannot be subjected to the
provisions of the Siete Partidas, to claim private ownership of the banks, as
such was already superceded by then.

9. Legal definition applies with the legal order, distinction due to physical
order cannot prevail
The conclusion made by the lower court that only the northern 2/5 of the
disputed area remained as plaintiff's private property is predicated from the
findings that the portion where rice and corn were found in the ocular
inspection of 15 June 1951, was on the northern 2/5 of the disputed area;
that this cannot be a part of the bed because of the existence of vegetation
which could not have grown underwater, and that this portion is man-
made. This is bereft of evidence, as the unexcavated portion of the land is
the southwestern ¼. Further, American cases cannot be applied as these
do not involve a similar statutory provision, unlike in the Law of Waters,
which defined "beds" and "banks" and considered the latter as part of the
former. That plants can and do grow on the banks which otherwise could
not have grown on the bed which is constantly subjected to the flow of the
waters proves the distinction between "beds" and "banks" in the physical
order. However, in dealing with the legal order, legal definitions prevail.

10. Limits of banks of rivers

Article 73 of the Law of Waters which defines the limits of banks of rivers
"By the phrase 'banks of a river' is understood those lateral strips or zones
of its bed which are washed by the stream only during such high floods as
do not cause inundations. The farthest extremity of the bank on the west
side would, therefore, be that lateral line or strip which is reached by the
waters during those high floods that do not cause inundations. In other
words, the extent reached by the waters when the River is at high tide.

11. Banks of river different in topography

There is a difference between the topography of the two sides immediately
adjoining the River. The line indicated as "primary bank," which is on the
east, is about 3 meters high and has a steep grade right at the edge where
it drops almost vertically to the watercourse level. The opposite side, on
the other hand, has no such steep acclivity. The bank near the water edge,
is about 30 to 50 cms. high only, and gradually slopes up to a height of
about 2 to 2-1/2 meters along the line indicated as "secondary bank",
which is quite far from the waterline. Considering the peculiar
characteristics of the two sides banking the river, the rise in the waterlevel
would not have the same effect on the two sides. Thus, on the east, the
water would rise vertically, until the top of the "primary bank" is reached,
but on the west, there would be a low angled inclined rise, the water
covering more ground until the "secondary bank" line is reached. In other
words, while the water expansion on the east is vertical, that on the west
is more or less lateral, or horizontal.

12. Ordinary and extraordinary flood

There are two types of floods in the area during the rainy season. One is
the so-called "ordinary" flood, when the river is swollen but the flowing
water is kept within the confines of the "primary" and "secondary" banks.
This occurs annually, about three to four times during the period. Then
there is the "extraordinary" flood, when the waters overflow beyond the
said banks, and even inundate the surrounding areas. However, this flood
does not happen regularly. From 1947 to 1955, there were only three such
floods.
13. Movement of the river, west bank, from 1945-1955
From 1945 to 1949, the west bank of the River extended westward up to
the "secondary bank" line; from 1950 to 1952, this bank had moved, with
the River, to the east, its lateral borders running along a line just 20
meters west of the camachile tree; and from 1953 to 1955, the extremities
of the west bank further receded eastward beyond the camachile tree, until
they lay just about 20 meters east of said tree.

14. Floodings not accidental as they are annual; Government v. Colegio de

San Jose does not apply
Evidence shows that the River floods with annual regularity during the
rainy season. These floods can hardly be called "accidental". The Colegio
de San Jose case is not exactly in point. What was mainly considered there
was Article 74 of the Law of Waters relating to lakes, ponds and pools. In
the present case, none of these is involved.

15. Movement of the river not due to excavation and extraction of

materials
The excavations and extractions of materials, even from the American
period, have been made only on the strip of land west of the River. Under
the "following-the nature-of-things" argument advanced by plaintiff, the
River should have moved westward, where the level of the ground had
been lowered. But the movement has been in the opposite direction
instead. Therefore, it cannot be attributed to defendants' operations.
Moreover, Hilario's own evidence indicates that the movement eastward
was all due to natural causes. The movement eastward of the channel by
as much as 31 meters, from 1950 to 1953, was due to two typhoons which
caused the erosion of the east bank and the depositing of materials on the
west side which increased its level from as much as .93 to 2 meters.

16. River of different width; claim of unnatural widening unfounded

Reliance is made on the finding by the lower court that in 1943, the river
was only 60 meters wide, whereas in 1950, it was already 140 meters
wide. Such area sampled shows only the width of the River near the
southwestern boundary of the Hilario estate. It does not indicate how wide
it was in the other parts, especially up north.

17. Extraction confined on the banks of the river and not beyond limits of
the west bank to invade his private estate; Hilario cannot recover damages
from defendants
From 1947 to the early part of 1949, the defendants conducted their
operations only in the New Accretion Area along a narrow longitudinal zone
contiguous to the watercourse then. This zone, City Engineer Manila, is
about 1 km. long and extends northward up to pt. 50.35. However, no
extractions nor excavations were undertaken west of this zone, i.e., above
the "temporary bank" line. This line is located east of the "secondary bank"
line, the lateral extremity of the west bank then. In the latter part of 1949,
plaintiff prohibited the defendants from extracting along the New Accretion
Area and constructed a fence across the same. This forced the defendants
to go southeast of the "Excavated Area". From 1954 to 1955, defendants'
area of operation was still farther east of the New Accretion Area. They
were. working within a confined area along the west waterline, the
northern and western boundaries of which were 20 meters away east from
the camachile tree. It appears sufficiently established, therefore, that
defendants have not gone beyond the receding western extremities of the
west riverbank. They have confined their extraction of gravel and sand only
from which the banks of the River, which constitute part of the public
domain wherein they had the right to operate. Plaintiff has not presented
sufficient evidence that defendants have gone beyond the limits of the
west bank, as previously established, and have invaded his private estate.
He cannot, therefore, recover from them.

18. Plaintiff not denied of property without just compensation

The Court does not declare that the entire channel, i.e., all that space
between the "secondary bank" line and the "primary bank" line, has
permanently become part of the riverbed. What is held is that at the time
the defendants made their extractions, the excavations were within the
confines of the riverbanks then. All that space to the west of said receding
line" would still be part of plaintiff's property and also whatever portion
adjoining the river is, at present, no longer reached by the non-inundating
ordinary floods. Further, it is not correct to say that plaintiff would be
deprived of his property without any compensation at all. Under Article 370
of the old Civil Code, the abandoned bed of the old river belongs to the
riparian owners either fully or in part with the other riparian owners. And
had the change occurred under the Civil Code of the Philippines, plaintiff
would even be entitled to all of the old bed in proportion to the area he has
lost.
19. Defendants did not unjustly profit at plaintiff’s expense as they are not
responsible for the shifting of the river
Defendants cannot be accused of unjustly profiting at plaintiff's expense.
They were not responsible for the shifting of the river. It was due to
natural causes for which no one can be blamed. Furher, defendants were
extracting from public property then, under proper authorization. The
government, through the defendants, may have been enriched by chance,
but not unjustly.

G.R. No. 154270 March 9, 2010

TEOFISTO OÑO, PRECY O. NAMBATAC, VICTORIA O. MANUGAS and

POLOR O. CONSOLACION, Petitioners,
vs.
VICENTE N. LIM, Respondent.

DECISION

BERSAMIN, J.:

The subject of controversy is Lot No. 943 of the Balamban Cadastre in

Cebu City, covered by Original Certificate of Title (OCT) No. RO-9969-(O-
20449), over which the contending parties in this action for quieting of
title, initiated by respondent Vicente N. Lim (Lim) in the Regional Trial
Court (RTC) in Cebu City, assert exclusive ownership, to the exclusion of
the other. In its decision dated July 30, 1996,1 the RTC favored Lim, and
ordered the cancellation of OCT No. RO-9969-(O-20449) and the issuance
of a new certificate of title in the name of Luisa Narvios-Lim (Luisa), Lim’s
deceased mother and predecessor-in-interest.

On appeal (CA-GR CV No. 57823), the Court of Appeals (CA) affirmed the
RTC on January 28, 2002.2 It later denied the petitioners’ motion for
reconsideration through the resolution dated June 17, 2002.3

Hence, this appeal via petition for review on certiorari.

Antecedents
On October 23, 1992, Lim filed in the RTC in Cebu City a petition for the
reconstitution of the owner’s duplicate copy of OCT No. RO-9969-(O-
20449), alleging that said OCT had been lost during World War II by his
mother, Luisa;4 that Lot No. 943 of the Balamban Cadastre in Cebu City
covered by said OCT had been sold in 1937 to Luisa by Spouses Diego Oño
and Estefania Apas (Spouses Oño), the lot’s registered owners; and that
although the deed evidencing the sale had been lost without being
registered, Antonio Oño (Antonio), the only legitimate heir of Spouses Oño,
had executed on April 23, 1961 in favor of Luisa a notarized document
denominated as confirmation of sale,5 which was duly filed in the Provincial
Assessor’s Office of Cebu.

Zosimo Oño and petitioner Teofisto Oño (Oños) opposed Lim’s petition,
contending that they had the certificate of title in their possession as the
successors-in-interest of Spouses Oño.

On account of the Oños’ opposition, and upon order of the RTC, Lim
converted the petition for reconstitution into a complaint for quieting of
title,6 averring additionally that he and his predecessor-in-interest had been
in actual possession of the property since 1937, cultivating and developing
it, enjoying its fruits, and paying the taxes corresponding to it. He prayed,
inter alia, that the Oños be ordered to surrender the reconstituted owner’s
duplicate copy of OCT No. RO-9969-(O-20449), and that said OCT be
cancelled and a new certificate of title be issued in the name of Luisa in
lieu of said OCT.

In their answer,7 the Oños claimed that their predecessors-in-interest,

Spouses Oño, never sold Lot No. 943 to Luisa; and that the confirmation of
sale purportedly executed by Antonio was fabricated, his signature thereon
not being authentic.

RTC Ruling

On July 30, 1996, after trial, the RTC rendered its decision,8 viz:

WHEREFORE, premises considered, judgment is hereby rendered quieting

plaintiff's title to Lot No. 943 of the Balamban (Cebu) Cadastre, and
directing the Register of Deeds of Cebu —
 (1) To register the aforestated April 23, 1961 Confirmation of Sale of
Lot No. 943 of the Balamban, Cebu Cadastre by Antonio Oño in favor
of Luisa Narvios-Lim;

(2) To cancel the original certificate of title covering the said Lot No.
943 of the Balamban, Cebu Cadastre; and,

(3) To issue in the name of Luisa Narvios-Lim, a new duplicate

certificate of title No. RO-9969 (O-20449) of the Register of Deeds of
Cebu, which shall contain a memorandum of the fact that it is issued
in place of the lost duplicate certificate of title, and shall in all
respects be entitled to like faith and credit as the original certificate,
and shall be regarded as such for all purposes of this decree,
pursuant to the last paragraph of Section 109, Presidential Decree
No. 1529.

Without special pronouncement as to costs.

SO ORDERED.9

The RTC found that the Lims had been in peaceful possession of the land
since 1937; that their possession had never been disturbed by the Oños,
except on two occasions in 1993 when the Oños seized the harvested
copra from the Lims’ caretaker; that the Lims had since declared the lot in
their name for taxation purposes, and had paid the taxes corresponding to
the lot; that the signature of Antonio on the confirmation of sale was
genuine, thereby giving more weight to the testimony of the notary public
who had notarized the document and affirmatively testified that Antonio
and Luisa had both appeared before him to acknowledge the instrument as
true than to the testimony of the expert witness who attested that
Antonio’s signature was a forgery.

CA Ruling

On appeal, the Oños maintained that the confirmation of sale was

spurious; that the property, being a titled one, could not be acquired by
the Lims through prescription; that their (the Oños) action to claim the
property could not be barred by laches; and that the action instituted by
the Lims constituted a collateral attack against their registered
title.1avvphi1

The CA affirmed the RTC, however, and found that Spouses Oño had sold
Lot No. 943 to Luisa; and that such sale had been confirmed by their son
Antonio. The CA ruled that the action for quieting of title was not a
collateral, but a direct attack on the title; and that the Lims’ undisturbed
possession had given them a continuing right to seek the aid of the courts
to determine the nature of the adverse claim of a third party and its effect
on their own title.

Nonetheless, the CA corrected the RTC, by ordering that the Office of the
Register of Deeds of Cebu City issue a new duplicate certificate of title in
the name of Luisa, considering that the owner’s duplicate was still intact in
the possession of the Oños.

The decree of the CA decision was as follows:

WHEREFORE, the appeal is DISMISSED for lack of merit. However, the

dispositive portion of the decision appealed from is CORRECTED as follows:

(1) Within five (5) days from finality of the decision, defendants-
appellants are directed to present the owner's duplicate copy of OCT
No. RO-9969 (O-20449) to the Register of Deeds who shall
thereupon register the "Confirmation of Sale" of Lot No. 943,
Balamban Cadastre, Cebu, executed on April 23, 1961 by Antonio
Oño in favor of Luisa Narvios-Lim, and issue a new transfer certificate
of title to and in the name of the latter upon cancellation of the
outstanding original and owner's duplicate certificate of title.

(2) In the event defendants-appellants neglect or refuse to present

the owner's copy of the title to the Register of Deeds as herein
directed, the said title, by force of this decision, shall be deemed
annulled, and the Register of Deeds shall make a memorandum of
such fact in the record and in the new transfer certificate of title to
be issued to Luisa Narvios-Lim.

(3) Defendants-appellants shall pay the costs.

SO ORDERED.10

The CA denied the Oños’ motion for reconsideration11 on June 17, 2002.12

Hence, this appeal.

Issues

The petitioners raise the following issues:

1. Whether or not the validity of the OCT could be collaterally

attacked through an ordinary civil action to quiet title;

2. Whether or not the ownership over registered land could be lost

by prescription, laches, or adverse possession;

3. Whether or not there was a deed of sale executed by Spouses Oño

in favor of Luisa and whether or not said deed was lost during World
War II;

4. Whether or not the confirmation of sale executed by Antonio in

favor of Luisa existed; and

5. Whether or not the signature purportedly of Antonio in that

confirmation of sale was genuine.

Ruling of the Court

The petition has no merit.

A.

Action for cancellation of title is not an attack on the title

The petitioners contend that this action for quieting of title should be
disallowed because it constituted a collateral attack on OCT No. RO-9969-
(O-20449), citing Section 48 of Presidential Decree No. 1529, viz:
Section 48. Certificate not subject to collateral attack.– A certificate of title
shall not be subject to collateral attack. It cannot be altered, modified, or
cancelled except in a direct proceeding in accordance with law.

The petitioners’ contention is not well taken.

An action or proceeding is deemed an attack on a title when its objective is

to nullify the title, thereby challenging the judgment pursuant to which the
title was decreed.13 The attack is direct when the objective 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 is nevertheless made as an incident thereof.14

Quieting of title is a common law remedy for the removal of any cloud,
doubt, or uncertainty affecting title to real property.15 Whenever there is a
cloud on title to real property or any interest in real property by reason of
any instrument, record, claim, encumbrance, or proceeding that is
apparently valid or effective, but is, in truth and in fact, invalid, ineffective,
voidable, or unenforceable, and may be prejudicial to said title, an action
may be brought to remove such cloud or to quiet the title.16 In such action,
the competent court is tasked to determine the respective rights of the
complainant and the other claimants, not only to place things in their
proper places, and to make the claimant, who has no rights to said
immovable, respect and not disturb the one so entitled, but also for the
benefit of both, so that whoever has the right will see every cloud of doubt
over the property dissipated, and he can thereafter fearlessly introduce the
improvements he may desire, as well as use, and even abuse the property
as he deems fit.17

Lim’s complaint pertinently alleged:

18. If indeed, the genuine original of the Owner's Duplicate of the

Reconstituted Original Certificate of Title No. RO-9699 (O-20449) for Lot
943, Balamban Cadastre xxx is in Defendant's (Oño’s) possession, then
VNL submits the following PROPOSITIONS:

xxx
18.2. Therefore, the Original of Owner’s Duplicate Certificate (which
Respondents [Defendants Oños] claim in their Opposition is in their
possession) must be surrendered to VNL upon order of this Court, after the
Court shall have determined VNL's mother's acquisition of the attributes of
ownership over said Lot 943, in this action, in accordance with Section 107,
P.D. 1529, Property Registration Decree xxx

xxx

[t]hat OCT 20449 be cancelled and new title for Lot 943 be issued directly
in favor of LUISA NARVIOS, to complete her title to said Lot;18

The averments readily show that the action was neither a direct nor a
collateral attack on OCT No. RO-9969-(O-20449), for Lim was asserting
only that the existing title registered in the name of the petitioners’
predecessors had become inoperative due to the conveyance in favor of
Lim’s mother, and resultantly should be cancelled. Lim did not thereby
assail the validity of OCT No. RO-9969-(O-20449), or challenge the
judgment by which the title of the lot involved had been decreed. In other
words, the action sought the removal of a cloud from Lim’s title, and the
confirmation of Lim’s ownership over the disputed property as the
successor-in-interest of Luisa.

B.

Prescription was not relevant

The petitioners assert that the lot, being titled in the name of their
predecessors-in-interest, could not be acquired by prescription or adverse
possession.

The assertion is unwarranted.

Prescription, in general, is a mode of acquiring or losing ownership and

other real rights through the lapse of time in the manner and under the
conditions laid down by law.19 However, prescription was not relevant to
the determination of the dispute herein, considering that Lim did not base
his right of ownership on an adverse possession over a certain period. He
insisted herein, instead, that title to the land had been voluntarily
transferred by the registered owners themselves to Luisa, his predecessor-
in-interest.

Lim showed that his mother had derived a just title to the property by
virtue of sale; that from the time Luisa had acquired the property in 1937,
she had taken over its possession in the concept of an owner, and had
performed her obligation by paying real property taxes on the property, as
evidenced by tax declarations issued in her name;20 and that in view of the
delivery of the property, coupled with Luisa’s actual occupation of it, all
that remained to be done was the issuance of a new transfer certificate of
title in her name.

C.

Forgery, being a question of fact, could not be dealt with now

The petitioners submit that Lim’s evidence did not preponderantly show
that the ownership of the lot had been transferred to Luisa; and that both
the trial and the appellate courts disregarded their showing that Antonio’s
signature on the confirmation of sale was a forgery.

Clearly, the petitioners hereby seek a review of the evaluation and

appreciation of the evidence presented by the parties.

The Court cannot anymore review the evaluation and appreciation of the
evidence, because the Court is not a trier of facts.21 Although this rule
admits of certain exceptions, viz: (1) when the conclusion is a finding
grounded entirely on speculation, surmises, or conjecture; (2) when the
inference made is manifestly mistaken; (3) where there is a grave abuse of
discretion; (4) when the judgment is based on a misapprehension of facts;
(5) when the findings of fact are conflicting; (6) when the Court of
Appeals, in making its findings, went beyond the issues of the case, and
the findings are contrary to the admissions of both appellant and appellee;
(7) when the findings of the Court of Appeals are contrary to those of the
trial court; (8) when the findings of fact are conclusions without specific
evidence on which they are based; (9) when the facts set forth in the
petition as well in the petitioners’ main and reply briefs are not disputed by
the respondents; and, (10) when the findings of fact of the Court of
Appeals are premised on the supposed absence of evidence and are
contradicted by the evidence on record,22 it does not appear now that any
of the exceptions is present herein. We thus apply the rule without
hesitation, and reject the appeal for that reason.

It is emphasized, too, that the CA upheld the conclusion arrived at by the

RTC that the signature of Antonio had not been simulated or forged. The
CA ruled that the testimony of the notary public who had notarized the
confirmation of sale to the effect that Antonio and Luisa had appeared
before him prevailed over that of the petitioners’ expert witness. The
concurrence of their conclusion on the genuineness of Antonio’s signature
now binds the Court.23

In civil cases, the party having the burden of proof must establish his case
by a preponderance of evidence. Preponderance of evidence is the weight,
credit, and value of the aggregate evidence on either side, and is usually
considered to be synonymous with the term greater weight of the evidence
or greater weight of the credible evidence. Preponderance of evidence is a
phrase that means, in the last analysis, probability of the truth.24 It is
evidence that is more convincing to the court as worthy of belief than that
which is offered in opposition thereto.

Lim successfully discharged his burden of proof as the plaintiff. He

established by preponderant evidence that he had a superior right and title
to the property. In contrast, the petitioners did not present any proof of
their better title other than their copy of the reconstituted certificate of
title. Such proof was not enough, because the registration of a piece of
land under the Torrens system did not create or vest title, such registration
not being a mode of acquiring ownership. The petitioners need to be
reminded that a certificate of title is merely an evidence of ownership or
title over the particular property described therein. Its issuance in favor of
a particular person does not foreclose the possibility that the real property
may be co-owned with persons not named in the certificate, or that it may
be held in trust for another person by the registered owner.25

WHEREFORE, the petition for review on certiorari is denied, and the

decision dated January 28, 2002 is affirmed.

The petitioners are ordered to pay the costs of suit.

SO ORDERED.

[G.R. No. 176929, July 04, 2008]

INOCENCIO Y. LUCASAN FOR HIMSELF AND AS THE JUDICIAL

ADMINISTRATOR OF THE INTESTATE ESTATE OF THE LATE JULIANITA
SORBITO LUCASAN, PETITIONER, VS. PHILIPPINE DEPOSIT INSURANCE
CORPORATION (PDIC) AS RECEIVER AND LIQUIDATOR OF THE DEFUNCT
PACIFIC BANKING CORPORATION, RESPONDENT.

DECISION

NACHURA, J.:

On appeal is the March 23, 2006 Decision[1] of the Court of Appeals (CA) in
CA-G.R. CV No. 81518, affirming the July 24, 2003 Order[2] of the Regional
Trial Court (RTC) of Bacolod City, Branch 43, granting respondent's motion
to dismiss, as well as its subsequent Resolution[3] denying petitioner's
motion for reconsideration.

The factual antecedents are as follows.

Petitioner Inocencio Y. Lucasan (Lucasan) and his wife Julianita Sorbito

(now deceased) were the owners of Lot Nos. 1500-A and 229-E situated in
Bacolod City, respectively covered by TCT Nos. T-68115 and T-13816.

On August 3, 1972, Pacific Banking Corporation (PBC) extended a

P5,000.00 loan to Lucasan, with Carlos Benares as his co-maker. Lucasan
and Benares failed to pay the loan when it became due and demandable.
Consequently, PBC filed a collection case with the RTC of Bacolod City,
docketed as Civil Case No. 12188.

On April 30, 1979, the RTC rendered a decision ordering Lucasan and
Benares to jointly and severally pay PBC P7,199.99 with interest at 14%
per annum computed from February 7, 1979, until the full payment of the
obligation. Lucasan failed to pay the monetary award; thus, to satisfy the
judgment, the RTC issued a writ of execution directing the sheriff to effect
a levy on the properties owned by Lucasan and sell the same at public
auction.

In compliance with the writ, the City Sheriff of Bacolod issued a Notice of
Embargo on January 8, 1981, which was annotated on Lucasan's TCT Nos.
T-68115 and T-13816 as Entry No. 110107. Annotated as prior
encumbrances on the same titles were the mortgages in favor of Philippine
National Bank (PNB) and Republic Planter's Bank (RPB) executed to secure
Lucasan's loans with the banks.

On May 13, 1981, the lots were sold at public auction and were awarded to
PBC as the highest bidder. A certificate of sale was executed in its favor
and was registered and annotated on TCT Nos. T- 68115 and T-13816 as
Entry No. 112552 on June 5, 1981. Neither PNB nor RPB, the mortgagees,
assailed the auction sale.

Lucasan, as well as the mortgagee banks, PNB and RPB, did not redeem
the properties within the redemption period. Nevertheless, PBC did not file
a petition for consolidation of ownership.

In January 1997, Lucasan, through counsel, wrote a letter to the Philippine

Deposit Insurance Corporation (PDIC), PBC's receiver and liquidator
seeking the cancellation of the certificate of sale and offering to pay PBC's
claim against Lucasan.[4]

Not long thereafter, Lucasan paid his loans with the PNB and RPB.
Consequently, the mortgagee banks executed their respective releases of
mortgage, resulting in the cancellation of the prior encumbrances in favor
of PNB and RPB.

On August 13, 2001, PDIC denied Lucasan's request for the cancellation of
the certificate of sale stating:
Please be informed that based on our records, TCT Nos. T-68115 and T-
13816 have already become part of the acquired assets of Pacific Banking
Corporation by virtue of a Certificate of Sale dated May 13, 1981 executed
by the City Sheriff of Bacolod. Subsequently, this document was registered
on the titles on June 5, 1981 so that the last day of the redemption period
was June 5, 1982.
With regard to your request, we regret to inform you that reacquisition of
the subject properties have to be through sale following PDIC's policy on
disposal. Accordingly, these properties can be disposed through public
bidding using the latest appraised value in the total amount of
P2,900,300.00 as of March 29, 2000 as a minimum bid. If you are still
interested to acquire the properties, please get in touch with our Asset
Management Group x x x.[5]
Lucasan then filed a petition denominated as declaratory relief with the
RTC of Bacolod City docketed as Civil Case No. 02-11874.[6] He sought
confirmation of his rights provided in the second paragraph of Section 1,
Rule 63 of the Rules of Court in relation to Section 75 of Presidential
Decree (P.D.) No. 1529. Lucasan also pleaded for the lifting and/or
cancellation of the notice of embargo and the certificate of sale annotated
on TCT Nos. T-68115 and T-13816, and offered to pay P100,000.00 or
such amount as may be determined by the RTC, as consideration for the
cancellation.

PDIC moved to dismiss the complaint for lack of cause of action. It averred
that an action to quiet title under Section 1 of Rule 63 may only be brought
when there is a cloud on, or to prevent a cloud from being cast upon, the
title to real property. It asseverated that a cloud on the title is an
outstanding instrument record, claim, encumbrance or proceeding which is
actually invalid or inoperative, but which may nevertheless impair or affect
injuriously the title to property. PDIC claimed that the notice of embargo
was issued pursuant to a writ of execution in Civil Case No. 12188, while
the certificate of sale was executed as a result of a public bidding. Thus,
their annotations on the titles were valid, operative or effective. PDIC
asserted that Lucasan's petition is nothing but a disguised attempt to
compel PDIC to resell the properties at a reduced price of P100,000.00.
Accordingly, it prayed for the dismissal of the petition.[7]

Lucasan opposed the motion.[8] He countered that the subject properties

were still in his possession, and neither PBC nor PDIC instituted an action
for consolidation of ownership. Since the certificate of title was still in his
name, he contended that he could pursue all legal and equitable remedies,
including those provided for in Section 1, Rule 63 of the Rules of Court to
reacquire the properties. He also claimed that PDIC's policy of disposing
the subject properties through public bidding at the appraised value of
P2,900,300.00 was unjust, capricious and arbitrary, considering that the
judgment debt amounted only to P7,199.99 with interest at 14% per
annum. Lucasan urged the RTC to apply the liberal construction of the
redemption laws stressed in Cometa v. Court of Appeals.[9]

In its Order[10] dated July 24, 2003, the RTC granted PDIC's motion to
dismiss, thus:
The clouds contemplated by the provision of law under Article 476 of the
Civil Code is one where the instrument, record, claim, encumbrance or
proceeding is apparently valid or effective on its face that nothing appears
to be wrong, but in reality, is null and void. Hence, the petition filed by
[Lucasan] pursuant to the said article is equivalent to questioning the
validity of the subsequent annotation of Entry No. 110107 and Entry No.
112522 in TCT Nos. T-13816 and T-68115.

Records disclose that Entry No. 110107 which is a Notice of Embargo was
issued by virtue of a valid judgment rendered in Civil Case No. 12188
entitled "Pacific Banking Corporation vs. [Inocencio] Lucasan, et al.,"
whereby the Court found [Lucasan] liable in favor of [PBC] the sum of
P7,199.99 with 14% interest per annum to be computed from February 7,
1979 until fully paid.

As mandated in Sec. 12, Rule 39 of the Revised Rules of Court, such levy
on execution create a lien in favor of [PBC] over the right, title and interest
of [Lucasan] over the two (2) subject parcels of land covered by TCT Nos.
T-13816 and T-68115, subject to liens and encumbrances then existing.
The fact that [Lucasan] has redeemed the mortgage properties from the
first mortgages (sic), PNB and PNB (sic) Republic Bank, does not vest him
any title free from the lien of [PBC].

While the law requires that the judgment debtor, [Lucasan] must be served
with a notice of levy and even if not served therewith, the defect is cured
by service on him of the notice of sale prior to the sale, nowhere in the
petition which alleges that [Lusasan] refutes the validity of the execution
sale. Thus, he is deemed to have received and recognized the same.

As support for his thesis, [Lucasan] cites the case of Balanga vs. Ca., et al.
(supra). However this Court is unable to agree that it is applicable to the
present case. As correctly argued by [PDIC], in that case the proceedings
under execution suffered infirmity from the very start as the levy and sale
made by the sheriff of the land of petitioner Balanga included the house
erected on the land [and] constituted as a family home which, under the
law, exempt from execution. In the case at bar, no objection was
interposed by [Lucasan] as a valid levy has been made pursuant to Sec. 7,
Rule 57 of the Revised Rules of Court, as a consequence of which, the sale
made pursuant to Sec. 11 of the same rule is also valid and effective.[11]
The dispositive portion of the RTC Order reads:
WHEREFORE, finding the claim of any cloud over the titles of [Lucasan] to
be bereft of basis in fact and in law, the Motion to Dismiss filed by [PDIC]
is granted. Accordingly, this is hereby ordered DISMISSED

SO ORDERED.[12]
Lucasan filed a motion for reconsideration, but the RTC denied it on
October 20, 2003.[13]

On appeal, the CA affirmed in toto the RTC ruling. It declared that Lucasan
already lost his right to redeem the properties when he failed to exercise it
within the prescribed period. The effect of such failure was to vest in PBC
absolute ownership over the subject properties.[14]

The CA disposed, thus:

WHEREFORE, in view of all the foregoing premises, the appeal is hereby
DENIED. Accordingly, the assailed Order of the Regional Trial Court of
Bacolod City, Branch 43 dated 24 July 2003 dismissing [Lucasan's] Petition
for Declaratory Relief and the subsequent Order of the same Court dated
20 October 2003 denying [Lucasan's] motion for reconsideration from the
Order of Denial (sic) are hereby affirmed in toto. No costs.

SO ORDERED.[15]
Lucasan sought a reconsideration of the CA Decision, but the same was
denied on February 7, 2007.[16]

Before us, Lucasan impugns the CA Decision on the following grounds:

1- THE COURT OF APPEALS ERRED AND GRAVELY ABUSED ITS
DISCRETION IN AFFIRMING THE ORDER OF DISMISSAL OF THE
PETITIONER'S PETITION IN THE REGIONAL TRIAL COURT WHEN IT
DISREGARDED THE CLEAR PROVISION OF SECTION 75 OF PRESIDENTIAL
DECREE NO. 1529 AND PUT TO NAUGHT THE APPLICABLE
JURISPRUDENCE IN ZACARIAS COMETA x x x AND THE CASES CITED
THEREIN, INSPITE (sic) OF THE CLEAR AND OUTSTANDING SIMILARITY
OF FACTS WITH THE CASE UNDER CONSIDERATION.

2- THE COURT OF APPEALS ALSO ERRED AND GRAVELY ABUSED ITS

DISCRETION WHEN IT FAILED TO CONSIDER THAT THE NOTICE OF
EMBARGO AND CERTIFICATE OF SALE ISSUED BY THE CITY SHERIFF
WERE ONLY LEVY ON THE INTEREST OF THE PETITIONER ON THE TWO
(2) SUBJECT LOTS, AS DECREED IN QUEZON BEARING & PARTS
CORPORATION, x x x, WHICH IS LIKEWISE APPLICABLE TO THE CASE AT
BAR.[17]
Lucasan posits that he has sufficient cause of action against PDIC; thus, he
chides the RTC for dismissing his complaint, and the CA for affirming the
dismissal. In support of his thesis, he cites Section 75 of Presidential
Decree (PD) No. 1529, or the Property Registration Decree[18] and Cometa
v. Court of Appeals.[19]

As gleaned from the averments of the complaint, Lucasan's action was one
for quieting of title under Rule 63 of the Rules of Court. Essentially, he
sought the cancellation of the notice of embargo and the certificate of sale
annotated on TCT Nos. T-68115 and T-13816 claiming that the said
annotations beclouded the validity and efficacy of his title. The RTC,
however, dismissed his complaint for lack of cause of action which was
affirmed by the CA in its assailed Decision. Thus, the key issue for our
consideration is whether the dismissal of Lucasan's complaint was proper.

Quieting of title is a common law remedy for the removal of any cloud of
doubt or uncertainty with respect to real property. The Civil Code
authorizes the said remedy in the following language:
ART. 476. Whenever there is a cloud on title to real property or any
interest therein, by reason of any instrument, record, claim, encumbrance
or proceeding which is apparently valid or effective but is in truth and in
fact invalid, ineffective, voidable, or unenforceable, and may be prejudicial
to said title, an action may be brought to remove such cloud or to quiet the
title.
An action may also be brought to prevent a cloud from being cast upon
title to real property or any interest therein.

ART. 477. The plaintiff must have legal or equitable title to, or interest in
the real property which is the subject-matter of the action. He need not be
in possession of said property.
To avail of the remedy of quieting of title, two (2) indispensable requisites
must concur, namely: (1) the plaintiff or complainant has a legal or an
equitable title to or interest in the real property subject of the action; and
(2) the deed, claim, encumbrance or proceeding claimed to be casting a
cloud on his title must be shown to be in fact invalid or inoperative despite
its prima facie appearance of validity or legal efficacy.[20] Stated differently,
the plaintiff must show that he has a legal or at least an equitable title over
the real property in dispute, and that some deed or proceeding beclouds its
validity or efficacy.

Unfortunately, the foregoing requisites are wanting in this case.

Admittedly, the subject parcels of land were levied upon by virtue of a writ
of execution issued in Civil Case No. 12188. On May 13, 1981, a public
auction of the subject parcels of land was held and the lots were awarded
to PBC as the highest bidder. A certificate of sale in favor of PBC was
issued on the same day, and was registered and annotated on TCT Nos. T-
68115 and T-13816 as Entry No. 112552 on June 5, 1981.

Under the 1964 Rules of Court, which were in effect at that time, the
judgment debtor or redemptioner had the right to redeem the property
from PBC within twelve (12) months from the registration of the certificate
of sale.[21] With the expiration of the twelve-month period of redemption
and no redemption having been made, as in this case, the judgment debtor
or the redemptioner lost whatever right he had over the land in
question.[22]

Lucasan admitted that he failed to redeem the properties within the

redemption period, on account of his then limited financial situation. [23] It
was only in January 1997 or fifteen (15) years later that he manifested his
desire to reacquire the properties. Clearly thus, he had lost whatever right
he had over Lot Nos. 1500-A and 229-E.
The payment of loans made by Lucasan to PNB and RPB in 1997 cannot, in
any way, operate to restore whatever rights he had over the subject
properties. Such payment only extinguished his loan obligations to the
mortgagee banks and the liens which Lucasan claimed were subsisting at
the time of the registration of the notice of embargo and certificate of sale.

Neither can Lucasan capitalize on PBC's failure to file a petition for

consolidation of ownership after the expiration of the redemption period.
As we explained in Calacala v. Republic:[24]
[P]etitioners' predecessors-in-interest lost whatever right they had over
[the] land in question from the very moment they failed to redeem it
during the 1-year period of redemption. Certainly, the Republic's failure to
execute the acts referred to by the petitioners within ten (10) years from
the registration of the Certificate of Sale cannot, in any way, operate to
restore whatever rights petitioners' predecessors-in-interest had over the
same. For sure, petitioners have yet to cite any provision of law or rule of
jurisprudence, and we are not aware of any, to the effect that the failure of
a buyer in a foreclosure sale to secure a Certificate of Final Sale, execute
an Affidavit of Consolidation of Ownership and obtain a writ of possession
over the property thus acquired, within ten (10) years from the registration
of the Certificate of Sale will operate to bring ownership back to him whose
property has been previously foreclosed and sold.

xxxx

Moreover, with the rule that the expiration of the 1-year redemption period
forecloses the obligor's right to redeem and that the sale thereby becomes
absolute, the issuance thereafter of a final deed of sale is at best a mere
formality and mere confirmation of the title that is already vested in the
purchaser. As this Court has said in Manuel vs. Philippine National Bank, et
al.:
Note must be taken of the fact that under the Rules of Court the expiration
of that one-year period forecloses the owner's right to redeem, thus
making the sheriff's sale absolute. The issuance thereafter of a final deed
of sale becomes a mere formality, an act merely confirmatory of the title
that is already in the purchaser and constituting official evidence of that
fact.(Emphasis supplied.)
Certainly, Lucasan no longer possess any legal or equitable title to or
interest over the subject parcels of land; hence, he cannot validly maintain
an action for quieting of title.

Furthermore, Lucasan failed to demonstrate that the notice of embargo

and the certificate of sale are invalid or inoperative. In fact, he never put in
issue the validity of the levy on execution and of the certificate of sale duly
registered on June 5, 1981. It is clear, therefore, that the second requisite
for an action to quiet title is, likewise, absent.

Concededly, Lucasan can pursue all the legal and equitable remedies to
impeach or annul the execution sale prior to the issuance of a new
certificate of title in favor of PBC. Unfortunately, the remedy he had chosen
cannot prosper because he failed to satisfy the requisites provided for by
law for an action to quiet title. Hence, the RTC rightfully dismissed
Lucasan's complaint.

Lucasan tries to find solace in our ruling in Cometa v. Court of Appeals.

Sadly for him, that case is not on all fours with his case, for it was not for
quieting of title but a petition for issuance of a writ of possession and
cancellation of lis pendens. Likewise, in Cometa the registered owner
assailed the validity of the levy and sale, which Lucasan failed to do.

Undoubtedly, Lucasan's right to redeem the subject properties had elapsed

on June 5, 1982. His offer to redeem the same in 1997 or long after the
expiration of the redemption period is not really one for redemption but for
repurchase. Thus, PBC and PDIC, its receiver and liquidator, are no longer
bound by the bid price. It is entirely within their discretion to set a higher
price. As we explained in De Robles v. Court of Appeals:[25]
The right to redeem becomes functus officio on the date of its expiry, and
its exercise after the period is not really one of redemption but a
repurchase. Distinction must be made because redemption is by force of
law; the purchaser at public auction is bound to accept redemption.
Repurchase however of foreclosed property, after redemption period,
imposes no such obligation. After expiry, the purchaser may or may not re-
sell the property but no law will compel him to do so. And, he is not bound
by the bid price; it is entirely within his discretion to set a higher price, for
after all, the property already belongs to him as owner.
Accordingly, the condition imposed by the PDIC for the re-acquisition of the
property cannot be considered unjust or unreasonable.

Verily, in several cases,[26] this Court allowed redemption even after the
lapse of the redemption period. But in those cases a valid tender was made
by the original owners within the redemption period. Even in Cometa, the
redemption was allowed beyond the redemption period because a valid
tender of payment was made within the redemption period. The same is
not true in the case before us.

In fine, we find that the RTC correctly dismissed Lucasan's complaint for
quieting of title. Thus, the CA committed no reversible error in sustaining
the RTC.

WHEREFORE, the petition is DENIED. The Decision and Resolution of the

Court of Appeals in CA-G.R. CV No. 81518, are AFFIRMED. Costs against
the petitioner.

SO ORDERED.