ART 215 01 Luna vs Encarnacion 02 Leung Yee vs Strong Machinery Co.

, 03 Sibal vs Valdez 04 Mindanao Bus vs City Assessor 05 Berkenkotter vs Cu Unjieng e Hiyos 06 Ago vs CA 07 Presbeterio vs Fernandez 08 Board of Assessment vs Meralco 09 Meralco vs Board of Assessment 10 Sawmill Co. vs Castillo 11 Marcelo R. Soriano vs Sps Galit 12 Meralco Securities Industrialvs CBA 13 Fels Inc vs Province of Batangas 14 Benguet Corp vs CBAA ART 416 15 US vs Carlos 16 Luis Marcos Laurel vs Hon. Zeus Abrogar ART 417 17 Strockchecker vs Ramirez ART 420 18 Usero vs CA 19 MIAA vs CA ART 421 20 Dela Cruz vs CA ART 422 21 Cebu Oxygen vs Bercilles ART 423, 424 22 In the Matter of Reversion/Recall of Reconstituted OCT No. 0-116 ART 425 23 Register of Deeds vs CBC 24 Director of Lands vs IAC 25 Halili vs CA 26 Krivenko vs Register of Deeds ART 428 26 Ayala vs Burton 27 Fajardo vs Freedom 26 Tayag vs Lacson 27 Ross vs Sps Ong

2 4 8 15 18 21 25 29 33 36 39 45 50 58

ART 429 28 German Management vs CA 29 Grand Union vs Espino 30 UCPB vs Basco ART 432 31 Tan vs Standard Oil ART 435 32 ATO & MCIAA vs Gapuco 33 RP vs Lim ART 445 34 Philippine Sugar vs Poizat 35 Caltex vs Felias ART 447 36 Pacific Farm vs Esguerra ART 448 37 PNB vs De Jesus 38 Geminiano vs CA 39 Balucanag vs Francisco 49 NHA vs Grace Baptist Church 50 Sps Nuguid vs CA 51 Carrascoso vs CA 52 sps Rasdas vs Estenor 53 Rosales vs Castellfort 54 Bacaling vs Laguna 55 Programme Inc vs Province of Bataan 56 Sulo sa Nayon vs nayong Pilipini 57 Floreza vs Evangelista ART 449 58 Del Rosario vs Sps Manuel 59 Sps Rasdas vs Estenor 60 Lumungo vs Usman ART 453 61 Municipality of Oas vs Roa ART 457 62 Heirs of Emiliano vs IAC ART 458 63 Government of Philippines vs Colegio de San Jose ART 476 64 Anastacia de Alla vs CA 65 Teofisto Ono vs Vicente Lim ART 477 66 Tan vs Valdhueza

225 228 234 245 248 254 263 274 277 279 282 286 290 293 298 316 321 331 335 339 345 349 351 356 360 362 370 374 378 382

ART 486 67 Borbajo vs Hidden View Homeowners 68 Cruz vs Catapang ART 487 69 Resuena vs CA 70 Baloloy vs Hular 71 Adlawan vs Adlawan 72 Iglesia ni Kristo vs Ponferrada ART 488 73 Jalandoni vs Guanzon ART 493 74 Sanchez vs CA 75 Vagilidad vs Vagilidad 76 Santos vs Lumbao 77 Go Ong vs CA 78 Mercado vs Liwanag 79 Acabal vs Acabal 80 Cuizon vs Remoto 81 Pamplona vs Moreto 82 Caro vs CA ART 494 83 Salvador vs CA 84 Tuason vs Tuason 85 Flores vs Cichon ART 499 86 Lopez vs Lustre ART 520 89 Coffee Oartners vs SFCR ART 523 90 Go vs Bacaron 91 Medina vs Valdellon ART 525 92 RP vs CA ART 526 93 Liu vs Loy 94 Calicdan vs Cendana ARTS 565, 601, 606 95 NHA vs CA ART 566 96 Bachrach vs Seifert ART 596 97 BAA Zamboanga vs Samar Mining ART 603 98 City of Manila vs Monte de Piedad ART 607 99 Albar vs Carangdang

387 392 396 401 411 416 425 427 431 439 448 452 455 468 474 480

63 69 76 78 82 131 134 136

485 495 499 504 506 511 517 521 526 536 541 547 549 554 558

141 144 148 152 194 204 207 219

ART 613 100 Dela Cruz vs Ramiscal 101 Private Devt Corp vs CA ART 617 102 Velasco vs Cusi 103 Valisno vs Adriano ART 619 104 La Vista Assoc vs CA ART 624 105 Amor vs Florentino ART 631 106 Ongsiaco vs Ongsiaco ART 649 107 Quimen vs CA 108 Jariol vs CA ART 660 109 Lao vs Alburo ART 668 110 Cortez vs Yu-Tibo 111 Fabie vs Lichauco ART 688 112 Trias vs Araneta ART 699 113 Timoner vs People ART 712 114 Acap vs CA ART 725 115 Shoppers Paradise vs Ruque ART 733 116 CJ Yulo vs CB of San Pablo 117 Sec of Educ vs Dulay 118 Manalo vs De Mesa ART 744 119 Cagaon vs Cagaon ART 749 120 RP vs Silim ART 764 12i Dolar vs Brgy Lublub

563 569 576 579 582 590 604 605 610 614 617 626 632 634 637 642 646 652 657 662 664 670

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LUNA vs ENCARNACION No. L-4637. June 30, 1952 JOSE A. LUNA, petitioner, vs. DEMETRIO B. ENCARNACION, Judge of First Instance of Rizal, TRINIDAD REYES and THE PROVINCIAL SHERIFF OF RIZAL, respondents.
1. REAL ESTATE MORTGAGE; EXTRAJUDICIAL FORECLOSURE; HOUSE REGARDED AS NOT REAL PROPERTY.Where the undertaking executed by and between mortgagor and mortgagee is a chattel mortgage, and not a real estate mortgage, it is a mistake for the mortgagee to request the sheriff, under Act No. 3135 as amended by Act No. 4118, to sell extrajudicially the house subject of the mortgage in order to secure full satisfaction of the indebtedness owned by the mortgagor, specially when the house is of mixed materials which by its very nature is considered as personal property. Act No. 3135, as amended, covers only real estate mortgages and is intended merely to regulate the extrajudicial sale of the property mortgaged if and when the mortgagee is given a special power or express authority to do so in the deed itself or in a document annexed thereto. 2. CHATTEL MORTGAGE; EXTRAJUDICIAL FORECLOSURE; REQUIREMENTS OF NOTICE AND REGISTRATION.Chattel mortgages are covered and regulated by the Chattel Mortgage Law, Act No. 1508. Section 14 of this Act allows the mortgagee to have the property mortgaged sold at public auction through a public officer in almost the same manner as that allowed by Act No. 3135, as amended by Act No. 4118, provided that the requirements of the law relative to notice and registration are complied with. 3. Id.; Id.; PROCEDURE TO ENFORCE MORTGAGEE'S REMEDY.In the supposition that the sale of the property by the sheriff has been made in accordance with law, and the question he is confronted with is how to deliver the possession of the property to the purchaser in case of refusal to surrender its possession on the part of the debtor or mortgagor, the remedy of the purchaser, according to the authorities, is to bring an ordinary action for recovery of possession (Continental Gin Co. vs. Pannell, 160 P., 598; 61 Okl., 102; 14 C. J. S., pp. 1027, 1028). The purchaser cannot take possession of the property by force either directly or through the sheriff. The creditor cannot merely file a petition for a writ of possession. Her remedy is to file an ordinary action for recovery of possession in order that the debtor may be given an opportunity to be heard not only regarding possession but also regarding the obligation covered by the mortgage.

On September 25, 1948, a deed designated as chattel mortgage was executed by Jose A. Luna in favor of Trinidad Reyes whereby the former conveyed by way of first mortgage to the latter a certain house of mixed materials situated in barrio San Nicolas, municipality of Pasig, Province of Rizal, to secure the payment of a promissory note in the amount of P1,500, with interest at 12 per cent per annum. The document was registered in the office of the register of deeds for the Province of Rizal. The mortgagor having failed to pay the promissory note when it fell due, sheriff of said province to sell the house at public auction so that with its proceeds the amount indebted may be paid notifying the mortgagor in writing of the time and place of the sale as required by law. The sheriff acceded to the request and sold the property to the mortgagee for the amount covering the whole indebtedness with interest and costs. The certificate of the sale was issued by the sheriff on May 28, 1949. After the period for the redemption of the property had expired without the mortgagor having exercised his right to repurchase, the mortgagee demanded from the mortgagor the surrender of the possession of the property, but the latter refused and so on October 13, 1950, she filed a petition in the Court of First Instance of Rizal praying that the provincial sheriff be authorized to place her in possession of the property invoking in her favor the provisions of Act No, 3135, as amended by Act No. 4118.

ORIGINAL ACTION in the Supreme Court. Certiorari with preliminary injunction. The facts are stated in the opinion of the Court. Jose S. Fineza for petitioner. BAUTISTA ANGELO, J.:

When the petition came up for hearing before the court on October 25, 1950, Jose A. Luna, the mortgagor, opposed the petition on the following grounds: (1) that Act No. 3135 as amended by Act No. 4118 is applicable only to a real estate mortgage; (2) that the mortgage involved herein is a chattel mortgage; and (3) that even if the mortgage executed by the parties herein be considered as real estate mortgage, the extra-judicial sale made by the sheriff of the property in question is invalid because the mortgage does not contain an express stipulation authorizing the extra-judicial sale of the property. After hearing, at which both parties have expressed their views in support of their respective contentions, respondent judge, then presiding the court, overruled the opposition and granted the petition ordering the provincial sheriff of Rizal, or any of his deputies, to immediately place petitioner in possession of the property in question while at the same time directing the mortgagor Jose A, Luna to vacate it and relinquish it in favor of petitioner. It is from this order that Jose A. Luna desires now to obtain relief by filing this petition for certiorari contending that the respondent judge has acted in excess of his jurisdiction.

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The first question which petitioner poses in his petition for certiorari is that which relates to the validity of the extra-judicial sale made by the provincial sheriff of Rizal of the property in question in line with the request of the mortgagee Trinidad Reyes. It is contended that said extra-judicial sale, having been conducted under the provisions of Act No. 3135, as amended by Act No. 4118, is invalid because the mortgage in question is not a real estate mortgage and, besides, it does not contain an express stipulation authorizing the mortgagee to foreclose the mortgage extra-judicially. There is merit in this claim. As may be gleaned from a perusal of the deed signed by the parties (Annex "C"), the understanding executed by them is a chattel mortgage, as the parties have so expressly designated, and not a real estate mortgage, especially when it is considered that the property given as a security is a house of mixed materials which by its very nature is considered as personal property. Such being the case, it is indeed a mistake for the mortgagee to consider this transaction in the light of Act No. 3135, as amended by Act No. 4118, as was so considered by her when she requested the provincial sheriff to sell it extra-judicially in order to secure full satisfaction of the indebtedness still owed her by the mortgagor. It is clear that Act No. 3135, as amended, only covers real estate mortgages and is intended merely to regulate the extra-judicial sale of the property mortgaged if and when the mortgagee is given a special power or express authority to do so in the deed itself, or in a document annexed thereto. These conditions do not here obtain. The mortgage before us is not a real estate mortgage nor does it contain an express authority or power to sell the property extra-judicially. But regardless of what we have heretofore stated, we find that the validity of the sale in question may be maintained, it appearing that the mortgage in question is a chattel mortgage and as such it is covered and regulated by the Chattel Mortgage Law, Act No. 1508. Section 14 of this Act allows the mortgagee to have the property mortgaged sold at public auction through a public officer in almost the same manner as that allowed by Act No. 3135, as amended by Act No. 4118, provided that the requirements of the law relative to notice and registration are complied with. We are not prepared to state if these requirements of the law had been complied with in this case for the record before us is not complete and there is no showing to that effect. At any rate, this issue is not now important because the same can be threshed out when the opportunity comes for its determination, nor is it necessary for us to consider it in reaching a decision in the present case. Suffice it to state that for the present we are not expressing any opinion on this matter which concerns the validity of the sale in question for the reason that this opinion will only be

limited to a matter of procedure relative to the step taken by the mortgagee in securing the possession of the property involved. In the supposition that the sale of the property made by the sheriff has been made in accordance with law, and the question he is confronted is how to deliver the possession of the property to the purchaser in case of refusal to surrender its possession on the part of the debtor or mortgagor, the remedy of the purchaser, according to the authorities, is to bring an ordinary action for recovery of possession (Continental Gin Co. vs. Pannell, 160 P., 598; 61 Okl., 102; 14 C. J. S., pp. 1027, 1028). The purchaser cannot take possession of the property by force either directly or through the sheriff. And the reason for this is "that the creditor's right of possession is conditioned upon the fact of default, and the existence of this fact may naturally be the subject of controversy" (Bachrach Motor Co. vs. Summers, 42 Phil., 3, 6). The creditor cannot merely file a petition for a writ of possession as was done by Trinidad Reyes in this case. Her remedy is to file an ordinary action for recovery of possession in order that the debtor may be given an opportunity to be heard not only regarding possession but also regarding the obligation covered by the mortgage. The petition she has filed in the lower court, which was not even docketed, is therefore improper and should be disregarded. Wherefore, the order subject of the present petition for certiorari is hereby set aside, with costs against respondent Trinidad Reyes.

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LEUNG YEE vs STRONG MACHINERY CO. No. 11658. February 15, 1918 LEUNG YEE, plaintiff and appellant, vs. FRANK L. STRONG MACHINERY COMPANY and J. G. WILLIAMSON, defendants and appellees.

8. ID.; ID."Good faith, or the want of it, is not a visible, tangible fact that can be seen or touched but rather a state or condition of mind which can only be judged of by actual or fancied tokens. or signs."

APPEAL from a judgment of the Court of First Instance of Cavite. Revilla, J. The facts are stated in the opinion of the court.

1. CHATTEL MORTGAGE; REGISTRY OF MORTGAGE .COVERING REAL PROPERTY. The sole purpose and object of the chattel mortgage registry is to provide for the registry of "chattel mortgages," and transfers thereof, that is to say, mortgages of personal property executed in the manner and form prescribed in the statute. Neither the original registry in a chattel mortgage registry of an instrument purporting to be a chattel mortgage of a building and the machinery installed therein, nor the annotation in that registry of the sale of the mortgaged property, had any effect whatever so far as the building is concerned. 2. ID.; ID.A factory building is real property, and the mere fact that it is mortgaged and sold, separate and apart from the land on which it stands, in no wise changes its character as real property. 3. VENDOR AND PURCHASER; REGISTRY OF TITLE; GOOD FAITH.The rights secured under the provisions of article 1473 of the Civil Code to that one of two purchasers of the same real estate, who has secured and inscribed his title thereto in the Land Registry,. do not accrue unless such inscription is made in good faith. 4. ID.; SEPARATE PURCHASERS; DETERMINATION OF RIGHTS.The respective rights of two or more separate purchasers of the same real estate from the same owner in case none of them has secured an inscription of his title in the land registry in good faith, are to be determined in accord with the third, and not the second paragraph of that article. 5. ID.; GOOD FAITH.One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim that he has acquired title thereto in good faith, as against the true owner of the land or of an interest therein; and the same rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor. 6. ID.; ID.A purchaser cannot close his eyes to facts which should put a reasonable man upon his guard and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor. 7. ID.; ID.Good faith, or the lack of it, is in its last analysis a question of intention; but in ascertaining the intention by which one is actuated on a given occasion, we are necessarily controlled by the evidence as to the conduct and outward acts by which alone the inward motive may, with safety, be determined.

Booram & Mahoney for appellant. Williams, Ferrier & SyCip for appellees. CARSON, J.: The "Compaa Agrcola Filipina" bought a considerable quantity of ricecleaning machinery from the defendant machinery company, and executed a chattel mortgage thereon to secure payment of the purchase price. It included in the mortgage deed the building of strong materials in which the machinery was installed, without any reference to the land on which it stood. The indebtedness secured by this instrument not having been paid when it fell due, the mortgaged property was sold by the sheriff, in pursuance of the terms of the mortgage instrument, and was bought by the machinery company. The mortgage was registered in the chattel mortgage registry, and the sale of the property to the machinery company in satisfaction of the mortgage was annotated in the same registry on December 29, 1913. A few weeks thereafter, on or about the 14th of January, 1914, the "Compaa Agrcola Filipina" executed a deed of sale of the land upon which the building stood to the machinery company, but this deed of sale, although executed in a public document, was not registered. This deed makes no reference to the building erected on the land and would appear to have been executed for the purpose of curing any defects which might be found to exist in the machinery company's title to the building under the sheriff's certificate of sale. The machinery company went into possession of the building at or about the time when this sale took place, that is to say, the month of December, 1913, and it has continued in possession ever since. At or about the time when the chattel mortgage was executed in favor of the machinery company, the mortgagor, the "Compaa Agrcola Filipina" executed another mortgage to the plaintiff upon the building, separate and apart from the land on which it stood, to secure payment of the balance of its indebtedness to the plaintiff under a contract for the construction of the building. Upon the failure of the mortgagor to pay the amount of the indebtedness secured by the
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mortgage, the plaintiff secured judgment for that amount, levied execution upon the building, bought it in at the sheriff s sale on or about the 18th of December, 1914, and had the sheriff's certificate of sale duly registered in the land registry of the Province of Cavite. At the time when the execution was levied upon the building, the defendant machinery company, which was in possession, filed with the sheriff a sworn statement setting up its claim of title and demanding the release of the property from the levy. Thereafter, upon demand of the sheriff, the plaintiff executed an indemnity bond in favor of the sheriff in the sum of P12,000, in reliance upon which the sheriff sold the property at public auction to the plaintiff, who was the highest bidder at the sheriff's sale. This action was instituted by the plaintiff to recover possession of the building from the machinery company. The trial judge, relying upon the terms of article 1473 of the Civil Code, gave judgment in favor of the machinery company, on the ground that the company had its title to the building registered prior to the date of registry of the plaintiff's certificate. Article 1473 of the Civil Code is as follows: "If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be personal property. "Should it be real property, it shall belong to the person acquiring it who first recorded it in the registry. "Should there be no entry, the property shall belong to the person who first took possession of it in good faith, and, in the absence thereof, to the person who presents the oldest title, provided there is good faith." The registry here referred to is of course the registry of real property, and it must be apparent that the annotation or inscription of a deed of sale of real property in a chattel mortgage registry cannot be given the legal effect of an inscription in the registry of real property. By its express terms, the Chattel Mortgage Law contemplates and makes provision for mortgages of personal property; and the sole purpose and object of the chattel mortgage registry is to provide for the registry of "Chattel mortgages," that is to say, mortgages of personal property executed in the manner and form prescribed in the statute.

The building of strong materials in which the rice-cleaning machinery was installed by the "Compaa Agrcola Filipina" was real property, and the mere fact that the parties seem to have dealt with it separate and apart from the land on which it stood in no wise changed its character as real property. It follows that neither the original registry in the chattel mortgage registry of the instrument purporting to be a chattel mortgage of the building and the machinery installed therein, nor the annotation in that registry of the sale of the mortgaged property, had any effect whatever so far as the building was concerned. We conclude that the ruling in favor of the machinery company cannot be sustained on the ground assigned by the trial judge. We are of opinion, however, that the judgment must be sustained on the ground that the agreed statement of facts in the court below discloses that neither the purchase of the building by plaintiff nor his inscription of the sheriff's certificate of sale in his favor was made in good faith, and that the machinery company must be held to be the owner of the property under the third paragraph of the above cited article of the code, it appearing that the company first took possession of the property; and further, that the building and the land were sold to the machinery company long prior to the date of the sheriff's sale to the plaintiff. It has been suggested that since the provisions of article 1473 of the Civil Code require "good faith," in express terms, in relation to "possession" and "title," but contain no express requirement as to "good faith" in relation to the "inscription" of the property in the registry, it must be presumed that good faith is not an essential requisite of registration in order that it may have the effect contemplated in this article. We cannot agree with this contention. It could not have been the intention of the legislator to base the preferential right secured under this article of the code upon an inscription of title in bad faith. Such an interpretation placed upon the language of this section would open wide the door to fraud and collusion. The public records cannot be converted into instruments of fraud and oppression by one who secures an inscription therein in bad f faith. The force and effect given by law to an inscription in a public record presupposes the good faith of him who enters such inscription; and rights created by statute, which are predicated upon an inscription in a public registry, do not and cannot accrue under an inscription "in bad faith," to the benefit of the person who thus makes the inscription. Construing the second paragraph of this article of the code, the supreme court of Spain held in its sentencia of the 13th of May, 1908, that:
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"This rule is always to be understood on the basis of the good faith mentioned in the first paragraph; therefore, it having been found that the second purchasers who record their purchase had knowledge of the previous sale, the question is to be decided in accordance with the following paragraph." (Note 2, art. 1473, Civ. Code, Medina and Maraon [1911] edition.) "Although article 1473, in its second paragraph, provides that the title of conveyance of -ownership of the real property that is first recorded in the registry shall have preference, this provision must always be understood on the basis of the good faith mentioned in the first paragraph; the legislator could not have wished to strike it out and to sanction bad faith, just to comply with a mere formality which, in given cases, does not obtain even in real disputes between third persons." (Note 2, art. 1473, Civ. Code, issued by the publishers of the La Revista, de los Tribunales, 13th edition.) The agreed statement of facts clearly discloses that the plaintiff, when he bought the building at the sheriff's sale and inscribed his title in the land registry, was duly notified that the machinery company had bought the building from plaintiff's judgment debtor; that it had gone into possession long prior to the sheriff's sale; and that it was in possession at the time when the sheriff executed his levy. The execution of an indemnity bond by the plaintiff in favor of the sheriff, after the machinery company had filed its sworn claim of ownership, leaves no room for doubt in this regard. Having bought in the building at the sheriff's sale with full knowledge that at the time of the levy and sale the building had already been sold to the machinery company by the judgment debtor, the plaintiff cannot be said to have been a purchaser in good f faith; and of course, the subsequent inscription of the sheriff's certificate of title must be held to have been tainted with the same defect. Perhaps we should make it clear that in holding that the inscription of the sheriff's certificate of sale to the plaintiff was not made in good faith, we should not be understood as questioning, in any way, the good faith and genuineness of plaintiff's claim against the "Compaa Agrcola Filipina." The truth is that both the plaintiff and the defendant company appear to have had just and righteous claims against their common debtor. No criticism can properly be made of the exercise of the utmost diligence by the plaintiff in asserting and exercising his right to recover the amount of his claim from the estate of the common debtor. We are strongly inclined to believe that in procuring the levy of execution upon the factory building and in buying it at the sheriff's sale, he conceived that he was doing no more than he had a right to do under all the circumstances, and it is highly possible and even probable that he thought at

that time that he would be able to maintain his position in a contest with the machinery company. There was no collusion on his part with the common debtor, and no thought of the perpetration of a fraud upon the rights of another, in the ordinary sense of the word. He may have hoped, and doubtless he did hope, that the title of the machinery company would not stand the test of an action in a court of law; and if later developments had confirmed his unfounded hopes, no one could question the legality or the propriety of the course he adopted. But it appearing that he had full knowledge of the machinery company's claim of ownership when he executed the indemnity bond and bought in the property at the sheriff's sale, and it appearing further that the machinery company's claim of ownership was well founded, he cannot be said to have been an innocent purchaser for value. He took the risk and must Stand by the consequences; and it is in this sense that we find that he was not a purchaser in good faith. One who purchases real estate with knowledge of a defect or lack of title in his vendor cannot claim that he has acquired title thereto in good faith as against the true owner of the land or of an interest therein; and the same rule must be applied to one who has knowledge of facts which should have put him upon such inquiry and investigation as might be necessary to acquaint him with the defects in the title of his vendor. A purchaser cannot close his eyes to facts which should put a reasonable man upon his guard, and then claim that he acted in good faith under the belief that there was no defect in the title of the vendor. His mere refusal to believe that such defect exists, or his willful closing of his eyes to the possibility of the existence of a defect in his vendor's title, will not make him an innocent purchaser for value, if it afterwards develops that the title was in fact defective, and it appears that he had such notice of the defect as would have led to its discovery had he acted with that measure of precaution which may reasonably be required of a prudent man in a like situation. Good faith, or the lack of it, is in its last analysis a question of intention; but 'in ascertaining the intention by which one is actuated on a given occasion, we are necessarily controlled by the evidence as to the conduct and outward acts by which alone the inward motive may, with safety, be determined. So it is that "the honesty of intention," "the honest lawful intent," which constitutes good faith implies a "freedom from knowledge and circumstances which ought to put a person on inquiry," and so it is that proof of such knowledge overcomes the presumption of good faith in which the courts always indulge in the absence of proof to the contrary. "Good faith, or the want of it, is not a visible, tangible fact that can be seen or touched, but rather a
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state or condition of mind which can only be judged of by actual or fancied tokens or signs." (Wilder vs. Gilman, 55 Vt., 504, 505; Cf. Cardenas vs. Miller, 108 Cal., 250; Breaux-Renoudet, Cypress Lumber Co. vs. Shadel, 52 La. Ann., 2094-2098; Pinkerton Bros. Co. vs. Bromley, 119 Mich., 8, 10, 17.) We conclude that upon the grounds herein set forth the disposing part of the decision and judgment entered in the court below should be affirmed with the costs of this instance against the appellant. So ordered. Arellano, C. J., Johnson, Araullo, Street, and Malcolm, JJ., concur. Torres, Avancea, and Fisher, JJ., did not take part. Judgment affirmed

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SIBAL vs VALDEZ No. 26278. August 4, 1927 LEON SIBAL, plaintiff and appellant, vs. EMILIANO J. VALDEZ ET AL., defendants. EMILIANO J. VALDEZ, appellee.
ATTACHMENT; GROWING CROPS, REAL OR PERSONAL PROPERTY.Held: Under the facts of the record, notwithstanding the provisions of paragraph 2 of article 334 of the Civil Code, that growing sugar cane is considered personal property and not real property and is subject to attachment and sale. Act No. 1508, the Chattel Mortgage Law, provides that all personal property shall be subject to mortgage. At common law all annual crops which are raised by yearly manurance and labor and essentially owe their existence to cultivation may be levied on as personal property. Paragraph 2 of article 334 of the Civil Code has been modified by section 450 of the Code of Civil Procedure and by Act No. 1508 in the sense that, for the purpose of attachment and execution and for the purposes of the Chattel Mortgage Law, "ungathered products" have the nature of personal property.

As a second cause of action, the plaintiff alleged that the defendant Emiliano J. Valdez was attempting to harvest the palay planted in four of the seven parcels mentioned in the first cause of action; that he had harvested and taken possession of the palay in one of said seven parcels and in another parcel described in the second cause of action, amounting to 300 cavans; and that all of said palay belonged to the plaintiff. Plaintiff prayed that a writ of preliminary injunction be issued against the defendant Emiliano J. Valdez, his attorneys and agents, restraining them (1) from disturbing him in the possession of the parcels of land described in the complaint; (2) from taking possession of, or harvesting the sugar cane in question; and (3) from taking possession, or harvesting the palay in said parcels of land. Plaintiff also prayed that a judgment be rendered in his favor and against the defendants, ordering them to consent to the redemption of the sugar cane in question, and that the defendant Valdez be condemned to pay to the plaintiff the sum of P1,056, the value of palay harvested by him in the two parcels above-mentioned, with interest and costs. On December 27, 1924, the court, after hearing both parties and upon approval of the bond for P6,000 filed by the plaintiff, issued the writ of preliminary injunction prayed for in the complaint. The defendant Emiliano J. Valdez, in his amended answer, denied generally and specifically each and every allegation of the complaint and set up the f ollowing def enses:

APPEAL from a judgment of the Court of First Instance of Tarlac. Lukban, J. The facts are stated in the opinion of the court. J. E. Blanco for appellant. Felix B. Bautista and Santos & Benitez for appellee. JOHNSON, J.: This action was commenced in the Court of First Instance of the Province of Tarlac on the 14th day of December, 1924. The facts are about as conflicting as it is possible for facts to be, in the trial of causes. As a first cause of action the plaintiff alleged that the defendant Vitaliano Mamawal, deputy sheriff of the Province of Tarlac, by virtue of a writ of execution issued by the Court of First Instance of Pampanga, attached and sold to the defendant Emiliano J. Valdez the sugar cane planted by the plaintiff and his tenants on seven parcels of land described in the complaint, in the third paragraph of the first cause of action; that within one year from the date of the attachment and sale the plaintiff offered to redeem said sugar cane and tendered to the defendant Valdez the amount sufficient to cover the price paid by the latter, the interest thereon and any assessments or taxes which he may have paid thereon after the purchase, and the interest corresponding thereto and that Valdez refused to accept the money and to return the sugar cane to the plaintiff.

(a) That the sugar cane in question had the nature of personal property and was not, therefore, subject to redemption; (b) That he was the owner of parcels 1, 2 and 7 described in the first cause of action of the complaint; (c) That he was the owner of the palay in parcels 1, 2 and 7; and (d) That he never attempted to harvest the palay in par-cels 4 and 5. The defendant Emiliano J. Valdez, by way of counterclaim, alleged that by reason of the preliminary injunction he was unable to gather the sugar cane, sugar-cane shoots (puntas de caa dulce) and palay in said parcels of land, representing a loss to him of P8,375.20 and that, in addition thereto, he suffered damages amounting to P3,458.56. He prayed for a judgment (1)
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absolving him from all liability under the complaint; (2) declaring him to be the absolute owner of the sugar cane in question and of the palay in parcels 1, 2 and 7; and (3) ordering the plaintiff to pay to him the sum of P11,833.76, representing the value of the sugar cane and palay in question, including damages. Upon the issue thus presented by the pleadings the cause was brought on for trial. After hearing the evidence, and on April 28, 1926, the Honorable Cayetano Lukban, judge, rendered a judgment against the plaintiff and in favor of the defendants (1) Holding that the sugar cane in question was personal property and, as such, was not subject to redemption; (2) Absolving the defendants from all liability under the complaint; and (3) Condemning the plaintiff and his sureties Cenon de la Cruz, Juan Sangalang and Marcos Sibal to jointly and severally pay to the defendant Emiliano J. Valdez the sum of P9,439.08 as follows: (a) P6,757.40, the value of the sugar cane; (b) 1,435.68, the value of the sugar-cane shoots; (c) 646.00, the value of palay harvested by plaintiff; (d) 600.00, the value of 150 cavans of palay which the defendant was not able 9,439.08 to raise by reason of the injunction, at P4 cavan. From that judgment the plaintiff appealed and in his assignments of error contends that the lower court erred: (1) In holding that the sugar cane in question was per-sonal property and, therefore, not subject to redemption; (2) In holding that parcels 1 and 2 of the complaint belonged to Valdez, as well as parcels 7 and 8, and that the palay therein was planted by Valdez;

(3) In holding that Valdez, by reason of the preliminary injunction failed to realize P6,757.40 from the sugar cane and P1,435.68 from sugar-cane shoots (puntas de caa, dulce); (4) In holding that, for failure of plaintiff to gather the sugar cane on time, the defendant was unable to raise palay on the land, which would have netted .him the sum of P600; and (5) In condemning the plaintiff and his sureties to pay to the defendant the sum of P9,439.08.

It appears from the record: (1) That on May 11, 1923, the deputy sheriff of the Province of Tarlac, by virtue of a writ of execution in civil case No. 20203 of the Court of First Instance of Manila (Macondray & Co., Inc. vs. Leon Sibal), levied an attachment on eight parcels of land belonging to said Leon Sibal, situated in the Province of Tarlac, designated in the record of attachment as parcels 1, 2, 3, 4, 5, 6, 7 and 8 (Exhibit B, Exhibit 2-A). (2) That on July 30, 1923, Macondray & Co., Inc., bought said eight parcels of land, at the auction held by the sheriff of the Province of Tarlac, for the sum of P4,273.93, having paid for the said parcels separately as follows (Exhibits C and 2-A): [Sibal 1. vs. Valdez, 50 Phil. 512(1927)] Parcel 1 2 3 4 5 6 7 with the house thereon 8 P 1.00

2,000.00 120.93 1,000.00 1.00 1.00 150.00 1,000.00 4,273.93

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(3) That within one year from the sale of said parcels of land, and on the 24th day of September, 1923, the judgment debtor, Leon Sibal, paid ?2,000, to Macondray & Co., Inc., for the account of the redemption price of said parcels of land, without specifying the particular parcels to which said amount was to be applied. The redemption price of said eight parcels was reduced, by virtue of said transaction, to P2,579.97, including interest (Exhibits C and 2). The record further shows: (1) That on April 29, 1924, the defendant Vitaliano Mamawal, deputy sheriff of the Province of Tarlac, by virtue of a writ of execution in civil case No. 1301 of the Province of Pampanga (Emiliano J. Valdez vs. Leon Sibal 1.the same parties in the present case), attached the personal property of said Leon Sibal located in Tarlac, among which was included the sugar cane now in question in the seven parcels of land described in the complaint (Exhibit A). (2) That on May 9 and 10, 1924, said deputy sheriff sold at public auction said personal properties of Leon Sibal, including the sugar cane in question, to Emiliano J. Valdez, who paid therefor the sum of P1,550, of which P600 was for the sugar cane (Exhibit A). (3) That on April .29, 1924, said deputy sheriff, by virtue of said writ of execution, also attached the real property of said Leon Sibal in Tarlac, including all of his rights, interest and participation therein, which real property consisted of eleven parcels of land and a house and camarin situated in one of said parcels (Exhibit A). (4) That on June 25, 1924, eight of said eleven parcels, including the house and the camarn, were bought by Emiliano J. Valdez at the auction held by the sheriff for the sum of P12,200. Said eight parcels were designated in the certificate of sale as parcels 1, 3, 4, 5, 6, 7, 10 and 11. The house and camarin were situated on parcel 7 (Exhibit A). (5) That the remaining.three parcels, indicated in the certificate of the sheriff as parcels 2, 12 and 13, were released from the attachment by virtue of claims presented by Agustin Cuyugan and Domiciano Tizon (Exhibit A). (6) That on the same date, June 25, 1924, Macondray & Co. sold and conveyed to Emiliano J. Valdez for P2,579.97 all of its rights and interest in the eight parcels of land acquired by it at public auction held by the deputy sheriff of Tarlac in connection with civil case No. 20203 of the Court of First Instance of Manila, as stated above. Said amount represented the unpaid balance of the

redemption price of said eight parcels, after payment by Leon Sibal of P2,000 on September 24, 1923, for the account of the redemption price, as stated above. (Exhibits C and 2.) The foregoing statement of facts shows: (1) That Emiliano J. Valdez bought the sugar cane in question, located in the seven parcels of land described in the first cause of action of the complaint at public auction on May 9 and 10, 1924, for P600. (2) That on July 30, 1923, Macondray & Co. became the owner of eight parcels of land situated in the Province of Tarlac belonging to Leon Sibal and that on September 24, 1923, Leon Sibal paid to Macondray & Co. P2000 for the account of the redemption price of said parcels. (3) That on June 25, 1924, Emiliano J. Valdez acquired from Macondray & Co. all of its rights and interest in the said eight parcels of land. (4) That on the same date (June 25, 1924) Emiliano J. Valdez also acquired all of the rights and interest which Leon Sibal had or might have had on said eight parcels by virtue of the P2,000 paid by the latter to Macondray. (5) That Emiliano J. Valdez became the absolute owner of said eight parcels of land. The first question raised by the appeal is, whether the sugar cane in question is personal or real property. It is contended that sugar cane comes under the classification of real property as "ungathered products" in paragraph 2 of article 334 of the Civil Code. Said paragraph 2 of article 334 enumerates as real property the following: "Trees, plants, and ungathered products, while they are annexed to the land or form an integral part of any immovable property." That article, however, has received in recent years an interpretation by the Tribunal Supremo de Espaa, which holds that, under certain conditions, growing crops may be considered as personal property. (Decision of March 18, 1904, vol. 97, Civil Jurisprudence of Spain.) Manresa, the eminent commentator of the Spanish Civil Code, in discussing section 334 of the Civil Code, in view of the recent decisions of the Supreme Court of Spain, admits that growing crops are sometimes considered and treated as personal property. He says: "No creemos, sin embargo, que esto excluya la excepcin que muchos autores hacen tocante a la venta de toda cosecha o de parte de ella cuando an no
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est cogida (cosa frecuente con la uva y la naranja), y a la de leas, considerando ambas como muebles. El Tribunal Supremo, en sentencia de 18 de marzo de 1904, al entender sobre un contrato de arrendamiento de un predio rstico, resuelve que su terminacin por desahucio no extingue los derechos del arrendatario, para recolectar o percibir los frutos correspondientes al ao agrcola, dentro del que nacieron aquellos derechos, cuando el arrendador ha percibido a su vez el importe de la renta ntegra correspondiente, aun cuando lo haya sido por precepto legal durante el curso del juicio, fundndose para ello, no solo en que de otra suerte se dara al desahucio un alcance que no tiene, sino en que, y esto es lo interesante a nuestro propsito, la consideracin de inmuebles que el artculo 334 del Cdiga Civil atribuye a los frutos pendientes, no les priva, del carcter de productos pertenecientes, como tales, a quienes a, ellos tenga, derecho, llegado el momento de su recoleccin.

before they are cut down, are likewise immovable, and are considered as part of the land to which they are attached." The Supreme Court of Louisiana having occasion to interpret that provision, held that in some cases "standing crops" may be considered and dealt with as personal property. In the case of Lumber Co. vs. Sheriff and Tax Collector (106 La., 418) the Supreme Court said: "True, by article 465 of the Civil Code it is provided that 'standing crops and the fruits of trees not gathered and trees before they are cut down * * * are considered as part of the land to which they are attached/ but the immovability provided for is only one in abstracto and without reference to rights on or to the crop acquired by others than the owners of the property to which the crop is attached. * * * The existence 'of a right on the growing crop is a mobilization by anticipation, a gathering as it were in advance, rendering the crop movable quoad the right acquired therein. Our jurisprudence recognizes the possible mobilization of the growing crop." (Citizens' Bank vs. Wiltz, 31 La. Ann., 244; Porche vs. Bodin, 28 La. Ann., 761; Sandel vs. Douglass, 27 La. Ann., 629; Lewis vs. Klotz, 39 La. Ann., 267.) "It is true," as the Supreme Court of Louisiana said in the case of Porche vs. Bodin (28 La. An., 761) that "article 465 of the Revised Code says that standing crops are considered .as immovable and as part of the land to which they are attached, and article 466 declares that the fruits of an immovable gathered or produced while it is under seizure are considered as making part thereof, and inure to the benefit of the person making the seizure. But the evident meaning of these articles is, where the crops belong to the owner of the plantation, they form part of the immovable, and where it is seized, the fruits gathered or produced inure to the benefit of the seizing creditor.

"Mas actualmente y por virtud de la nueva edicin de la Ley Hipotecaria, publicada en 16 de diciembre de 1909, con las reformas introducidas por la de 21 de abril anterior, la hipoteca, salvo pacto expreso que disponga lo contrario, y cualquiera que sea la naturaleza y forma de la obligacin que garantice, no comprende los frutos cualquiera que sea la situacin en que se encuentre." (3 Manresa, 5.a edicin, pgs. 22, 23.)

From the foregoing it appears (1) that, under Spanish authorities, pending fruits and ungathered products may be sold and transferred as personal property; (2) that the Supreme Court of Spain, in a case of ejectment of a lessee of an agricultural land, held that the lessee was entitled to gather the products corresponding to the agricultural year, because said fruits did not go with the land but belonged separately to the lessee; and (3) that under the Spanish Mortgage Law of 1909, as amended, the mortgage of a piece of land does not include the fruits and products existing thereon, unless the contract expressly provides otherwise. An examination of the decisions of the Supreme Court of Louisiana may give us some light on the question which we are discussing. Article 465 of the Civil Code of Louisiana, which corresponds to paragraph 2 of article 334 of our Civil Code, provides: "Standing crops and the fruits of trees not gathered, and trees

"A crop raised on leased premises in no sense forms part of the immovable. It belongs to the lessee, .and may be sold by him, whether it be gathered or not, and it may be sold by his judgment creditors. If it necessarily forms part of the leased premises the result would be that it could not be sold under execution separate and apart from the land. If a lessee obtain supplies to make his crop, the factor's lien would not attach to the crop as a separate thing belonging to his debtor, but the land belonging to the lessor would be affected with the recorded -privilege. The law cannot be construed so as to result in such absurd consequences." In the case of Citizens' Bank vs. Wiltz (31 La. Ann., 244) the court said:

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"If the crop quoad the pledge thereof under the act of 1874 was an immovable, it would be destructive of the very objects of the act, it would render the pledge of the crop impossible, for if the crop was an inseparable part of the realty possession of the latter would be necessary to that of the former; but such is not the case. True, by article 465 C. C. it is provided that 'standing crops and the fruits of trees not gathered and trees before they are cut down are likewise immovable and are considered as part of the land to which they are attached;' but the immovability provided for is only one in abstracto and without reference to rights on or to the crop acquired by other than the owners of the property to which the crop was attached. The immovability of a growing crop is in the order of things temporary, for the crop passes from the state of a growing to that of a gathered one, from an immovable to a movable. The existence of a right on the growing crop is a mobilization by anticipation, a gathering as it were in advance, rendering the crop movable quoad the right acquired thereon. The provision of our Code is identical with the Napoleon Code, 520, and we may therefore obtain light by an examination of the jurisprudence of France." The rule above announced, not only by the Tribunal Supremo de Espaa but by the Supreme Court of Louisiana, is followed in practically every state of the Union. From an examination of the reports and codes of the State of California and other states we find that the settled doctrine followed in said states in connection with the attachment of property and execution of judgment is, that growing crops raised by yearly labor and cultivation are considered personal property. (6 Corpus Juris, p. 197; 17 Corpus Juris, p. 879; 23 Corpus Juris, p. 329; Raventas vs. Green, 57 Cal., 254; Norris vs. Watson, 55 Am. Dec., 161; Whipple vs. Foot, 3 Am. Dec., 442; 1 Benjamin on Sales, sec. 126; McKenzie vs. Lampley, 31 Ala., 526; Crine vs. Tifts and Co., 65 Ga., 644'; Gillitt vs. Truax, 27 Minn., 528; Preston vs. Ryan, 45 Mich., 174; Freeman on Execution, vol. 1, p. 438; Drake on Attachment,, sec. 249; Mechem on Sales, secs. 200 and 763.) Mr. Mechem says that a valid sale may be made of a thing, which though not yet actually in existence, is reasonably certain to come into existence as the natural increment or usual incident of something already in existence, and then belonging to the vendor, and the title will vest in the buyer the moment the thing comes into existence. (Emerson vs. European Railway Co., 67 Me., 387; Cutting vs. Packers Exchange, 21 Am. St. Rep., 63.) Things of this nature are said to have a potential existence. A man may sell property of which he is potentially and not actually possessed. He may make a valid sale of the wine

that a vineyard is expected to produce; or the grain a field may grow in a given time; or the milk a cow may yield during the coming year; or the wool that shall thereafter grow upon sheep; or what may be taken at the next cast of a fisherman's net; or fruits to grow; or young animals not yet in existence; or the good will of a trade and the like. The thing sold, however, must be specific and identified. They must be also owned at the time by the vendor. (Hull vs. Hull, 48 Conn., 250 [40 Am. Rep., 165].) It is contended on the part of the appellee that paragraph 2 of article 334 of the Civil Code has been modified by section 450 of the Code of Civil Procedure as well as by Act No. 1508, the Chattel Mortgage Law. Said section 450 enumerates the property of a judgment debtor which may be subjected to execution. The pertinent portion of said section reads as follows: "All goods, chattels, moneys, and other property, both- real and personal, * * * shall be liable to execution." Said section 450 and most of the other sections of the Code of Civil Procedure relating to the execution of judgments were taken from the Code of Civil Procedure of California. The Supreme Court of California, under section 688 of the Code of Civil Procedure of that state (Pomeroy, p. 424) has held, without variation, that growing crops were personal property and subject to execution. Act No. 1508, the Chattel Mortgage Law, fully recognizes that growing crops are personal property. Section 2 of said Act provides: "All personal property shall be subject to mortgage, agreeably to the provisions of this Act, and a mortgage executed in pursuance thereof shall be termed a chattel mortgage." Section 7 in part provides: "If growing crops be mortgaged the mortgage may contain an agreement stipulating that the mortgagor binds himself properly to tend, care for and protect the crop while growing '* * *." It is clear from the foregoing provisions that Act No. 1508 was enacted on the assumption that "growing crops" are personal property. This consideration tends to support the conclusion hereinbefore stated, that paragraph 2 of article 334 of the Civil Code has been modified by section 450 of Act No. 190 and by Act No. 1508 in the sense that "ungathered products" as mentioned in said article of the Civil Code have the nature of personal property. In other words, the phrase "personal property" should be understood to include "ungathered products." "At common law, and generally in the United States, all annual crops which are raised by yearly manurance and labor, and essentially owe their annual existence to cultivation by man, * * * may be levied on as personal property."
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(23 C. J., p. 329.) On this question Freeman, in his treatise on the Law of Executions, says: "Crops, whether growing or standing in the field ready to be harvested, are, when produced by annual cultivation, no part of the realty. They are, therefore, liable to voluntary transfer as chattels. It is equally well settled that they may be seized and sold under execution." (Freeman on Executions, vol. 1, p. 438.) We may, therefore, conclude that paragraph 2 of article 334 of the Civil Code has been modified by section 450 of the Code of Civil Procedure and by Act No. 1508, in the sense that, for the purposes of attachment and execution, and for the purposes of the Chattel Mortgage Law, "ungathered products" have the nature of personal property. The lower court, therefore, committed no error in holding that the sugar cane in question was personal property and, as such, was not subject to redemption. All the other assignments of error made by the appellant, as above stated, relate to questions of fact only. Before entering upon a discussion of said assignments of error, we deem it opportune to take special notice of the failure of the plaintiff to appear at the trial during the presentation of evidence by the defendant. His absence from the trial and his failure to cross-examine the defendant have lent considerable weight to the evidence then presented for the defense. Coming now to the ownership of parcels 1 and 2 described in the first cause of action of the complaint, the plaintiff made a futile attempt to show that said two parcels belonged to Agustin Cuyugan and were the identical parcel 2 which was excluded from the attachment and sale of real property of Sibal to Valdez on June 25, 1924, as stated above. A comparison of the description of parcel 2 in the certificate of sale by the sheriff (Exhibit A) and the description of parcels 1 and 2 of the complaint will readily show that they are not the same. The description of the parcels in the complaint is as follows: "1. La caa dulce sembrada por los inquilinos del ejecutado Len Sibal 1. en una parcela de terreno de la pertenencia del citado ejecutado, situada en Libutad, Culubasa, Bamban, Trlac, de unas dos hectreas poco ms o menos de superficie. "2. La caa dulce sembrada por el inquilino del ejecutado Leon Sibal 1., llamado Alejandro Policarpio, en una parcela de terreno de la pertenencia del ejecutado, situada en Dalayap, Culubasa, Bamban, Trlac de unas dos

hectreas de superficie poco ms o menos." The description of parcel 2 given in the certificate of sale (Exhibit A) is as follows: "2.a Terreno palayero situado en Culubasa, Bamban, Tr-lac, de 177,090 metros cuadrados de superficie, linda al N. con Canuto Sibal, Esteban Lazatin and Alejandro Dayrit; al E. con Francisco Dizon, Felipe Mau and others; al S. con Alejandro Dayrit, Isidoro Santos and Melecio Mau; y al O. con Alejandro Dayrit and Paulino Vergara. Tax No. 2854, valor amillarado P4,200 pesos." On the other hand the evidence for the defendant purported to show that parcels 1 and 2 of the complaint were included among the parcels bought by Valdez from Macondray on June 25, 1924, and corresponded to parcel 4 in the deed of sale (Exhibits B and 2), and were also included among the parcels bought by Valdez at the auction of the real property of Leon Sibal on June 25, 1924, and corresponded to parcel 3 in the certificate of sale made by the sheriff (Exhibit A). The description of parcel 4 (Exhibit 2) and parcel 3 (Exhibit A) is as follows: "Parcela No. 4.Terreno palayero, ubicado en el barrio de Culubasa, Bamban, Trlac, I. F. de 145,000 metros cuadrados de superficie, lindante al Norte con Road of the barrio of Culubasa that goes to Concepcion; al Este con Juan Dizon; al Sur con Lucio Mao y Canuto Sibal y al Oeste con Esteban Lazatin, su valor amillarado asciende a la suma de P2,990. Tax No. 2856." As will be noticed, there is hardly any relation between parcels 1 and 2 of the complaint and parcel 4 (Exhibits 2 and B) and parcel 3 (Exhibit A). But, inasmuch as the plaintiff did not care to appear at the trial when the defendant offered his evidence, we are inclined to give more weight to the evidence adduced by him than to the evidence adduced by the plaintiff, with respect to the ownership of parcels 1 and 2 of the complaint. We, therefore, conclude that parcels 1 and 2 of the complaint belong to the defendant, having acquired the same from Macondray & Co. on June 25, 1924, and from the plaintiff Leon Sibal on the same date. It appears, however, that the plaintiff planted the palay in said parcels and harvested therefrom 190 cavans. There being no evidence of bad faith on his part, he is therefore entitled to one-half of the crop, or 95 cavans. He should therefore be condemned to pay to the defendant for 95 cavans only, at P3.40 a cavan, or the sum of P323, and not for the total of 190 cavans as held by the lower court.

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As to the ownership of parcel 7 of the complaint, the evidence shows that said parcel corresponds to parcel 1 of the deed of sale of Macondray & Co. to Valdez (Exhibits B and 2), and to parcel 4 in the certificate of sale to Valdez of real property belonging to Sibal, executed by the sheriff as above stated (Exhibit A). Valdez is therefore the absolute owner of said parcel, having acquired the interest of both Macondray and Sibal in said parcel. With reference to the parcel of land in Pacalcal, Tarlac, described in paragraph 3 of the second cause of action, it appears from the testimony of the plaintiff himself that said parcel corresponds to parcel 8 of the deed of sale of Macondray to Valdez (Exhibits B and 2) and to parcel 10 in the deed of sale executed by the sheriff in favor of Valdez (Exhibit A). Valdez is therefore the absolute owner of said parcel, having acquired the interest of both Macondray and Sibal therein. In this connection the following facts are worthy of mention: Execution in favor of Macondray & Co., May 11, 1923. Eight parcels of land were attached under said execution. Said parcels of land were sold to Macondray & Co. on the 30th day of July, 1923. Rice paid P4,273.93. On September 24, 1923, Leon Sibal paid to Macondray & Co. P2,000 on the redemption of said parcels of land. (See Exhibits B and C.) Attachment, April 29, 1924, in favor of Valdez. Personal property of Sibal was attached, including the sugar cane in question. (Exhibit A.) The said personal property so attached, sold at public auction May 9 and 10, 1924. April 29, 1924, the real property of Sibal was attached under the execution in favor of Valdez (Exhibit A). June 25, 1924, said real property was sold and purchased by Valdez (Exhibit A). June 25, 1924, Macondray & Co. sold all of the land which they had purchased at public auction on the 30th day of July, 1923, to Valdez. As to the loss of the defendant in sugar cane by reason of the injunction, the evidence shows that the sugar cane in question covered an area of 22 hectares and 60 ares (Exhibits 8, 8-b and 8-c); that said area would have yielded an average crop of 1039 picos and 60 cates; that one-half of that quantity, or 519 picos and 80 cates would have corresponded to the defendant, as owner; that during the season the sugar was selling at P13 a pico (Exhibits 5 and 5-A). Therefore, the defendant, as owner, would have netted P6,757.40 from the sugar cane in question. The evidence also shows that the defendant could have taken from the sugar cane 1,017,000 sugar-cane shoots (puntas de

caa) and not 1,170,000 as computed by the lower court. During the season the shoots were selling at P1.20 a thousand (Exhibits 6 and 7). The defendant therefore would have netted P1,220.40 from sugar-cane shoots and not P1,435.68 as allowed by the lower court. As to the palay harvested by the plaintiff in parcels 1 and 2 of the complaint, amounting to 190 cavans, one-half of said quantity should belong to the plaintiff, as stated above, and the other half to the defendant. The court erred in awarding the whole crop to the defendant. The plaintiff should therefore pay the defendant for 95 cavans only, at P3.40 a cavan, or P323 instead of P646 as allowed by the lower court. The evidence also shows that the defendant was prevented by the acts of the plaintiff from cultivating about 10 hectares of the land involved in the litigation. He expected to have raised about 600 cavans of palay, 300 cavans of which would have corresponded to him as owner. The lower court has wisely reduced his share to 150 cavans only. At P4 a cavan, the palay would have netted him P600. In view of the foregoing, the judgment appealed from is hereby modified. The plaintiff and his sureties Cenon de la Cruz, Juan Sangalang and Marcos Sibal are hereby ordered to pay to the defendant jointly and severally the sum of P8, 900.80, instead of P9, 439.08 allowed by the lower court, as follows:

P 6,757.40 1,220.40 323.00 600.00 8,900.80

for the sugar cane; for the sugar cane shoots; for the palay harvested by plaintiff in parcels 1 and 2; for the palay which defendant could have raised.

In all other respects, the judgment appealed from is hereby affirmed, with costs. So ordered.

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MINDANAO BUS CO vs CITY ASSESSOR No. L-17870. September 29, 1962. MINDANAO BUS COMPANY, petitioner, vs. THE CITY ASSESSOR &TREASURER and the BOARD OF TAX APPEALS of Cagayan de Oro City, respondents.
Property; Immovable Property by Destination; Two requisites before movables may be deemed to have immobilized; Tools and equipments merely incidental to business not subject to real estate tax.Movable equipments, to be immobilized in contemplation of Article 415 of the Civil Code, must be the essential and principal elements of an industry or works which are carried on in a building or on a piece of land. Thus, where the business is one of transportation, which is carried on without a repair or service shop, and its rolling equipment is repaired or serviced in a shop belonging to another, the tools and equipments in its repair shop which appear movable are merely incidentals and may not be considered immovables, and, hence, not subject to assessment as real estate for purposes of the real estate tax.

1. That petitioner is a public utility solely engaged in transporting passengers and cargoes by motor trucks, over its authorized lines in the Island of Mindanao, collecting rates approved by the Public Service Commission; 2. That petitioner has its main office and shop at Cagayan de Oro City. It maintains Branch Offices and/or stations at Iligan City, Lanao; Pagadian, Zamboanga del Sur; Davao City and Kibawe, Bukidnon Province; 3. That the machineries sought to be assessed by the respondent as real properties are the following: (a) Hobart Electric Welder Machine, appearing in the attached photograph, marked Annex A; (b) Storm Boring Machine, appearing in the attached photograph, marked Annex B; (c) Lathe machine with motor, appearing in the attached photograph, marked Annex C; (d) Black and Decker Grinder, appearing in the attached photograph, marked Annex D; (e) PEMCO Hydraulic Press, appearing in the attached photograph, marked Annex E; (f) Battery charger (Tungar charge machine) appearing in the attached photograph, marked Annex F; and (g) D-Engine Waukesha-M-Fuel, appearing in the attached photograph, marked Annex G. 4. That these machineries are sitting on cement or wooden platforms as may be seen in the attached photographs which form part of this agreed stipulation of facts; 5. That petitioner is the owner of the land where it maintains and operates a garage for its TPU motor trucks; a repair shop; blacksmith and carpentry shops, and with these machineries which are placed therein, its TPU trucks are made; body constructed; and same are repaired in a condition to be serviceable in the TPU land transportation business it operates;

PETITION for review of a decision of the Court of the Appeals. The facts are stated in the opinion of the Court. Binamira, Barria & Irabagon for petitioner. Vicente E. Sabellina for respondents. LABRADOR, J.: This is a petition for the review of the decision of the Court of Tax Appeals in C.T.A. Case No. 710 holding that the petitioner Mindanao Bus Company is liable to the payment of the realty tax on its maintenance and repair equipment hereunder referred to. Respondent City Assessor of Cagayan de Oro City assessed at P4,400 petitioners above-mentioned equipment. Petitioner appealed the assessment to the respondent Board of Tax Appeals on the ground that the same are not realty. The Board of Tax Appeals of the City sustained the city assessor, so petitioner herein filed with the Court of Tax Appeals a petition for the review of the assessment. In the Court of Tax Appeals the parties submitted the following stipulation of facts: Petitioner and respondents, thru their respective counsels agreed to the following stipulation of facts:

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6. That these machineries have never been or were never used as industrial equipments to produce finished products for sale, nor to repair machineries, parts and the like offered to the general public indiscriminately for business or commercial purposes for which petitioner has never engaged in, to date. The Court of Tax Appeals having sustained the respondent city assessors ruling, and having denied a motion for reconsideration, petitioner brought the case to this Court assigning the following errors: 1. The Honorable Court of Tax Appeals erred in upholding respondents contention that the questioned assessments are valid; and that said tools, equipments or machineries are immovable taxable real properties. 2. The Tax Court erred in its interpretation of paragraph 5 of Article 415 of the New Civil Code, and holding that pursuant thereto, the movable equipments are taxable realties, by reason of their being intended or destined for use in an industry. 3. The Court of Tax Appeals erred in denying petitioners contention that the respondent City Assessors power to assess and levy real estate taxes on machineries is further restricted by section 31, paragraph (c) of Republic Act No. 521; and 4. The Tax Court erred in denying petitioners motion for reconsideration. Respondents contend that said equipments, tho movable, are immobilized by destination, in accordance with paragraph 5 of Article 415 of the New Civil Code which provides: Art. 415.The following are immovable properties: x x x x

Article 344 (Now Art. 415), paragraph (5) of the Civil Code, gives the character of real property to machinery, liquid containers, instruments or implements intended by the owner of any building or land for use in connection with any industry or trade being carried on therein and which are expressly adapted to meet the requirements of such trade or industry. If the installation of the machinery and equipment in question in the central of the Mabalacat Sugar Co., Inc., in lieu of the other of less capacity existing therein, for its sugar industry, converted them into real property by reason of their purpose, it cannot be said that their incorporation therewith was not permanent in character because, as essential and principal elements of a sugar central, without them, the sugar central would be unable to function or carry on the industrial purpose for which it was established. Inasmuch as the central is permanent in character, the necessary machinery and equipment installed for carrying on the sugar industry for which it has been established must necessarily be permanent. (Italics ours.) So that movable equipments to be immobilized in contemplation of the law must first be essential and principal elements of an industry or works without which such industry or works would be unable to function or carry on the industrial purpose for which it was established. We may here distinguish, therefore, those movables which become immobilized by destination because they are essential and principal elements in the industry from those which may not be so considered immobilized because they are merely incidental, not essential and principal. Thus, cash registers, typewriters, etc., usually found and used in hotels, restaurants, theaters, etc. are merely incidentals and are not and should not be considered immobilized by destination, for these businesses can continue or carry on their functions without these equipments. Airline companies use forklifts, jeep-wagons, pressure pumps, IBM machines, etc. which are incidentals, not essentials, and thus retain their movable nature. On the other hand, machineries of breweries used in the manufacture of liquor and soft drinks, though movable in nature, are immobilized because they are essential to said industries; but the delivery trucks and adding machines which they usually own and use and are found within their industrial compounds are merely incidentals and retain their movable nature. Similarly, the tools and equipments in question in this instant case are, by their nature, not essential and principal elements of petitioners business of transporting passengers and cargoes by motor trucks. They are merely incidentalsacquired as movables and used only for expediency to facilitate and/or improve its service. Even without such tools and equipments, its
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(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works. (Italics ours.) Note that the stipulation expressly states that the equipment are placed on wooden or cement platforms. They can be moved around and about in petitioners repair shop. In the case of B. H. Berkenkotter vs. Cu Unjieng, 61 Phil. 663, the Supreme Court said:

business may be carried on, as petitioner has carried on, without such equipments, before the war. The transportation business could be carried on without the repair or service shop if its rolling equipment is repaired or serviced in another shop belonging to another. The law that governs the determination of the question at issue is as follows: Art. 415. The following are immovable property: x x x x

(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works; (Civil Code of the Phil.) Aside from the element of essentiality the above-quoted provision also requires that the industry or works be carried on in a building or on a piece of land. Thus in the case of Berkenkotter vs. Cu Unjieng, supra, the machinery, liquid containers, and instruments or implements are found in a building constructed on the land. A sawmill would also be installed in a building on land more or less permanently, and the sawing is conducted in the land or building. But in the case at bar the equipments in question are destined only to repair or service the transportation business, which is not carried on in a building or permanently on a piece of land, as demanded by the law. Said equipments may not, therefore, be deemed real property. Resuming what we have set forth above, we hold that the equipments in question are not absolutely essential to the petitioners transportation business, and petitioners business is not carried on in a building, tenement or on a specified land, so said equipment may not be considered real estate within the meaning of Article 415(c) of the Civil Code. WHEREFORE, the decision subject of the petition for review is hereby set aside and the equipment in question declared not subject to assessment as real estate for the purposes of the real estate tax. Without costs. So ordered.

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BERKENKOTTER vs CU UNJIENG E HIYOS No. 41643. July 31, 1935 B. H. BERKENKOTTER, plaintiff and appellant, vs. CU UNJIENG E HIJOS, YEK TONG LIN FIRE AND MARINE INSURANCE COMPANY, MABALACAT SUGAR COMPANY and THE PROVINCIAL SHERIFF OF PAMPANGA, defendants and appellees.
1. MORTGAGE; IMPROVEMENT ON THE MORTGAGED PROPERTY, INCLUDED IN THE MORTGAGE.The installation of a machinery and equipment in a mortgaged sugar central, in lieu of another of less capacity, for the purpose of carrying out the industrial functions of the latter and increasing production, constitutes a permanent improvement on said sugar central and subjects said machinery and equipment to the mortgage constituted thereon. (Article 1877, Civil Code.) 2. ID.; ID.; PERMANENT CHARACTER OF THE IMPROVEMENT.The fact that the purchaser of the new machinery and equipment has bound himself to the person supplying him the purchase money to hold them as security for the payment of the latter's credit, and to refrain from mortgaging or otherwise encumbering them does not alter the permanent character of the incorporation of said machinery and equipment with the central. 3. ID.; ID.; OWNERSHIP OF THE IMPROVEMENT.The sale of the machinery and equipment in question by the purchaser who was supplied the purchase money, as a loan, to the person who supplied the money, after the incorporation thereof with the mortgaged sugar central, does not vest the creditor with ownership of said machinery and equipment but simply with the right of redemption.

The first question to be decided in this appeal, which is raised in the first assignment of alleged error, is whether or not the lower court erred in declaring that the additional machinery and equipment, as improvement incorporated with the central are subject to the mortgage deed executed in favor of the defendants Cu Unjieng e Hijos. It is admitted by the parties that on April 26, 1926, the Mabalacat Sugar Co., Inc., owner of the sugar central situated in Mabalacat, Pampanga, obtained from the defendants, Cu Unjieng e Hijos, a loan secured by a first mortgage constituted on two parcels of land "with all its buildings, improvements, sugarcane mill, steel railway, telephone line, apparatus, utensils and whatever forms part or is a necessary complement of said sugar-cane mill, steel railway, telephone line, now existing or that may in the future exist in said lots." On October 5, 1926, shortly after said mortgage had been constituted, the Mabalacat Sugar Co., Inc., decided to increase the capacity of its sugar central by buying additional machinery and equipment, so that instead of milling 150 tons daily, it could produce 250. The estimated cost of said additional machinery and equipment was approximately P100,000. In order to carry out this plan, B. A. Green, president of said corporation, proposed to the plaintiff, B. H. Berkenkotter, to advance the necessary amount for the purchase of said machinery and equipment, promising to reimburse him as soon as he could obtain an additional loan from the mortgagees, the herein defendants Cu Unjieng e Hijos. Having agreed to said proposition made in a letter dated October 5, 1926 (Exhibit E), B. H. Berkenkotter, on October 9th of the same year, delivered the sum of P1,710 to B. A. Green, president of the Mabalacat Sugar Co., Inc., the total amount supplied by him to said B. A. Green having been P25,750. Furthermore, B. H. Berkenkotter had a credit of P22,000 against said corporation for unpaid salary. With the loan of P25,750 and said credit of P22,000, the Mabalacat Sugar Co., Inc., purchased the additional machinery and equipment now in litigation. On June 10, 1927, B. A. Green, president of the Mabalacat Sugar Co., Inc., applied to Cu Unjieng e Hijos for an additional loan of P75,000 offering as security the additional machinery and equipment acquired by said B. A. Green and installed in the sugar central after the execution of the original mortgage deed, on April 27, 1927, together with whatever additional equipment acquired with said loan. B. A. Green failed to obtain said loan. Article 1877 of the Civil Code provides as follows.
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APPEAL from a judgment of the Court of First Instance of Manila. Sison, J. The facts are stated in the opinion of the court. Briones & Martinez for appellant. Araneta, Zaragoza & Araneta for appellees Cu Unjieng e Hijos. No appearance for the other appellees. VILLA-REAL, J.: This is an appeal taken by the plaintiff, B. H. Berkenkotter, from the judgment of the Court of First Instance of Manila, dismissing said plaintiff's complaint against Cu Unjieng e Hijos et al., with costs. In support of his appeal, the appellant assigns six alleged errors as committed by the trial court in its decision in question, which will be discussed in the course of this decision.

"ART. 1877. A mortgage includes all natural accessions, improvements, growing fruits, and rents not collected when the obligation falls due, and the amount of any indemnities paid or due the owner by the insurers of the mortgaged property or by virtue of the exercise of the power of eminent domain, with the declarations, amplifications, and limitations established by law, whether the estate continues in the possession of the person who mortgaged it or whether it passes into the hands of a third person." In the case of Bischoff vs. Pomar and Compaa General de Tabacos (12 Phil., 690), cited with approval in the case of Cea vs. Villanueva (18 Phil., 538), this court laid down the following doctrine: "1. REALTY; MORTGAGE OF REAL ESTATE INCLUDES IMPROVEMENTS AND FIXTURES.It is a rule, established by the Civil Code and also by the Mortgage Law, with which the decisions of the courts of the United States are in accord, that in a mortgage of real estate, the improvements on the same are included; therefore, all objects permanently attached to a mortgaged building or land, although they may have been placed there after the mortgage was constituted, are also included. (Arts. 110 and 111 of the Mortgage Law, and 1877 of the Civil Code; decision of U. S. Supreme Court in the matter of Royal Insurance Co. vs. R. Miller, liquidator, and Amadeo [26 Sup. Ct. Rep., 46; 199 U. S., 353].) "2. ID.; ID.; INCLUSION OR EXCLUSION OF MACHINERY, ETC.In order that it may be understood that the machinery and other objects placed upon and used in connection with a mortgaged estate are excluded from the mortgage, when it was stated in the mortgage that the improvements, buildings, and machinery that existed thereon were also comprehended, it is indispensable that the exclusion thereof e stipulated between the contracting parties." The appellant contends that the installation of the mahinery and equipment claimed by him in the sugar central of the Mabalacat Sugar Company, Inc., was not permanent n character inasmuch as B. A. Green, in proposing to him to advance the money for the purchase thereof, made it appear in the letter, Exhibit E, that in case B. A. Green should fail to obtain an additional loan from the defendants Cu Unjieng e Hijos, said machinery and equipment would become security therefor, said B. A. Green binding himself not to mortgage nor encumber them to anybody until said plaintiff be f ully reimbursed for the corporation's indebtedness to him.

Upon acquiring the machinery and equipment in question with money obtained as loan from the plaintiff-appellant by B. A. Green, as president of the Mabalacat Sugar Co., Inc., the latter became owner of said machinery and equipment, otherwise B. A. Green, as such president, could not have offered them to the plaintiff as security for the payment of his credit. Article 334, paragraph 5, of the Civil Code gives the character of real property to "machinery, liquid containers, instruments or implements intended by the owner of any building or land for use in connection with any industry or trade being carried on therein and which are expressly adapted to meet the requirements of such trade or industry." If the installation of the machinery and equipment in question in the central of the Mabalacat Sugar Co., Inc., in lieu of. the other of less capacity existing therein, for its sugar industry, converted them into real property by reason of their purpose, it cannot be said that their incorporation therewith was not permanent in character because, as essential and principal elements of a sugar central, without them the sugar central would be unable to function or carry on the industrial purpose for which it was established. Inasmuch as the central is permanent in character, the necessary machinery and equipment installed for carrying on the sugar industry for which it has been established must necessarily be permanent. Furthermore, the fact that B. A. Green bound himself to the plaintiff B. H. Berkenkotter to hold said machinery and equipment as security for the payment of the latter's credit and to refrain from mortgaging or otherwise encumbering them until Berkenkotter has been fully reimbursed therefor, is not incompatible with the permanent character of the incorporation of said machinery and equipment with the sugar central of the Mabalacat Sugar Co., Inc., as nothing could prevent B. A. Green from giving them as security at least under a second mortgage. As to the alleged sale of said machinery and equipment to the plaintiff and appellant after they had been permanently incorporated with the sugar central of the Mabalacat Sugar Co., Inc., and while the mortgage constituted on said sugar central to Cu Unjieng e Hijos remained in force, only the right of redemption of the vendor Mabalacat Sugar Co., Inc., in the sugar central with which said machinery and equipment had been incorporated, was transferred thereby, subject to the right of the defendants Cu Unjieng e Hijos under the first mortgage.

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For the foregoing considerations, we are of the opinion and so hold: (1) That the installation of a machinery and equipment in a mortgaged sugar central, in lieu of another of less capacity, for the purpose of carrying out the industrial functions of the latter and increasing production, constitutes a permanent improvement on said sugar central and subjects said machinery and equipment to the mortgage constituted thereon (article 1877, Civil Code); (2) that the fact that the purchaser of the new machinery and equipment has bound himself to the person supplying him the purchase money to hold them as security for the payment of the latter's credit, and to refrain from mortgaging or otherwise encumbering them does not alter the permanent character of the incorporation of said machinery and equipment with the central; and (3) that the sale of the machinery and equipment in question by the purchaser who was supplied the purchase money, as a loan, to the person who supplied the money, after the incorporation thereof with the mortgaged sugar central, does not vest the creditor with ownership of said machinery and equipment but simply with the right of redemption. Wherefore, finding no error in the appealed judgment, it is affirmed in all its parts, with costs to the appellant. So ordered. Malcolm, Imperial, Butte, and Goddard, JJ., concur.

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AGO vs COURT OF APPEALS No. L-17898. October 31, 1962 PASTOR D. AGO, petitioner, vs. THE HON.COURT OF APPEALS,HON.MONTANO A. ORTIZ, Judge of the Court of First Instance of Agusan, THE PROVINCIAL SHERIFF OF SURIGAO and GRACE PARK ENGINEERING,INC., respondents.
Judgments; What constitutes rendition of judgment in courts of first instance.It is the filing of the signed decision with the clerk of court, and not the pronouncement of the judgment in open court, that constitutes rendition of a decision by a court of first instance. Before such filing, the decision may still be subject to amendment and change and may not yet be considered effective and binding. Same; Notice by party of judgment dictated in open court not valid notice.The fact that a party heard the judge dictating the judgment in open court, is not a valid notice of said judgment, because it is the filing with the clerk of court of a signed decision that constitutes the rendition of the judgment. Besides, Section 7, Rule 27 of the Rules of Court expressly requires that final orders or judgments be served personally or by registered mail. Property; Immovables by destination; Installation of sawmill machineries in building of sawmill company.By the installation of the sawmill machineries in the building of the sawmill company, for use in the sawing of logs carried on in said building, the same became a necessary and permanent part of the building or real estate on which the same was constructed, converting the said machineries and equipments into real estate within the meaning of Article 415 (5) of the. Civil Code.

Agusan rendered judgment (Annex A) in open court on January 28, 1959, basing said judgment on a compromise agreement between the parties. On August 15, 1959, upon petition, the Court of First Instance issued a writ of execution. Petitioners motion for reconsideration dated October 12, 1959 alleges that he, or his counsel, did not receive a formal and valid notice of said decision, which motion for reconsideration was denied by the court below in the order of November 14, 1959. Petitioner now contends that the respondent Judge exceeded in his jurisdiction in ordering the execution without valid and formal notice of the decision. A compromise agreement is binding between the parties and becomes the law between them. (Gonzales vs. Gonzales, G.R. No. L-1254, May 21, 1948, 81 Phil. 38; Martin vs. Martin, G.R. No. L-12439, May 22, 1959) It is a general rule in this jurisdiction that a judgment based on a compromise agreement is not appealable and is immediately executory, unless a motion is filed on the ground of fraud, mistake or duress. (De los Reyes vs. Ugarte, 75 Phil. 505; Lapena vs. Morfe, G.R. No. L-10089, July 31, 1957) Petitioners claim that he was not notified or served notice of the decision is untenable. The judgment on the compromise agreement rendered by the court below dated January 28, 1959, was given in open court. This alone is a substantial compliance as to notice. (De los Reyes vs. Ugarte, supra) IN VIEW THEREOF, we believe that the lower court did not exceed nor abuse its jurisdiction in ordering the execution of the judgment. The petition for certiorari is hereby dismissed and the writ of preliminary injunction heretofore dissolved, with costs against the petitioner. IT IS SO ORDERED.

APPEAL for review by certiorari of a decision of the Court of Appeals. The facts are stated in the opinion of the Court. Jose M. Luison for petitioner. Norberlo J. Quisumbing for respondent Grace Park Engineering, Inc. The Provincial Fiscal of Surigao for respondent Sheriff of Surigao. LABRADOR, J.: Appeal by certiorari to review the decision of respondent Court of Appeals in CA-G.R. No. 26723-R entitled Pastor D. Ago vs. The Provincial Sheriff of Surigao, et al. which in part reads: In this case for certiorari and prohibition with preliminary injunction, it appears from the records that the respondent Judge of the Court of First Instance of

The facts of the case may be briefly stated as follows: In 1957, petitioner Pastor D. Ago bought sawmill machineries and equipments from respondent Grace Park Engineering, Inc., executing a chattel mortgage over said machineries and equipments to secure the payment of a balance of the price remaining unpaid of P32,000.00, which petitioner agreed to pay on installment basis.
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Petitioner Ago defaulted in his payment and so, in 1958, respondent Grace Park Engineering, Inc. instituted extra-judicial foreclosure proceedings of the mortgage. To enjoin said foreclosure, petitioner herein instituted Special Civil Case No. 53 in the Court of First Instance of Agusan. The parties to the case arrived at a compromise agreement and submitted the same in court in writing, signed by Pastor D. Ago and the Grace Park Engineering, Inc. The Hon. Montano A. Ortiz, Judge of the Court of First Instance of Agusan, then presiding, dictated a decision in open court on January 28, 1959. Petitioner continued to default in his payments as provided in the judgment by compromise, so Grace Park Engineering, Inc. filed with the lower court a motion for execution, which was granted by the court on August 15, 1959. A writ of execution, dated September 23, 1959, later followed. The herein respondent, Provincial Sheriff of Surigao, acting upon the writ of execution issued by the lower court, levied upon and ordered the sale of the sawmill machineries and equipments in question. These machineries and equipments had been taken to and installed in a sawmill building located in Lianga, Surigao del Sur, and owned by the Golden Pacific Sawmill, Inc., to whom, petitioner alleges, he had sold them on February 16, 1959 (a date after the decision of the lower court but before levy by the Sheriff). Having been advised by the sheriff that the public auction sale was set for December 4, 1959, petitioner, on December 1, 1959, filed the petition for certiorari and prohibition with preliminary injunction with respondent Court of Appeals, alleging that a copy of the aforementioned judgment given in open court on January 28, 1959 was served upon counsel for petitioner only on September 25, 1959 (writ of execution is dated September 23, 1959); that the order and writ of execution having been issued by the lower court before counsel for petitioner received a copy of the judgment, its resultant last order that the sheriff may now proceed with the sale of the properties levied, constituted a grave abuse of discretion and was in excess of its jurisdiction; and that the respondent Provincial Sheriff of Surigao was acting illegally upon the allegedly void writ of execution by levying the same upon the sawmill machineries and equipments which have become real properties of the Golden Pacific Sawmill, Inc., and is about to proceed in selling the same without prior publication of the notice of sale thereof in some newspaper of general circulation as required by the Rules of Court. The Court of Appeals, on December 8, 1959, issued a writ of preliminary injunction against the sheriff but it turned out that the latter had already sold at

public auction the machineries in question, on December 4, 1959, as scheduled. The respondent Grace Park Engineering, Inc. was the only bidder for P15,000.00, although the certificate of sale was not yet executed. The Court of Appeals instructed the sheriff to suspend the issuance of a certificate of sale of the said sawmill machineries and equipments sold by him on December 4, 1959 until the final decision of the case. On November 9, 1960 the Court of Appeals rendered the aforequoted decision. Before this Court, petitioner alleges that the Court of Appeals erred (1) in holding that the rendition of the judgment on compromise in open court on January 29, 1959 was a sufficient notice; and (2) in not resolving the other issues raised before it, namely, (a) the legality of the public auction sale made by the sheriff, and (b) the nature of the machineries in question, whether they are movables or immovables.

The Court of Appeals held that as a judgment was entered by the court below in open court upon the submission of the compromise agreement, the parties may be considered as having been notified of said judgment and this fact constitutes due notice of said judgment. This raises the following legal question: Is the order dictated in open court the judgment of the court, and is the fact that the petitioner herein was present in open court when the judgment was dictated, sufficient notice thereof? The provisions of the Rules of Court decree otherwise. Section 1 of Rule 35 describes the manner in which judgments shall be rendered, thus: SECTION 1. How judgment rendered.All judgments determining the merits of cases shall be in writing personally and directly prepared by the judge, and signed by him, stating clearly and distinctly the facts and the law on which it is based, and filed with the clerk of the court. The court of first instance being a court of record, in order that a judgment may be considered as rendered, it must not only be in writing, signed by the judge, but it must also be filed with the clerk of court. The mere pronouncement of the judgment in open court with the stenographer taking note thereof does not, therefore, constitute a rendition of the judgment. It is the filing of the signed decision with the clerk of court that constitutes rendition. While it is to be presumed that the judgment that was dictated in open court will be the judgment of the court, the court may still modify said order as the same is being put into writing. And even if the order or judgment has already been
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put into writing and signed, while it has not yet been delivered to the clerk for filing, it is still subject to amendment or change by the judge. It is only when the judgment signed by the judge is actually filed with the clerk of court that it becomes a valid and binding judgment. Prior thereto, it could still be subject to amendment and change and may not, therefore, constitute the real judgment of the court. Regarding the notice of judgment, the mere fact that a party heard the judge dictating the judgment in open court, is not a valid notice of said judgment. If rendition thereof is constituted by the filing with the clerk of court of a signed copy (of the judgment), it is evident that the fact that a party or an attorney heard the order or judgment being dictated in court cannot be considered as notice of the real judgment. No judgment can be notified to the parties unless it has previously been rendered. The notice, therefore, that a party has of a judgment that was being dictated is of no effect because at the time no judgment has as yet been signed by the judge and filed with the clerk. Besides, the Rules expressly require that final orders or judgments be served personally or by registered mail. Section 7 of Rule 27 provides as follows: SEC. 7. Service of final orders or judgments.Final orders or judgments shall be served either personally or by registered mail. In accordance with this provision, a party is not considered as having been served with the judgment merely because he heard the judge dictating the said judgment in open court; it is necessary that he be served with a copy of the signed judgment that has been filed with the clerk in order that he may legally be considered as having been served with the judgment. For all the foregoing, the fact that the petitioner herein heard the trial judge dictating the judgment in open court, is not sufficient to constitute the service of judgment as required by the above-quoted section 7 of Rule 27; the signed judgment not having been served upon the petitioner, said judgment could not be effective upon him (petitioner) who had not received it. It follows as a consequence that the issuance of the writ of execution was null and void, having been issued before petitioner herein was served, personally or by registered mail, a copy of the decision. The second question raised in this appeal, which has not been passed upon by the Court of Appeals, concerns the validity of the proceedings of the sheriff in selling the sawmill machineries and equipments at public auction without a notice of the sale having been previously published.

The record shows that after petitioner herein Pastor D. Ago had purchased the sawmill machineries and equipments he assigned the same to the Golden Pacific Sawmill, Inc. in payment of his subscription to the shares of stock of said corporation. Thereafter the sawmill machineries and equipments were installed in a building and permanently attached to the ground. By reason of such installment in a building, the said sawmill machineries and equipments became real estate properties in accordance with the provision of Art. 415(5) of the Civil Code, thus: ART. 415. The following are immovable property: x x x x x x x x

(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works; This Court in interpreting a similar question raised before it in the case of Berkenkotter vs. Cu Unjieng e Hijos, 61 Phil. 683, held that the installation of the machinery and equipment in the central of the Mabalacat Sugar Co., Inc. for use in connection with the industry carried by that company, converted the said machinery and equipment into real estate by reason of their purpose. Paraphrasing the language of said decision we hold that by the installation of the sawmill machineries in the building of the Golden Pacific Sawmill, Inc., for use in the sawing of logs carried on in said building, the same became a necessary and permanent part of the building or real estate on which the same was constructed, converting the said machineries and equipments into real estate within the meaning of Article 415(5) above-quoted of the Civil Code of the Philippines. Considering that the machineries and equipments in question valued at more than P15,000.00 appear to have been sold without the necessary advertisement of sale by publication in a newspaper, as required in Sec. 16 of Rule 39 of the Rules of Court, which is as follows: SEC. 16. Notice of sale of property on execution.-Before the sale of property on execution, notice thereof must be given as follows: x x x x x x x x

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(c) In case of real property, by posting a similar notice particularly describing the property for twenty days in three public places in the municipality or city where the property is situated, and also where the property is to be sold, and, if the assessed value of the property exceeds four hundred pesos, by publishing a copy of the notice once a week, for the same period, in some newspaper published or having general circulation in the province, if there be one. If there are newspapers published in the province in both the English and Spanish languages, then a like publication for a like period shall be made in one newspaper published in the English language, and in one published in the Spanish language. the sale made by the sheriff must be declared null and void. WHEREFORE, the decision of the Court of Appeals sought to be reviewed is hereby set aside and We declare that the issuance of the writ of execution in this case against the sawmill machineries and equipments purchased by petitioner Pastor D. Ago from the Grace Park Engineering, Inc., as well as the sale of the same by the Sheriff of Surigao, are null and void. Costs shall be against the respondent Grace Park Engineering, Inc. Bengzon, C.J., Bautista Angelo, Concepcion, Reyes. J.B.L., Barrera, Paredes, Dizon, Regala and Makalintal, JJ., concur. Padilla, J., took no part. Decision set aside; writ of execution declared null and void. [Ago vs. Court of Appeals, 6 SCRA 530(1962)]

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PRESBITERO vs FERNANDEZ No. L-19527. March 30, 1963.

RICARDO PRESBITERO, in his capacity as Executor of the Testate Estate of EPERIDION PRESBITERO, petitioner, vs. THE HON. JOSE F. FERNANDEZ, HELEN CARAM NAVA, and the PROVINCIAL SHERIFF OF NEGROS OCCIDENTAL, respondents.
Property; Sugar quotas deemed immovable property; Levy not valid if copy of order and description of property is not filed with Register of Deeds.As an improvement attached to land, by express provision of law (Section 9, Act 4166), though not physically so united, sugar quotas are inseparable therefrom, just like servitudes and other real rights over an immovable, and should be considered as immovable or real property under Article 416 (10) of the Civil Code. The fact that the Philippine Trade Act of 1946 (U.S. Public Law 371-79th Congress) allows transfers of sugar quotas does not militate against their immo-vability. There cannot be a sugar plantation owner without land to which the quota is attached; and there can exist no quota without there being first a corresponding plantation. Hence, a levy made by the sheriff upon a sugar quota is null and void if not in compliance with the procedure prescribe in Section 14, Rule 39, in relation with Section 7, Rule 59, of the Rules of Court, requiring the filing with the register of deeds of a copy of the orders together with a description of the property.

same cadastral survey, also free from all liens and encumbrances, or, upon failure to do so, to pay to the plaintiff the value of each of the said properties, as may be determined by the Court a quo upon evidence to be presented by the parties before it. The defendant is further adjudged to pay to the plaintiff the value of the products received by him from the 5-hectare portion equivalent to 20 cavans of palay per hectare every year, or 125 cavans yearly, at the rate of P10.00 per cavan, from 1951 until possession of the said 5-hectare portion is finally delivered to the plaintiff with legal interest thereon from the time the complaint was filed; and to pay to the plaintiff the sum of P1,000.00 by way of attorneys fees, plus costs. This judgment, which became final, was a modification of a decision of the Court of First Instance of Negros Occidental, in its Civil Case No. 3492, entitled Helen Caram Nava, plaintiff, versus Esperidion Presbitero, defendant. Thereafter, plaintiffs counsel, in a letter dated December 8, 1959, sought in vain to amicably settle the case through petitioners son, Ricardo Presbitero. When no response was forthcoming, said counsel asked for, and the court a quo ordered on June 9, 1960, the issuance of a partial writ of execution for the sum of P12,250.00. On the following day, June 10, 1960, said counsel, in another friendly letter, reiterated his previous suggestion for an amicable settlement, but the same produced no fruitful result. Thereupon, on June 21, 1960, the sheriff levied upon and garnished the sugar quotas allotted to plantation audit Nos. 26-237, 26-238, 26-239, 26-240 and 26-241 adhered to the Ma-ao Mill District and registered in the name of Esperidion Presbitero as the original plantation-owner, furnishing copies of the writ of execution and the notice of garnishment to the manager of the Ma-ao Sugar Central Company, Bago, Negros Occidental, and the Sugar Quota Administration at Bacolod City, but without presenting for registration copies thereof to the Register of Deeds. Plaintiff Helen Caram Nava (herein respondent) then moved the court, on June 22, 1960, to hear evidence on the market value of the lots; and after some hearings, occasionally protracted by postponements, the trial court, on manifestation of defendants willingness to cede the properties in litigation, suspended the proceedings and ordered him to segregate the portion of Lot 608 pertaining to the plaintiff from the mass of properties belonging to the defendant within a period to expire on August 24, 1960, and to effect the final conveyance of the said portion of Lot 608 and the whole of Lot 788 free from any lien and encumbrance whatsoever. Because of Presbiteros failure to comply with this order within the time set forth by the court, the plaintiff again moved on August 25, 1960 to declare the market value of the lots in question
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PETITION for a writ of certiorari against the Court of First Instance of Negros Occidental. The facts are stated in the opinion of the Court. San Juan, Africa & Benedicto and Hilado & Hilado for petitioner. Paredes, Poblador, Cruz & Nazareno and Manuel Soriano for respondents. REYES, J.B.L., J.: Petition for a writ of certiorari against the Court of First Instance of Negros Occidental. It appears that during the lifetime of Esperidion Presbitero, judgment was rendered against him by the Court of Appeals on October 14, 1959, in CA-G.R. No. 20879, x x x to execute in favor of the plaintiff, within 30 days from the time this judgment becomes final, a deed of reconveyance of Lot No. 788 of the cadastral survey of Valladolid, free from all liens and encumbrances, and another deed of reconveyance of a 7-hectare portion of Lot No. 608 of the

to be P2,500.00 per hectare, based on uncontradicted evidence previously adduced. But the court, acting on a prayer of defendant Presbitero, in an order dated August 27, 1960, granted him twenty (20) days to finalize the survey of Lot 608, and ordered him to execute a reconveyance of Lot 788 not later than August 31, 1960. Defendant again defaulted; and so plaintiff, on September 21, 1960, moved the court for payment by the defendant of the sum of P35,000.00 for the 14 hectares of land at P2,500.00 to the hectare, and the court, in its order dated September 24, 1960, gave the defendant until October 15, 1960 either to pay the value of the 14 hectares at the rate given or to deliver the clean titles of the lots. On October 15, 1960, the defendant finally delivered Certificate of Title No. T-28046 covering Lot 788, but not the title covering Lot 608 because of an existing encumbrance in favor of the Philippine National Bank. In view thereof, Helen Caram Nava moved for, and secured on October 19, 1960, a writ of execution for P17,500.00, and on the day following wrote the sheriff to proceed with the auction sale of the sugar quotas previously scheduled for November 5, 1960. The sheriff issued the notice of auction sale on October 20, 1960. On October 22, 1960, death overtook the defendant Esperidion Presbitero. Proceedings for the settlement of his estate were commenced in Special Proceedings No. 2936 of the Court of First Instance of Negros Occidental; and on November 4, 1960, the special administrator, Ricardo Presbitero, filed an urgent motion, in Case No. 3492, to set aside the writs of execution, and to order the sheriff to desist from holding the auction sale on the grounds that the levy on the sugar quotas was invalid because the notice thereof was not registered with the Register of Deeds, as for real property, and that the writs, being for sums of money, are unenforceable since Esperidion Presbitero died on October 22, 1960, and, therefore, could only be enforced as a money claim against his estate. This urgent motion was heard on November 5, 1960, but the auction sale proceeded on the same date, ending in the plaintiffs putting up the highest bid for P34,970.11; thus, the sheriff sold 21,640 piculs of sugar quota to her. On November 10, 1960, plaintiff Nava filed her opposition to Presbiteros urgent motion of November 4, 1960; the latter filed on May 4, 1961 a supplement to his urgent motion; and on May 8 and 23, 1961, the court continued hearings on the motion, and ultimately denied it on November 18, 1961.

On January 11, 1962, plaintiff Nava also filed an urgent motion to order the Maao Sugar Central to register the sugar quotas in her name and to deliver the rentals of these quotas corresponding to the crop year 1960-61 and succeeding years to her. The court granted this motion in its order dated February 3, 1962. A motion for reconsideration by Presbitero was denied in a subsequent order under date of March 5, 1962. Wherefore, Presbitero instituted the present proceedings for certiorari. A preliminary restraining writ was thereafter issued by the court against the respondents from implementing the aforesaid orders of the respondent Judge, dated February 3, 1960 and March 5, 1962, respectively. The petition further seeks the setting aside of the sheriffs certificate of sale of the sugar quotas made out in favor of Helen Caram Nava, and that she be directed to file the judgment credit in her favor in Civil Case No. 3492 as a money claim in the proceedings to settle the Estate of Esperidion Presbitero. The petitioner denies having been personally served with notice of the garnishment of the sugar quotas, but this disclaimer cannot be seriously considered since it appears that he was sent a copy of the notice through the chief of police of Valladolid on June 21, 1960, as certified to by the sheriff, and that he had actual knowledge of the garnishment, as shown by his motion of November 4, 1960 to set aside the writs of execution and to order the sheriff to desist from holding the auction sale. Squarely at issue in this case is whether sugar quotas are real (immovable) or personal properties. If they be realty, then the levy upon them by the sheriff is null and void for lack of compliance with the procedure prescribed in Section 14, Rule 39, in relation with Section 7, Rule 59, of the Rules of Court requiring the filing with the register of deeds a copy of the orders together with a description of the property x x x. In contending that sugar quotas are personal property, the respondent, Helen Caram Nava, invoked the test formulated by Manresa (3 Manresa, 6th Ed. 43), and opined that sugar quotas can be carried from place to place without injury to the land to which they are attached, and are not one of those included in Article 415 of the Civil Code; and not being thus included, they fall under the category of personal properties: ART. 416. x x x The following are deemed to be personal property: x
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4. In general, all things which can be transported from place to place without impairment of the real property to which they are fixed. Respondent likewise points to evidence she submitted that sugar quotas are, in fact, transferred apart from the plantations to which they are attached, without impairing, destroying, or diminishing the potentiality of either quota or plantation. She was sustained by the lower court when it stated that it is a matter of public knowledge and it is universal practice in this province, whose principal industry is sugar, to transfer by sale, lease, or otherwise, sugar quota allocations from one plantation to any other and that it is specious to insist that quotas are improvements attaching to one plantation when in truth and in fact they are no longer attached thereto for having been sold or leased away to be used in another plantation. Respondent would add weight to her argument by invoking the role that sugar quotas play in our modern social and economic life, and cites that the Sugar Office does not require any registration with the Register of Deeds for the validity of the sale of these quotas; and, in fact, those here in question were not noted down in the certificate of title of the land to which they pertain; and that Ricardo Presbitero had leased sugar quotas independently of the land. The respondent cites further that the U.S.-Philippine Trade Relations Act, approved by the United States Congress in 1946, limiting the production of unrefined sugar in the Philippines did not allocate the quotas for said unrefined sugar among lands planted to sugarcane but among the sugar producing mills and plantation OWNERS, and for this reason Section 3 of Executive Order No. 873, issued by Governor General Murphy, authorizes the lifting of sugar allotments from one land to another by means only of notarized deeds. While respondents arguments are thought-provoking, they cannot stand against the positive mandate of the pertinent statute. The Sugar Limitation Law (Act 4166, as amended) provides SEC. 9. The allotment corresponding to each piece of land under the provisions of this Act shall be deemed to be an improvement attaching to the land entitled thereto x x x; and Republic Act No. 1825 similarly provides SEC. 4. The production allowance or quotas corresponding to each piece of land under the provisions of this Act shall be deemed to be an improvement attaching to the land entitled thereto x x x. And Executive Order No. 873 defines plantation as follows:

(a) The term plantation means any specific area of land under sole or undivided ownership to which is attached an allotment of centrifugal sugar. Thus, under express provisions of law, the sugar quota allocations are accessories to land, and can not have independent existence away from a plantation, although the latter may vary. Indeed, this Court held in the case of Abelarde vs. Lopez, 74 Phil. 344, that even if a contract of sale of haciendas omitted the right, title, interest, participation, action (and) rent which the grantors had or might have in relation to the parcels of land sold, the sale would include the quotas, it being provided in Section 9, Act 4166, that the allotment is deemed an improvement attached to the land, and that at the time the contract of sale was signed the land devoted to sugar were practically of no use without the sugar allotment. As an improvement attached to land, by express provision of law, though not physically so united, the sugar quotas are inseparable therefrom, just like servitudes and other real rights over an immovable. Article 415 of the Civil Code, in enumerating what are immovable properties, names 10. Contracts for public works, and servitudes and other real rights over immovable property. (Emphasis supplied) It is by law, therefore, that these properties are immovable or real, Article 416 of the Civil Code being made to apply only when the thing (res) sought to be classified is not included in Article 415. The fact that the Philippine Trade Act of 1946 (U.S. Public Law 371-79th Congress) allows transfers of sugar quotas does not militate against their immovability. Neither does the fact that the Sugar Quota Office does not require registration of sales of quotas with the Register of Deeds for their validity, nor the fact that allocation of unrefined sugar quotas is not made among lands planted to sugarcane but among the sugar producing mills and plantation OWNERS, since the lease or sale of quotas are voluntary transactions, the regime of which, is not necessarily identical to involuntary transfers or levies; and there cannot be a sugar plantation owner without land to which the quota is attached; and there can exist no quota without there being first a corresponding plantation. Since the levy is invalid for non-compliance with law, it is impertinent to discuss the survival or non-survival of claims after the death of the judgment debtor, gauged from the moment of actual levy. Suffice it to state that, as the case presently stands, the writs of execution are not in question, but the levy on the
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quotas, and, because of its invalidity, the levy amount to no levy at all. Neither is it necessary, or desirable, to pass upon the conscionableness or unconscionableness of the amount produced in the auction sale as compared with the actual value of the quotas inasmuch as the sale must necessarily be also illegal. As to the remedial issue that the respondents have presented: that certiorari does not lie in this case because the petitioner had a remedy in the lower court to suspend the auction sale, but did not avail thereof, it may be stated that the latters urgent motion of November 4, 1960, a day before the scheduled sale (though unresolved by the court on time), did ask for desistance from holding the sale. WHEREFORE, the preliminary injunction heretofore granted is hereby made permanent, and the sheriffs certificate of sale of the sugar quotas in question declared null and void. Costs against respondent Nava. Bengzon, C.J., Padilla, Labrador, Barrera, Paredes, Dizon and Regala, JJ., concur. Makalintal, J., did not take part. Preliminary injunction made permanent. Notes.Rights are neither movable nor immovable; but it being necessary for legal purposes to classify them, their classification should naturally follow that of the things or objects over which they are exercised (Capistrano, Civil Code Annotated, Vol. I, 1950 ed., p. 339). The ruling is Sibal v.Valdez, 50 Phil. 512, which classified sugar cane as personal property, may now be considered abandoned in view of the explicit provision of Article 415 (No. 2) of the new Civil Code, which classifies as immovable property plants while they are attached to the land or form an integral part of an immovable.

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BOARD OF ASSESSMENT APPEALS vs MERALCO No. L-15334. January 31, 1964. BOARD OF ASSESSMENT APPEALS, ClTY ASSESSOR and ClTY TREASURER OF QUEZON CITY, petitioners, vs. MANILA ELECTRIC COMPANY, respondent.

Ordinance No. 44 approved on March 24, 1903. Respondent Manila Electric Co. (Meralco for short), became the transferee and owner of the franchise. Meralco's electric power is generated by its hydro-electric plant located at Botocan Falls, Laguna and is transmitted to the City of Manila by means of electric transmission wires, running from the province of Laguna to the said City. These electric transmission wires which carry high voltage current, are fastened to insulators attached on steel towers constructed by respondent at intervals, from its hydro-electric plant in the province of Laguna to the City of Manila. The respondent Meralco has constructed 40 of these steel towers within Quezon City, on land belonging to it. A photograph of one of these steel towers is attached to the petition for review, marked Annex A. Three steel towers were inspected by the lower court and the parties and the following were the descriptions given thereof by said court: "The first steel tower is located in South Tatalon, Espaa Extension, Quezon City. The findings were as follows: the ground around one of the four posts was excavated to a depth of about eight (8) feet, with an opening of about one (1) meter in diameter, decreased to about a quarter of a meter as it went deeper until it reached the bottom of the posts; at the bottom of the post were two parallel steel bars attached to the leg by means of bolts; the tower proper was attached to the leg by three bolts; with two cross metals to prevent mobility; there was no concrete foundation but there was adobe stone underneath; as the bottom of the excavation was covered with water about three inches high, it could not be determined with certainty as to whether said adobe stone was placed purposely or not, as the place abounds with this kind of stone; and the tower carried five high voltage wires without cover or any insulating materials. The second tower inspected was located in Kamuning Road, K-F, Quezon City, on land owned by the petitioner approximately more than one kilometer from the first tower. As in the first tower, the ground around one of the four legs was excavated from seven to eight (8) feet deep and one and a half (1-1/2) meters wide. There being very little water at the bottom, it was seen that there was no concrete foundation, but there was soft adobe beneath. The leg was likewise provided with two parallel steel bars bolted to a square metal frame also bolted to each corner. Like the first one, the second tower is made up of metal rods joined together by means of bolts, so that by unscrewing the bolts, the tower could be dismantled and reassembled. The third tower examined is located along Kamias Road, Quezon City. As in the first two towers given above, the ground around the two legs of the third
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Taxation; Real property tax; Steel towers of Meralco exempt under its franchise.The tax exemption privilege of the Meralco on its poles, as granted by its franchise (Act No. 484), is held to include its steel towers. Same; Same; Term "pole" includes steel towers.The term "pole" refers to an upright standard to the top of which something is affixed or by which something is supported, and includes a steel tower of an electric power company, like the Meralco. Same; Same; Steel towers of electric company not real property.The steel towers of an electric company do not constitute real property for the purpose of the real property tax. Same; Same; Refund; City Treasurer held responsible.The City Treasurer of Quezon City is held responsible for the refund of real property taxes, despite his contention that Quezon City, which was not made a party to the suit, is the real party in interest, not only because this question was not raised in the lower court but also because, factually, actually, it was he who had insisted that the taxpayer pay the taxes now to be refunded.

PETITION for review of a decision of the Court of Tax Appeals. The facts are stated in the opinion of the Court. Assistant City Attorney Jaime R. Agloro for petitioners. Ross, Selph & Carrascoso for respondent. PAREDES, J.: From the stipulation of facts and evidence adduced during the hearing, the following appear: On October 20, 1902, the Philippine Commission enacted Act No. 484 which authorized the Municipal Board of Manila to grant a franchise to construct, maintain and operate an electric street railway and electric light, heat and power system in the City of Manila and its suburbs to the person or persons making the most favorable bid. Charles M. Swift was awarded the said franchise on March 1903, the terms and conditions of which were embodied in

tower was excavated to a depth about two or three inches beyond the outside level of the steel bar foundation. It was found that there was no concrete foundation. Like the two previous ones, the bottom arrangement of the legs thereof were found to be resting on -soft adobe, which, probably due to high humidity, looks like mud or clay. It was also found that the square metal frame supporting the legs were not attached to any material or foundation." On November 15, 1955, petitioner City Assessor of Quezon City declared the aforesaid steel towers for real property tax under Tax Declaration Nos. 31992 and 15549. After denying respondent's petition to cancel these declarations, an appeal was taken by respondent to the Board of Assessment Appeals of Quezon City, which required respondent to pay the amount of P11,651.86 as real property tax on the said steel towers for the years 1952 to 1956. Respondent paid the amount under protest, and filed a petition for review in the Court of Tax Appeals (CTA for short) which rendered a decision on December 29, 1958, ordering the cancellation of the said tax declarations and the petitioner City Treasurer of Quezon City to refund to the respondent the sum of P11,651.86. The motion for reconsideration having been denied, on April 22, 1959, the instant petition for review was filed. In upholding the cause of respondents, the CTA held that: (1) the steel towers come within the term "poles" which are declared exempt from taxes under part II paragraph 9 of respondent's franchise; (2) the steel towers are personal properties and are not subject to real property tax; and (3) the City Treasurer of Quezon City is held responsible for the refund of the amount paid. These are assigned as errors by the petitioner in the brief. The tax exemption privilege of the petitioner is quoted hereunder: "PAR. 9. The grantee shall be liable to pay the same taxes upon its real estate, buildings, plant (not including poles, wires, transformers, and insulators), machinery and personal property as other persons are or may be hereafter required by law to pay. x x x Said percentage shall be due and payable at the times stated in paragraph nineteen of Part One hereof, x x x and shall be in lieu of all taxes and assessments of whatsoever nature, and by whatsoever authority upon the privileges, earnings, income, franchise, and poles, wires, transformers, and insulators of the grantee from which taxes and assessments the grantee is hereby expressly exempted." (Par. 9, Part Two, Act No. 484, Respondent's Franchise; italics supplied.) The word "pole" means "a long, comparatively slender usually cylindrical piece of wood or timber, as typically, the stem of a small tree stripped of its branches;

also, by extension, a similar typically cylindrical piece or object of metal or the like". The term also refers to "an upright standard to the top of which something is affixed or by which something is supported; as a dovecote set on a pole; telegraph poles; a tent pole; sometimes, specifically, a vessel's mast." (Webster's New International Dictionary, 2nd Ed., p. 1907.) Along the streets, in the City of Manila, may be seen cylindrical metal poles, cubical concrete poles, and poles of the PLDT Co. which are made of two steel bars joined together by an interlacing metal rod. They are called "poles" notwithstanding the fact that they are not made of wood. It must be noted from paragraph 9, above quoted, that the concept of the "poles" for which exemption is granted, is not determined by their place or location, nor by the character of the electric current it carries, nor the material or form orm of which it is made, but the use to which they are dedicated. In accordance with the definitions, a pole is not restricted to a long cylindrical piece of wood or metal, but includes "upright standards to the top of which something is affixed or by which something is supported." As heretofore described, respondent's steel supports consist of a framework of four steel bars or strips which are bound by steel cross-arms atop of which are cross-arms supporting five high voltage transmission wires (See Annex A) and their sole function is to support or carry such wires. The conclusion of the CTA that the steel supports in question are embraced in the term "poles" is not a novelty. Several courts of last resort in the United States have called these steel supports "steel towers", and they have denominated these steel supports or towers, as electric poles. In their decisions the words "towers" and "poles" were used interchangeably, and it is well understood in that jurisdiction that a transmission tower or pole means the same thing. In a proceeding to condemn land for the use of electric power wires, in which the law provided that wires shall be constructed upon suitable poles, this term was construed to mean either wood or metal poles and in view of the land being subject to overflow, and the necessary carrying of numerous wires and the distance between poles, the statute was interpreted to include towers or poles. (Stemmons v. Dallas Power & Light Co. (Tex) 212 S.W. 222, 224; 32-A Words and Phrases, p. 365.) The term "poles" was also used to denominate the steel supports or towers used by an association to convey its electric power furnished to subscribers and members, constructed for the purpose of fastening high voltage and dangerous electric wires alongside public highways. The steel supports or
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towers were made of iron or other metals consisting of two pieces running from the ground up some thirty feet high, being wider at the bottom than at the top, the said two metal pieces being connected with criss-cross iron running from the bottom to the top, constructed like ladder and loaded with high voltage electricity. In form and structure, they are like the steel towers in question. (Salt River Valley Users' Ass'n v. Compton, 8 P. 2nd, 249-250.) The term "poles" was used to denote the steel towers of an electric company engaged in the generation of hydroelectric power and transmitting the power generated from its plant to the tower of Oxford and City of Waterbury. These steel towers are about 15 feet square at the base and extended to a height of about 35 feet to a point, and are embedded in cement foundations sunk in the earth, the top of which extends above the surface of the soil in the tower of Oxford, and to the towers are attached insulators, arms, and other equipment capable of carrying wires for the transmission of electric power (Connecticut Light and Power Co. v. Oxford, 101 Conn. 383, 126 Atl. p. 1). In a case, the defendant admitted that the structure on which a certain person met his death was built for the purpose of supporting a transmission wire used for carrying high-tension electric power,. but claimed that the steel towers on which it was carried were so large that their wire took its structure out of the definition inition of a pole line. It was held that in defining the word pole, one should not be governed by the wire or material of the support used, but was considering the danger from any elevated wire carrying electric current, and that regardless of the size or material wire of its individual members, any continuous series of structures intended and used solely or primarily for the purpose of supporting wires carrying electric currents is a pole line (Inspiration Consolidation Cooper Co. v. Bryan, 252 P. 1016). It is evident, therefore, that the word "poles", as used in Act No. 484 and incorporated in the petitioner's franchise, should not be given a restrictive and narrow interpretation, as to defeat the very object for which the franchise was granted. The poles as contemplated thereon, should be understood and taken as a part of the electric power system of the respondent Meralco, for the conveyance of electric current from the source thereof to its consumers. If the respondent would be required to employ "woden poles," or "rounded poles" as it used to do fifty years back, then one should admit that the Philippines is one century behind the age of space. It should also be conceded by now that steel towers, like the ones in question, for obvious reasons, can better effectuate the purposes for which the respondent's franchise was granted.

Granting for the purpose of argument that the steel supports or towers in question are not embraced within the term poles, the logical question posited is whether they constitute real properties, so that they can be subject to a real property tax. The tax law does not provide for a definition of real property; but Article 415 of the Civil Code does, by stating the following are immovable property: "(1) Land, buildings, roads, and constructions of all kinds adhered to the soil; xxx xxx xxx

(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the material or deterioration of the object; xxx xxx xxx

(5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried in a building or on a piece of land, and which tends directly to meet the needs of the said industry or works ;" xxx xxx xxx

The steel towers or supports in question, do not come within the objects mentioned in paragraph 1, because they do not constitute buildings or constructions adhered to the soil. They are not constructions analogous to buildings nor adhering to the soil. As per description, given by the lower court, they are removable and merely attached to a square metal frame by means of bolts, which when unscrewed could easily be dismantled and moved from place to place. They can not be included under paragraph 3, as they are not attached to an immovable in a fixed manner, and they can be separated without breaking the material or causing deterioration upon the object to which they are attached. Each of these steel towers or supports consists of steel bars or metal strips, joined together by means of bolts, which can be disassembled by unscrewing the bolts and reassembled by screwing the same. These steel towers or supports do not also fall under paragraph 5, for they are not machineries, receptacles, instruments or implements, and even if they were, they are not intended for industry or works on the land. Petitioner is not engaged in an industry or works on the land in which the steel supports or towers are constructed.

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It is finally contended that the CTA erred in ordering the City Treasurer of Quezon City to refund the sum of P11,-651.86, despite the fact that Quezon City is not a party to the case. It is argued that as the City Treasurer is not the real party in interest, but Quezon City, which was not made a party to the suit, notwithstanding its capacity to sue and be sued, he should not be ordered to effect the refund. This question has not been raised in the court below and, therefore, it cannot properly be raised for the first time on appeal. The herein petitioner is indulging in legal technicalities and niceties which do not help him any; for, factually, it was he (City Treasurer) who had insisted that respondent herein pay the real estate taxes, which respondent paid under protest. Having acted in his official capacity as City Treasurer of Quezon City, he would surely know what to do, under the circumstances. IN VIEW HEREOF, the decision appealed from is hereby affirmed, with costs against the petitioners. Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera and Regala, JJ., concur. Makalintal, J., concurs in the result. Dizon, J., took no part. Decision affirmed.

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MERALCO vs BOARD OF ASSESSMENT APPEALS No. L-47943. May 31, 1982.* MANILA ELECTRIC COMPANY, petitioner, vs. CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS OF BATANGAS and PROVINCIAL ASSESSOR OF BATANGAS, respondents.
Taxation; Civil Law; Property; Storage tanks although not embedded on land considered as improvements and are subject to realty tax.We hold that while the two storage tanks are not embedded in the land, they may, nevertheless, be considered as improvements on the land, enhancing its utility and rendering it useful to the oil industry. It is undeniable that the two tanks have been installed with some degree of permanence as receptacles for the considerable quantities of oil needed by Meralco for its operations. Oil storage tanks were held to be taxable realty in Standard Oil Co. of New Jersey vs. Atlantic City, 15 Atl. 2nd 271. Same; Same; Same; Real property, for taxation purposes, defined.For purposes of taxation, the term real property may include things which should generally be regarded as personal property (84 C.J.S. 171, Note 8). It is a familiar phenomenon to see things classed as real property for purposes of taxation which on general principle might be considered personal property (Standard Oil Co. of New York vs. Jaramillo, 44 Phil. 630, 633).

anchored or welded to the concrete circular wall. Its bottom plate is not attached to any part of the foundation by bolts, screws or similar devices. The tank merely sits on its foundation. Each empty tank can be floated by flooding its dike-inclosed location with water four feet deep. (pp. 29-30, Rollo.) On the other hand, according to the hearing commissioners of the Central Board of Assessment Appeals, the area where the two tanks are located is enclosed with earthen dikes with electric steel poles on top thereof and is divided into two parts as the site of each tank. The foundation of the tanks is elevated from the remaining area. On both sides of the earthen dikes are two separate concrete steps leading to the foundation of each tank. Tank No. 2 is supported by a concrete foundation with an asphalt lining about an inch thick. Pipelines were installed on the sides of each tank and are connected to the pipelines of the Manila Enterprises Industrial Corporation whose buildings and pumping station are near Tank No. 2. The Board concludes that while the tanks rest or sit on their foundation, the foundation itself and the walls, dikes and steps, which are integral parts of the tanks, are affixed to the land while the pipelines are attached to the tanks. (pp. 60-61, Rollo.) In 1970, the municipal treasurer of Bauan, Batangas, on the basis of an assessment made by the provincial assessor, required Meralco to pay realty taxes on the two tanks. For the five-year period from 1970 to 1974, the tax and penalties amounted to P431,703.96 (p. 27, Rollo). The Board required Meralco to pay the tax and penalties as a condition for entertaining its appeal from the adverse decision of the Batangas board of assessment appeals. The Central Board of Assessment Appeals (composed of Acting Secretary of Finance Pedro M. Almanzor as chairman and Secretary of Justice Vicente Abad Santos and Secretary of Local Government and Community Development Jose Roo as members) in its decision dated November 5, 1976 ruled that the tanks together with the foundation, walls, dikes, steps, pipelines and other appurtenances constitute taxable improvements. Meralco received a copy of that decision on February 28, 1977. On the fifteenth day, it filed a motion for reconsideration which the Board denied in its resolution of November 25, 1977, a copy of which was received by Meralco on February 28, 1978.

SPECIAL CIVIL ACTION for certiorari to review the decision and resolution of the Central Board of Assessment Appeals. The facts are stated in the opinion of the Board. AQUINO, J.: This case is about the imposition of the realty tax on two oil storage tanks installed in 1969 by Manila Electric Company on a lot in San Pascual, Batangas which it leased in 1968 from Caltex (Phil.). Inc. The tanks are within the Caltex refinery compound. They have a total capacity of 566,000 barrels. They are used for storing fuel oil for Meralcos power plants. According to Meralco, the storage tanks are made of steel plates welded and assembled on the spot. Their bottoms rest on a foundation consisting of compacted earth as the outermost layer, a sand pad as the intermediate layer and a two-inch thick bituminous asphalt stratum as the top layer. The bottom of each tank is in contact with the asphalt layer. The steel sides of the tank are directly supported underneath by a circular wall made of concrete, eighteen inches thick, to prevent the tank from sliding. Hence, according to Meralco, the tank is not attached to its foundation. It is not

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On March 15, 1978, Meralco filed this special civil action of certiorari to annul the Boards decision and resolution. It contends that the Board acted without jurisdiction and committed a grave error of law in holding that its storage tanks are taxable real property. Meralco contends that the said oil storage tanks do not fall within any of the kinds of real property enumerated in article 415 of the Civil Code and, therefore, they cannot be categorized as realty by nature, by incorporation, by destination nor by analogy. Stress is laid on the fact that the tanks are not attached to the land and that they were placed on leased land, not on the land owned by Meralco. This is one of those highly controversial, borderline or penumbral cases on the classification of property where strong divergent opinions are inevitable. The issue raised by Meralco has to be resolved in the light of the provisions of the Assessment Law, Commonwealth Act No. 470, and the Real Property Tax Code, Presidential Decree No. 464 which took effect on June 1, 1974. Section 2 of the Assessment Law provides that the realty tax is due on real property, including land, buildings, machinery, and other improvements not specifically exempted in section 3 thereof. This provision is reproduced with some modification in the Real Property Tax Code which provides: Sec. 38. Incidence of Real Property Tax.They shall be levied, assessed and collected in all provinces, cities and municipalities an annual ad valorem tax on real property, such as land, buildings, machinery and other improvements affixed or attached to real property not hereinafter specifically exempted. The Code contains the following definition in its section 3: k) Improvementsis a valuable addition made to property or an amelioration in its condition, amounting to more than mere repairs or replacement of waste, costing labor or capital and intended to enhance its value, beauty or utility or to adapt it for new or further purposes. We hold that while the two storage tanks are not embedded in the land, they may, nevertheless, be considered as improvements on the land, enhancing its utility and rendering it useful to the oil industry. It is undeniable that the two tanks have been installed with some degree of permanence as receptacles for the considerable quantities of oil needed by Meralco for its operations.

Oil storage tanks were held to be taxable realty in Standard Oil Co. of New Jersey vs. Atlantic City, 15 Atl. 2nd 271. For purposes of taxation, the term real property may include things which should generally be regarded as personal property (84 C.J.S. 171, Note 8). It is a familiar phenomenon to see things classed as real property for purposes of taxation which on general principle might be considered personal property (Standard Oil Co. of New York vs. Jaramillo, 44 Phil. 630, 633). The case of Board of Assessment Appeals vs., Manila Electric Company, 119 Phil. 328, wherein Meralcos steel towers were held not to be subject to realty tax, is not in point because in that case the steel towers were regarded as poles and under its franchise Meralcos poles are exempt from taxation. Moreover, the steel towers were not attached to any land or building. They were removable from their metal frames. Nor is there any parallelism between this case and Mindanao Bus Co. vs. City Assessor, 116 Phil. 501, where the tools and equipment in the repair, carpentry and blacksmith shops of a transportation company were held not subject to realty tax because they were personal property. WHEREFORE, the petition is dismissed. The Boards questioned decision and resolution are affirmed. No costs. SO ORDERED. Barredo (Chairman), Guerrero, De Castro and Escolin, JJ., concur. Concepcion Jr., J., is on leave. Justice Abad Santos did not take part. Decision and resolution affirmed. Notes.Tax exemptions are strictly constituted against the taxpayer and liberally in favor of the taxing authority. (City of Baguio vs. Basuego, 100 SCRA 116.) Taxes being the chief source of revenue for the Government to keep it running must be paid immediately and without delay. (Collector of Internal Revenue vs. Yuseco, 3 SCRA 313.)

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Exceptions from taxation are considered in strictissimi juris against the taxpayer and liberally in favor of the taxing authority. (Esso Standard Eastern, Inc. vs. Acting Commissioner of Customs; 18 SCRA 488.) The power of taxation should be exercised with caution to minimize injury to the propriety rights of a taxpayer. (Roxas vs. Court of Tax Appeals, 23 SCRA 276.) Local governments are without power to tax electric power companies already subject to franchise tax, unless their franchise allows the imposition of an additional tax. (Ilocos Norte Electric Co., Inc. vs. Municipality of Laoag, 18 SCRA 703.) Where the law clearly refers to the condonation of unpaid taxes, it is held that it cannot be extended to authorize the refund of paid taxes. (Surigao Consolidated Mining Co., Inc. vs. Collector of Internal Revenue, 9 SCRA 728.) The term insulating oil comes within the meaning of the term insulator and qualifies the Manila Electric Company for exemption from the tax due on the importation thereof under the terms of its franchise which expressly exempts its insulator from all taxes of whatever kind and nature. (Acting Commissioner of Customs vs. Manila Electric Co., 77 SCRA 469.) The forfeiture proceeding concluded by the collector in favor of the State, after notice to unknown owners is made and when no claim is interposed in the prescribed interim period, attains finality and cannot be the subject of any relief. (Commissioner of Customs vs. Geronimo, 80 SCRA 74.) The prohibition against the imposition of percentage taxes (formerly provided for in Sec. 1 of C.A. 472) refers to municipalities and municipal districts but not to chartered cities. (Philippine Match Co. vs. City of Cebu, 81 SCRA 99.) Alleged lack of personal notice of tax sale to petitioner is negated by averments in her pleading (Vda, de Gordon vs. Court of Appeals, 109 SCRA 388.) Term AS IS in public auction of imported goods refers to the physical condition of the merchandise and not the legal situation in which it was at the time of the sale. (Auyong Hian vs. Court of Tax Appeals, 109 SCRA 472.)

o0o
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DAVAO SAW MILL CO vs CASTILLO No. 40411. August 7, 1935 DAVAO SAW MILL Co., INC., plaintiff and appellant, vs. APRONIANO G. CASTILLO and DAVAO LIGHT & POWER Co., INC., def endants and appellees.

land upon which the business was conducted belonged to another person. On the land the sawmill company erected a building which housed the machinery used by it. Some of the implements thus used were clearly personal property, the conflict concerning machines which were placed' and mounted on f oundations of cement. In the contract of lease between the sawmill company and the owner of the land there appeared the following provision: "That on the expiration of the period agreed upon, all the improvements and buildings introduced and erected by the party of the second part shall pass to the exclusive ownership of the party of the first part without any obligation on its part to pay any amount for said improvements and buildings; also, in the event the party of the second part should leave or abandon the land leased before the time herein stipulated, the improvements and buildings shall likewise pass to the ownership of the party of the first part as though the time agreed upon had expired: Provided, however, That the machineries and accessories are not included in the improvements which will pass to the party of the first part on the expiration or abandonment of the land leased." In another action, wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao Saw Mill Co., Inc., was the defendant, a judgment was rendered in favor of the plaintiff in that action against the def endant in that action; a writ of execution issued thereon, and the properties now in question were levied upon as personalty by the sheriff. No third party claim was filed for such properties at the time of the sales thereof as is borne out by the record made by the plaintiff herein. Indeed the bidder, which was the plaintiff in that action, and the defendant herein having consummated the sale, proceeded to take possession of the machinery and other properties described in the corresponding certificates of sale executed in its favor by the sheriff of Davao. As connecting up with the facts, it should further be explained that the Davao Saw Mill Co., Inc., has on a number of occasions treated the machinery as personal property by executing chattel mortgages in favor of third persons. One of such persons is the appellee by assignment from the original mortgagees. Article 334, paragraphs 1 and 5, of the Civil Code, is in point. According to the Code, real property consists of "1. Land, buildings, roads and constructions of all kinds adhering to the soil; * * * * * * *

1. PROPERTY; MACHINERY AS PERSONAL PROPERTY; CIVIL CODE, ARTICLE 334, PARAGRAPHS 1 and 5, CONSTRUED.A lessee placed machinery in a building erected on land belonging to another, with the understanding that the machinery was not included in the improvements which would pass to the lessor on the expiration or abandonment of the land leased. The lessee also treated the machinery as personal property by executing chattel mortgages in f favor of third persons. The machinery was levied upon by the sheriff as personalty pursuant to a writ of execution obtained without any protest being registered. Held: That the machinery must be classified as personal property.

2. ID.; ID.; ID.Machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant, but not when so placed by a tenant, a usufructuary, or any person having only a temporary right, unless such person acted as the agent of the owner.

APPEAL from a judgment of the Court of First Instance of Davao. Hilario, J. The facts are stated in the opinion of the court. Arsenio Suazo & Jose L. Palma Gil and Pablo Lorenzo & Delfin Joven for appellant. J. W. Ferrier for appellees. MALCOLM, J.: The issue in this case, as announced in the opening sentence of the decision in the trial court and as set forth by counsel for the parties on appeal, involves the determination of the nature of the properties described in the complaint. The trial judge found that those properties were personal in nature, and as a consequence absolved the defendants from the complaint, with costs against the plaintiff. The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of the Philippine Islands. It has operated a sawmill in the sitio of Maa, barrio of Tigatu, municipality of Davao, Province of Davao. However, the

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"5. Machinery, liquid containers, instruments or implements intended by the owner of any building or land for use in connection with any industry or trade being carried on therein and which are expressly adapted to meet the requirements of such trade or industry." Appellant emphasizes the first paragraph, and appellees the last mentioned paragraph. We entertain no doubt that the trial judge and the appellees are right in their appreciation of the legal doctrines flowing from the facts. In the first place, it must again be pointed out that the appellant should have registered its protest before or at the time of the sale of this property. It must further be pointed out that while not conclusive, the characterization of the property as chattels by the appellant is indicative of intention and impresses upon the property the character determined by the parties. In this connection the decision of this court in the case of Standard Oil Co. of New York vs. Jaramillo ([1923], 44 Phil., 630), whether obiter dicta or not, furnishes the key to such a situation. It is, however, not necessary to spend overly much time in the resolution of this appeal on side issues. It is machinery which is involved; moreover, machinery not intended by the owner of any building or land for use in connection therewith, but intended by a lessee for use in a building erected on the land by the latter to be returned to the lessee on the expiration or abandonment of the lease. A similar question arose in Puerto Rico, and on appeal being taken to the United States Supreme Court, it was held that machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant, but not when so placed by a tenant, a usufructuary, or any person having only a temporary right, unless such person acted as the agent of the owner. In the opinion written by Chief Justice White, whose knowledge of the Civil Law is well known, it was in part said: "To determine this question involves fixing the nature and character of the property from the point of view of the rights of Valdes and its nature and character from the point of view of Nevers & Callaghan as a judgment creditor of the Altagracia Company and the rights derived by them from the execution levied on the machinery placed by the corporation in the plant. Following the Code Napoleon, the Porto Rican Code treats as immovable (real) property, not only land and buildings, but also attributes immovability in some cases to property of a movable nature, that is, personal property, because of the destination to which it is applied. 'Things,' says section 334 of the Porto Rican

Code, 'may be immovable either by their own nature or by their destination or the object to which they are applicable.' Numerous illustrations are given in the fifth subdivision of section 335, which is as follows: 'Machinery, vessels, instruments or implements intended by the owner of the tenements for the industry or works that they may carry on in any building or upon any land and which tend directly to meet the needs of the said industry or works.' (See also Code Nap., articles 516, 518 et seq. to and inclusive of article 534, recapitulating the things which, though in themselves movable, may be immobilized.) So far as the subject-matter with which we are dealing machinery placed in the plantit is plain, both under the provisions of the Porto Rican Law and of the Code Napoleon, that machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner of the property or plant. Such result would not be accomplished, therefore, by the placing of machinery in a plant by a tenant or a usufructuary or any person having only a temporary right. (Demolombe, Tit. 9, No. 203; Aubry et Rau, Tit. 2, p. 12, Section 164; Laurent, Tit. 5, No. 447; and decisions quoted in FuzierHerman ed. Code Napoleon under articles 522 et seq.) The distinction rests, as pointed out by Demolombe, upon the fact that one only having a temporary right to the possession or enjoyment of property is not presumed by the law to have applied movable property belonging to him so as to deprive him of it by causing it by an act of immobilization to become the property of another. It follows that abstractly speaking the machinery put by the Altagracia Company in the plant belonging to Sanchez did not lose its character of movable property and become immovable by destination. But in the concrete immobilization took place because of the express provisions of the lease under which the Altagracia held, since the lease in substance required the putting in of improved machinery, deprived the tenant of any right to charge against the lessor the cost of such machinery, and it was expressly stipulated that the machinery so put in should become a part of the plant belonging to the owner without compensation to the lessee. Under such conditions the tenant in putting in the machinery was acting but as the agent of the owner in compliance with the obligations resting upon him, and the immobilization of the machinery which resulted arose in legal effect from the act of the owner in giving by contract a permanent destination to the machinery. * * * * * * *

"The machinery levied upon by Nevers & Callaghan, that is, that which was placed in the plant by the Altagracia Company, being, as regards Nevers & Callaghan, movable property, it follows that they had the right to levy on it under the execution upon the judgment in their favor, and the exercise of that
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right did not in a legal sense conflict with the claim of Valdes, since as to him the property was a part of the realty which, as the result of his obligations under the lease, he could not, for the purpose of collecting his debt, proceed separately against." (Valdes vs. Central Altagracia [1912], 225 U. S., 58.) Finding no reversible error in the record, the judgment appealed from will be affirmed, the costs of this instance to be paid by the appellant. Villa-Real, Imperial, Butte, and Goddard, JJ., concur. Judgment affirmed.

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SORIANO vs SPS RICARDO G.R. No. 156295. September 23, 2003.* MARCELO R. SORIANO, petitioner, vs. SPOUSES RICARDO and ROSALINA GALIT, respondents.

inclusion coupled with the furtive manner of its intercalation casts serious doubt on the authenticity of petitioners copy of the Certificate of Sale. Thus, it has been held that while a public document like a notarized deed of sale is vested with the presumption of regularity, this is not a guarantee of the validity of its contents? Same; Same; The issuance of a Certificate of Sale is an end result of judicial foreclosure where statutory requirements are strictly adhered to, where even the slightest deviations therefrom will invalidate the proceeding and the sale; The Certificate of Sale is an accurate record of what properties were actually sold to satisfy the debt, and the strictness in the observance of accuracy and correctness in the description of the properties renders the enumeration in the certificate exclusive.It must be pointed out in this regard that the issuance of a Certificate of Sale is an end result of judicial foreclosure where statutory requirements are strictly adhered to; where even the slightest deviations therefrom will invalidate the proceeding and the sale. Among these requirements is an explicit enumeration and correct description of what properties are to be sold stated in the notice. The stringence in the observance of these requirements is such that an incorrect title number together with a correct technical description of the property to be sold and vice versa is deemed a substantial and fatal error which results in the invalidation of the sale. The certificate of sale is an accurate record of what properties were actually sold to satisfy the debt. The strictness in the observance of accuracy and correctness in the description of the properties renders the enumeration in the certificate exclusive. Thus, subsequently including properties which have not been explicitly mentioned therein for registration purposes under suspicious circumstances smacks of fraud. The explanation that the land on which the properties sold is necessarily included and, hence, was belatedly typed on the dorsal portion of the copy of the certificate subsequently registered is at best a lame excuse unworthy of belief. Real Estate Mortgages; While it is true that a mortgage of land necessarily includes, in the absence of stipulation of the improvements thereon, buildings, still a building by itself may be mortgaged apart from the land on which it has been built.The foregoing provision of the Civil Code enumerates land and buildings separately. This can only mean that a building is, by itself, considered immovable. Thus, it has been held that. . . while it is true that a mortgage of land necessarily includes, in the absence of stipulation of the improvements thereon, buildings, still a building by itself may be mortgaged apart from the land on which it has been built. Such mortgage would be still a real estate mortgage for the building would still be considered immovable property even if dealt with separately and apart from the land. (emphasis and italics supplied) In this case, considering that what was sold by virtue of the writ of execution issued by the trial court was merely the storehouse and bodega constructed on the parcel of land covered by Transfer Certificate of Title No. T-40785, which by themselves are real properties of respondents spouses, the same should be regarded as separate and distinct from the conveyance of the lot on which they stand.

Actions; Pleadings and Practice; Procedural Rules and Technicalities; While it is a rule that those who seek to avail of the procedural remedies provided by the rules must adhere to the requirements thereof, failing which the right to do so is lost, it is, however, equally settled that the Rules of Court seek to eliminate undue reliance on technical rules and to make litigation as inexpensive as practicable and as convenient as can be done.Concededly, those who seek to avail of the procedural remedies provided by the rules must adhere to the requirements thereof, failing which the right to do so is lost. It is, however, equally settled that the Rules of Court seek to eliminate undue reliance on technical rules and to make litigation as inexpensive as practicable and as convenient as can be done. This is in accordance with the primary purpose of the 1997 Rules of Civil Procedure as provided in Rule 1, Section 6, which reads: Section 6. Construction.These rules shall be liberally construed in order to promote their objective of securing a just, speedy and inexpensive determination of every action and proceeding. The rules of procedure are not to be applied in a very rigid, technical sense and are used only to help secure substantial justice. If a technical and rigid enforcement of the rules is made, their aim would be defeated. They should be liberally construed so that litigants can have ample opportunity to prove their claims and thus prevent a denial of justice due to technicalities. Public Auction Sales; Certificates of Sale; Evidence; Public Documents; While it is true that public documents by themselves may be adequate to establish the presumption of their validity, their probative weight, however, must be evaluated not in isolation but in conjunction with other evidence adduced by the parties in the controversy, much more so where the contents of a copy thereof subsequently registered for documentation purposes is being contested; While a public document like a notarized deed of sale is vested with the presumption of regularity, this is not a guarantee of the validity of its contents.There are actually two (2) copies of the Certificate of Sale on Execution of Real Properties issued on February 4, 1999 involved, namely: (a) copy which is on file with the deputy sheriff; and (b) copy registered with the Registry of Deeds. The object of scrutiny, however, is not the copy of the Certificate of Sale on Execution of Real Properties issued by the deputy sheriff on February 4, 1999, but the copy thereof subsequently registered by petitioner with the Registry of Deeds on April 23, 1999, which included an entry on the dorsal portion of the first page thereof describing a parcel of land covered by OCT No. T40785 not found in the Certificate of Sale of Real Properties on file with the sheriff. True, public documents by themselves may be adequate to establish the presumption of their validity. However, their probative weight must be evaluated not in isolation but in conjunction with other evidence adduced by the parties in the controversy, much more so in this case where the contents of a copy thereof subsequently registered for documentation purposes is being contested. No reason has been offered how and why the questioned entry was subsequently intercalated in the copy of the certificate of sale subsequently registered with the Registry of Deeds. Absent any satisfactory explanation as to why said entry was belatedly inserted, the surreptitiousness of its

PETITION for review on certiorari of a decision of the Court of Appeals. The facts are stated in the opinion of the Court. Cacho & Chua Law Offices for petitioner.
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YNARES-SANTIAGO, J.: Petitioner was issued a writ of possession in Civil Case No. 6643 1 for Sum of Money by the Regional Trial Court of Balanga, Bataan, Branch 1. The writ of possession was, however, nullified by the Court of Appeals in CA-G.R. SP No. 65891 2 because it included a parcel of land which was not among those explicitly enumerated in the Certificate of Sale issued by the Deputy Sheriff, but on which stand the immovables covered by the said Certificate. Petitioner contends that the sale of these immovables necessarily encompasses the land on which they stand. Dissatisfied, petitioner filed the instant petition for review on certiorari. Respondent Ricardo Galit contracted a loan from petitioner Marcelo Soriano, in the total sum of P480,000.00, evidenced by four promissory notes in the amount of P120,000.00 each dated August 2, 1996;3 August 15, 1996;4 September 4, 19965 and September 14, 1996.6 This loan was secured by a real estate mortgage over a parcel of land covered by Original Certificate of Title No. 569.7 After he failed to pay his obligation, Soriano filed a complaint for sum of money against him with the Regional Trial Court of Balanga City, Branch 1, which was docketed as Civil Case No. 6643.8 Respondents, the Spouses Ricardo and Rosalina Galit, failed to file their answer. Hence, upon motion of Marcelo Soriano, the trial court declared the spouses in default and proceeded to receive evidence for petitioner Soriano ex parte. On July 7, 1997, the Regional Trial Court of Balanga City, Branch 1 rendered judgment9 in favor of petitioner Soriano, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant ordering the latter to pay: 1. the plaintiff the amount of P350,000.00 plus 12% interest to be computed from the dates of maturity of the promissory notes until the same are fully paid; 2. the plaintiff P20,000.00, as attorneys fees; and 3. the costs of suit. SO ORDERED.

The judgment became final and executory. Accordingly, the trial court issued a writ of execution in due course, by virtue of which, Deputy Sheriff Renato E. Robles levied on the following real properties of the Galit spouses: 1. A parcel of land covered by Original Certificate of Title No. T-569 (Homestead Patent No. 14692) situated in the Bo. of Tapulac, Orani, Bataan. Bounded on the SW, along line 1-2 by Lot No. 3, Cad. 145; containing an area of THIRTY FIVE THOUSAND SEVEN HUNDRED FIFTY NINE (35,759) SQUARE METERS, more or less x x x; 2. STORE/HOUSECONSTRUCTED on Lot No. 1103 made of strong materials G.I. roofing situated at Centro I, Orani, Bataan, x x x containing an area of 30 sq. meters, more or less x x x (constructed on TCT No. T40785); 3. BODEGAconstructed on Lot 1103, made of strong materials, G.I. roofing, situated in Centro I, Orani, Bataan, x x x with a floor area of 42.75 sq.m. more or less x x x.11 At the sale of the above-enumerated properties at public auction held on December 23, 1998, petitioner was the highest and only bidder with a bid price of P483,000.00. Accordingly, on February 4, 1999, Deputy Sheriff Robles issued a Certificate of Sale of Execution of Real Property,12 which reads: CERTIFICATE OF SALE ON EXECUTION OF REAL PROPERTY TO ALL WHO MAY SEE THESE PRESENTS: GREETINGS: I HEREBY that (sic) by virtue of the writ of execution dated October 16, 1998, issued in the above-entitled case by the HON. BENJAMIN T. VIANZON, ordering the Provincial Sheriff of Bataan or her authorized Deputy Sheriff to cause to be made (sic) the sum of P350,000.00 plus 12% interest to be computed from the date of maturity of the promissory notes until the same are fully paid; P20,000.00 as attorneys fees plus legal expenses in the implementation of the writ of execution, the undersigned Deputy Sheriff sold at public auction on December 23, 1998 the rights and interests of defendants Sps. Ricardo and Rosalina Galit, to the plaintiff Marcelo Soriano, the highest and only bidder for the amount of FOUR HUNDRED EIGHTY THREE THOUSAND PESOS (P483,000.00, Philippine Currency), the following real estate properties more particularly described as follows: ORIGINAL CERTIFICATE OF TITLE NO. T-569
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A parcel of land (Homestead Patent No. 14692) situated in the Bo. of Tapulac, Orani, Bataan, x x x. Bounded on the SW., along line 1-2 by Lot No. 3, Cad. 145, containing an area of THIRTY FIVE THOUSAND SEVEN HUNDRED FIFTY NINE (35,759) SQUARE METERS, more or less x x x TAX DEC. NO.PROPERTY INDEX NO.018-09-001-02 STOREHOUSEconstructed on Lot 1103, made of strong materials G.I. roofing situated at Centro I, Orani, Bataan x x x containing an area of 30 sq. meters, more or less x x (constructed on TCT No. 40785) TAX DEC. NO. 86PROPERTY INDEX No. 018-09-001-02 BODEGAconstructed on Lot 1103, made of strong materials G.I. roofing situated in Centro I, Orani, Bataan, x x x with a floor area of 42.75 sq. m. more or less x x x IT IS FURTHER CERTIFIED, that the aforesaid highest and lone bidder, Marcelo Soriano, being the plaintiff did not pay to the Provincial Sheriff of Bataan the amount of P483,000.00, the sale price of the abovedescribed property which amount was credited to partial/full satisfaction of the judgment embodied in the writ of execution. The period of redemption of the above described real properties together with all the improvements thereon will expire One (1) year from and after the registration of this Certificate of Sale with the Register of Deeds. This Certificate of Sheriff s Sale is issued to the highest and lone bidder, Marcelo Soriano, under guarantees prescribed by law. Balanga, Bataan, February 4, 1999. On April 23, 1999, petitioner caused the registration of the Certificate of Sale on Execution of Real Property with the Registry of Deeds. The said Certificate of Sale registered with the Register of Deeds includes at the dorsal portion thereof the following entry, not found in the Certificate of Sale on file with Deputy Sheriff Renato E. Robles:13 ORIGINAL CERTIFICATE OF TITLE NO. T-40785 A parcel of land (Lot No. 1103 of the Cadastral Survey of Orani), with the improvements thereon, situated in the Municipality of Orani, Bounded on the

NE; by Calle P. Gomez; on the E. by Lot No. 1104; on the SE by Calle Washington; and on the W. by Lot 4102, containing an area of ONE HUNDRED THIRTY NINE (139) SQUARE METERS, more or less. All points referred to are indicated on the plan; bearing true; declination 0 deg. 40E., date of survey, February 191-March 1920. On February 23, 2001, ten months from the time the Certificate of Sale on Execution was registered with the Registry of Deeds, petitioner moved14 for the issuance of a writ of possession. He averred that the one-year period of redemption had elapsed without the respondents having redeemed the properties sold at public auction; thus, the sale of said properties had already become final. He also argued that after the lapse of the redemption period, the titles to the properties should be considered, for all legal intents and purposes, in his name and favor.15 On June 4, 2001, the Regional Trial Court of Balanga City, Branch 1, granted the motion for issuance of writ of possession.16 Subsequently, on July 18, 2001, a writ of possession17 was issued in petitioners favor which reads: WRIT OF POSSESSION Mr. Renato E. Robles Deputy Sheriff RTC, Br. 1, Balanga City Greetings : WHEREAS on February 3, 2001, the counsel for plaintiff filed Motion for the Issuance of Writ of Possession; WHEREAS on June 4, 2001, this court issued an order granting the issuance of the Writ of Possession; WHEREFORE, you are hereby commanded to place the herein plaintiff Marcelo Soriano in possession of the property involved in this case situated (sic) more particularly described as: 1. STORE HOUSE constructed on Lot No. 1103 situated at Centro 1, Orani, Bataan covered by TCT. No. 40785;

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2. BODEGA constructed on Lot No. 1103 with an area of 42.75 square meters under Tax Declaration No. 86 situated at Centro 1, Orani, Bataan; 3. Original Certificate of Title No. 40785 with an area of 134 square meters known as Lot No. 1103 of the Cadastral Survey of Orani . . . against the mortgagor/former owners Sps. Ricardo and Rosalinda (sic) Galit, her (sic) heirs, successors, assigns and all persons claiming rights and interests adverse to the petitioner and make a return of this writ every thirty (30) days from receipt hereof together with all the proceedings thereon until the same has been fully satisfied. WITNESS THE HONORABLE BENJAMIN T. VIANZON, Presiding Judge, this 18th day of July 2001, at Balanga City. (Sgd.) GILBERT S. ARGONZA OIC Respondents filed a petition for certiorari with the Court of Ap-peals, which was docketed as CA-G.R. SP No. 65891, assailing the inclusion of the parcel of land covered by Transfer Certificate of Title No. T-40785 among the list of real properties in the writ of possession.18 Respondents argued that said property was not among those sold on execution by Deputy Sheriff Renato E. Robles as reflected in the Certificate of Sale on Execution of Real Property. In opposition, petitioner prayed for the dismissal of the petition because respondent spouses failed to move for the reconsideration of the assailed order prior to the filing of the petition. Moreover, the proper remedy against the assailed order of the trial court is an appeal, or a motion to quash the writ of possession. On May 13, 2002, the Court of Appeals rendered judgment as follows: WHEREFORE, the instant petition is hereby GRANTED. Accordingly, the writ of possession issued by the Regional Trial Court of Balanga City, Branch 1, on 18 July 2001 is declared NULL and VOID. In the event that the questioned writ of possession has already been implemented, the Deputy Sheriff of the Regional Trial Court of Balanga City, Branch 1, and private respondent Marcelo Soriano are hereby ordered to cause the redelivery of Transfer Certificate of Title No. T-40785 to the petitioners.

SO ORDERED. Aggrieved, petitioner now comes to this Court maintaining that 1.) THE SPECIAL CIVIL ACTION OF CERTIORARI UNDER RULE 65 IS NOT THE PLAIN, SPEEDY AND ADEQUATE REMEDY OF THE RESPONDENTS IN ASSAILING THE WRIT OF POSSESSION ISSUED BY THE LOWER COURT BUT THERE WERE STILL OTHER REMEDIES AVAILABLE TO THEM AND WHICH WERE NOT RESORTED TO LIKE THE FILING OF A MOTION FOR RECONSIDERATION OR MOTION TO QUASH OR EVEN APPEAL. 2.) THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN DECLARAING THE CERTIFICATE OF SALE ON EXECUTION OF REAL PROPERTY AS NULL AND VOID AND SUBSEQUENTLY THE WRIT OF POSSESSION BECAUSE THE SAME IS A PUBLIC DOCUMENT WHICH ENJOYS THE PRESUMPTION OF REGULARITY AND IT CANNOT BE OVERCOME BY A MERE STRANGE FEELING THAT SOMETHING IS AMISS ON ITS SURFACE SIMPLY BECAUSE THE TYPEWRITTEN WORDS ON THE FRONT PAGE AND AT THE DORSAL PORTION THEREOF IS DIFFERENT OR THAT IT IS UNLIKELY FOR THE SHERIFF TO USE THE DORSAL PORTION OF THE FIRST PAGE BECAUSE THE SECOND PAGE IS MERELY HALF FILLED AND THE NOTATION ON THE DORSAL PORTION COULD STILL BE MADE AT THE SECOND PAGE. On the first ground, petitioner contends that respondents were not without remedy before the trial court. He points out that respondents could have filed a motion for reconsideration of the Order dated June 4, 1999, but they did not do so. Respondents could also have filed an appeal but they, likewise, did not do so. When the writ of possession was issued, respondents could have filed a motion to quash the writ. Again they did not. Respondents cannot now avail of the special civil action for certiorari as a substitute for these remedies. They should suffer the consequences for sleeping on their rights. We disagree. Concededly, those who seek to avail of the procedural remedies provided by the rules must adhere to the requirements thereof, failing which the right to do so is lost. It is, however, equally settled that the Rules of Court seek to eliminate undue reliance on technical rules and to make litigation as inexpensive as practicable and as convenient as can be done.20 This is in
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accordance with the primary purpose of the 1997 Rules of Civil Procedure as provided in Rule 1, Section 6, which reads: Section 6. Construction.These rules shall be liberally construed in order to promote their objective of securing a just, speedy and inexpensive determination of every action and proceeding.21 The rules of procedure are not to be applied in a very rigid, technical sense and are used only to help secure substantial justice. If a technical and rigid enforcement of the rules is made, their aim would be defeated.22 They should be liberally construed so that litigants can have ample opportunity to prove their claims and thus prevent a denial of justice due to technicalities.23 Thus, in China Banking Corporation v. Members of the Board of Trustees of Home Development Mutual Fund,24 it was held: . . . while certiorari as a remedy may not be used as a substitute for an appeal, especially for a lost appeal, this rule should not be strictly enforced if the petition is genuinely meritorious.25 It has been said that where the rigid application of the rules would frustrate substantial justice, or bar the vindication of a legitimate grievance, the courts are justified in exempting a particular case from the operation of the rules.26 (Emphasis ours) Indeed, well-known is the rule that departures from procedure may be forgiven where they do not appear to have impaired the substantial rights of the parties.27 Apropos in this regard is Cometa v. CA,28 where we said that There is no question that petitioners were remiss in attending with dispatch to the protection of their interests as regards the subject lots, and for that reason the case in the lower court was dismissed on a technicality and no definitive pronouncement on the inadequacy of the price paid for the levied properties was ever made. In this regard, it bears stressing that procedural rules are not to be belittled or dismissed simply because their non-observance may have resulted in prejudice to a partys substantive rights as in this case. Like all rules, they are required to be followed except when only for the most persuasive of reasons they may be relaxed to relieve a litigant of an injustice not commensurate with the degree of his thoughtlessness in not complying with the procedure prescribed.29 (emphasis and italics supplied.) In short, since rules of procedure are 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 avoided.30 Technicality should not be allowed to stand in the way of equitably and completely resolving the rights and obligations of the parties.31 Eschewing, therefore, the procedural objections raised by petitioner, it behooves us to address the issue of whether or not the questioned writ of possession is in fact a nullity considering that it includes real property not expressly mentioned in the Certificate of Sale of Real Property. Petitioner, in sum, dwells on the general proposition that since the certificate of sale is a public document, it enjoys the presumption of regularity and all entries therein are presumed to be done in the performance of regular functions. The argument is not persuasive. There are actually two (2) copies of the Certificate of Sale on Execution of Real Properties issued on February 4, 1999 involved, namely: (a) copy which is on file with the deputy sheriff; and (b) copy registered with the Registry of Deeds. The object of scrutiny, however, is not the copy of the Certificate of Sale on Execution of Real Properties issued by the deputy sheriff on February 4, 1999,32 but the copy thereof subsequently registered by petitioner with the Registry of Deeds on April 23, 1999,33 which included an entry on the dorsal portion of the first page thereof describing a parcel of land covered by OCT No. T-40785 not found in the Certificate of Sale of Real Properties on file with the sheriff. True, public documents by themselves may be adequate to establish the presumption of their validity. However, their probative weight must be evaluated not in isolation but in conjunction with other evidence adduced by the parties in the controversy, much more so in this case where the contents of a copy thereof subsequently registered for documentation purposes is being contested. No reason has been offered how and why the questioned entry was subsequently intercalated in the copy of the certificate of sale subsequently registered with the Registry of Deeds. Absent any satisfactory explanation as to why said entry was belatedly inserted, the surreptitiousness of its inclusion coupled with the furtive manner of its intercalation casts serious doubt on the authenticity of petitioners copy of the Certificate of Sale. Thus, it has been held that while a public document like a notarized deed of sale is vested with the presumption of regularity, this is not a guarantee of the validity of its contents?34 It must be pointed out in this regard that the issuance of a Certificate of Sale is an end result of judicial foreclosure where statutory requirements are strictly
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adhered to; where even the slightest deviations therefrom will invalidate the proceeding35 and the sale.36 Among these requirements is an explicit enumeration and correct description of what properties are to be sold stated in the notice. The stringence in the observance of these requirements is such that an incorrect title number together with a correct technical description of the property to be sold and vice versa is deemed a substantial and fatal error which results in the invalidation of the sale.37 The certificate of sale is an accurate record of what properties were actually sold to satisfy the debt. The strictness in the observance of accuracy and correctness in the description of the properties renders the enumeration in the certificate exclusive. Thus, subsequently including properties which have not been explicitly mentioned therein for registration purposes under suspicious circumstances smacks of fraud. The explanation that the land on which the properties sold is necessarily included and, hence, was belatedly typed on the dorsal portion of the copy of the certificate subsequently registered is at best a lame excuse unworthy of belief. The appellate court correctly observed that there was a marked difference in the appearance of the typewritten words appearing on the first page of the copy of the Certificate of Sale registered with the Registry of Deeds38 and those appearing at the dorsal portion thereof. Underscoring the irregularity of the intercalation is the clearly devious attempt to let such an insertion pass unnoticed by typing the same at the back of the first page instead of on the second page which was merely half-filled and could accommodate the entry with room to spare. The argument that the land on which the buildings levied upon in execution is necessarily included is, likewise, tenuous. Article 415 of the Civil Code provides: ART. 415. The following are immovable property: (1) Land, buildings, roads and constructions of all kinds adhered to the soil. xxx xxx xxx

(4) Statues, reliefs, paintings or other objects for use or ornamentation, placed in buildings or on lands by the owner of the immovable in such a manner that it reveals the intention to attach them permanently to the tenements; (5) Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works; (6) Animal houses, pigeon houses, beehives, fish ponds or breeding places of similar nature, in case their owner has placed them or preserves them with the intention to have them permanently attached to the land, and forming a permanent part of it; the animals in these places are also included; xxx xxx xxx

(9) Docks and structures which, though floating, are intended by their nature and object to remain at a fixed place on a river, lake or coast; xxx xxx xxx

The foregoing provision of the Civil Code enumerates land and buildings separately. This can only mean that a building is, by itself, considered immovable.39 Thus, it has been held that . . . while it is true that a mortgage of land necessarily includes, in the absence of stipulation of the improvements thereon, buildings, still a building by itself may be mortgaged apart from the land on which it has been built. Such mortgage would be still a real estate mortgage for the building would still be considered immovable property even if dealt with separately and apart from the land.40 (emphasis and italics supplied)

(3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking them material or deterioration of the object;

In this case, considering that what was sold by virtue of the writ of execution issued by the trial court was merely the storehouse and bodega constructed on the parcel of land covered by Transfer Certificate of Title No. T-40785, which by themselves are real properties of respondents spouses, the same should be regarded as separate and distinct from the conveyance of the lot on which they stand. WHEREFORE, in view of all the foregoing, the petition is hereby DENIED for lack of merit. The Decision dated May 13, 2002 of the Court of Appeals in CA44 | P r o p e r t y

G.R. SP No. 65891, which declared the writ of possession issued by the Regional Trial Court of Balanga City, Branch 1, on July 18, 2001, null and void, is AFFIRMED in toto. SO ORDERED. Davide, Jr. (C.J., Chairman), Vitug and Carpio, JJ., concur. Azcuna, J., On leave. Petition denied, judgment affirmed in toto. Notes.In the interest of substantial justice, procedural rules of the most mandatory character in terms of compliance may be relaxed. (Yao vs. Court of Appeals, 344 SCRA 202 [2000])

The fact that the sheriff, in levying on the property of the corporation, stated in the notice of levy as well as in the certificate of sale that what was being levied upon and sold was whatever rights, shares, interest and/or participation of the stockholder and president in the corporation, may have on the subject property, shows that the sheriff s conduct was impelled partly by ignorance of the Corporation Law and partly by mere overzealousness to comply with his duties and not by bad faith or blatant disregard of the trial courts order. (Booc vs. Bantuas, 354 SCRA 279 [2001])

o0o

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MERALCO SECURITIES INDUSTRIAL CORPORATION vs . CENTRAL BOARD OF ASSESSMENT APPEALS ET AL No. L-46245. May 31, 1982.* MERALCO SECURITIES INDUSTRIAL CORPORATION, petitioner, vs. CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS OF LAGUNA and PROVINCIAL ASSESSOR OF LAGUNA, respondents.

local tax is imposed by municipal or city council by virtue of the Local Tax Code, Presidential Decree No. 231, which took effect on July 1, 1973 (69 O.G. 6197).

Concepcion, J.: Took no part. SPECIAL CIVIL ACTION of certiorari to review the decision of the Central Board of Assessment Appeals. The facts are stated in the opinion of the Court. Remedial Law; Special Civil Actions; Certiorari; Nature and purpose of remedy;
Petition for certiorari can be availed of to review the decision of the Central Board of Assessment Appeals in the absence of judicial review of the Boards decision provided for in the Real Property Tax Code; Purpose of judicial review.We hold that certiorari was properly availed of in this case. It is a writ issued by a superior court to an inferior court, board or officer exercising judicial or quasijudicial functions whereby the record of a particular case is ordered to be elevated for review and correction in matters of law (14 C.J.S. 121-122; 14 Am Jur. 2nd 777). The rule is that as to administrative agencies exercising quasi-judicial power there is an underlying power in the courts to scrutinize the acts of such agencies on questions of law and jurisdiction even though no right of review is given by the statute (73 C.J.S. 506, note 56). The purpose of judicial review is to keep the administrative agency within its jurisdiction and protect substantial rights of parties affected by its decisions (73 C.J.S. 507, Sec. 165). The review is a part of the system of checks and balances which is a limitation on the separation of powers and which forestalls arbitrary and unjust adjudications. Taxation; Property; Real Property Tax Code; Pipeline System of Meralco Securities classified as real property and subject to tax they being machinery or improvements; And does not fall within the classes of exempt real property.Meralco Securities insists that its pipeline is not subject to realty tax because it is not real property within the meaning of article 415. This contention is not sustainable under the provisions of the Assessment Law, the Real Property Tax Code and the Civil Code. Section 2 of the Assessment Law provides that the realty tax is due on real property, including land, buildings, machinery, and other improvements not specifically exempted in section 3 thereof. It is incontestable that the pipeline of Meralco Securities does not fall within any of the classes of exempt real property enumerated in section 3 of the Assessment Law and section 40 of the Real Property Tax Code. Same; Same; Same; Petroleum Law does not exempt Meralco Securities from payment of realty taxes; Realty tax distinguished from local tax.Meralco Securities argues that the realty tax is a local tax or levy and not a tax of general application. This argument is untenable because the realty tax has always been imposed by the lawmaking body and later by the President of the Philippines in the exercise of his lawmaking powers, as shown in sections 342 et seq. of the Revised Administrative Code, Act No. 3995, Commonwealth Act No. 470 and Presidential Decree No. 464. The realty tax is enforced throughout the Philippines and not merely in a particular municipality or city but the proceeds of the tax accrue to the province, city, municipality and barrio where the realty taxed is situated (Sec. 86, P.D. No. 464). In contrast, a

AQUINO, J.: In this special civil action of certiorari, Meralco Securities Industrial Corporation assails the decision of the Central Board of Assessment Appeals (composed of the Secretary of Finance as chairman and the Secretaries of Justice and Local Government and Community Development as members) dated May 6, 1976, holding that Meralco Securities oil pipeline is subject to realty tax. The record reveals that pursuant to a pipeline concession issued under the Petroleum Act of 1949, Republic Act No. 387, Meralco Securities installed from Batangas to Manila a pipeline system consisting of cylindrical steel pipes joined together and buried not less than one meter below the surface along the shoulder of the public highway. The portion passing through Laguna is about thirty kilometers long.

The pipes for white oil products measure fourteen inches in diameter by thirtysix feet with a maximum capacity of 75,000 barrels daily. The pipes for fuel and black oil measure sixteen inches by forty-eight feet with a maximum capacity of 100,000 barrels daily. The pipes are embedded in the soil and are firmly and solidly welded together so as to preclude breakage or damage thereto and prevent leakage or seepage of the oil. The valves are welded to the pipes so as to make the pipeline system one single piece of property from end to end. In order to repair, replace, remove or transfer segments of the pipeline, the pipes have to be cold-cut by means of a rotary hard-metal pipe-cutter after digging or excavating them out of the ground where they are buried. In points where the pipeline traversed rivers or creeks, the pipes were laid beneath the bed thereof. Hence, the pipes are permanently attached to the land.

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However, Meralco Securities notes that segments of the pipeline can be moved from one place to another as shown in the permit issued by the Secretary of Public Works and Communications which permit provides that the government reserves the right to require the removal or transfer of the pipes by and at the concessionaires expense should they be affected by any road repair or improvement. Pursuant to the Assessment Law, Commonwealth Act No. 470, the provincial assessor of Laguna treated the pipeline as real property and issued Tax Declarations Nos. 6535-6537, San Pedro; 7473-7478, Cabuyao; 7967-7971, Sta. Rosa; 9882-9885, Binan and 15806-15810, Calamba, containing the assessed values of portions of the pipeline. Meralco Securities appealed the assessments to the Board of Assessment Appeals of Laguna composed of the register of deeds as chairman and the provincial auditor as member. That board in its decision of June 18, 1975 upheld the assessments (pp. 47-49, Rollo). Meralco Securities brought the case to the Central Board of Assessment Appeals. As already stated, that Board, composed of Acting Secretary of Finance Pedro M. Almanzor as chairman and Secretary of Justice Vicente Abad Santos and Secretary of Local Government and Community Development Jose Roo as members, ruled that the pipeline is subject to realty tax (p. 40, Rollo). A copy of that decision was served on Meralco Securities counsel on August 27, 1976. Section 36 of the Real Property Tax Code, Presidential Decree No. 464, which took effect on June 1, 1974, provides that the Boards decision becomes final and executory after the lapse of fifteen days from the date of receipt of a copy of the decision by the appellant. Under Rule III of the amended rules of procedure of the Central Board of Assessment Appeals (70 O.G. 10085), a party may ask for the reconsideration of the Boards decision within fifteen days after receipt. On September 7, 1976 (the eleventh day), Meralco Securities filed its motion for reconsideration. Secretary of Finance Cesar Virata and Secretary Roo (Secretary Abad Santos abstained) denied the motion in a resolution dated December 2, 1976, a copy of which was received by appellants counsel on May 24, 1977 (p. 4, Rollo). On June 6, 1977, Meralco Securities filed the instant petition for certiorari.

The Solicitor General contends that certiorari is not proper in this case because the Board acted within its jurisdiction and did not gravely abuse its discretion and Meralco Securities was not denied due process of law. Meralco Securities explains that because the Court of Tax Appeals has no jurisdiction to review the decision of the Central Board of Assessment Appeals and because no judicial review of the Boards decision is provided for in the Real Property Tax Code, Meralco Securities recourse is to file a petition for certiorari. We hold that certiorari was properly availed of in this case. It is a writ issued by a superior court to an inferior court, board or officer exercising judicial or quasijudicial functions whereby the record of a particular case is ordered to be elevated for review and correction in matters of law (14 C.J.S. 121-122; 14 Am Jur. 2nd 777).

The rule is that as to administrative agencies exercising quasi-judicial power there is an underlying power in the courts to scrutinize the acts of such agencies on questions of law and jurisdiction even though no right of review is given by the statute (73 C.J.S. 506, note 56). The purpose of judicial review is to keep the administrative agency within its jurisdiction and protect substantial rights of parties affected by its decisions (73 C.J.S. 507, Sec. 165). The review is a part of the system of checks and balances which is a limitation on the separation of powers and which forestalls arbitrary and unjust adjudications. Judicial review of the decision of an official or administrative agency exercising quasi-judicial functions is proper in cases of lack of jurisdiction, error of law, grave abuse of discretion, fraud or collusion or in case the administrative decision is corrupt, arbitrary or capricious (Mafinco Trading Corporation vs. Ope, L-37790, March 25, 1976, 70 SCRA 139, 158; San Miguel Corporation vs. Secretary of Labor, L-39195, May 16, 1975, 64 SCRA 56, 60; Mun. Council of Lemery vs. Prov. Board of Batangas, 56 Phil. 260, 268). The Central Board of Assessment Appeals, in confirming the ruling of the provincial assessor and the provincial board of assessment appeals that Meralco Securities pipeline is subject to realty tax, reasoned out that the pipes are machinery or improvements, as contemplated in the Assessment Law and the Real Property Tax Code; that they do not fall within the category of property
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exempt from realty tax under those laws; that articles 415 and 416 of the Civil Code, defining real and personal property, have no application to this case; that even under article 415, the steel pipes can be regarded as realty because they are constructions adhered to the soil and things attached to the land in a fixed manner and that Meralco Securities is not exempt from realty tax under the Petroleum law (pp. 36-40). Meralco Securities insists that its pipeline is not subject to realty tax because it is not real property within the meaning of article 415. This contention is not sustainable under the provisions of the Assessment Law, the Real Property Tax Code and the Civil Code Section 2 of the Assessment Law provides that the realty tax is due on real property. including land, buildings, machinery, and other improvements not specifically exempted in section 3 thereof. This provision is reproduced with some modification in the Real Property Tax Code which provides: SEC. 38. Incidence of Real Property Tax.There shall be levied, assessed and collected in all provinces, cities and municipalities an annual ad valorem tax on real property, such as land, buildings, machinery and other improvements affixed or attached to real property not hereinafter specifically exempted.* It is incontestable that the pipeline of Meralco Securities does not fall within any of the classes of exempt real property enumerated in section 3 of the Assessment Law and section 40 of the Real Property Tax Code.

The pipeline system in question is indubitably a construction adhering to the soil (Exh. B, p. 39, Rollo). It is attached to the land in such a way that it cannot be separated therefrom without dismantling the steel pipes which were welded to form the pipeline. Insofar as the pipeline uses valves, pumps and control devices to maintain the flow of oil, it is in a sense machinery within the meaning of the Real Property Tax Code. It should be borne in mind that what are being characterized as real property are not the steel pipes but the pipeline system as a whole. Meralco Securities has apparently two pipeline systems. A pipeline for conveying petroleum has been regarded as real property for tax purposes (Miller County Highway, etc., Dist vs. Standard Pipe Line Co., 19. Fed. 2nd 3; Board of Directors of Red River Levee Dist. No. 1 of Lafayette County, Ark vs. R. F. C., 170 Fed. 2nd 430; 50 C. J. 750, note 86). The other contention of Meralco Securities is that the Petroleum Law exempts it from the payment of realty taxes. The alleged exemption is predicated on the following provisions of that law which exempt Meralco Securities from local taxes and make it liable for taxes of general application: ART. 102. Work obligations, taxes, royalties not to be changed.Work obligations, special taxes and royalties which are fixed by the provisions of this Act or by the concession for any of the kinds of concessions to which this Act relate, are considered as inherent on such concessions after they are granted, and shall not be increased or decreased during the life of the concession to which they apply; nor shall any other special taxes or levies be applied to such concessions, nor shall concessionaires under this Act be subject to any provincial municipal or other local taxes or levies; nor shall any sales tax be charged on any petroleum produced from the concession or portion thereof, manufactured by the concessionaires and use in the working of his concession. All such concessionaires, however, shall be subject to such taxes as are of general application, in addition to taxes and other levies specifically provided in this Act. Meralco Securities argues that the realty tax is a local tax or levy and not a tax of general application. This argument is untenable because the realty tax has always been imposed by the lawmaking body and later by the President of the Philippines in the exercise of his lawmaking powers, as shown in section 342 et
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Pipeline means a line of pipe connected to pumps, valves and control devices for conveying liquids, gases or finely divided solids. It is a line of pipe running upon or in the earth, carrying with it the right to the use of the soil in which it is placed (Note 21[10], 54 C.J.S. 561).

Article 415[1] and [3] provides that real property may consist of constructions of all kinds adhered to the soil and everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the material or deterioration of the object.

seq. of the Revised Administrative Code, Act No. 3995, Commonwealth Act No. 470 and Presidential Decree No. 464. The realty tax is enforced throughout the Philippines and not merely in a particular municipality or city but the proceeds of the tax accrue to the province, city, municipality and barrio where the realty taxed is situated (Sec. 86, P.D. No. 464). In contrast, a local tax is imposed by the municipal or city council by virtue of the Local Tax Code, Presidential Decree No. 231, which took effect on July 1, 1973 (69 O.G. 6197). We hold that the Central Board of Assessment Appeals did not act with grave abuse of discretion, did not commit any error of law and acted within its jurisdiction in sustaining the holding of the provincial assessor and the local board of assessment appeals that Meralco Securities pipeline system in Laguna is subject to realty tax. WHEREFORE, the questioned decision and resolution are affirmed. The petition is dismissed. No costs. SO ORDERED. Barredo (Chairman), Guerrero, De Castro and Escolin, JJ., concur. Concepcion, Jr., J., no part. Justice Abad Santos did not take part. Decision and resolution affirmed. Notes.The Supreme Court can review or alter findings of fact of the Court of Industrial Relations if such findings are completely devoid of basis and there is a grave abuse of discretion. (Citizens League of Free Workers vs. Court of Industrial Relations, 96 SCRA 225.)

There is grave abuse of discretion justifying the issuance of the writ of certiorari when there is such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction. (Police Commission vs. Bello, 37 SCRA 231.) No abuse of discretion could be attributed to the trial court when, after its attention had been called to its mistake, it issued an order in effect reconsidering and setting aside its erroneous order. (Tuason vs. Court of Appeals, 43 SCRA 664.) Exemption of the GSIS from payment of realty taxes does not cover its property the beneficial use of which is granted to a taxable person. (City of Baguio, 100 SCRA 116.) P.D. 464 although inexistent at the time the taxes were assessed against the purchaser aids in determining the legislative intent in the enactment of C.A. 186. (City of Baguio vs. Busuego, 100 SCRA 116.) An intestate proceeding cannot be closed and a document regarding legacy and inheritance cannot be registered without proof of payment of estate and inheritance taxes. (Gonzales vs. Court of Tax Appeals, 101 SCRA 633.) Every buyer of real property must make a new declaration thereof. Failure to do so shall make the assessment in the name of the previous owner binding. A landowner is supposed to know that he has land taxes to pay. (Tajonera vs. Court of Appeals, 103 SCRA 487.) Where the taxpayer neither pays the tax assessed against him nor contests its validity, the only remedy left to the Government, aside from distraint and levy, is to enforce its collection. by judicial action in the ordinary courts of juctice (Republic vs. Dy Chay, 1 SCRA 975.) o0o

Sound discretion should not frustrate the law by defeating its objective. (Chief of Staff Armed Forces of the Philippines vs. Guadiz, Jr., 101 SCRA 827.) Disregard of available facts by a judge constitutes grave abuse of discretion. (Commissioner of Customs vs. Geronimo, 80 SCRA 74.)

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FELS, INC vs PROVINCE OF BATANGAS G.R. No. 168557. February 16, 2007.* FELS ENERGY, INC., petitioner, vs. THE PROVINCE OF BATANGAS and THE OFFICE OF THE PROVINCIAL ASSESSOR OF BATANGAS, respondents. G.R. No. 170628. February 16, 2007.* NATIONAL POWER CORPORATION, petitioner, vs. LOCAL BOARD OF ASSESSMENT APPEALS OF BATANGAS, LAURO C. ANDAYA, in his capacity as the Assessor of the Province of Batangas, and the PROVINCE OF BATANGAS represented by its Provincial Assessor, respondents.
Taxation; Real Property Tax Code; Appeals; Assessments; The remedy of appeal to the Local Board of Assessment Appeals (LBAA) is available from an adverse ruling or action of the provincial, city or municipal assessor in the assessment of the property.Instead of appealing to the Board of Assessment Appeals (as stated in the notice), NPC opted to file a motion for reconsideration of the Provincial Assessors decision, a remedy not sanctioned by law. The remedy of appeal to the LBAA is available from an adverse ruling or action of the provincial, city or municipal assessor in the assessment of the property. It follows then that the determination made by the respondent Provincial Assessor with regard to the taxability of the subject real properties falls within its power to assess properties for taxation purposes subject to appeal before the LBAA. Same; Same; Same; Same; Under Section 226 of R.A. No. 7160, the last action of the local assessor on a particular assessment shall be the notice of assessment.We fully agree with the rationalization of the CA in both CA-G.R. SP No. 67490 and CA-G.R. SP No. 67491. The two divisions of the appellate court cited the case of Callanta v. Office of the Ombudsman, 285 SCRA 648 (1998), where we ruled that under Section 226 of R.A. No 7160, the last action of the local assessor on a particular assessment shall be the notice of assessment; it is this last action which gives the owner of the property the right to appeal to the LBAA. The procedure likewise does not permit the property owner the remedy of filing a motion for reconsideration before the local assessor. Same; Same; Same; Same; The taxpayers failure to question the assessment in the Local Board of Assessment Appeals (LBAA) renders the assessment of the local assessor final, executory and demandable.If the taxpayer fails to appeal in due course, the right of the local government to collect the taxes due with respect to the taxpayers property becomes absolute upon the expiration of the period to appeal. It also bears stressing that the taxpayers failure to question the assessment in the LBAA renders the assessment of the local assessor final, executory and demandable, thus, precluding the taxpayer from questioning the correctness of the assessment, or from invoking any defense that would reopen the question of its liability on the merits.

Same; Same; Same; Same; Taxation is the rule and exemption is the exception.Time and again, the Supreme Court has stated that taxation is the rule and exemption is the exception. The law does not look with favor on tax exemptions and the entity that would seek to be thus privileged must justify it by words too plain to be mistaken and too categorical to be misinterpreted. Thus, applying the rule of strict construction of laws granting tax exemptions, and the rule that doubts should be resolved in favor of provincial corporations, we hold that FELS is considered a taxable entity. Same; Same; Same; Same; The right of local government units to collect taxes due must always be upheld to avoid severe tax erosion.It must be pointed out that the protracted and circuitous litigation has seriously resulted in the local governments deprivation of revenues. The power to tax is an incident of sovereignty and is unlimited in its magnitude, acknowledging in its very nature no perimeter so that security against its abuse is to be found only in the responsibility of the legislature which imposes the tax on the constituency who are to pay for it. The right of local government units to collect taxes due must always be upheld to avoid severe tax erosion. This consideration is consistent with the State policy to guarantee the autonomy of local governments and the objective of the Local Government Code that they enjoy genuine and meaningful local autonomy to empower them to achieve their fullest development as self-reliant communities and make them effective partners in the attainment of national goals. Remedial Law; Judgments; Res Judicata; Res judicata is founded on two grounds, namely: (1) public policy and necessity, which makes it to the interest of the State that there should be an end to litigation and (2) the hardship on the individual of being vexed twice for the same cause.Res judicata pervades every organized system of jurisprudence and is founded upon two grounds embodied in various maxims of common law, namely: (1) public policy and necessity, which makes it to the interest of the State that there should be an end to litigationrepublicae ut sit litium; and (2) the hardship on the individual of being vexed twice for the same causenemo debet bis vexari et eadem causa. A conflicting doctrine would subject the public peace and quiet to the will and dereliction of individuals and prefer the regalement of the litigious disposition on the part of suitors to the preservation of the public tranquility and happiness. Same; Actions; Forum Shopping; An important factor in determining the existence of forum shopping is the vexation caused to the courts and the parties-litigants by the filing of similar cases to claim substantially the same reliefs; Requisites of Forum Shopping.It must be stressed that an important factor in determining the existence of forum shopping is the vexation caused to the courts and the parties-litigants by the filing of similar cases to claim substantially the same reliefs. The rationale against forum shopping is that a party should not be allowed to pursue simultaneous remedies in two different fora. Filing multiple petitions or complaints constitutes abuse of court processes, which tends to degrade the administration of justice, wreaks havoc upon orderly judicial procedure, and adds to the congestion of the heavily burdened dockets of the courts. Thus, there is forum shopping when there exist: (a) identity of parties, or at least such parties as represent the same interests in both actions, (b) identity of rights asserted and relief prayed for, the relief being founded on the same facts, and (c) the identity of the two preceding particulars is such that any judgment rendered in the pending case, regardless of which party is successful, would amount to res judicata in the other.
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PETITIONS for review on certiorari of the decisions and resolutions of the Court of Appeals. The facts are stated in the opinion of the Court. Jimenez, Gonzales, Liwanag, Bello, Valdez, Caluya and Fernandez for FELS Energy, Inc. Melchor P. Ridulme for National Power Corporation. Emmanuel R. Matibag for the Province of Batangas and the Assessors Office of Batangas. CALLEJO, SR., J.: Before us are two consolidated cases docketed as G.R. No. 168557 and G.R. No. 170628, which were filed by petitioners FELS Energy, Inc. (FELS) and National Power Corporation (NPC), respectively. The first is a petition for review on certiorari assailing the August 25, 2004 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 67490 and its Resolution2 dated June 20, 2005; the second, also a petition for review on certiorari, challenges the February 9, 2005 Decision3 and November 23, 2005 Resolution4 of the CA in CA-G.R. SP No. 67491. Both petitions were dismissed on the ground of prescription. The pertinent facts are as follows: On January 18, 1993, NPC entered into a lease contract with Polar Energy, Inc. over 3x30 MW diesel engine power barges moored at Balayan Bay in Calaca, Batangas. The contract, denominated as an Energy Conversion Agreement5 (Agreement), was for a period of five years. Article 10 reads: 10.1 RESPONSIBILITY. NAPOCOR shall be responsible for the payment of (a) all taxes, import duties, fees, charges and other levies imposed by the National Government of the Republic of the Philippines or any agency or instrumentality thereof to which POLAR may be or become subject to or in relation to the performance of their obligations under this agreement (other than (i) taxes imposed or calculated on the basis of the net income of POLAR and Personal Income Taxes of its employees and (ii) construction permit fees, environmental permit fees and other similar fees and charges) and (b) all real estate taxes and assessments, rates and other charges in respect of the Power Barges.6

Subsequently, Polar Energy, Inc. assigned its rights under the Agreement to FELS. The NPC initially opposed the assignment of rights, citing paragraph 17.2 of Article 17 of the Agreement. On August 7, 1995, FELS received an assessment of real property taxes on the power barges from Provincial Assessor Lauro C. Andaya of Batangas City. The assessed tax, which likewise covered those due for 1994, amounted to P56,184,088.40 per annum. FELS referred the matter to NPC, reminding it of its obligation under the Agreement to pay all real estate taxes. It then gave NPC the full power and authority to represent it in any conference regarding the real property assessment of the Provincial Assessor. In a letter7 dated September 7, 1995, NPC sought reconsideration of the Provincial Assessors decision to assess real property taxes on the power barges. However, the motion was denied on September 22, 1995, and the Provincial Assessor advised NPC to pay the assessment.8 This prompted NPC to file a petition with the Local Board of Assessment Appeals (LBAA) for the setting aside of the assessment and the declaration of the barges as nontaxable items; it also prayed that should LBAA find the barges to be taxable, the Provincial Assessor be directed to make the necessary corrections.9 In its Answer to the petition, the Provincial Assessor averred that the barges were real property for purposes of taxation under Section 199(c) of Republic Act (R.A.) No. 7160. Before the case was decided by the LBAA, NPC filed a Manifestation, informing the LBAA that the Department of Finance (DOF) had rendered an opinion10 dated May 20, 1996, where it is clearly stated that power barges are not real property subject to real property assessment. On August 26, 1996, the LBAA rendered a Resolution11 denying the petition. The fallo reads: WHEREFORE, the Petition is DENIED. FELS is hereby ordered to pay the real estate tax in the amount of P56,184,088.40, for the year 1994. SO ORDERED.12 The LBAA ruled that the power plant facilities, while they may be classified as movable or personal property, are nevertheless considered real property for taxation purposes because they are installed at a specific location with a
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character of permanency. The LBAA also pointed out that the owner of the bargesFELS, a private corporationis the one being taxed, not NPC. A mere agreement making NPC responsible for the payment of all real estate taxes and assessments will not justify the exemption of FELS; such a privilege can only be granted to NPC and cannot be extended to FELS. Finally, the LBAA also ruled that the petition was filed out of time. Aggrieved, FELS appealed the LBAAs ruling to the Central Board of Assessment Appeals (CBAA). On August 28, 1996, the Provincial Treasurer of Batangas City issued a Notice of Levy and Warrant by Distraint13 over the power barges, seeking to collect real property taxes amounting to P232,602,125.91 as of July 31, 1996. The notice and warrant was officially served to FELS on November 8, 1996. It then filed a Motion to Lift Levy dated November 14, 1996, praying that the Provincial Assessor be further restrained by the CBAA from enforcing the disputed assessment during the pendency of the appeal. On November 15, 1996, the CBAA issued an Order14 lifting the levy and distraint on the properties of FELS in order not to preempt and render ineffectual, nugatory and illusory any resolution or judgment which the Board would issue. Meantime, the NPC filed a Motion for Intervention15 dated August 7, 1998 in the proceedings before the CBAA. This was approved by the CBAA in an Order16 dated September 22, 1998. During the pendency of the case, both FELS and NPC filed several motions to admit bond to guarantee the payment of real property taxes assessed by the Provincial Assessor (in the event that the judgment be unfavorable to them). The bonds were duly approved by the CBAA. On April 6, 2000, the CBAA rendered a Decision17 finding the power barges exempt from real property tax. The dispositive portion reads: WHEREFORE, the Resolution of the Local Board of Assessment Appeals of the Province of Batangas is hereby reversed. Respondent-appellee Provincial Assessor of the Province of Batangas is hereby ordered to drop subject property under ARP/Tax Declaration No. 018-00958 from the List of Taxable Properties in the Assessment Roll. The Provincial Treasurer of Batangas is hereby directed to act accordingly.

SO ORDERED.18 Ruling in favor of FELS and NPC, the CBAA reasoned that the power barges belong to NPC; since they are actually, directly and exclusively used by it, the power barges are covered by the exemptions under Section 234(c) of R.A. No. 7160.19 As to the other jurisdictional issue, the CBAA ruled that prescription did not preclude the NPC from pursuing its claim for tax exemption in accordance with Section 206 of R.A. No. 7160. The Provincial Assessor filed a motion for reconsideration, which was opposed by FELS and NPC. In a complete volte face, the CBAA issued a Resolution20 on July 31, 2001 reversing its earlier decision. The fallo of the resolution reads: WHEREFORE, premises considered, it is the resolution of this Board that: (a) The decision of the Board dated 6 April 2000 is hereby reversed. (b) The petition of FELS, as well as the intervention of NPC, is dismissed. (c) The resolution of the Local Board of Assessment Appeals of Batangas is hereby affirmed, (d) The real property tax assessment on FELS by the Provincial Assessor of Batangas is likewise hereby affirmed. SO ORDERED.21 FELS and NPC filed separate motions for reconsideration, which were timely opposed by the Provincial Assessor. The CBAA denied the said motions in a Resolution22 dated October 19, 2001. Dissatisfied, FELS filed a petition for review before the CA docketed as CAG.R. SP No. 67490. Meanwhile, NPC filed a separate petition, docketed as CA-G.R. SP No. 67491. On January 17, 2002, NPC filed a Manifestation/Motion for Consolidation in CA-G.R. SP No. 67490 praying for the consolidation of its petition with CA-G.R. SP No. 67491. In a Resolution23 dated February 12, 2002, the appellate court directed NPC to refile its motion for consolidation with CAG.R. SP No. 67491, since it is the ponente of the latter petition who should resolve the request for reconsideration.
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NPC failed to comply with the aforesaid resolution. On August 25, 2004, the Twelfth Division of the appellate court rendered judgment in CA-G.R. SP No. 67490 denying the petition on the ground of prescription. The decretal portion of the decision reads: WHEREFORE, the petition for review is DENIED for lack of merit and the assailed Resolutions dated July 31, 2001 and October 19, 2001 of the Central Board of Assessment Appeals are AFFIRMED. SO ORDERED.24 On September 20, 2004, FELS timely filed a motion for reconsideration seeking the reversal of the appellate courts decision in CA-G.R. SP No. 67490.

A. Whether power barges, which are floating and movable, are personal properties and therefore, not subject to real property tax.

B. Assuming that the subject power barges are real properties, whether they are exempt from real estate tax under Section 234 of the Local Government Code (LGC).

C. Assuming arguendo that the subject power barges are subject to real estate tax, whether or not it should be NPC which should be made to pay the same under the law.

Thereafter, NPC filed a petition for review dated October 19, 2004 before this Court, docketed as G.R. No. 165113, assailing the appellate courts decision in CA-G.R. SP No. 67490. The petition was, however, denied in this Courts Resolution25 of November 8, 2004, for NPCs failure to sufficiently show that the CA committed any reversible error in the challenged decision. NPC filed a motion for reconsideration, which the Court denied with finality in a Resolution26 dated January 19, 2005. Meantime, the appellate court dismissed the petition in CA-G.R. SP No. 67491. It held that the right to question the assessment of the Provincial Assessor had already prescribed upon the failure of FELS to appeal the disputed assessment to the LBAA within the period prescribed by law. Since FELS had lost the right to question the assessment, the right of the Provincial Government to collect the tax was already absolute. NPC filed a motion for reconsideration dated March 8, 2005, seeking reconsideration of the February 5, 2005 ruling of the CA in CA-G.R. SP No. 67491. The motion was denied in a Resolution27 dated November 23, 2005. The motion for reconsideration filed by FELS in CA-G.R. SP No. 67490 had been earlier denied for lack of merit in a Resolution28 dated June 20, 2005. On August 3, 2005, FELS filed the petition docketed as G.R. No. 168557 before this Court, raising the following issues: III

D. Assuming arguendo that the subject power barges are real properties, whether or not the same is subject to depreciation just like any other personal properties.

E. Whether the right of the petitioner to question the patently null and void real property tax assessment on the petitioners personal properties is imprescriptible.29 On January 13, 2006, NPC filed its own petition for review before this Court (G.R. No. 170628), indicating the following errors committed by the CA: I THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE APPEAL TO THE LBAA WAS FILED OUT OF TIME. II THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE POWER BARGES ARE NOT SUBJECT TO REAL PROPERTY TAXES.

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THE COURT OF APPEALS GRAVELY ERRED IN NOT HOLDING THAT THE ASSESSMENT ON THE POWER BARGES WAS NOT MADE IN ACCORDANCE WITH LAW.30 Considering that the factual antecedents of both cases are similar, the Court ordered the consolidation of the two cases in a Resolution31 dated March 8, 2006. In an earlier Resolution dated February 1, 2006, the Court had required the parties to submit their respective Memoranda within 30 days from notice. Almost a year passed but the parties had not submitted their respective memoranda. Considering that taxesthe lifeblood of our economyare involved in the present controversy, the Court was prompted to dispense with the said pleadings, with the end view of advancing the interests of justice and avoiding further delay. In both petitions, FELS and NPC maintain that the appeal before the LBAA was not time-barred. FELS argues that when NPC moved to have the assessment reconsidered on September 7, 1995, the running of the period to file an appeal with the LBAA was tolled. For its part, NPC posits that the 60-day period for appealing to the LBAA should be reckoned from its receipt of the denial of its motion for reconsideration. Petitioners contentions are bereft of merit. Section 226 of R.A. No. 7160, otherwise known as the Local Government Code of 1991, provides: SECTION 226. Local Board of Assessment Appeals.Any owner or person having legal interest in the property who is not satisfied with the action of the provincial, city or municipal assessor in the assessment of his property may, within sixty (60) days from the date of receipt of the written notice of assessment, appeal to the Board of Assessment Appeals of the province or city by filing a petition under oath in the form prescribed for the purpose, together with copies of the tax declarations and such affidavits or documents submitted in support of the appeal. We note that the notice of assessment which the Provincial Assessor sent to FELS on August 7, 1995, contained the following statement: If you are not satisfied with this assessment, you may, within sixty (60) days from the date of receipt hereof, appeal to the Board of Assessment Appeals of

the province by filing a petition under oath on the form prescribed for the purpose, together with copies of ARP/Tax Declaration and such affidavits or documents submitted in support of the appeal.32 Instead of appealing to the Board of Assessment Appeals (as stated in the notice), NPC opted to file a motion for reconsideration of the Provincial Assessors decision, a remedy not sanctioned by law. The remedy of appeal to the LBAA is available from an adverse ruling or action of the provincial, city or municipal assessor in the assessment of the property. It follows then that the determination made by the respondent Provincial Assessor with regard to the taxability of the subject real properties falls within its power to assess properties for taxation purposes subject to appeal before the LBAA.33 We fully agree with the rationalization of the CA in both CA-G.R. SP No. 67490 and CA-G.R. SP No. 67491. The two divisions of the appellate court cited the case of Callanta v. Office of the Ombudsman,34 where we ruled that under Section 226 of R.A. No 7160,35 the last action of the local assessor on a particular assessment shall be the notice of assessment; it is this last action which gives the owner of the property the right to appeal to the LBAA. The procedure likewise does not permit the property owner the remedy of filing a motion for reconsideration before the local assessor. The pertinent holding of the Court in Callanta is as follows: x x x [T]he same Code is equally clear that the aggrieved owners should have brought their appeals before the LBAA. Unfortunately, despite the advice to this effect contained in their respective notices of assessment, the owners chose to bring their requests for a review/readjustment before the city assessor, a remedy not sanctioned by the law. To allow this procedure would indeed invite corruption in the system of appraisal and assessment. It conveniently courts a graft-prone situation where values of real property may be initially set unreasonably high, and then subsequently reduced upon the request of a property owner. In the latter instance, allusions of a possible covert, illicit tradeoff cannot be avoided, and in fact can conveniently take place. Such occasion for mischief must be prevented and excised from our system.36 For its part, the appellate court declared in CA-G.R. SP No. 67491: x x x. The Court announces: Henceforth, whenever the local assessor sends a notice to the owner or lawful possessor of real property of its revised assessed value, the former shall no longer have any jurisdiction to entertain any request
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for a review or readjustment. The appropriate forum where the aggrieved party may bring his appeal is the LBAA as provided by law. It follows ineluctably that the 60-day period for making the appeal to the LBAA runs without interruption. This is what We held in SP 67490 and reaffirm today in SP 67491.37 To reiterate, if the taxpayer fails to appeal in due course, the right of the local government to collect the taxes due with respect to the taxpayers property becomes absolute upon the expiration of the period to appeal.38 It also bears stressing that the taxpayers failure to question the assessment in the LBAA renders the assessment of the local assessor final, executory and demandable, thus, precluding the taxpayer from questioning the correctness of the assessment, or from invoking any defense that would reopen the question of its liability on the merits.39 In fine, the LBAA acted correctly when it dismissed the petitioners appeal for having been filed out of time; the CBAA and the appellate court were likewise correct in affirming the dismissal. Elementary is the rule that the perfection of an appeal within the period therefor is both mandatory and jurisdictional, and failure in this regard renders the decision final and executory.40 In the Comment filed by the Provincial Assessor, it is asserted that the instant petition is barred by res judicata; that the final and executory judgment in G.R. No. 165113 (where there was a final determination on the issue of prescription), effectively precludes the claims herein; and that the filing of the instant petition after an adverse judgment in G.R. No. 165113 constitutes forum shopping. FELS maintains that the argument of the Provincial Assessor is completely misplaced since it was not a party to the erroneous petition which the NPC filed in G.R. No. 165113. It avers that it did not participate in the aforesaid proceeding, and the Supreme Court never acquired jurisdiction over it. As to the issue of forum shopping, petitioner claims that no forum shopping could have been committed since the elements of litis pendentia or res judicata are not present. We do not agree. Res judicata pervades every organized system of jurisprudence and is founded upon two grounds embodied in various maxims of common law, namely: (1) public policy and necessity, which makes it to the interest of the State that there should be an end to litigationrepublicae ut sit litium; and (2) the hardship on the individual of being vexed twice for the same causenemo

debet bis vexari et eadem causa. A conflicting doctrine would subject the public peace and quiet to the will and dereliction of individuals and prefer the regalement of the litigious disposition on the part of suitors to the preservation of the public tranquility and happiness.41 As we ruled in Heirs of Trinidad De Leon Vda. de Roxas v. Court of Appeals:42 x x x An existing final judgment or decreerendered upon the merits, without fraud or collusion, by a court of competent jurisdiction acting upon a matter within its authorityis conclusive on the rights of the parties and their privies. This ruling holds in all other actions or suits, in the same or any other judicial tribunal of concurrent jurisdiction, touching on the points or matters in issue in the first suit. xxx Courts will simply refuse to reopen what has been decided. They will not allow the same parties or their privies to litigate anew a question once it has been considered and decided with finality. Litigations must end and terminate sometime and somewhere. The effective and efficient administration of justice requires that once a judgment has become final, the prevailing party should not be deprived of the fruits of the verdict by subsequent suits on the same issues filed by the same parties.

This is in accordance with the doctrine of res judicata which has the following elements: (1) the former judgment must be final; (2) the court which rendered it had jurisdiction over the subject matter and the parties; (3) the judgment must be on the merits; and (4) there must be between the first and the second actions, identity of parties, subject matter and causes of action. The application of the doctrine of res judicata does not require absolute identity of parties but merely substantial identity of parties. There is substantial identity of parties when there is community of interest or privity of interest between a party in the first and a party in the second case even if the first case did not implead the latter.43 To recall, FELS gave NPC the full power and authority to represent it in any proceeding regarding real property assessment. Therefore, when petitioner NPC filed its petition for review docketed as G.R. No. 165113, it did so not only on its behalf but also on behalf of FELS. Moreover, the assailed decision in the earlier petition for review filed in this Court was the decision of the appellate court in CA-G.R. SP No. 67490, in which FELS was the petitioner. Thus, the
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decision in G.R. No. 165116 is binding on petitioner FELS under the principle of privity of interest. In fine, FELS and NPC are substantially identical parties as to warrant the application of res judicata. FELSs argument that it is not bound by the erroneous petition filed by NPC is thus unavailing. On the issue of forum shopping, we rule for the Provincial Assessor. Forum shopping exists when, as a result of an adverse judgment in one forum, a party seeks another and possibly favorable judgment in another forum other than by appeal or special civil action or certiorari. There is also forum shopping when a party institutes two or more actions or proceedings grounded on the same cause, on the gamble that one or the other court would make a favorable disposition.44 Petitioner FELS alleges that there is no forum shopping since the elements of res judicata are not present in the cases at bar; however, as already discussed, res judicata may be properly applied herein. Petitioners engaged in forum shopping when they filed G.R. Nos. 168557 and 170628 after the petition for review in G.R. No. 165116. Indeed, petitioners went from one court to another trying to get a favorable decision from one of the tribunals which allowed them to pursue their cases. It must be stressed that an important factor in determining the existence of forum shopping is the vexation caused to the courts and the parties-litigants by the filing of similar cases to claim substantially the same reliefs.45 The rationale against forum shopping is that a party should not be allowed to pursue simultaneous remedies in two different fora. Filing multiple petitions or complaints constitutes abuse of court processes, which tends to degrade the administration of justice, wreaks havoc upon orderly judicial procedure, and adds to the congestion of the heavily burdened dockets of the courts.46 Thus, there is forum shopping when there exist: (a) identity of parties, or at least such parties as represent the same interests in both actions, (b) identity of rights asserted and relief prayed for, the relief being founded on the same facts, and (c) the identity of the two preceding particulars is such that any judgment rendered in the pending case, regardless of which party is successful, would amount to res judicata in the other.47 Having found that the elements of res judicata and forum shopping are present in the consolidated cases, a discussion of the other issues is no longer necessary. Nevertheless, for the peace and contentment of petitioners, we shall shed light on the merits of the case.

As found by the appellate court, the CBAA and LBAA power barges are real property and are thus subject to real property tax. This is also the inevitable conclusion, considering that G.R. No. 165113 was dismissed for failure to sufficiently show any reversible error. Tax assessments by tax examiners are presumed correct and made in good faith, with the taxpayer having the burden of proving otherwise.48 Besides, factual findings of administrative bodies, which have acquired expertise in their field, are generally binding and conclusive upon the Court; we will not assume to interfere with the sensible exercise of the judgment of men especially trained in appraising property. Where the judicial mind is left in doubt, it is a sound policy to leave the assessment undisturbed.49 We find no reason to depart from this rule in this case. In Consolidated Edison Company of New York, Inc., et al. v. The City of New York, et al.,50 a power company brought an action to review property tax assessment. On the citys motion to dismiss, the Supreme Court of New York held that the barges on which were mounted gas turbine power plants designated to generate electrical power, the fuel oil barges which supplied fuel oil to the power plant barges, and the accessory equipment mounted on the barges were subject to real property taxation. Moreover, Article 415 (9) of the New Civil Code provides that [d]ocks and structures which, though floating, are intended by their nature and object to remain at a fixed place on a river, lake, or coast are considered immovable property. Thus, power barges are categorized as immovable property by destination, being in the nature of machinery and other implements intended by the owner for an industry or work which may be carried on in a building or on a piece of land and which tend directly to meet the needs of said industry or work.51 Petitioners maintain nevertheless that the power barges are exempt from real estate tax under Section 234 (c) of R.A. No. 7160 because they are actually, directly and exclusively used by petitioner NPC, a government-owned and controlled corporation engaged in the supply, generation, and transmission of electric power. We affirm the findings of the LBAA and CBAA that the owner of the taxable properties is petitioner FELS, which in fine, is the entity being taxed by the local government. As stipulated under Section 2.11, Article 2 of the Agreement: OWNERSHIP OF POWER BARGES. POLAR shall own the Power Barges and all the fixtures, fittings, machinery and equipment on the Site used in
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connection with the Power Barges which have been supplied by it at its own cost. POLAR shall operate, manage and maintain the Power Barges for the purpose of converting Fuel of NAPOCOR into electricity.52 It follows then that FELS cannot escape liability from the payment of realty taxes by invoking its exemption in Section 234 (c) of R.A. No. 7160, which reads: SECTION 234. Exemptions from Real Property Tax.The following are exempted from payment of the real property tax: xxx (c) All machineries and equipment that are actually, directly and exclusively used by local water districts and government-owned or controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power; x x x Indeed, the law states that the machinery must be actually, directly and exclusively used by the government owned or controlled corporation; nevertheless, petitioner FELS still cannot find solace in this provision because Section 5.5, Article 5 of the Agreement provides: OPERATION. POLAR undertakes that until the end of the Lease Period, subject to the supply of the necessary Fuel pursuant to Article 6 and to the other provisions hereof, it will operate the Power Barges to convert such Fuel into electricity in accordance with Part A of Article 7.53 It is a basic rule that obligations arising from a contract have the force of law between the parties. Not being contrary to law, morals, good customs, public order or public policy, the parties to the contract are bound by its terms and conditions.54 Time and again, the Supreme Court has stated that taxation is the rule and exemption is the exception.55 The law does not look with favor on tax exemptions and the entity that would seek to be thus privileged must justify it by words too plain to be mistaken and too categorical to be misinterpreted.56 Thus, applying the rule of strict construction of laws granting tax exemptions, and the rule that doubts should be resolved in favor of provincial corporations, we hold that FELS is considered a taxable entity. The mere undertaking of petitioner NPC under Section 10.1 of the Agreement, that it shall be responsible for the payment of all real estate taxes and

assessments, does not justify the exemption. The privilege granted to petitioner NPC cannot be extended to FELS. The covenant is between FELS and NPC and does not bind a third person not privy thereto, in this case, the Province of Batangas. It must be pointed out that the protracted and circuitous litigation has seriously resulted in the local governments deprivation of revenues. The power to tax is an incident of sovereignty and is unlimited in its magnitude, acknowledging in its very nature no perimeter so that security against its abuse is to be found only in the responsibility of the legislature which imposes the tax on the constituency who are to pay for it.57 The right of local government units to collect taxes due must always be upheld to avoid severe tax erosion. This consideration is consistent with the State policy to guarantee the autonomy of local governments58 and the objective of the Local Government Code that they enjoy genuine and meaningful local autonomy to empower them to achieve their fullest development as self-reliant communities and make them effective partners in the attainment of national goals.59 In conclusion, we reiterate that the power to tax is the most potent instrument to raise the needed revenues to finance and support myriad activities of the local government units for the delivery of basic services essential to the promotion of the general welfare and the enhancement of peace, progress, and prosperity of the people.60 WHEREFORE, the Petitions are DENIED and the assailed Decisions and Resolutions AFFIRMED. SO ORDERED. Ynares-Santiago (Chairperson), Austria-Martinez and Chico-Nazario, JJ., concur. Petitions denied, assailed decisions and resolutions affirmed. Note.Elsewhere stated, taxation is the rule, exemption therefrom is the exception. (Paseo Realty & Development Corporation vs. Court of Appeals, 440 SCRA 235 [2004]) o0o

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BENGUET CORP vs CBAA G.R. No. 106041. January 29, 1993.* BENGUET CORPORATION, petitioner, vs. CENTRAL BOARD OF ASSESSMENT APPEALS, BOARD OF ASSESSMENT APPEALS OF ZAMBALES, PROVINCIAL ASSESSOR OF ZAMBALES, PROVINCE OF ZAMBALES, and MUNICIPALITY OF SAN MARCELINO, respondents.

The realty tax assessment involved in this case amounts to P1 1,319,304.00. It has been imposed on the petitioner's tailings dam and the land thereunder over its protest. The controversy arose in 1985 when the Provincial Assessor of Zambales assessed the said properties as taxable improvements. The assessment was appealed to the Board of Assessment Appeals of the Province of Zambales. On August 24, 1988, the appeal was dismissed mainly on the ground of the petitioner's "failure to pay the realty taxes that fell due during the pendency of the appeal." The petitioner seasonably elevated the matter to the Central Board of Assessment Appeals,1 one of the herein respondents. In its decision dated March 22, 1990, the Board reversed the dismissal of the appeal but, on the merits, agreed that "the tailings dam and the lands submerged thereunder (were) subject to realty tax." For purposes of taxation the dam is considered as real property as it comes within the object mentioned in paragraphs (a) and (b) of Article 415 of the New Civil Code. It is a construction adhered to the soil which cannot be separated or detached without breaking the material or causing destruction on the land upon which it is attached. The immovable nature of the dam as an improvement determines its character as real property, hence taxable under Section 38 of the Real Property Tax Code. (P.D. 464). Although the dam is partly used as an anti-pollution device, this Board cannot accede to the request for tax exemption in the absence of a law authorizing the same. xxx We find the appraisal on the land submerged as a result of the construction of the tailings dam, covered by Tax Declaration Nos. 002-0260 and 002-0266, to be in accordance with the Schedule of Market Values for Zambales which was reviewed and allowed for use by the Ministry (Department) of Finance in the 1981-1982 general revision. No serious attempt was made by PetitionerAppellant Benguet Corporation to impugn its reasonableness, i.e., that the P50.00 per square meter applied by Respondent-Appellee Provincial Assessor is indeed excessive and unconscionable. Hence, we find no cause to disturb the market value applied by Respondent Appellee Provincial Assessor of Zambales on the properties of PetitionerAppellant Benguet Corporation covered by Tax Declaration Nos. 0020260 and 002-0266.
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Civil Law; Taxation; Property; The Real Property Tax Code does not carry a definition of "real property".The Real Property Tax Code does not carry a definition of "real property" and simply says that the realty tax is imposed on "real property, such as lands, buildings, machinery and other improvements affixed or attached to real property." In the absence of such a definition, we apply Article 415 of the Civil Code. Same; Same; Same; The tailings dam of the petitioner does not fall under any of the classes of exempt real properties enumerated under Section 2 of C.A. No. 470.Section 2 of C.A. No. 470, otherwise known as the Assessment Law, provides that the realty tax is due "on the real property, including land, buildings, machinery and other improvements" not specifically exempted in Section 3 thereof. A reading of that section shows that the tailings dam of the petitioner does not fall under any of the classes of exempt real property therein enumerated. Same; Same; Same; Court is convinced that the subject dam falls within the definition of an improvement because it is permanent in character and it enhances both the value and utility of petitioner's mine.The Court is convinced that the subject dam falls within the definition of an "improvement" because it is permanent in character and it enhances both the value and utility of petitioner's mine. Moreover, the immovable nature of the dam defines its character as real property under Article 415 of the Civil Code and thus makes it taxable under Section 38 of the Real Property Tax Code. Same; Same; Same; Evidence; Court respects the conclusions of quasi-judicial agencies like the CBAA.It has been the long-standing policy of this Court to respect the conclusions of quasijudicial agencies like the CBAA, which, because of the nature of its functions and its frequent exercise thereof, has developed expertise in the resolution of assessment problems. The only exception to this rule is where it is clearly shown that the administrative body has committed grave abuse of discretion calling for the intervention of this Court in the exercise of its own powers of review. There is no such showing in the case at bar.

PETITION for certiorari to review the decision of the Central Board of Assessment Appeals. The facts are stated in the opinion of the Court. Romulo, Mabanta, Buenaventura, Sayoc & De los Angeles for petitioner. CRUZ, J.:

This petition for certiorari now seeks to reverse the above ruling. The principal contention of the petitioner is that the tailings dam is not subject to realty tax because it is not an "improvement" upon the land within the meaning of the Real Property Tax Code. More particularly, it is claimed (1) as regards the tailings dam as an "improvement": (a) that the tailings dam has no value separate from and independent of the mine; hence, by itself it cannot be considered an improvement separately assessable; (b) that it is an integral part of the mine; (c) that at the end of the mining operation of the petitioner corporation in the area, the tailings dam will benefit the local community by serving as an irrigation facility; (d) that the building of the dam has stripped the property of any commercial value as the property is submerged under water wastes from the mine; (e) that the tailings dam is an environmental pollution control device for which petitioner must be commended rather than penalized with a realty tax assessment; (f) that the installation and utilization of the tailings dam as a pollution control device is a requirement imposed by law; (2) as regards the valuation of the tailings dam and the submerged lands: (a) that the subject properties have no market value as they cannot be sold independently of the mine; (b) that the valuation of the tailings dam should be based on its incidental use by petitioner as a water reservoir and not on the alleged cost of construction of the dam and the annual build-up expense; (c) that the "residual value formula" used by the Provincial Assessor and adopted by respondent CBAA is arbitrary and erroneous; and (3) as regards the petitioner's liability for penalties for nondeclaration of the tailings dam and the submerged lands for realty tax purposes:

(a) that where a tax is not paid in an honest belief that it is not due, no penalty shall be collected in addition to the basic tax; (b) that no other mining companies in the Philippines operating a tailings dam have been made to declare the dam for realty tax purposes. The petitioner does not dispute that the tailings dam may be considered realty within the meaning of Article 415. It insists, however, that the dam cannot be subjected to realty tax as a separate and independent property because it does not constitute an "assessable improvement" on the mine although a considerable sum may have been spent in constructing and maintaining it. To support its theory, the petitioner cites the following cases: 1. Municipality of Cotabato v. Santos (105 Phil. 963), where this Court considered the dikes and gates constructed by the taxpayer in connection with a fishpond operation as integral parts of the fishpond. 2. Bislig Bay Lumber Co. v. Provincial Government of Surigao (100 Phil 303), involving a road constructed by the timber concessionaire in the area, where this Court did not impose a realty tax on the road primarily for two reasons: In the first place, it cannot be disputed that the ownership of the road that was constructed by appellee belongs to the government by right of accession not only because it is inherently incorporated or attached to the timber land x x x but also because upon the expiration of the concession said road would ultimately pass to the national government. x x x In the second place, while the road was constructed by appellee primarily for its use and benefit, the privilege is not exclusive, for x x x appellee cannot prevent the use of portions, of the concession for homesteading purposes. It is also duty bound to allow the free use of forest products within the concession for the personal use of individuals residing in or within the vicinity of the land. x x x In other words, the government has practically reserved the rights to use the road to promote its varied activities. Since, as above shown, the road in question cannot be considered as an improvement which belongs to appellee, although in part is for its benefit, it is clear that the same cannot be the subject of assessment within the meaning of Section 2 of C.A. No. 470. Apparently, the realty tax was not imposed not because the road was an integral part of the lumber concession but because the government had the right to use the road to promote its varied activities.
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3. Kendrick v. Twin Lakes Reservoir Co. (144 Pacific 884), an American case, where it was declared that the reservoir dam went with and formed part of the reservoir and that the dam would be "worthless and useless except in connection with the outlet canal, and the water rights in the reservoir represent and include whatever utility or value there is in the dam and headgates." 4. Ontario Silver Mining Co. v. Hixon (164 Pacific 498), also from the United States. This case involved drain tunnels constructed by plaintiff when it expanded its mining operations downward, resulting in a constantly increasing flow of water in the said mine. It was held that: "Whatever value they have is connected with and in fact is an integral part of the mine itself. Just as much so as any shaft which descends into the earth or an underground incline, tunnel, or drift would be which was used in connection with the mine. On the other hand, the Solicitor General argues that the dam is an assessable improvement because it enhances the value and utility of the mine. The primary function of the dam is to receive, retain and hold the water coming from the operations of the mine, and it also enables the petitioner to impound water, which is then recycled for use in the plant. There is also ample jurisprudence to support this view, thus: x x x The said equipment and machinery, as appurtenances to the gas station building or shed owned by Caltex (as to which it is subject to realty tax) and which fixtures are necessary to the operation of the gas station, for without them the gas station would be useless and which have been attached or affixed permanently to the gas station site or embedded therein, are taxable improvements and machinery within the meaning of the Assessment Law and the Real Property Tax Code. (Caltex [Phil.] Inc. v. CBAA, 114 SCRA 296) We hold that while the two storage tanks are not embedded in the land, they may, nevertheless, be considered as improvements on the land, enhancing its utility and rendering it useful to the oil industry. It is undeniable that the two tanks have been installed with some degree of permanence as receptacles for the considerable quantities of oil needed by MERALCO for its operations. (Manila Electric Co. v. CBAA, 114 SCRA 273) The pipeline system in question is indubitably a construction adhering to the soil. It is attached to the land in such a way that it cannot be separated

therefrom without dismantling the steel pipes which were welded to form the pipeline. (MERALCO Securities Industrial Corp. v. CBAA, 114 SCRA 261) The tax upon the dam was properly assessed to the plaintiff as a tax upon real estate. (Flax-Pond Water Co. v. City of Lynn, 16 N.E. 742) The oil tanks are structures within the statute, that they are designed and used by the owner as permanent improvement of the free hold, and that for such reasons they were properly assessed by the respondent taxing district as improvements. (Standard Oil Co. of New Jersey v. Atlantic City, 15 A 2d. 271) The Real Property Tax Code does not carry a definition of "real property" and simply says that the realty tax is imposed on "real property, such as lands, buildings, machinery and other improvements affixed or attached to real property." In the absence of such a definition, we apply Article 415 of the Civil Code, the pertinent portions of which state: ART. 415. The following are immovable property. (1) Lands, buildings and constructions of all kinds adhered to the soil; xxx (3) Everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the material or deterioration of the object. Section 2 of C.A. No. 470, otherwise known as the Assessment Law, provides that the realty tax is due "on the real property, including land, buildings, machinery and other improvements" not specifically exempted in Section 3 thereof. A reading of that section shows that the tailings dam of the petitioner does not fall under any of the classes of exempt real properties therein enumerated. Is the tailings dam an improvement on the mine? Section 3(k) of the Real Property Tax Code defines improvement as follows: (k) Improvementsis a valuable addition made to property or an amelioration in its condition, amounting to a more than mere repairs or replacement of waste, costing labor or capital and intended to enhance its value, beauty or utility or to adopt it for new or further purposes.

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The term has also been interpreted as "artificial alterations of the physical condition of the ground that are reasonably permanent in character."2 The Court notes that in the Ontario case the plaintiff admitted that the mine involved therein could not be operated without the aid of the drain tunnels, which were indispensable to the successful development and extraction of the minerals therein. This is not true in the present case. Even without the tailings dam, the petitioner's mining operation can still be carried out because the primary function of the dam is merely to receive and retain the wastes and water coming from the mine. There is no allegation that the water coming from the dam is the sole source of water for the mining operation so as to make the dam an integral part of the mine. In fact, as a result of the construction of the dam, the petitioner can now impound and recycle water without having to spend for the building of a water reservoir. And as the petitioner itself points out, even if the petitioner's mine is shut down or ceases operation, the dam may still be used for irrigation of the surrounding areas, again unlike in the Ontario case. As correctly observed by the CBAA, the Kendrick case is also not applicable because it involved water reservoir dams used for different purposes and for the benefit of the surrounding areas. By contrast, the tailings dam in question is being used exclusively for the benefit of the petitioner.

value and utility of petitioner's mine. Moreover, the immovable nature of the dam defines its character as real property under Article 415 of the Civil Code and thus makes it taxable under Section 38 of the Real Property Tax Code. The Court will also reject the contention that the appraisal at P50.00 per square meter made by the Provincial Assessor is excessive and that his use of the "residual value formula" is arbitrary and erroneous. Respondent Provincial Assessor explained the use of the "residual value formula" as follows: A 50% residual value is applied in the computation because, while it is true that when slime fills the dike, it will then be covered by another dike or stage, the stage covered is still there and still exists and since only one face of the dike is filled, 50% or the other face is unutilized. In sustaining this formula, the CBAA gave the following justification: We find the appraisal on the land submerged as a result of the construction of the tailings dam, covered by Tax Declaration Nos. 002-0260 and 002-0266, to be in accordance with the Schedule of Market Values for San Marcelino, Zambales, which is fifty (50.00) pesos per square meter for third class industrial land (TSN, page 17, July 5, 1989) and Schedule of Market Values for Zambales which was reviewed and allowed for use by the Ministry (Department) of Finance in the 1981-1982 general revision. No serious attempt was made by Petitioner-Appellant Benguet Corporation to impugn its reasonableness, i.e., that the P50.00 per square meter applied by RespondentAppellee Provincial Assessor is indeed excessive and unconscionable. Hence, we find no cause to disturb the market value applied by Respondent-Appellee Provincial Assessor of Zambales on the properties of Petitioner-Appellant Benguet Corporation covered by Tax Declaration Nos. 002-0260 and 0020266. It has been the long-standing policy of this Court to respect the conclusions of quasi-judicial agencies like the CBAA, which, because of the nature of its functions and its frequent exercise thereof, has developed expertise in the resolution of assessment problems. The only exception to this rule is where it is clearly shown that the administrative body has committed grave abuse of discretion calling for the intervention of this Court in the exercise of its own powers of review. There is no such showing in the case at bar.

Curiously, the petitioner, while vigorously arguing that the tailings dam has no separate existence, just as vigorously contends that at the end of the mining operation the tailings dam will serve the local community as an irrigation facility, thereby implying that it can exist independently of the mine. From the definitions and the cases cited above, it would appear that whether a structure constitutes an improvement so as to partake of the status of realty would depend upon the degree of permanence intended in its construction and use. The expression "permanent" as applied to an improvement does not imply that the improvement must be used perpetually but only until the purpose to which the principal realty is devoted has been accomplished. It is sufficient that the improvement is intended to remain as long as the land to which it is annexed is still used for the said purpose. The Court is convinced that the subject dam falls within the definition of an "improvement" because it is permanent in character and it enhances both the

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We disagree, however, with the ruling of respondent CBAA that it cannot take cognizance of the issue of the propriety of the penalties imposed upon it, which was raised by the petitioner for the first time only on appeal. The CBAA held that this "is an entirely new matter that petitioner can take up with the Provincial Assessor (and) can be the subject of another protest before the Local Board or a negotiation with the local sanggunian x x x, and in case of an adverse decision by either the Local Board or the local sanggunian, (it can) elevate the same to this Board for appropriate action." There is no need for this time-wasting procedure. The Court may resolve the issue in this petition instead of referring it back to the local authorities. We have studied the facts and circumstances of this case as above discussed and find that the petitioner has acted in good faith in questioning the assessment on the tailings dam and the land submerged thereunder. It is clear that it has not done so for the purpose of evading or delaying the payment of the questioned tax. Hence, we hold that the petitioner is not subject to penalty for its nondeclaration of the tailings dam and the submerged lands for realty tax purposes.

WHEREFORE, the petition is DISMISSED for failure to show that the questioned decision of respondent Central Board of Assessment Appeals is tainted with grave abuse of discretion except as to the imposition of penalties upon the petitioner which is hereby SET ASIDE. Costs against the petitioner. It is so ordered. Narvasa (C.J.), Gutierrez, Jr., Padilla, Bidin, Grio-Aquino, Regalado, Davide, Jr., Romero, Nocon, Bellosillo, Melo and Campos, Jr., JJ., concur. Feliciano, J., No part. Petition dismissed; decision set aside. Note.Collection of taxes should be made in accordance with law as any arbitrariness will negate the very reason for government itself (Reyes us. Almanzor, 196 SCRA 322). o0o

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US vs CARLOS No. 6295. September 1,1911. THE UNITED STATES, plaintiff and appellee, vs. IGNACIO CARLOS, defendant and appellant.

"Prosecuting Attorney. "Subscribed and sworn to before me this 4th day of March, 1910, in the city of Manila, Philippine Islands, by L. M. Southworth, prosecuting attorney for the city of Manila. (Sgd.) "CHARLES S. LOBINGIER, "Judge, First Instance. "A preliminary investigation has heretofore been conducted in this case, under my direction, having examined the witnesses under oath, in accordance with the provisions of section 39 of Act No. 183 of the Philippine Commission, as amended by section 2 of Act No. 612 of the Philippine Commission. (Sgd.) "L. M. SOUTHWORTH, "Prosecuting Attorney. "Subscribed and sworn to before me this 4th day of March, 1910, in the city of Manila, Philippine Islands, by L. M. Southworth, prosecuting attorney for the city of Manila. (Sgd.) "CHARLES S. LOBINGIER,

ELECTRICITY; UNLAWFUL USE OF ELECTRIC CURRENT; LARCENY.A person to whom an electric light company furnishes electric current for lighting purposes, and who, by means of a "jumper," uses electricity which does not pass through the meter installed f or the purpose of measuring the current used, thus depriving the company of such electric current, is guilty of larceny.

APPEAL from a judgment of the Court of First Instance of Manila. Lobingier, J. The facts are stated in the opinion of the court. A. D. Gibbs, for appellant. Acting Attorney-General Harvey, for appellee. PER CURIAM: The information filed in this case is as follows: "The undersigned accuses Ignacio Carlos of the crime of theft, committed as follows: "That on, during, and between the 13th day of February, 1909, and the 3rd day of March, 1910, in the city of Manila, Philippine Islands, the said Ignacio Carlos, with intent of gain and without violence or intimidation against the person or force against the thing, did then and there, willfully, unlawfully, and feloniously, take, steal, and carry away two thousand two hundred and seventy-three (2,273) kilowatts of electric current, of the value of nine hundred and nine (909) pesos and twenty (20) cents Philippine currency, the property of the Manila Electric Railroad and Light Company, a corporation doing business in the Philippine Islands, without the consent of the owner thereof; to the damage and prejudice of the said Manila Electric Railroad and Light Company in the said sum of nine hundred and nine (909) pesos and twenty (20) cents Philippine currency, equal to and the equivalent of 4,546 pesetas Philippine currency. All contrary to law. (Sgd.) "L. M. SOUTHWORTH,

"Judge, First Instance" A warrant for the arrest of the defendant was issued by the Honorable J. C. Jenkins on the 4th of March and placed in the hands of the sheriff. The sheriff's return shows that the defendant gave bond for his appearance. On the 14th of the same month counsel for the defendant demurred to the complaint on the following grounds: "1. That the court has no jurisdiction over the person of the accused nor of the offense charged because the accused has not been accorded a preliminary investigation or examination as required by law and no court, magistrate, or other competent authority has determined from a sworn complaint or evidence adduced that there is probable cause to believe that a crime has been committed, or that this defendant has committed any crime. "2. That the facts charged do not constitute a public offense."

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The demurrer was overruled on the same day and the defendant having refused to plead, a plea of not guilty was entered by direction of the court for him and the trial proceeded. After due consideration of all the proofs presented and the arguments of counsel the trial court f ound the def endant guilty of the crime charged and sentenced him to one year eight months and twenty-one days' presidio correccional, to indemnify the offended party, The Manila Electric Railroad and Light Company, in the sum of P865.26, to the corresponding subsidiary imprisonment in case of insolvency and to the payment of the costs. From this judgment the defendant appealed and makes the following assignments of error: "I. "The court erred in overruling the objection of the accused to the jurisdiction of the court, because he was not given a preliminary investigation as required by law, and in overruling his demurrer for the same reason. "II. "The court erred in declaring the accused to be guilty, in view of the evidence submitted. "III. "The court erred in declaring that electrical energy may be stolen. "IV. "The court erred in not declaring that the plaintiff consented to the taking of the current. "V. "The court erred in finding the accused guilty of more than one offense. "VI. "The court erred in condemning the accused to pay P865.26 to the electric company as damages." Exactly the same question as that raised in the first assignment of error was, after a thorough examination and due consideration, decided adversely to

appellant's contention in the case of U. S. vs. Grant and Kennedy (18 Phil. Rep., 122). No sufficient reason is presented why we should not follow the doctrine enunciated in that case. The question raised in the second assignment of error is purely one of fact. Upon this point the trial court said:

"For considerably more than a year previous to the filing of this complaint the accused had been a consumer of electricity furnished by the Manila Electric Railroad and Light Company for a building containing the residence of the accused and three other residences, and which was equipped, according to the defendant's testimony, with thirty electric lights. On March 15, 1909, the representatives of the company, believing that more light was being used than their meter showed, installed an additional meter (Exhibit A) on a pole outside of defendant's house, and both it and the meter (Exhibit B) which had been previously installed in the house were read on said date. Exhibit A read 218 kilowatt hours; Exhibit B, 745 kilowatt hours. On March 3, 1910, each was read again, Exhibit A showing 2,718 kilowatt hours and Exhibit B, 968. It is undisputed that the current which supplied the house passed through both meters and the city electrician testifies that each meter was tested on the date of the last reading and was "in good condition." The result of this registration therefore is that while the outside meter (Exhibit A) showed a consumption in defendant's building of 2,500 kilowatt hours of electricity, the inside meter (Exhibit B) showed but 223 kilowatt hours. In other words the actual consumption, according to the outside meter, was more than ten times as great as that registered by the one inside. Obviously this difference could not be due to normal causes, for while the electrician called by the defense (Lanusa) testifies to the possibility of a difference between two such meters, he places the extreme limit of such difference between them at 5 per cent. Here, as we have seen, the difference is more than 900 percent. Besides, according to the defendant's electrician, the outside meter should normally run faster, while according to the test made in this case the inside meter (Exhibit B) ran the faster. The city electrician also testifies that the electric current could have been deflected from the inside meter by placing thereon a device known as a 'jumper' connecting the two outside wires, and there is other testimony that there were marks on the insulation of the meter Exhibit B which showed the use of such a device. There is further evidence that the consumption of 223 kilowatt hours, registered by the inside meter would not be a reasonable amount f or the number of lights installed in defendant's building during the
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period in question, and the accused f ails to explain why he should have had thirty lights installed if he needed but four or five. "On the strength of this showing a search warrant was issued for the examination of defendant's premises and was duly served by a police officer (Hartpence). He was accompanied at the time by three employees of the Manila Electric Railroad and Light Company, and he found there the accused, his wife and son, and perhaps one or two others. There is a sharp conflict between the several spectators on some points but on one there is no dispute. All agree that the 'jumper' (Exhibit C) was found in a drawer of a small cabinet in the room of defendant's house where the meter was installed and not more than 20 feet therefrom. In the absence of a satisf actory explanation this constituted possession on defendant's part, and such possession, under the Code of Civil Procedure, section 334 (10), raises the presumption that the accused was the owner of a device whose only use was to deflect the current from the meter. "Is there any other 'satisfactory explanation' of the 'jumper's' presence? The only one sought to be offered is the statement by the son of the accused, a boy of twelve years, that he saw the 'jumper' placed there by the witness Porter, an employee of the Light Company. The boy is the only witness who so testifies and Porter himself squarely denies it. We can not agree with counsel for the defense that the boy's interest in the outcome of this case is less than that of the witnesses for the prosecution. It seems to us that his natural desire to shield his father would far outweigh any interest such an employee like Porter would have and which, at most, would be merely pecuniary. "There is, however, one witness whom so far as appears, has no interest in the matter whatsoever. This is officer Hartpence, who executed the search warrant. He testifies that after inspecting other articles and places in the building as he and the other spectators, including the accused, approached the cabinet in which the 'jumper' was found, the officer's attention was called to the defendant's appearance and the former noticed that the latter was becoming nervous. Where the only two witnesses who are supposed to know anything of the matter thus contradict each other this item of testimony by the officer is of more than ordinary significance; for if, as the accused claims, the 'jumper' was placed in the cabinet for the first time by Porter there would be no occasion for any change of demeanor on the part of the accused. We do not think that the officer's declination to wait until defendant should secure a notary public shows bias. The presence of such an official was neither required nor authorized by law and the very efficacy of a search often depends upon its swiftness.

"We must also agree with the prosecuting attorney that the attending circumstances do not strengthen the story told by the boy; that the latter would have been likely to call out at the time he saw the 'jumper' being placed in the drawer, or at least directed his father's attention to it immediately instead of waiting, as he says, until the latter was called by the officer. Finally, to accept the boy's story we must believe that this company or its representatives deliberately conspired not merely to lure the defendant into the commission of a crime but to fasten upon him a crime which he did not commit and thus convict an innocent man by perjured evidence. This is a much more serious charge than that contained in the complaint and should be supported by very strong corroborating circumstances which we do not find here. We are, accordingly, unable to consider as satisfactory defendant's explanation of the 'jumper's' presence. "The only alternative is the conclusion that the 'jumper' was placed there by the accused or by some one acting for him and that it was the instrument by which the current was deflected from the meter Exhibit B and the Light Company deprived of its lawful compensation." After a careful examination of the entire record we are satisfied beyond peradventure of a doubt that the proofs presented fully support the facts as set forth in the foregoing finding. Counsel f or the appellant insists that only corporeal property can be the subject of the crime of larceny, and in support of this proposition cites several authorities for the purpose of showing that the only subjects of larceny are tangible, movable, chattels, something which could be taken in possession and carried away, and which had some, although trifling, intrinsic value, and also to show that electricity is an unknown force and can not be a subject of larceny. In the case of U. S. vs. Genato (15 Phil. Rep., 170) the defendant, the owner of the store situated at No. 154 Escolta, Manila, was using a contrivance known as a "jumper" on the electric meter installed by the Manila Electric Railroad and Light Company. As a result of the use of this "jumper" the meter, instead of making one revolution in every f our seconds, registered one in seventy-seven seconds, thereby reducing the current approximately 95 per cent. Genato was charged in the municipal court with a violation of a certain ordinance of the city of Manila, and was sentenced to pay a fine of P200. He appealed to the Court of First Instance, was again tried and sentenced to pay the same fine. An appeal was taken from the judgment of the Court of First Instance to the Supreme Court on the ground that the ordinance in question was null and void.
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It is true that the only question directly presented was that of the validity of the city ordinance. The court, after holding that said ordinance was valid, said: "Even without them (ordinances), the right of ownership of electric current is secured by articles 517 and 518 of the Penal Code; the application of these articles in cases of substraction of gas, a fluid used for lighting, and in some respects resembling electricity, is confirmed by the rule laid down in the decisions of the supreme court of Spain January 20, 1887, and April 1, 1897, construing and enforcing the provisions of articles 530 and 531 of the penal code of that country, articles identical with articles 517 and 518 of the code in force in these Islands." Article 517 of the Penal Code above referred to reads as follows: "The following are guilty of larceny: " (1) Those who with intent of gain and without violence or intimidation against the person, or force against things, shall take another's personal property without the owner's consent." And article 518 fixes the penalty for larceny in proportion to the value of the personal property stolen. It is true that electricity is "no longer, as formerly, regarded by electricians as a fluid, but its manifestations and effects, like those of gas, may be seen and felt. The true test of what is a proper subject of larceny seems to be not whether the subject is corporeal or incorporeal, but whether it is capable of appropriation by another than the owner. It is well-settled that illuminating gas may be the subject of larceny, even in the absence of a statute so providing. (Decisions of supreme court of Spain, January 20, 1887, and April 1, 1897, supra; also (England) Queen vs. Firth, L. R. 1 C. C., 172, 11 Cox C. C., 234; Queen vs. White, 3 C. & K, 363, 6 Cox C. C., 213; Woods vs. People, 222 111., 293, 7 L. R. A., 520; Commonwealth vs. Shaw, 4 Allen (Mass.), 308; State vs. Wellman, 34 Minn., 221, N. W. Rep., 385, and 25 Cyc., p. 12, note 10.) In the case of Commonwealth vs. Shaw, supra, the court, speaking through Chief Justice Bigelow, said: "There is nothing in the nature of gas used for illuminating purposes which renders it incapable of being feloniously taken and carried away. It is a valuable article of merchandise, bought and sold like other personal property,

susceptible of being severed from a mass or larger quantity, and of being transported from place to place. In the present case it appears that it was the property of the Boston Gas Light Company; that it was in their possession by being confined in conduits and tubes which belonged to them, and that the defendant severed a portion of that which was in the pipes of the company by taking it into her house and there consuming it. All this being proved to have been done by her secretly and with intent to deprive the company of their property and to appropriate it to her own use, clearly constitutes the crime of larceny." Electricity, the same as gas, is a valuable article of merchandise, bought and sold like other personal property and is capable of appropriation by another. So no error was committed by the trial court in holding that electricity is a subject of larceny. It is urged in support of the fourth assignment of error that if it be true that the appellant did appropriate to his own use the electricity as charged he can not be held guilty of larceny for any part of the electricity thus appropriated, after the first month, for the reason that the complaining party, the Manila Electric Railroad and Light Company, knew of this misappropriation and consented thereto. The outside meter was installed on March 15, 1909, and read 218 kilowatt hours. On the same day the inside meter was read and showed 745 kilowatt hours. Both meters were again read on March 3, 1910, and the outside one showed 2,718 kilowatt hours while the one on the inside only showed 968, the difference in consumption during this time being 2,277 kilowatt hours. The taking of this current continued over a period of one year, less twelve days. Assuming that the company read both meters at the end of each month; that it knew the defendant was misappropriating the current to that extent; and that it continued to furnish the current, thereby giving the defendant an opportunity to continue the misappropriation, still, we think, that the defendant is criminally responsible for the taking of the whole amount, 2,277 kilowatt hours. The company had a contract with the defendant to furnish him with current for lighting purposes. It could not stop the misappropriation without cutting off the current entirely. It could not reduce the current so as to just furnish sufficient for the lighting of two, three, or five lights, as claimed by the defendant that he used during the most of this time, but the current must always be sufficiently strong to furnish current for the thirty lights, at any time the defendant desired to use them.
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There is no pretense that the accused was solicited by the company or any one else to commit the acts charged. At most there was a mere passive submission on the part of the company that the current should be taken and no indication that it wished it to be taken, and no knowledge by the defendant that the company wished him to take the current, and no mutual understanding between the company and the defendant, and no measures of inducement of any kind were employed by the company for the purpose of leading the defendant into temptation, and no preconcert whatever between him and the company. The original design to misappropriate this current was formed by the defendant absolutely independent of any acts on the part of the company or its agents. It is true, no doubt, as a general proposition, that larceny is not committed when the property is taken with the consent of its owner. It may be difficult in some instances to determine whether certain acts constitute, in law, such "consent." But under the facts in the case at bar it is not difficult to reach a conclusion that the acts performed by the plaintiff company did not constitute a consent on its part that the defendant take its property. We have been unable to find a well-considered case holding a contrary opinion under similar facts, but, there are numerous cases holding that such acts do not constitute such consent as would relieve the taker of criminal responsibility. The fourth assignment of error is, therefore, not well founded. It is also contended that since the "jumper" was not used continuously, the defendant committed not a single offense but a series of offenses. It is, no doubt, true that the defendant did not allow the "jumper" to remain in place continuously for any number of days as the company inspected monthly the inside meter. So the "jumper" was put on and taken off at least monthly, if not daily, in order to avoid detection, and while the "jumper" was off the defendant was not misappropriating the current. The complaint alleged that the defendant did on, during, and between the 13th day of February, 1909, and the 3rd of March, 1910, willfully, unlawfully, and feloniously take, steal, and carry away 2,277 kilowatts of electric current of the value of P909. No demurrer was presented against this complaint on the ground that more than one crime was charged. The Government had no opportunity to amend or correct this error, if error at all. In the case of U. S. vs. Macaspac (12 Phil. Rep., 26), the defendant received from one Joaquina Punu the sum of P31.50, with the request to deliver it to Marcelina Dy-Oco. The defendant called upon Marcelina, but instead of delivering the said amount she asked Marcelina for P30 in the name of Joaquina who had in no way authorized her to do so. Marcelina gave her P30, believing that Joaquina had sent for it. Counsel for the defendant insisted that the complaint charged his client with two different crimes of estafa in

violation of section 11 of General Orders, No. 58. In disposing of this question this court said: "The said defect constitutes one of the dilatory pleas indicated by section 21, and the accused ought to have raised the point before the trial began. Had this been done, the complaint might have been amended -in time, because it is merely a defect of form easily remedied. * * * Inasmuch as in the first instance the accused did not make the corresponding dilatory plea to the irregularity of the complaint, it must be understood that she has waived such objection, and is not now entitled to raise for the first time any question in reference thereto when submitting to this court her assignment of errors. Apart from the fact that the defense does not pretend that any of the essential rights of the accused have been injured, the allegation of the defect above alluded to, which in any case would only affect the form of the complaint, can not justify a reversal of the judgment appealed from, according to the provisions of section 10 of General Orders, No. 58." In the case at bar it is not pointed out wherein any of the essential rights of the defendant have been prejudiced by reason of the fact that the complaint covered the entire period. If twelve distinct and separate complaints had been filed against the defendant, one for each month, the sum total of the penalties imposed might have been very much greater than that imposed by the court in this case. The covering of the entire period by one charge has been beneficial, if anything, and not prejudicial to the rights of the defendant. The prosecuting attorney elected to cover the entire period with one charge and the accused having been convicted for this offense, he can not again be prosecuted for the stealing of the current at any time within that period. Then, again, we are of the opinion that the charge was properly laid. The electricity was stolen from the same person, in the same manner, and in the same place. It was substantially one continuous act, although the "jumper" might have been removed and replaced daily or monthly. The defendant was moved by one impulse to appropriate to his own use the current, and the means adopted by him for the taking of the current were in the execution of a general fraudulent plan. "A person stole gas for the use of a manufactory by means of a pipe, which drew off the gas from the main without allowing it to pass through the meter. The gas from this pipe was burnt every day, and turned off at night. The pipe was never closed at its junction with the main, and consequently always remained full of gas. It was held, that if the pipe always remained full, there was, in fact, a continuous taking of the gas and not a series of separate
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takings. It was held also that even if the pipe had not been kept full, the taking would have been continuous, as it was substantially all one transaction." (Regina vs. Firth, L. R., 1 C. C., 172; 11 Cox C. C., 234. Cited on p. 758 of Wharton's Criminal Law, vol. 1, 10th ed.) The value of the electricity taken by the defendant was found by the trial court to be P865.26. This finding is fully in accordance with the evidence presented. So no error was committed in sentencing the defendant to indemnify the company in this amount, or to suffer the corresponding subsidiary imprisonment in case of insolvency. The judgment being strictly in accordance with the law and the merits of the case, same is hereby affirmed, with costs against the appellant.

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LAUREL vs ABROGAR G.R. No. 155076. January 13, 2009.* LUIS MARCOS P. LAUREL, petitioner, vs. HON. ZEUS C. ABROGAR, Presiding Judge of the Regional Trial Court, Makati City, Branch 150, PEOPLE OF THE PHILIPPINES & PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, respondents.

Same; Same; Telecommunication Industry; Property; The business of providing telecommunication or telephone service is likewise personal property which can be the object of theft under Article 308 of the Revised Penal Code.The business of providing telecommunication or telephone service is likewise personal property which can be the object of theft under Article 308 of the Revised Penal Code. Business may be appropriated under Section 2 of Act No. 3952 (Bulk Sales Law), hence, could be object of theft. Civil Law; Property; Interest in business was declared to be personal property since it is capable of appropriation and not included in the enumeration of real properties.Interest in business was not specifically enumerated as personal property in the Civil Code in force at the time the above decision was rendered. Yet, interest in business was declared to be personal property since it is capable of appropriation and not included in the enumeration of real properties. Article 414 of the Civil Code provides that all things which are or may be the object of appropriation are considered either real property or personal property. Business is likewise not enumerated as personal property under the Civil Code. Just like interest in business, however, it may be appropriated. Following the ruling in Strochecker v. Ramirez, 44 Phil. 933 (1922), business should also be classified as personal property. Since it is not included in the exclusive enumeration of real properties under Article 415, it is therefore personal property. Same; Same; Electricity; Electricity is personal property under Article 416(3) of the Civil Code, which enumerates forces of nature which are brought under control by science.It was conceded that in making the international phone calls, the human voice is converted into electrical impulses or electric current which are transmitted to the party called. A telephone call, therefore, is electrical energy. It was also held in the assailed Decision that intangible property such as electrical energy is capable of appropriation because it may be taken and carried away. Electricity is personal property under Article 416 (3) of the Civil Code, which enumerates forces of nature which are brought under control by science. Same; Same; Telecommunication Industry; It is the use of these telecommunications facilities without the consent of Philippine Long Distance Telephone (PLDT) that constitutes the crime of theft, which is the unlawful taking of the telephone services and business.While it may be conceded that international long distance calls, the matter alleged to be stolen in the instant case, take the form of electrical energy, it cannot be said that such international long distance calls were personal properties belonging to PLDT since the latter could not have acquired ownership over such calls. PLDT merely encodes, augments, enhances, decodes and transmits said calls using its complex communications infrastructure and facilities. PLDT not being the owner of said telephone calls, then it could not validly claim that such telephone calls were taken without its consent. It is the use of these communications facilities without the consent of PLDT that constitutes the crime of theft, which is the unlawful taking of the telephone services and business. Same; Same; Same; The business of providing telecommunication and the telephone service are personal property under Article 308 of the Revised Penal Code (RPC), and the act of engaging in International Simple Resale (ISR) is an act of subtraction penalized under said article. The business of providing telecommunication and the telephone service are personal property under Article 308 of the Revised Penal Code, and the act of engaging in ISR is an act of
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Criminal Law; Theft; Elements of theft.The elements of theft under Article 308 of the Revised Penal Code are as follows: (1) that there be taking of personal property; (2) that said property belongs to another; (3) that the taking be done with intent to gain; (4) that the taking be done without the consent of the owner; and (5) that the taking be accomplished without the use of violence against or intimidation of persons or force upon things. Same; Same; Property; The only requirement for a personal property to be the object of theft under the Penal Code is that it be capable of appropriation.The only requirement for a personal property to be the object of theft under the penal code is that it be capable of appropriation. It need not be capable of asportation, which is defined as carrying away. Jurisprudence is settled that to take under the theft provision of the penal code does not require asportation or carrying away. To appropriate means to deprive the lawful owner of the thing. The word take in the Revised Penal Code includes any act intended to transfer possession which, as held in the assailed Decision, may be committed through the use of the offenders own hands, as well as any mechanical device, such as an access device or card as in the instant case. This includes controlling the destination of the property stolen to deprive the owner of the property, such as the use of a meter tampering, as held in Natividad v. Court of Appeals, 1 SCRA 380 (1961), use of a device to fraudulently obtain gas, as held in United States v. Tambunting, and the use of a jumper to divert electricity, as held in the cases of United States v. Genato, United States v. Carlos, and United States v. Menagas, 11 N.E. 2d 403 (1937). Same; Same; The act of conducting International Simple Resale (ISR) operations by illegally connecting various equipment or apparatus to private respondent Philippine Long Distance Telephones (PLDTs) telephone system, through which petitioner is able to resell or re-route international long distance calls using respondent Philippine Long Distance Telephones (PLDTs) facilities constitutes all three acts of subtraction mentioned above.The acts of subtraction include: (a) tampering with any wire, meter, or other apparatus installed or used for generating, containing, conducting, or measuring electricity, telegraph or telephone service; (b) tapping or otherwise wrongfully deflecting or taking any electric current from such wire, meter, or other apparatus; and (c) using or enjoying the benefits of any device by means of which one may fraudulently obtain any current of electricity or any telegraph or telephone service. In the instant case, the act of conducting ISR operations by illegally connecting various equipment or apparatus to private respondent PLDTs telephone system, through which petitioner is able to resell or re-route international long distance calls using respondent PLDTs facilities constitutes all three acts of subtraction mentioned above.

subtraction penalized under said article. However, the Amended Information describes the thing taken as, international long distance calls, and only later mentions stealing the business from PLDT as the manner by which the gain was derived by the accused. In order to correct this inaccuracy of description, this case must be remanded to the trial court and the prosecution directed to amend the Amended Information, to clearly state that the property subject of the theft are the services and business of respondent PLDT. Parenthetically, this amendment is not necessitated by a mistake in charging the proper offense, which would have called for the dismissal of the information under Rule 110, Section 14 and Rule 119, Section 19 of the Revised Rules on Criminal Procedure. To be sure, the crime is properly designated as one of theft. The purpose of the amendment is simply to ensure that the accused is fully and sufficiently apprised of the nature and cause of the charge against him, and thus guaranteed of his rights under the Constitution. CORONA, J., Separate Opinion: Civil Law; Property; Telecommunication Industry; While telephone calls take the form of electrical energy, it cannot be said that such telephone calls were personal properties belonging to Philippine Long Distance Telephone (PLDT) since the latter could not have acquired ownership over such calls.The question of whether PLDT creates the phone calls or merely encodes and transmits them is a question of fact that can be answered by science. I agree with Justice Consuelo Ynares-Santiago that, while telephone calls take the form of electrical energy, it cannot be said that such [telephone] calls were personal properties belonging to PLDT since the latter could not have acquired ownership over such calls. PLDT merely encodes, augments, enhances, decodes and transmits said calls using its complex infrastructure and facilites. TINGA, J., Concurring Opinion: Civil Law; Telecommunication Industry; Criminal Law; Theft; The coursing of long distance calls through International Simple Resale (ISR) is not per se illegal.The coursing of long distance calls through ISR is not per se illegal. For example, the Federal Communications Commission of the United States is authorized by statute to approve long-distance calling through ISR for calls made to certain countries, as it has done so with nations such as Australia, France and Japan. However, as indicated by the Office of the Solicitor Generals support for the subject prosecution, there was no authority yet for the practice during the time of the subject incidents. Criminal Law; Theft; The crime of theft is penalized under Article 308 of the Revised Penal Code (RPC).The crime of theft is penalized under Article 308 of the RPC. From that provision, we have long recognized the following as the elements of theft: (1) that there be taking of personal property; (2) that said property belongs to another; (3) that the taking be done with intent to gain; (4) that the taking be done without the consent of the owner; and (5) that the taking be accomplished without the use of violence against or intimidation of persons or force upon things. Electricity; While electricity is merely the medium through which the telephone calls are carried, it is sufficiently analogous to allow the courts to consider such calls as possessing similar physical characteristics as electricity.Are international long distance calls personal

property? The assailed Decision did not believe so, but I agree with the present Resolution that they are. The Court now equates telephone calls to electrical energy. To be clear, telephone calls are not exactly alike as pure electricity. They are sound waves (created by the human voice) which are carried by electrical currents to the recipient on the other line. While electricity is merely the medium through which the telephone calls are carried, it is sufficiently analogous to allow the courts to consider such calls as possessing similar physical characteristics as electricity. Same; Property; Telecommunication Industry; Theft; Since physically a telephone call is in the form of an electric signal, our jurisprudence acknowledging that electricity is personal property which may be stolen through theft is applicable.The assailed Decision conceded that when a telephone call was made, the human voice [is] converted into electronic impulses or electrical current. As the Resolution now correctly points out, electricity or electronic energy may be the subject of theft, as it is personal property capable of appropriation. Since physically a telephone call is in the form of an electric signal, our jurisprudence acknowledging that electricity is personal property which may be stolen through theft is applicable. Same; Same; Same; Same; Just because the phone calls are transmitted using the facilities and services of Philippine Long Distance Telephone (PLDT), it does not follow that PLDT is the owner of such calls.The legal paradigm that treats PLDT as akin to a common carrier should alert against any notion that it is the owner of the long distance overseas calls alleged as having been stolen in the Amended Information. More precisely, it merely transmits these calls, owned by another, to the intended recipient. Applying the common carrier paradigm, when a public transport system is contracted to transport goods or persons to a destination, the transport company does not acquire ownership over such goods or such persons, even though it is in custody of the same for the duration of the trip. Just because the phone calls are transmitted using the facilities and services of PLDT, it does not follow that PLDT is the owner of such calls.

MOTION FOR RECONSIDERATION of a decision of the Supreme Court. The facts are stated in the resolution of the Court. Salonga, Hernandez & Mendoza for petitioner. Angara, Abello, Concepcion, Regala and Cruz and Kapunan, Tamano, Villodolid & Associates for respondent PLDT.

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RESOLUTION YNARES-SANTIAGO, J.: On February 27, 2006, this Courts First Division rendered judgment in this case as follows: IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed Orders of the Regional Trial Court and the Decision of the Court of Appeals are REVERSED and SET ASIDE. The Regional Trial Court is directed to issue an order granting the motion of the petitioner to quash the Amended Information. SO ORDERED.1 By way of brief background, petitioner is one of the accused in Criminal Case No. 99-2425, filed with the Regional Trial Court of Makati City, Branch 150. The Amended Information charged the accused with theft under Article 308 of the Revised Penal Code, committed as follows: On or about September 10-19, 1999, or prior thereto in Makati City, and within the jurisdiction of this Honorable Court, the accused, conspiring and confederating together and all of them mutually helping and aiding one another, with intent to gain and without the knowledge and consent of the Philippine Long Distance Telephone (PLDT), did then and there willfully, unlawfully and feloniously take, steal and use the international long distance calls belonging to PLDT by conducting International Simple Resale (ISR), which is a method of routing and completing international long distance calls using lines, cables, antenae, and/or air wave frequency which connect directly to the local or domestic exchange facilities of the country where the call is destined, effectively stealing this business from PLDT while using its facilities in the estimated amount of P20,370,651.92 to the damage and prejudice of PLDT, in the said amount. CONTRARY TO LAW.2 Petitioner filed a Motion to Quash (with Motion to Defer Arraignment), on ground that the factual allegations in the Amended Information do constitute the felony of theft. The trial court denied the Motion to Quash Amended Information, as well as petitioners subsequent Motion Reconsideration. the not the for

In the above-quoted Decision, this Court held that the Amended Information does not contain material allegations charging petitioner with theft of personal property since international long distance calls and the business of providing telecommunication or telephone services are not personal properties under Article 308 of the Revised Penal Code. Respondent Philippine Long Distance Telephone Company (PLDT) filed a Motion for Reconsideration with Motion to Refer the Case to the Supreme Court En Banc. It maintains that the Amended Information charging petitioner with theft is valid and sufficient; that it states the names of all the accused who were specifically charged with the crime of theft of PLDTs international calls and business of providing telecommunication or telephone service on or about September 10 to 19, 1999 in Makati City by conducting ISR or International Simple Resale; that it identifies the international calls and business of providing telecommunication or telephone service of PLDT as the personal properties which were unlawfully taken by the accused; and that it satisfies the test of sufficiency as it enabled a person of common understanding to know the charge against him and the court to render judgment properly. PLDT further insists that the Revised Penal Code should be interpreted in the context of the Civil Codes definition of real and personal property. The enumeration of real properties in Article 415 of the Civil Code is exclusive such that all those not included therein are personal properties. Since Article 308 of the Revised Penal Code used the words personal property without qualification, it follows that all personal properties as understood in the context of the Civil Code, may be the subject of theft under Article 308 of the Revised Penal Code. PLDT alleges that the international calls and business of providing telecommunication or telephone service are personal properties capable of appropriation and can be objects of theft. PLDT also argues that taking in relation to theft under the Revised Penal Code does not require asportation, the sole requisite being that the object should be capable of appropriation. The element of taking referred to in Article 308 of the Revised Penal Code means the act of depriving another of the possession and dominion of a movable coupled with the intention, at the time of the taking, of withholding it with the character of permanency. There must be intent to appropriate, which means to deprive the lawful owner of the thing. Thus, the term personal properties under Article 308 of the Revised Penal Code is not limited to only personal properties which are susceptible of being severed from a mass or larger quantity and of being transported from place to place.
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Petitioners special civil action for certiorari was dismissed by the Court of Appeals. Thus, petitioner filed the instant petition for review with this Court.

PLDT likewise alleges that as early as the 1930s, international telephone calls were in existence; hence, there is no basis for this Courts finding that the Legislature could not have contemplated the theft of international telephone calls and the unlawful transmission and routing of electronic voice signals or impulses emanating from such calls by unlawfully tampering with the telephone device as within the coverage of the Revised Penal Code.49 According to respondent, the international phone calls which are electric currents or sets of electric impulses transmitted through a medium, and carry a pattern representing the human voice to a receiver, are personal properties which may be subject of theft. Article 416(3) of the Civil Code deems forces of nature (which includes electricity) which are brought under the control by science, are personal property. In his Comment to PLDTs motion for reconsideration, petitioner Laurel claims that a telephone call is a conversation on the phone or a communication carried out using the telephone. It is not synonymous to electric current or impulses. Hence, it may not be considered as personal property susceptible of appropriation. Petitioner claims that the analogy between generated electricity and telephone calls is misplaced. PLDT does not produce or generate telephone calls. It only provides the facilities or services for the transmission and switching of the calls. He also insists that business is not personal property. It is not the business that is protected but the right to carry on a business. This right is what is considered as property. Since the services of PLDT cannot be considered as property, the same may not be subject of theft. The Office of the Solicitor General (OSG) agrees with respondent PLDT that international phone calls and the business or service of providing international phone calls are subsumed in the enumeration and definition of personal property under the Civil Code hence, may be proper subjects of theft. It noted that the cases of United States v. Genato,3 United States v. Carlos4 and United States v. Tambunting,5 which recognized intangible properties like gas and electricity as personal properties, are deemed incorporated in our penal laws. Moreover, the theft provision in the Revised Penal Code was deliberately couched in broad terms precisely to be all-encompassing and embracing even such scenario that could not have been easily anticipated. According to the OSG, prosecution under Republic Act (RA) No. 8484 or the Access Device Regulations Act of 1998 and RA 8792 or the Electronic Commerce Act of 2000 does not preclude prosecution under the Revised

Penal Code for the crime of theft. The latter embraces unauthorized appropriation or use of PLDTs international calls, service and business, for personal profit or gain, to the prejudice of PLDT as owner thereof. On the other hand, the special laws punish the surreptitious and advanced technical means employed to illegally obtain the subject service and business. Even assuming that the correct indictment should have been under RA 8484, the quashal of the information would still not be proper. The charge of theft as alleged in the Information should be taken in relation to RA 8484 because it is the elements, and not the designation of the crime, that control. Considering the gravity and complexity of the novel questions of law involved in this case, the Special First Division resolved to refer the same to the Banc. We resolve to grant the Motion for Reconsideration but remand the case to the trial court for proper clarification of the Amended Information. Article 308 of the Revised Penal Code provides: Art. 308. Who are liable for theft.Theft is committed by any person who, with intent to gain but without violence against, or intimidation of persons nor force upon things, shall take personal property of another without the latters consent. The elements of theft under Article 308 of the Revised Penal Code are as follows: (1) that there be taking of personal property; (2) that said property belongs to another; (3) that the taking be done with intent to gain; (4) that the taking be done without the consent of the owner; and (5) that the taking be accomplished without the use of violence against or intimidation of persons or force upon things. Prior to the passage of the Revised Penal Code on December 8, 1930, the definition of the term personal property in the penal code provision on theft had been established in Philippine jurisprudence. This Court, in United States v. Genato, United States v. Carlos, and United States v. Tambunting, consistently ruled that any personal property, tangible or intangible, corporeal or incorporeal, capable of appropriation can be the object of theft. Moreover, since the passage of the Revised Penal Code on December 8, 1930, the term personal property has had a generally accepted definition in civil law. In Article 335 of the Civil Code of Spain, personal property is defined as anything susceptible of appropriation and not included in the foregoing chapter (not real property). Thus, the term personal property in the Revised
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Penal Code should be interpreted in the context of the Civil Code provisions in accordance with the rule on statutory construction that where words have been long used in a technical sense and have been judicially construed to have a certain meaning, and have been adopted by the legislature as having a certain meaning prior to a particular statute, in which they are used, the words used in such statute should be construed according to the sense in which they have been previously used.6 In fact, this Court used the Civil Code definition of personal property in interpreting the theft provision of the penal code in United States v. Carlos. Cognizant of the definition given by jurisprudence and the Civil Code of Spain to the term personal property at the time the old Penal Code was being revised, still the legislature did not limit or qualify the definition of personal property in the Revised Penal Code. Neither did it provide a restrictive definition or an exclusive enumeration of personal property in the Revised Penal Code, thereby showing its intent to retain for the term an extensive and unqualified interpretation. Consequently, any property which is not included in the enumeration of real properties under the Civil Code and capable of appropriation can be the subject of theft under the Revised Penal Code.

nature, wrongfully redirecting such forces of nature from such apparatus, or using any device to fraudulently obtain such forces of nature. In the instant case, petitioner was charged with engaging in International Simple Resale (ISR) or the unauthorized routing and completing of international long distance calls using lines, cables, antennae, and/or air wave frequency and connecting these calls directly to the local or domestic exchange facilities of the country where destined. As early as 1910, the Court declared in Genato that ownership over electricity (which an international long distance call consists of), as well as telephone service, is protected by the provisions on theft of the Penal Code. The pertinent provision of the Revised Ordinance of the City of Manila, which was involved in the said case, reads as follows: Injury to electric apparatus; Tapping current; Evidence.No person shall destroy, mutilate, deface, or otherwise injure or tamper with any wire, meter, or other apparatus installed or used for generating, containing, conducting, or measuring electricity, telegraph or telephone service, nor tap or otherwise wrongfully deflect or take any electric current from such wire, meter, or other apparatus. No person shall, for any purpose whatsoever, use or enjoy the benefits of any device by means of which he may fraudulently obtain any current of electricity or any telegraph or telephone service; and the existence in any building premises of any such device shall, in the absence of satisfactory explanation, be deemed sufficient evidence of such use by the persons benefiting thereby. It was further ruled that even without the above ordinance the acts of subtraction punished therein are covered by the provisions on theft of the Penal Code then in force, thus: Even without them (ordinance), the right of the ownership of electric current is secured by Articles 517 and 518 of the Penal Code; the application of these articles in cases of subtraction of gas, a fluid used for lighting, and in some respects resembling electricity, is confirmed by the rule laid down in the decisions of the supreme court of Spain of January 20, 1887, and April 1, 1897, construing and enforcing the provisions of Articles 530 and 531 of the Penal Code of that country, Articles 517 and 518 of the code in force in these islands. The acts of subtraction include: (a) tampering with any wire, meter, or other apparatus installed or used for generating, containing, conducting, or
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The only requirement for a personal property to be the object of theft under the Penal Code is that it be capable of appropriation. It need not be capable of asportation, which is defined as carrying away.7 Jurisprudence is settled that to take under the theft provision of the penal code does not require asportation or carrying away.8 To appropriate means to deprive the lawful owner of the thing.9 The word take in the Revised Penal Code includes any act intended to transfer possession which, as held in the assailed Decision, may be committed through the use of the offenders own hands, as well as any mechanical device, such as an access device or card as in the instant case. This includes controlling the destination of the property stolen to deprive the owner of the property, such as the use of a meter tampering, as held in Natividad v. Court of Appeals,10 use of a device to fraudulently obtain gas, as held in United States v. Tambunting, and the use of a jumper to divert electricity, as held in the cases of United States v. Genato, United States v. Carlos, and United States v. Menagas.11 As illustrated in the above cases, appropriation of forces of nature which are brought under control by science such as electrical energy can be achieved by tampering with any apparatus used for generating or measuring such forces of

measuring electricity, telegraph or telephone service; (b) tapping or otherwise wrongfully deflecting or taking any electric current from such wire, meter, or other apparatus; and (c) using or enjoying the benefits of any device by means of which one may fraudulently obtain any current of electricity or any telegraph or telephone service. In the instant case, the act of conducting ISR operations by illegally connecting various equipment or apparatus to private respondent PLDTs telephone system, through which petitioner is able to resell or re-route international long distance calls using respondent PLDTs facilities constitutes all three acts of subtraction mentioned above.54 The business of providing telecommunication or telephone service is likewise personal property which can be the object of theft under Article 308 of the Revised Penal Code. Business may be appropriated under Section 2 of Act No. 3952 (Bulk Sales Law), hence, could be object of theft: Section 2. Any sale, transfer, mortgage, or assignment of a stock of goods, wares, merchandise, provisions, or materials otherwise than in the ordinary course of trade and the regular prosecution of the business of the vendor, mortgagor, transferor, or assignor, or any sale, transfer, mortgage, or assignment of all, or substantially all, of the business or trade theretofore conducted by the vendor, mortgagor, transferor or assignor, or all, or substantially all, of the fixtures and equipment used in and about the business of the vendor, mortgagor, transferor, or assignor, shall be deemed to be a sale and transfer in bulk, in contemplation of the Act. x x x. In Strochecker v. Ramirez,12 this Court stated: With regard to the nature of the property thus mortgaged, which is one-half interest in the business above described, such interest is a personal property capable of appropriation and not included in the enumeration of real properties in Article 335 of the Civil Code, and may be the subject of mortgage. Interest in business was not specifically enumerated as personal property in the Civil Code in force at the time the above decision was rendered. Yet, interest in business was declared to be personal property since it is capable of appropriation and not included in the enumeration of real properties. Article 414 of the Civil Code provides that all things which are or may be the object of appropriation are considered either real property or personal property. Business is likewise not enumerated as personal property under the Civil Code. Just like interest in business, however, it may be appropriated. Following

the ruling in Strochecker v. Ramirez, business should also be classified as personal property. Since it is not included in the exclusive enumeration of real properties under Article 415, it is therefore personal property.13 As can be clearly gleaned from the above disquisitions, petitioners acts constitute theft of respondent PLDTs business and service, committed by means of the unlawful use of the latters facilities. In this regard, the Amended Information inaccurately describes the offense by making it appear that what petitioner took were the international long distance telephone calls, rather than respondent PLDTs business. A perusal of the records of this case readily reveals that petitioner and respondent PLDT extensively discussed the issue of ownership of telephone calls. The prosecution has taken the position that said telephone calls belong to respondent PLDT. This is evident from its Comment where it defined the issue of this case as whether or not the unauthorized use or appropriation of PLDT international telephone calls, service and facilities, for the purpose of generating personal profit or gain that should have otherwise belonged to PLDT, constitutes theft.14 In discussing the issue of ownership, petitioner and respondent PLDT gave their respective explanations on how a telephone call is generated.15 For its part, respondent PLDT explains the process of generating a telephone call as follows: 38. The role of telecommunication companies is not limited to merely providing the medium (i.e. the electric current) through which the human voice/voice signal of the caller is transmitted. Before the human voice/voice signal can be so transmitted, a telecommunication company, using its facilities, must first break down or decode the human voice/voice signal into electronic impulses and subject the same to further augmentation and enhancements. Only after such process of conversion will the resulting electronic impulses be transmitted by a telecommunication company, again, through the use of its facilities. Upon reaching the destination of the call, the telecommunication company will again break down or decode the electronic impulses back to human voice/voice signal before the called party receives the same. In other words, a telecommunication company both converts/reconverts the human voice/voice signal and provides the medium for transmitting the same.

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39. Moreover, in the case of an international telephone call, once the electronic impulses originating from a foreign telecommunication company country (i.e. Japan) reaches the Philippines through a local telecommunication company (i.e. private respondent PLDT), it is the latter which decodes, augments and enhances the electronic impulses back to the human voice/voice signal and provides the medium (i.e. electric current) to enable the called party to receive the call. Thus, it is not true that the foreign telecommunication company provides (1) the electric current which transmits the human voice/voice signal of the caller and (2) the electric current for the called party to receive said human voice/voice signal.

PLDT that constitutes the crime of theft, which is the unlawful taking of the telephone services and business. Therefore, the business of providing telecommunication and the telephone service are personal property under Article 308 of the Revised Penal Code, and the act of engaging in ISR is an act of subtraction penalized under said article. However, the Amended Information describes the thing taken as, international long distance calls, and only later mentions stealing the business from PLDT as the manner by which the gain was derived by the accused. In order to correct this inaccuracy of description, this case must be remanded to the trial court and the prosecution directed to amend the Amended Information, to clearly state that the property subject of the theft are the services and business of respondent PLDT. Parenthetically, this amendment is not necessitated by a mistake in charging the proper offense, which would have called for the dismissal of the information under Rule 110, Section 14 and Rule 119, Section 19 of the Revised Rules on Criminal Procedure. To be sure, the crime is properly designated as one of theft. The purpose of the amendment is simply to ensure that the accused is fully and sufficiently apprised of the nature and cause of the charge against him, and thus guaranteed of his rights under the Constitution. ACCORDINGLY, the motion for reconsideration is GRANTED. The assailed Decision dated February 27, 2006 is RECONSIDERED and SET ASIDE. The Decision of the Court of Appeals in CA-G.R. SP No. 68841 affirming the Order issued by Judge Zeus C. Abrogar of the Regional Trial Court of Makati City, Branch 150, which denied the Motion to Quash (With Motion to Defer Arraignment) in Criminal Case No. 99-2425 for theft, is AFFIRMED. The case is remanded to the trial court and the Public Prosecutor of Makati City is hereby DIRECTED to amend the Amended Information to show that the property subject of the theft were services and business of the private offended party. SO ORDERED. Puno (C.J.), Quisumbing, Carpio, Austria-Martinez, Carpio-Morales, Azcuna, Chico-Nazario, Velasco, Jr., Nachura, Leonardo-De Castro and Brion, JJ., concur. Corona, J., See Separate Opinion. Tinga, J., Please see Concurring Opinion. o0o
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40. Thus, contrary to petitioner Laurels assertion, once the electronic impulses or electric current originating from a foreign telecommunication company (i.e. Japan) reaches private respondent PLDTs network, it is private respondent PLDT which decodes, augments and enhances the electronic impulses back to the human voice/voice signal and provides the medium (i.e. electric current) to enable the called party to receive the call. Without private respondent PLDTs network, the human voice/voice signal of the calling party will never reach the called party.16 In the assailed Decision, it was conceded that in making the international phone calls, the human voice is converted into electrical impulses or electric current which are transmitted to the party called. A telephone call, therefore, is electrical energy. It was also held in the assailed Decision that intangible property such as electrical energy is capable of appropriation because it may be taken and carried away. Electricity is personal property under Article 416 (3) of the Civil Code, which enumerates forces of nature which are brought under control by science.17 Indeed, while it may be conceded that international long distance calls, the matter alleged to be stolen in the instant case, take the form of electrical energy, it cannot be said that such international long distance calls were personal properties belonging to PLDT since the latter could not have acquired ownership over such calls. PLDT merely encodes, augments, enhances, decodes and transmits said calls using its complex communications infrastructure and facilities. PLDT not being the owner of said telephone calls, then it could not validly claim that such telephone calls were taken without its consent. It is the use of these communications facilities without the consent of

INVOLUNTARY INSOLVENCY OF PAUL STROCHECKER vs RAMIREZ No. 18700. September 26, 1922 INVOLUNTARY INSOLVENCY OF PAUL STROCHECKER, appellee, vs. ILDEFONSO RAMIREZ, creditor and appellant. WILLIAM EDMONDS, assignee.

In the lower court there were three mortgagees each of whom claimed pref erence. They were the two above mentioned and Concepcion Ayala. The latter's claim was rejected by the trial court, and from that ruling she did not appeal. There is no question as to the priority in time of the mortgage in favor of the Fidelity & Surety Co. which was executed on March 10, 1919, and registered in due time in the registry of property, that in favor of the appellant being dated September 22, 1919, and registered also in the registry. The appellant claims preference on these grounds: (a) That the first mortgage above-mentioned is not valid because the property which is the subject-matter thereof is not capable of being mortgaged, and the description of said property is not sufficient; and (b) that the amount due the appellant is a purchase price, citing article 1922 of the Civil Code in support thereof, and that his mortgage is but a modification of the security given by the debtor on February 15, 1919, that is, prior to the mortgage executed in favor of the Fidelity & Surety Co.

1. CHATTEL MORTGAGE; INTEREST IN A BUSINESS.An interest in a business may be the subject of mortgage, for it is a personal property, being capable of appropriation, and not included among the real properties enumerated in article 335 of the Civil Code. 2. ID.; ID.; DESCRIPTION; SUFFICIENCY OF.Where the description of the chattel mortgaged is such as to enable the .parties to the mortgage or any other person to identify the same after a reasonable investigation or inquiry, the description is sufficient. Thus, if the thing is described as the half interest of the debtor in the drug business known as Antigua Botica Ramirez (owned by a certain person therein named and the mortgagor) located at Nos. 123 and 125, Calle Real, District of Intramuros, Manila, P. I., the description meets the requirements of the law. 3. ID.; PREFERENCE; PURCHASE PRICE; POSSESSION.The vendor of a chattel, who is a creditor for the purchase price, has no preference over a creditor holding a mortgage on that chattel where the vendor is not in possession of the thing mortgaged. 4. ID.; ID.; RETROACTIVITY; PERSONAL SECURITY.A junior mortgage can have no preference over a senior mortgage by the mere fact that prior to said junior mortgage a personal security had been stipulated between the junior mortgagee and the debtor, because the second mortgage cannot be given effect as of the date the personal security was stipulated.

As to the first ground, the thing that was mortgaged to this corporation is described in the document as follows: " * * * his half interest in the drug business known as Antigua Botica Ramirez (owned by Srta. Dolores del Rosario and the mortgagor herein referred to as the partnership), located at Calle Real Nos. 123 and 125, District of Intramuros, Manila, Philippine Islands." With regard to the nature of the property thus mortgaged, which is one-half interest in the business above described, such interest is a personal property capable of appropriation and not included in the enumeration of real properties in article 335 of the Civil Code, and may be the subject of mortgage. All personal property may be mortgaged. (Sec. 2, Act No. 1508.) The description contained in the document is sufficient. The law (sec. 7, Act No. 1508) requires only a description of the following nature: "The description of the mortgaged property shall be such as to enable the parties to the mortgage, or any other person, after reasonable inquiry and investigation, to identify the same."
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APPEAL from a judgment of the Court of First Instance of Manila. Concepcion, J. The facts are stated in the opinion of the court. Lim & Lim f or -appellant. Ross & Lawrence and Antonio T. Carrascoso, jr., for the Fidelity & Surety Co. ROMUALDEZ, J.: The question at issue in this appeal is, which of the two mortgages here in question must be given preference? Is it the one in favor of the Fidelity & Surety Co., or that in favor of Ildefonso Ramirez. The first was declared by the trial court to be entitled to preference.

Turning to the second error assigned, numbers 1, 2, and 3 of article 1922 of the Civil Code invoked by the appellant are not applicable. Neither he, as debtor, nor the debtor himself, is in possession of the property mortgaged, which is, and since the registration of the mortgage has been, legally in possession of the Fidelity & Surety Co. (Sec. 4, Act No. 1508; Meyers vs. Thein, 15 Phil., 303.) In no way can the mortgage executed in favor of the appellant on September 22, 1919, be given effect as of February 15, 1919, the date of the sale of the drug store in question. On the 15th of February of that year, there was a stipulation about a personal security, but not a mortgage upon any property, and much less upon the property in question. Moreover, the appellant cannot deny the preferential character of the mortgage in favor of the Fidelity & Surety Co. because in the very document executed in his favor it was stated that his mortgage was a second mortgage, subordinate to the one made in favor of the Fidelity & Surety Co. The judgment appealed from is affirmed with costs against the appellant. So ordered. Araullo, C. J., Street, Malcolm, Avancea, Villamor, Ostrand, and Johns, JJ., concur. Judgment affirmed. [Involuntary Insolvency of Strochecker vs. Ramirez, 44 Phil. 933(1922)]

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G.R. No. 152115. January 26, 2005.* NIMFA USERO, petitioner, vs. COURT OF APPEALS and SPS. HERMINIGILDO & CECILIA POLINAR, respondents. G.R. No. 155055. January 26, 2005.* LUTGARDA R. SAMELA, petitioner, vs. COURT OF APPEALS and SPS. HERMINIGILDO & CECILIA POLINAR, respondents.
Remedial Law; Appeals; Jurisdictions; The jurisdiction of the Court in petitions for review on certiorari under Rule 45 of the Rules of Court is limited to reviewing errors of law, not of fact. The jurisdiction of the Court in petitions for review on certiorari under Rule 45 of the Rules of Court is limited to reviewing only errors of law, not of fact, unless the factual findings complained of are devoid of support by the evidence on record or the assailed judgment is based on a misapprehension of facts. This is obviously not the case here. Civil Law; Property; Property is either of public dominion or of private ownership.Property is either of public dominion or of private ownership. Concomitantly, Article 420 of the Civil Code provides: ART. 420. The following things are property of public dominion: (1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character. Same; Same; Public Lands; The phrase others of similar character includes a creek which is a recess or an arm of a river. It is a property belonging to the public domain which is not susceptible to private ownership.The phrase others of similar character includes a creek which is a recess or an arm of a river. It is property belonging to the public domain which is not susceptible to private ownership. Being public water, a creek cannot be registered under the Torrens System in the name of any individual.

filed by Nimfa Usero, assails the September 19, 2001 decision1 of the Court of Appeals in CA-GR SP No. 64718. The second petition, docketed as G.R. No. 155055, filed by Lutgarda R. Samela, assails the January 11, 2002 decision2 of the Court of Appeals in CA-GR SP No. 64181. The undisputed facts follow. Petitioners Lutgarda R. Samela and Nimfa Usero are the owners respectively of lots 1 and 2, Block 5, Golden Acres Subdivision, Barrio Almanza, Las Pias City. Private respondent spouses Polinar are the registered owners of a parcel of land at no. 18 Anahaw St., Pilar Village, Las Pias City, behind the lots of petitioners Samela and Usero. Situated between the lots of the parties is a low-level strip of land, with a stagnant body of water filled with floating water lilies; abutting and perpendicular to the lot of petitioner Samela, the lot of the Polinars and the lowlevel strip of land is the perimeter wall of Pilar Village Subdivision. Apparently, every time a storm or heavy rains occur, the water in said strip of land rises and the strong current passing through it causes considerable damage to the house of respondent Polinars. Frustrated by their predicament, private respondent spouses, on July 30, 1998, erected a concrete wall on the bank of the low-level strip of land about three meters from their house and riprapped the soil on that portion of the strip of land. Claiming ownership of the subject strip of land, petitioners Samela and Usero demanded that the spouses Apolinar stop their construction but the spouses paid no heed, believing the strip to be part of a creek. Nevertheless, for the sake of peace, the Polinars offered to pay for the land being claimed by petitioners Samela and Usero. However, the parties failed to settle their differences. On November 9, 1998, petitioners filed separate complaints for forcible entry against the Polinars at the Metropolitan Trial Court of Las Pias City. The case filed by petitioner Samela was docketed as Civil Case No. 5242, while that of petitioner Usero was docketed as Civil Case No. 5243. In Civil Case No. 5242, petitioner Samela adduced in evidence a copy of her Transfer Certificate of Title, plan of consolidation, subdivision survey, the tax

PETITIONS for review on certiorari of the decisions of the Court of Appeals.

The facts are stated in the opinion of the Court. Rudolf Philip B. Jurado for petitioner. Pedro Delgado Diwa for respondents. CORONA, J.:

Before this Court are two consolidated petitions for review on certiorari under Rule 45 of the Rules of Court. The first petition, docketed as G.R. No. 152115,
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declaration in her name, and affidavits of petitioner Usero and a certain Justino Gamela whose property was located beside the perimeter wall of Pilar Village. The spouses Polinar, on the other hand, presented in evidence their own TCT; a barangay certification as to the existence of the creek; a certification from the district engineer that the western portion of Pilar Village is bound by a tributary of Talon Creek throughout its entire length; boundary and index map of Pilar Village showing that the village is surrounded by a creek and that the Polinar property is situated at the edge of said creek; and pictures of the subject strip of land filled with water lilies. On March 22, 1999, the trial court rendered a decision in favor of petitioner Samela: WHEREFORE, the Court hereby renders judgment ordering the defendants to vacate and remove at their expense the improvements made on the subject lot; ordering the defendants to pay the plaintiff P1,000.00 a month as reasonable compensation for the use of the portion encroached from the filing of the complaint until the same is finally vacated; and to pay plaintiff P10,000.00 as reasonable attorneys fees plus costs of suit.3 In a parallel development, the Metropolitan Trial Court, in Civil Case No. 5243, issued an order on February 29, 2000, directing petitioner Usero and the Polinar spouses to commission a professional geodetic engineer to conduct a relocation survey and to submit the report to the trial court. On April 24, 2000, Mariano Flotilde, a licensed geodetic engineer, conducted a relocation survey of Useros property covered by TCT No. T-29545. The result of the said relocation survey, as stated in his affidavit, was as follows: 1. That I executed a relocation survey of Lot 2, Block 5, (LRC) PCS-4463 covered by TCT No. T-29545 registered in the name of Nimfa O. Usero; 2. That according to my survey, I found out that there is no existing creek on the boundary of the said lot; 3. That based on the relocation plan surveyed by the undersigned, attached herewith, appearing is the encroachment on the above-mentioned lot by Spouses Herminigildo and Cecilia Polinar with an area of FORTY THREE (43) SQUARE METERS; 4. That this affidavit was made in compliance with Court Order dated February 23, 2000 of Metropolitan Trial Court, Las Pias City, Branch LXXIX.4

On August 25, 2000, the Metropolitan Trial Court decided in favor of petitioner Usero: WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendants ordering them: a) To vacate and remove at their expense the improvement made on the subject lot; b) To pay the plaintiff P1,000.00 a month as reasonable compensation for the portion encroached from the time of the filing of the complaint until the same is finally vacated; c) To pay plaintiff P10,000.00 as reasonable attorneys fees plus costs of suit. SO ORDERED.5 The Polinar spouses appealed the decisions of the two Municipal Trial Courts to the Regional Trial Court of Las Pias, Branch 253 which heard the appeals separately. On December 20, 2000, the Regional Trial Court, deciding Civil Case No. 5242, reversed the decision of the trial court and ordered the dismissal of the complaint. It confirmed the existence of the creek between the northwestern portion of the lot of petitioner Samela and the southwestern portion of the lot of the spouses Polinar: Finding the existence of a creek between the respective properties of the parties, plaintiff-appellee cannot therefore lay claim of lawful ownership of that portion because the same forms part of public dominion. Consequently, she cannot legally stop the defendants-appellants from rip-rapping the bank of the creek to protect the latters property from soil erosion thereby avoiding danger to their lives and damage to property. Absent a lawful claim by the plaintiff-appellee over the subject portion of that lot, defendants-appellants are not duty bound to pay the former compensation for the use of the same. As a result, they may maintain the said improvements introduced thereon subject to existing laws, rules and regulations and/or ordinances appurtenant thereto. WHEREFORE, premises considered, the Decision rendered by Branch 79 of the Metropolitan Trial Court, Las Pias is REVERSED. Accordingly, the instant complaint is DISMISSED.
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SO ORDERED.6 On March 16, 2001, the Regional Trial Court, in Civil Case No. 5243, also reversed the finding of the Municipal Trial Court: From the foregoing, defendants-appellants may maintain the improvements introduced on the subject portion of the lot subject to existing laws, rules and regulations and/or ordinances pertaining thereto. Consequently, no compensation may be awarded in favor of the plaintiff-appellee. WHEREFORE, premises considered, the above-mentioned Decision rendered by Branch 79 of the Las Pias City Metropolitan Trial Court is REVERSED. Accordingly, the instant complaint is DISMISSED. From the adverse decisions of the Regional Trial Court, petitioners filed their respective petitions for review on certiorari to the Court of Appeals. Petitioner Samelas case was docketed as CA-G.R. SP 64181 while that of petitioner Usero was docketed as CA-G.R. SP 64718. Both petitions failed in the CA. Thus the instant consolidated petitions. The pivotal issue in the case at bar is whether or not the disputed strip of land, allegedly encroached upon by the spouses Polinar, is the private property of petitioners or part of the creek and therefore part of the public domain. Clearly this an issue which calls for a review of facts already determined by the Court of Appeals. The jurisdiction of the Court in petitions for review on certiorari under Rule 45 of the Rules of Court is limited to reviewing only errors of law, not of fact, unless the factual findings complained of are devoid of support by the evidence on record or the assailed judgment is based on a misapprehension of facts.7 This is obviously not the case here. A careful scrutiny of the records reveals that the assailed decisions are founded on sufficient evidence. That the subject strip of land is a creek is evidenced by: (1) a barangay certification that a creek exists in the disputed strip of land; (2) a certification from the Second Manila Engineering District, NCR-DPWH, that the western portion of Pilar Village where the subject strip of land is located is bounded by a tributary of Talon Creek and (3) photographs showing the abundance of water lilies in the subject strip of land. The Court of Appeals was correct: the fact that water lilies thrive in that strip of land can only mean that there is a permanent stream of water or creek there.

In contrast, petitioners failed to present proof sufficient to support their claim. Petitioners presented the TCTs of their respective lots to prove that there is no creek between their properties and that of the Polinars. However, an examination of said TCTs reveals that the descriptions thereon are incomplete. In petitioner Samelas TCT No. T-30088, there is no boundary description relative to the northwest portion of the property pertaining to the site of the creek. Likewise in TCT No. T-22329-A of the spouses Polinar, the southeast portion which pertains to the site of the creek has no described boundary. Moreover the tax declaration presented by petitioner is devoid of any entry on the west boundary vis--vis the location of the creek. All the pieces of evidence taken together, we can only conclude that the adjoining portion of these boundaries is in fact a creek and belongs to no one but the state. Property is either of public dominion or of private ownership.8 Concomitantly, Article 420 of the Civil Code provides: ART. 420. The following things are property of public dominion: (1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character; The phrase others of similar character includes a creek which is a recess or an arm of a river. It is property belonging to the public domain which is not susceptible to private ownership.9 Being public water, a creek cannot be registered under the Torrens System in the name of any individual.10 Accordingly, the Polinar spouses may utilize the rip-rapped portion of the creek to prevent the erosion of their property. WHEREFORE, the consolidated petitions are hereby denied. The assailed decisions of the Court of Appeals in CA-G.R. SP 64181 and CA-G.R. SP 64718 are affirmed in toto. SO ORDERED. Panganiban (Chairman), Sandoval-Gutierrez, Carpio-Morales and Garcia, JJ., concur. Consolidated petitions denied, assailed decisions affirmed in toto.

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Notes.A creek is property of the public domain which is not susceptible to private appropriation and acquisitive prescription. (Celestial vs. Cachopero, 413 SCRA 469 [2003]) Acesite Corporation vs. National Labor Relations Commission The abandoned river bed is given to the owner(s) of the land(s) onto which the river changed its course instead of the riparian owner(s). (Ibid.) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Usero vs. Court of Appeals, 449 SCRA 352(2005)]

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G.R. No. 155650. July 20, 2006.* MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner, vs. COURT OF APPEALS, CITY OF PARAAQUE, CITY MAYOR OF PARAAQUE, SANGGUNIANG PANGLUNGSOD NG PARAAQUE, CITY ASSESSOR OF PARAAQUE, and CITY TREASURER OF PARAAQUE, respondents.
Manila International Airport Authority; Taxation; MIAAs Airport Lands and Buildings are exempt from real estate tax imposed by local governments.We rule that MIAAs Airport Lands and Buildings are exempt from real estate tax imposed by local governments. First, MIAA is not a government-owned or controlled corporation but an instrumentality of the National Government and thus exempt from local taxation. Second, the real properties of MIAA are owned by the Republic of the Philippines and thus exempt from real estate tax. Same; Same; While there is no dispute that a government-owned or controlled corporation is not exempt from real estate tax, MIAA is not a government-owned or controlled corporation; A government-owned or controlled corporation must be organized as a stock or non-stock corporation, of which MIAA is neither; MIAA is not a stock corporation because it has no capital stock divided into shares.There is no dispute that a government-owned or controlled corporation is not exempt from real estate tax. However, MIAA is not a government-owned or controlled corporation. Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines a government-owned or controlled corporation as follows: SEC. 2. General Terms Defined.x x x x (13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock: x x x. (Emphasis supplied) A government-owned or controlled corporation must be organized as a stock or nonstock corporation. MIAA is not organized as a stock or non-stock corporation. MIAA is not a stock corporation because it has no capital stock divided into shares. Same; Same; Manila International Airport Authority (MIAA) is not a non-stock corporation because it has no members; Section 11 of the MIAA Charter which mandates MIAA to remit 20% of its annual gross operating income to the National Treasury prevents it from qualifying as a non-stock corporation.MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation Code defines a non-stock corporation as one where no part of its income is distributable as dividends to its members, trustees or officers. A non-stock corporation must have members. Even if we assume that the Government is considered as the sole member of MIAA, this will not make MIAA a non-stock corporation. Non-stock corporations cannot distribute any part of their income to their members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross operating income to the National Treasury. This prevents MIAA from qualifying as a non-stock corporation. Administrative Law; Manila International Airport Authority (MIAA) is a government instrumentality vested with corporate powers to perform efficiently its governmental functions.

Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a government-owned or controlled corporation. What then is the legal status of MIAA within the National Government? MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental functions. MIAA is like any other government instrumentality, the only difference is that MIAA is vested with corporate powers. Section 2(10) of the Introductory Provisions of the Administrative Code defines a government instrumentality as follows: SEC. 2. General Terms Defined.x x x x (10) Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. x x x (Emphasis supplied) Same; When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporationunless the government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only governmental but also corporate powers.When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only governmental but also corporate powers. Thus, MIAA exercises the governmental powers of eminent domain, police authority and the levying of fees and charges. At the same time, MIAA exercises all the powers of a corporation under the Corporation Law, insofar as these powers are not inconsistent with the provisions of this Executive Order. Same; When the law makes a government instrumentality operationally autonomous, the instrumentality remains part of the National Government machinery although not integrated with the department framework.Likewise, when the law makes a government instrumentality operationally autonomous, the instrumentality remains part of the National Government machinery although not integrated with the department framework. The MIAA Charter expressly states that transforming MIAA into a separate and autonomous body will make its operation more financially viable. Same; Manila International Airport Authority; Taxation; Local Government Code; A government instrumentality like MIAA falls under Section 133(o) of the Local Government Code, which provision recognizes the basic principle that local governments cannot tax the national government.A government instrumentality like MIAA falls under Section 133(o) of the Local Government Code, which states: SEC. 133. Common Limitations on the Taxing Powers of Local Government Units.Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: x x x x (o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities and local government units. (Emphasis and italics supplied) Section 133(o) recognizes the basic principle that local governments cannot tax the national government, which historically merely delegated to local governments the power to tax. While the 1987 Constitution now includes taxation as one of the powers of local governments, local governments may only exercise such power subject to such guidelines and limitations as the Congress may provide.
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Taxation; Local Government Code; Statutory Construction; When local governments invoke the power to tax on national government instrumentalities, such power is construed strictly against local governments, and when Congress grants an exemption to a national government instrumentality from local taxation, such exemption is construed liberally in favor of the national government instrumentality.Section 133(o) recognizes the basic principle that local governments cannot tax the national government, which historically merely delegated to local governments the power to tax. While the 1987 Constitution now includes taxation as one of the powers of local governments, local governments may only exercise such power subject to such guidelines and limitations as the Congress may provide. When local governments invoke the power to tax on national government instrumentalities, such power is construed strictly against local governments. The rule is that a tax is never presumed and there must be clear language in the law imposing the tax. Any doubt whether a person, article or activity is taxable is resolved against taxation. This rule applies with greater force when local governments seek to tax national government instrumentalities. Another rule is that a tax exemption is strictly construed against the taxpayer claiming the exemption. However, when Congress grants an exemption to a national government instrumentality from local taxation, such exemption is construed liberally in favor of the national government instrumentality. As this Court declared in Maceda v. Macaraig, Jr.: The reason for the rule does not apply in the case of exemptions running to the benefit of the government itself or its agencies. In such case the practical effect of an exemption is merely to reduce the amount of money that has to be handled by government in the course of its operations. For these reasons, provisions granting exemptions to government agencies may be construed liberally, in favor of non tax-liability of such agencies. There is, moreover, no point in national and local governments taxing each other, unless a sound and compelling policy requires such transfer of public funds from one government pocket to another. Same; Same; Taxation; Local Government Code; There is also no reason for local governments to tax national government instrumentalities for rendering essential public services to inhabitants of local governments, the only exception being when the legislature clearly intended to tax government instrumentalities for the delivery of essential services for sound and compelling policy considerations.There is also no reason for local governments to tax national government instrumentalities for rendering essential public services to inhabitants of local governments. The only exception is when the legislature clearly intended to tax government instrumentalities for the delivery of essential public services for sound and compelling policy considerations. There must be express language in the law empowering local governments to tax national government instrumentalities. Any doubt whether such power exists is resolved against local governments. Manila International Airport Authority; The Airport Lands and Buildings of the MIAA are property of public dominion and therefore owned by the State or the Republic of the Philippines.The Airport Lands and Buildings of MIAA are property of public dominion and therefore owned by the State or the Republic of the Philippines. The Civil Code provides: ARTICLE 419. Property is either of public dominion or of private ownership. ARTICLE 420. The following things are property of public dominion: (1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character; (2) Those which belong to the State, without being

for public use, and are intended for some public service or for the development of the national wealth. (Emphasis supplied) ARTICLE 421. All other property of the State, which is not of the character stated in the preceding article, is patrimonial property. ARTICLE 422. Property of public dominion, when no longer intended for public use or for public service, shall form part of the patrimonial property of the State. Same; Words and Phrases; The term ports in Article 420 (1) of the Civil Code includes seaports and airportsthe MIAA Airport Lands and Buildings constitute a port constructed by the State.No one can dispute that properties of public dominion mentioned in Article 420 of the Civil Code, like roads, canals, rivers, torrents, ports and bridges constructed by the State, are owned by the State. The term ports includes seaports and airports. The MIAA Airport Lands and Buildings constitute a port constructed by the State. Under Article 420 of the Civil Code, the MIAA Airport Lands and Buildings are properties of public dominion and thus owned by the State or the Republic of the Philippines. Same; Same; The Airport Lands and Buildings are devoted to public use because they are used by the public for international and domestic travel and transportation; The charging of fees to the public does not determine the character of the property whether it is of public dominion or not.The Airport Lands and Buildings are devoted to public use because they are used by the public for international and domestic travel and transportation. The fact that the MIAA collects terminal fees and other charges from the public does not remove the character of the Airport Lands and Buildings as properties for public use. The operation by the government of a tollway does not change the character of the road as one for public use. Someone must pay for the maintenance of the road, either the public indirectly through the taxes they pay the government, or only those among the public who actually use the road through the toll fees they pay upon using the road. The tollway system is even a more efficient and equitable manner of taxing the public for the maintenance of public roads. The charging of fees to the public does not determine the character of the property whether it is of public dominion or not. Article 420 of the Civil Code defines property of public dominion as one intended for public use. Even if the government collects toll fees, the road is still intended for public use if anyone can use the road under the same terms and conditions as the rest of the public. The charging of fees, the limitation on the kind of vehicles that can use the road, the speed restrictions and other conditions for the use of the road do not affect the public character of the road. Same; Taxation; Users Tax; Words and Phrases; The terminal fees MIAA charges passengers, as well as the landing fees MIAA charges airlines, are often termed users tax; A users tax is more equitablea principle of taxation mandated by the 1987 Constitution.The terminal fees MIAA charges to passengers, as well as the landing fees MIAA charges to airlines, constitute the bulk of the income that maintains the operations of MIAA. The collection of such fees does not change the character of MIAA as an airport for public use. Such fees are often termed users tax. This means taxing those among the public who actually use a public facility instead of taxing all the public including those who never use the particular public facility. A users tax is more equitablea principle of taxation mandated in the 1987 Constitution. Same; The Airport Lands and Buildings of MIAA, as properties of public dominion, are outside the commerce of man.The Airport Lands and Buildings of MIAA are devoted to public use and
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thus are properties of public dominion. As properties of public dominion, the Airport Lands and Buildings are outside the commerce of man. The Court has ruled repeatedly that properties of public dominion are outside the commerce of man. As early as 1915, this Court already ruled in Municipality of Cavite v. Rojas that properties devoted to public use are outside the commerce of man, thus: According to article 344 of the Civil Code: Property for public use in provinces and in towns comprises the provincial and town roads, the squares, streets, fountains, and public waters, the promenades, and public works of general service supported by said towns or provinces. Same; Public Auctions; Property of public dominion, being outside the commerce of man, cannot be the subject of an auction sale; Any encumbrance, levy on execution or auction sale of any property of public dominion is void for being contrary to public policy.Again in Espiritu v. Municipal Council, the Court declared that properties of public dominion are outside the commerce of man: x x x Town plazas are properties of public dominion, to be devoted to public use and to be made available to the public in general. They are outside the commerce of man and cannot be disposed of or even leased by the municipality to private parties. While in case of war or during an emergency, town plazas may be occupied temporarily by private individuals, as was done and as was tolerated by the Municipality of Pozorrubio, when the emergency has ceased, said temporary occupation or use must also cease, and the town officials should see to it that the town plazas should ever be kept open to the public and free from encumbrances or illegal private constructions. (Emphasis supplied) The Court has also ruled that property of public dominion, being outside the commerce of man, cannot be the subject of an auction sale. Properties of public dominion, being for public use, are not subject to levy, encumbrance or disposition through public or private sale. Any encumbrance, levy on execution or auction sale of any property of public dominion is void for being contrary to public policy. Essential public services will stop if properties of public dominion are subject to encumbrances, foreclosures and auction sale. This will happen if the City of Paraaque can foreclose and compel the auction sale of the 600-hectare runway of the MIAA for non-payment of real estate tax. Same; Unless the President issues a proclamation withdrawing the Airport Lands and Buildings from public use, these properties remain properties of public dominion and are inalienable. Before MIAA can encumber the Airport Lands and Buildings, the President must first withdraw from public use the Airport Lands and Buildings. Sections 83 and 88 of the Public Land Law or Commonwealth Act No. 141, which remains to this day the existing general law governing the classification and disposition of lands of the public domain other than timber and mineral lands, provide: x x x Thus, unless the President issues a proclamation withdrawing the Airport Lands and Buildings from public use, these properties remain properties of public dominion and are inalienable. Since the Airport Lands and Buildings are inalienable in their present status as properties of public dominion, they are not subject to levy on execution or foreclosure sale. As long as the Airport Lands and Buildings are reserved for public use, their ownership remains with the State or the Republic of the Philippines. Same; Trusts; MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic.MIAA is merely holding title to the Airport Lands and Buildings in trust for the

Republic. Section 48, Chapter 12, Book I of the Administrative Code allows instrumentalities like MIAA to hold title to real properties owned by the Republic. Same; The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to MIAA was not meant to transfer beneficial ownership of these assets from the Republic to MIAAthe Republic remains the beneficial owner of the Airport Lands and Buildings.The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to MIAA was not meant to transfer beneficial ownership of these assets from the Republic to MIAA. The purpose was merely to reorganize a division in the Bureau of Air Transportation into a separate and autonomous body. The Republic remains the beneficial owner of the Airport Lands and Buildings. MIAA itself is owned solely by the Republic. No party claims any ownership rights over MIAAs assets adverse to the Republic. The MIAA Charter expressly provides that the Airport Lands and Buildings shall not be disposed through sale or through any other mode unless specifically approved by the President of the Philippines. This only means that the Republic retained the beneficial ownership of the Airport Lands and Buildings because under Article 428 of the Civil Code, only the owner has the right to x x x dispose of a thing. Since MIAA cannot dispose of the Airport Lands and Buildings, MIAA does not own the Airport Lands and Buildings. At any time, the President can transfer back to the Republic title to the Airport Lands and Buildings without the Republic paying MIAA any consideration. Under Section 3 of the MIAA Charter, the President is the only one who can authorize the sale or disposition of the Airport Lands and Buildings. This only confirms that the Airport Lands and Buildings belong to the Republic. Taxation; Local Government Code; Section 234(a) of the Local Government Code exempts from real estate tax any real property owned by the Republic of the Philippines.Section 234(a) of the Local Government Code exempts from real estate tax any [r]eal property owned by the Republic of the Philippines. Section 234(a) provides: SEC. 234. Exemptions from Real Property Tax.The following are exempted from payment of the real property tax: (a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person; x x x. (Emphasis supplied) This exemption should be read in relation with Section 133(o) of the same Code, which prohibits local governments from imposing [t]axes, fees or charges of any kind on the National Government, its agencies and instrumentalities x x x. The real properties owned by the Republic are titled either in the name of the Republic itself or in the name of agencies or instrumentalities of the National Government. The Administrative Code allows real property owned by the Republic to be titled in the name of agencies or instrumentalities of the national government. Such real properties remain owned by the Republic and continue to be exempt from real estate tax. Manila International Airport Authority; Local Government Code; The Republic may grant the beneficial use of its real property to an agency or instrumentality of the national government, an arrangement which does not result in the loss of the tax exemption; MIAA, as a government instrumentality, is not a taxable person under Section 133(o) of the Local Government Code. The Republic may grant the beneficial use of its real property to an agency or instrumentality of the national government. This happens when title of the real property is transferred to an agency
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or instrumentality even as the Republic remains the owner of the real property. Such arrangement does not result in the loss of the tax exemption. Section 234(a) of the Local Government Code states that real property owned by the Republic loses its tax exemption only if the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person. MIAA, as a government instrumentality, is not a taxable person under Section 133(o) of the Local Government Code. Thus, even if we assume that the Republic has granted to MIAA the beneficial use of the Airport Lands and Buildings, such fact does not make these real properties subject to real estate tax. Same; Same; Taxation; Portions of the Airport Lands and Buildings that MIAA leases to private entities are not exempt from real estate tax.Portions of the Airport Lands and Buildings that MIAA leases to private entities are not exempt from real estate tax. For example, the land area occupied by hangars that MIAA leases to private corporations is subject to real estate tax. In such a case, MIAA has granted the beneficial use of such land area for a consideration to a taxable person and therefore such land area is subject to real estate tax. In Lung Center of the Philippines v. Quezon City, 433 SCRA 119, 138 (2004), the Court ruled: Accordingly, we hold that the portions of the land leased to private entities as well as those parts of the hospital leased to private individuals are not exempt from such taxes. On the other hand, the portions of the land occupied by the hospital and portions of the hospital used for its patients, whether paying or non-paying, are exempt from real property taxes. Same; Taxation; By express mandate of the Local Government Code, local governments cannot impose any kind of tax on national government instrumentalities like the MIAA.By express mandate of the Local Government Code, local governments cannot impose any kind of tax on national government instrumentalities like the MIAA. Local governments are devoid of power to tax the national government, its agencies and instrumentalities. The taxing powers of local governments do not extend to the national government, its agencies and instrumentalities, [u]nless otherwise provided in this Code as stated in the saving clause of Section 133. The saving clause refers to Section 234(a) on the exception to the exemption from real estate tax of real property owned by the Republic. Same; Same; The determinative test whether MIAA is exempt from local taxation is not whether MIAA is a juridical person, but whether it is a national government instrumentality under Section 133(o) of the Local Government Code.The minoritys theory violates Section 133(o) of the Local Government Code which expressly prohibits local governments from imposing any kind of tax on national government instrumentalities. Section 133(o) does not distinguish between national government instrumentalities with or without juridical personalities. Where the law does not distinguish, courts should not distinguish. Thus, Section 133(o) applies to all national government instrumentalities, with or without juridical personalities. The determinative test whether MIAA is exempt from local taxation is not whether MIAA is a juridical person, but whether it is a national government instrumentality under Section 133(o) of the Local Government Code. Section 133(o) is the specific provision of law prohibiting local governments from imposing any kind of tax on the national government, its agencies and instrumentalities. Taxation; The saving clause in Section 133 of the Local Government Code refers to the exception to the exemption in Section 234(a) of the Code, which makes the national government

subject to real estate tax when it gives the beneficial use of its real properties to a taxable entity; The exception to the exemption in Section 234(a) is the only instance when the national government, its agencies and instrumentalities are subject to any kind of tax by local governments.The saving clause in Section 133 refers to the exception to the exemption in Section 234(a) of the Code, which makes the national government subject to real estate tax when it gives the beneficial use of its real properties to a taxable entity. Section 234(a) of the Local Government Code provides: SEC. 234. Exemptions from Real Property Tax.The following are exempted from payment of the real property tax: (a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person. x x x. (Emphasis supplied) Under Section 234(a), real property owned by the Republic is exempt from real estate tax. The exception to this exemption is when the government gives the beneficial use of the real property to a taxable entity. The exception to the exemption in Section 234(a) is the only instance when the national government, its agencies and instrumentalities are subject to any kind of tax by local governments. The exception to the exemption applies only to real estate tax and not to any other tax. The justification for the exception to the exemption is that the real property, although owned by the Republic, is not devoted to public use or public service but devoted to the private gain of a taxable person. Same; Statutory Construction; When a provision of law grants a power but withholds such power on certain matters, there is no conflict between the grant of power and the withholding of power.There is no conflict whatsoever between Sections 133 and 193 because Section 193 expressly admits its subordination to other provisions of the Code when Section 193 states [u]nless otherwise provided in this Code. By its own words, Section 193 admits the superiority of other provisions of the Local Government Code that limit the exercise of the taxing power in Section 193. When a provision of law grants a power but withholds such power on certain matters, there is no conflict between the grant of power and the withholding of power. The grantee of the power simply cannot exercise the power on matters withheld from its power. Same; Words and Phrases; By their very meaning and purpose, the common limitations on the taxing power prevail over the grant or exercise of the taxing power.Since Section 133 prescribes the common limitations on the taxing powers of local governments, Section 133 logically prevails over Section 193 which grants local governments such taxing powers. By their very meaning and purpose, the common limitations on the taxing power prevail over the grant or exercise of the taxing power. If the taxing power of local governments in Section 193 prevails over the limitations on such taxing power in Section 133, then local governments can impose any kind of tax on the national government, its agencies and instrumentalitiesa gross absurdity. Administrative Law; The Administrative Law is the governing law defining the status and relationship of government departments, bureaus, offices, agencies and instrumentalities.The third whereas clause of the Administrative Code states that the Code incorporates in a unified document the major structural, functional and procedural principles and rules of governance. Thus, the Administrative Code is the governing law defining the status and relationship of government departments, bureaus, offices, agencies and instrumentalities. Unless a statute

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expressly provides for a different status and relationship for a specific government unit or entity, the provisions of the Administrative Code prevail. Same; The government-owned or controlled corporations created through special charters are those that meet the two conditions prescribed in Section 16, Article XII of the Constitution, regarding their creation in the interest of common good and their being subject to the test of economic viability.The government-owned or controlled corporations created through special charters are those that meet the two conditions prescribed in Section 16, Article XII of the Constitution. The first condition is that the government-owned or controlled corporation must be established for the common good. The second condition is that the government-owned or controlled corporation must meet the test of economic viability. Section 16, Article XII of the 1987 Constitution provides: SEC. 16. The Congress shall not, except by general law, provide for the formation, organization, or regulation of private corporations. Government-owned or controlled corporations may be created or established by special charters in the interest of the common good and subject to the test of economic viability. Same; The test of economic viability applies only to government-owned or controlled corporations that perform economic or commercial activities and need to compete in the market placegovernment instrumentalities vested with corporate powers and performing governmental or public functions need not meet the test of economic viability.The Constitution expressly authorizes the legislature to create government-owned or controlled corporations through special charters only if these entities are required to meet the twin conditions of common good and economic viability. In other words, Congress has no power to create government-owned or controlled corporations with special charters unless they are made to comply with the two conditions of common good and economic viability. The test of economic viability applies only to government-owned or controlled corporations that perform economic or commercial activities and need to compete in the market place. Being essentially economic vehicles of the State for the common goodmeaning for economic development purposesthese government-owned or controlled corporations with special charters are usually organized as stock corporations just like ordinary private corporations. In contrast, government instrumentalities vested with corporate powers and performing governmental or public functions need not meet the test of economic viability. These instrumentalities perform essential public services for the common good, services that every modern State must provide its citizens. These instrumentalities need not be economically viable since the government may even subsidize their entire operations. These instrumentalities are not the government-owned or controlled corporations referred to in Section 16, Article XII of the 1987 Constitution. Manila International Airport Authority; Administrative Law; The MIAA need not meet the test of economic viability because the legislature did not create MIAA to compete in the market place. The MIAA need not meet the test of economic viability because the legislature did not create MIAA to compete in the market place. MIAA does not compete in the market place because there is no competing international airport operated by the private sector. MIAA performs an essential public service as the primary domestic and international airport of the Philippines. Same; Words and Phrases; The terminal fees that MIAA charges every passenger are regulatory or administrative fees and not income from commercial transactions.MIAA performs an

essential public service that every modern State must provide its citizens. MIAA derives its revenues principally from the mandatory fees and charges MIAA imposes on passengers and airlines. The terminal fees that MIAA charges every passenger are regulatory or administrative fees and not income from commercial transactions.

TINGA, J., DISSENTING OPINION:

Courts; Supreme Court; Judgments; Decisions of the Supreme Court are expected to provide clarity to the parties and to students of jurisprudence, as to what the law of the case is, especially when the doctrines of long standing are modified or clarified.The icing on this inedible cake is the strained and purposely vague rationale used to justify the majority opinion. Decisions of the Supreme Court are expected to provide clarity to the parties and to students of jurisprudence, as to what the law of the case is, especially when the doctrines of long standing are modified or clarified. With all due respect, the decision in this case is plainly so, so wrong on many levels. More egregious, in the majoritys resolve to spare the Manila International Airport Authority (MIAA) from liability for real estate taxes, no clear-cut rule emerges on the important question of the power of local government units (LGUs) to tax government corporations, instrumentalities or agencies. The majority would overturn sub silencio, among others, at least one dozen precedents. Same; Same; Same; Only children should be permitted to subscribe to the theory that something bad will go away if you pretend hard enough that it does not exist.There are certainly many other precedents affected, perhaps all previous jurisprudence regarding local government taxation vis-a-vis government entities, as well as any previous definitions of GOCCs, and previous distinctions between the exercise of governmental and proprietary functions (a distinction laid down by this Court as far back as 1916). What is the reason offered by the majority for overturning or modifying all these precedents and doctrines? None is given, for the majority takes comfort instead in the pretense that these precedents never existed. Only children should be permitted to subscribe to the theory that something bad will go away if you pretend hard enough that it does not exist. Same; Judgments; If Mactan-Cebu International Airport v. Marcos, 330 Phil. 392 (1996), truly deserves to be discarded as precedent, it deserves a more honorable end than death by amnesia or ignominous disregardthe majority could have devoted its discussion in explaining why it thinks Mactan is wrong, instead of pretending that Mactan never existed at all.Before I dwell upon the
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numerous flaws of the majority, a brief comment is necessitated on the majoritys studied murkiness vis--vis the Mactan precedent. The majority is obviously inconsistent with Mactan and there is no way these two rulings can stand together. Following basic principles in statutory construction, Mactan will be deemed as giving way to this new ruling. However, the majority does not bother to explain why Mactan is wrong. The interpretation in Mactan of the relevant provisions of the Local Government Code is elegant and rational, yet the majority refuses to explain why this reasoning of the Court in Mactan is erroneous. In fact, the majority does not even engage Mactan in any meaningful way. If the majority believes that Mactan may still stand despite this ruling, it remains silent as to the viable distinctions between these two cases. The majoritys silence on Mactan is baffling, considering how different this new ruling is with the ostensible precedent. Perhaps the majority does not simply know how to dispense with the ruling in Mactan. If Mactan truly deserves to be discarded as precedent, it deserves a more honorable end than death by amnesia or ignonominous disregard. The majority could have devoted its discussion in explaining why it thinks Mactan is wrong, instead of pretending that Mactan never existed at all. Such an approach might not have won the votes of the minority, but at least it would provide some degree of intellectual clarity for the parties, LGUs and the national government, students of jurisprudence and practitioners. A more meaningful debate on the matter would have been possible, enriching the study of law and the intellectual dynamic of this Court. Manila International Airport Authority; Administrative Law; Based on the Administrative Code, a GOCC may be an instrumentality or an agency of the National Government.Based on the Administrative Code, a GOCC may be an instrumentality or an agency of the National Government. Thus, there actually is no point in the majoritys assertion that MIAA is not a GOCC, since based on the majoritys premise of Section 133 as the key provision, the material question is whether MIAA is either an instrumentality, an agency, or the National Government itself. The very provisions of the Administrative Code provide that a GOCC can be either an instrumentality or an agency, so why even bother to extensively discuss whether or not MIAA is a GOCC? Same; Same; The majority effectively declassifies many entities created and recognized as GOCCs and would give primacy to the Administrative Code of 1987 rather than their respective charters as to the definition of these entities.The inconsequential verbiage stewing in judicial opinions deserve little rebuttal. However, the entire discussion of the majority on the definition of a GOCC, obiter as it may ultimately be, deserves emphatic refutation. The

views of the majority on this matter are very dangerous, and would lead to absurdities, perhaps unforeseen by the majority. For in fact, the majority effectively declassifies many entities created and recognized as GOCCs and would give primacy to the Administrative Code of 1987 rather than their respective charters as to the definition of these entities. Taxation; It is sad, but not surprising that the majority is not willing to consider or even discuss the general rule, but only the exemptions under Section 133 and Section 234 of the Local Government Codeafter all, if the majority is dead set in ruling for MIAA no matter what the law says, why bother citing what the law does say.The majority abjectly refuses to engage Section 232 of the Local Government Code although it provides the indubitable general rule that LGUs may levy an annual ad valorem tax on real property such as land, building, machinery, and other improvements not hereafter specifically exempted. The specific exemptions are provided by Section 234. Section 232 comes sequentially after Section 133(o), and even if the sequencing is irrelevant, Section 232 would fall under the qualifying phrase of Section 133, Unless otherwise provided herein. It is sad, but not surprising that the majority is not willing to consider or even discuss the general rule, but only the exemptions under Section 133 and Section 234. After all, if the majority is dead set in ruling for MIAA no matter what the law says, why bother citing what the law does say. Manila International Airport Authority; If the distinction is to be blurred, as the majority does, between the State/Republic/Government and a body corporate such as the MIAA, then the MIAA charter showcases the remarkable absurdity of an entity transferring property to itself.It is the MIAA, and not either the State, the Republic of the Philippines or the national government that asserts legal title over the Airport Lands and Buildings. There was an express transfer of ownership between the MIAA and the national government. If the distinction is to be blurred, as the majority does, between the State/Republic/Government and a body corporate such as the MIAA, then the MIAA charter showcases the remarkable absurdity of an entity transferring property to itself. Nothing in the Civil Code or the Constitution prohibits the State from transferring ownership over property of public dominion to an entity that it similarly owns. It is just like a family transferring ownership over the properties its members own into a family corporation. The family exercises effective control over the administration and disposition of these properties. Yet for several purposes under the law, such as taxation, it is the corporation that is deemed to own those properties. A similar situation obtains with MIAA, the State, and the Airport Lands and Buildings.
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Same; The operation of an airport facility by the State may be imbued with public interest, but it is by no means indispensable or obligatory on the national government.The simple truth is that, based on these accepted doctrinal tests, MIAA performs proprietary functions. The operation of an airport facility by the State may be imbued with public interest, but it is by no means indispensable or obligatory on the national government. In fact, as demonstrated in other countries, it makes a lot of economic sense to leave the operation of airports to the private sector. Same; International airlines take into account the quality and conditions of various international airports in determining the number of flights it would assign to a particular airport, or even in choosing a hub through which destinations necessitating connecting flights would pass through.The majority tries to becloud this issue by pointing out that the MIAA does not compete in the marketplace as there is no competing international airport operated by the private sector; and that MIAA performs an essential public service as the primary domestic and international airport of the Philippines. This premise is false, for one. On a local scale, MIAA competes with other international airports situated in the Philippines, such as Davao International Airport and MCIAA. More pertinently, MIAA also competes with other international airports in Asia, at least. International airlines take into account the quality and conditions of various international airports in determining the number of flights it would assign to a particular airport, or even in choosing a hub through which destinations necessitating connecting flights would pass through. Same; Public Utilities; If the determinative point in distinguishing between sovereign functions and proprietary functions is the vitality of the public service being performed, then it should be noted that there is no more important public service performed than that engaged in by public utilities.If the determinative point in distinguishing between sovereign functions and proprietary functions is the vitality of the public service being performed, then it should be noted that there is no more important public service performed than that engaged in by public utilities. But notably, the Constitution itself authorizes private persons to exercise these functions as it allows them to operate public utilities in this country. If indeed such functions are actually sovereign and belonging properly to the government, shouldnt it follow that the exercise of these tasks remain within the exclusive preserve of the State? Same; Taxation; Administrative Law; There really is no prohibition against the government taxing itself, and nothing obscene with allowing government

entities exercising proprietary functions to be taxed for the purpose of raising the coffers of LGUs.There really is no prohibition against the government taxing itself, and nothing obscene with allowing government entities exercising proprietary functions to be taxed for the purpose of raising the coffers of LGUs. On the other hand, it would be an even more noxious proposition that the government or the instrumentalities that it owns are above the law and may refuse to pay a validly imposed tax. MIAA, or any similar entity engaged in the exercise of proprietary, and not sovereign functions, cannot avoid the adverseeffects of tax evasion simply on the claim that it is imbued with some of the attributes of government. Same; Same; Local Governent Code; While the Local Government Code withdrew all previous local tax exemptions of the MIAA and other natural and juridical persons, it did not similarly withdraw any previously enacted prohibitions on properties owned by GOCCs, agencies or instrumentalities. Despite the fact that the City of Paraaque ineluctably has the power to impose real property taxes over the MIAA, there is an equally relevant statutory limitation on this power that must be fully upheld. Section 3 of the MIAA charter states that [a]ny portion [of the [lands transferred, conveyed and assigned to the ownership and administration of the MIAA] shall not be disposed through sale or through any other mode unless specifically approved by the President of the Philippines. Nothing in the Local Government Code, even with its wide grant of powers to LGUs, can be deemed as repealing this prohibition under Section 3, even if it effectively forecloses one possible remedy of the LGU in the collection of delinquent real property taxes. While the Local Government Code withdrew all previous local tax exemptions of the MIAA and other natural and juridical persons, it did not similarly withdraw any previously enacted prohibitions on properties owned by GOCCs, agencies or instrumentalities. Moreover, the resulting legal effect, subjecting on one hand the MIAA to local taxes but on the other hand shielding its properties from any form of sale or disposition, is not contradictory or paradoxical, onerous as its effect may be on the LGU. It simply means that the LGU has to find another way to collect the taxes due from MIAA, thus paving the way for a mutually acceptable negotiated solution. Same; Same; The prohibition in Section 3 of the MIAA Charter against the sale or disposition of MIAA properties without the consent of the President prevents the peremptory closure of the MIAA or the hampering of its operations on account of the demands of its creditorsthe airport is important enough to be sheltered by legislation from ordinary legal processes.There are several other reasons this statutory limitation should be upheld and applied to this
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case. It is at this juncture that the importance of the Manila Airport to our national life and commerce may be accorded proper consideration. The closure of the airport, even by reason of MIAAs legal omission to pay its taxes, will have an injurious effect to our national economy, which is ever reliant on air travel and traffic. The same effect would obtain if ownership and administration of the airport were to be transferred to an LGU or some other entity which were not specifically chartered or tasked to perform such vital function. It is for this reason that the MIAA charter specifically forbids the sale or disposition of MIAA properties without the consent of the President. The prohibition prevents the peremptory closure of the MIAA or the hampering of its operations on account of the demands of its creditors. The airport is important enough to be sheltered by legislation from ordinary legal processes. Same; Same; Had this petition been denied instead with Mactan as basis, but with the caveat that the MIAA properties could not be subject of execution sale without the consent of the President, I suspect that the parties would feel little distressunfortunately, the majority will cause precisely the opposite result of unremitting hostility, not only to the City of Paraaque, but to the thousands of LGUs in the country.Had this petition been denied instead with Mactan as basis, but with the caveat that the MIAA properties could not be subject of execution sale without the consent of the President, I suspect that the parties would feel little distress. Through such action, both the Local Government Code and the MIAA charter would have been upheld. The prerogatives of LGUs in real property taxation, as guaranteed by the Local Government Code, would have been preserved, yet the concerns about the ruinous effects of having to close the Manila International Airport would have been averted. The parties would then be compelled to try harder at working out a compromise, a task, if I might add, they are all too willing to engage in. Unfortunately, the majority will cause precisely the opposite result of unremitting hostility, not only to the City of Paraaque, but to the thousands of LGUs in the country. Local Government Code; Taxation; Bangko Sentral ng Pilipinas; If the BSP is already preternaturally exempt from local taxation owing to its personality as a government instrumentality, why then the need to make a new grant of exemption, which if the majority is to be believed, is actually a redundancy. The New Central Bank Act was promulgated after the Local Government Code if the BSP is already preternaturally exempt from local taxation owing to its personality as an government instrumentality, why then the need to make a new grant of exemption, which if the majority is to be believed, is actually a redundancy. But even more tellingly, does not this provision evince a clear intent that after the lapse of five (5) years, that the Bangko Sentral will be liable

for provincial, municipal and city taxes? This is the clear congressional intent, and it is Congress, not this Court which dictates which entities are subject to taxation and which are exempt. Courts; Supreme Court; Judgments; One might say, certainly a decision of the Supreme Court cannot be construed to promote an absurdity, but precisely the majority, and the faulty reasoning it utilizes, opens itself up to all sorts of mischief, and certainly, a tax-exempt massage parlor is one of the lesser evils that could arise from the majority ruling.Consider further the example of the Philippine Institute of Traditional and Alternative Health Care (PITAHC), created by Republic Act No. 8243 in 1997. It has similar characteristics as MIAA in that it is established as a body corporate, and empowered with the attributes of a corporation, including the power to purchase or acquire real properties. However the PITAHC has no capital stock and no members, thus following the majority, it is not a GOCC. The state policy that guides PITAHC is the development of traditional and alternative health care, and its objectives include the promotion and advocacy of alternative, preventive and curative health care modalities that have been proven safe, effective and cost effective. Alternative health care modalities include other forms of non-allophatic, occasionally non-indigenous or imported healing methods which include, among others reflexology, acupuncture, massage, acupressure and chiropractics. Given these premises, there is no impediment for the PITAHC to purchase land and construct thereupon a massage parlor that would provide a cheaper alternative to the opulent spas that have proliferated around the metropolis. Such activity is in line with the purpose of the PITAHC and with state policy. Is such massage parlor exempt from realty taxes? For the majority, it is, for PITAHC is an instrumentality or agency exempt from local government taxation, which does not fall under the exceptions under Section 234 of the Local Government Code. Hence, this massage parlor would not just be a shelter for frazzled nerves, but for taxes as well. Ridiculous? One might say, certainly a decision of the Supreme Court cannot be construed to promote an absurdity. But precisely the majority, and the faulty reasoning it utilizes, opens itself up to all sorts of mischief, and certainly, a tax-exempt massage parlor is one of the lesser evils that could arise from the majority ruling. This is indeed a very strange and very wrong decision. PETITION for review on certiorari of the resolutions of the Court of Appeals. The facts are stated in the opinion of the Court. Gil V. Savedia, Roderick B. Morales and Gary Villanueva for respondents.
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CARPIO, J.:

The Antecedents Petitioner Manila International Airport Authority (MIAA) operates the Ninoy Aquino International Airport (NAIA) Complex in Paraaque City under Executive Order No. 903, otherwise known as the Revised Charter of the Manila International Airport Authority (MIAA Charter). Executive Order No. 903 was issued on 21 July 1983 by then President Ferdinand E. Marcos. Subsequently, Executive Order Nos. 9091 and 2982 amended the MIAA Charter. As operator of the international airport, MIAA administers the land, improvements and equipment within the NAIA Complex. The MIAA Charter transferred to MIAA approximately 600 hectares of land,3 including the runways and buildings (Airport Lands and Buildings) then under the Bureau of Air Transportation.4 The MIAA Charter further provides that no portion of the land transferred to MIAA shall be disposed of through sale or any other mode unless specifically approved by the President of the Philippines.5 On 21 March 1997, the Office of the Government Corporate Counsel (OGCC) issued Opinion No. 061. The OGCC opined that the Local Government Code of 1991 withdrew the exemption from real estate tax granted to MIAA under Section 21 of the MIAA Charter. Thus, MIAA negotiated with respondent City of Paraaque to pay the real estate tax imposed by the City. MIAA then paid some of the real estate tax already due. On 28 June 2001, MIAA received Final Notices of Real Estate Tax Delinquency from the City of Paraaque for the taxable years 1992 to 2001. MIAAs real estate tax delinquency is broken down as follows: TAX DECLARATION
TAXABLEYEAR 1992-2001 E-016-01370 E-016-01374 1992-2001 E-016-01375 1992-2001 E-016-01376 1992-2001 TAX DUE 19,558,160.00 111,689,424.90 20,276,058.00 58,144,028.00 PENALTY 11,201,083.20 68,149,479.59 12,371,832.00 35,477,712.00 TOTAL 30,789,243.20 179,838,904.49 32,647,890.00 93,621,740.00

E-016-01377 18,134,614.65 11,065,188.59 29,199,803.24 1992-2001 E-016-01378 111,107,950.40 67,794,681.59 178,902,631.99 1992-2001 E-016-01379 4,322,340.00 2,637,360.00 6,959,700.00 1992-2001 E-016-01380 7,776,436.00 4,744,944.00 12,521,380.00 1992-2001 *E-016-013-85 6,444,810.00 2,900,164.50 9,344,974.50 1998-2001 *E-016-01387 34,876,800.00 5,694,560.00 50,571,360.00 1998-2001 *E-016-01396 75,240.00 33,858.00 109,098.00 1998-2001 GRAND TOTAL P392,435,861.95 P232,070,863.47 P624,506,725.42 1992-1997 RPT was paid on Dec. 24, 1997 as per O.R.#9476102 for P4,207,028.75 #9476101 for P28,676,480.00 #9476103 for P49,115.006

On 17 July 2001, the City of Paraaque, through its City Treasurer, issued notices of levy and warrants of levy on the Airport Lands and Buildings. The Mayor of the City of Paraaque threatened to sell at public auction the Airport Lands and Buildings should MIAA fail to pay the real estate tax delinquency. MIAA thus sought a clarification of OGCC Opinion No. 061. On 9 August 2001, the OGCC issued Opinion No. 147 clarifying OGCC Opinion No. 061. The OGCC pointed out that Section 206 of the Local Government Code requires persons exempt from real estate tax to show proof of exemption. The OGCC opined that Section 21 of the MIAA Charter is the proof that MIAA is exempt from real estate tax. On 1 October 2001, MIAA filed with the Court of Appeals an original petition for prohibition and injunction, with prayer for preliminary injunction or temporary restraining order. The petition sought to restrain the City of Paraaque from imposing real estate tax on, levying against, and auctioning for public sale the Airport Lands and Buildings. The petition was docketed as CA-G.R. SP No. 66878. On 5 October 2001, the Court of Appeals dismissed the petition because MIAA filed it beyond the 60-day reglementary period. The Court of Appeals also denied on 27 September 2002 MIAAs motion for reconsideration and supplemental motion for reconsideration. Hence, MIAA filed on 5 December 2002 the present petition for review.7

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Meanwhile, in January 2003, the City of Paraaque posted notices of auction sale at the Barangay Halls of Barangays Vitalez, Sto. Nio, and Tambo, Paraaque City; in the public market of Barangay La Huerta; and in the main lobby of the Paraaque City Hall. The City of Paraaque published the notices in the 3 and 10 January 2003 issues of the Philippine Daily Inquirer, a newspaper of general circulation in the Philippines. The notices announced the public auction sale of the Airport Lands and Buildings to the highest bidder on 7 February 2003, 10:00 a.m., at the Legislative Session Hall Building of Paraaque City. A day before the public auction, or on 6 February 2003, at 5:10 p.m., MIAA filed before this Court an Urgent Ex-Parte and Reiteratory Motion for the Issuance of a Temporary Restraining Order. The motion sought to restrain respondentsthe City of Paraaque, City Mayor of Paraaque, Sangguniang Panglungsod ng Paraaque, City Treasurer of Paraaque, and the City Assessor of Paraaque (respondents)from auctioning the Airport Lands and Buildings. On 7 February 2003, this Court issued a temporary restraining order (TRO) effective immediately. The Court ordered respondents to cease and desist from selling at public auction the Airport Lands and Buildings. Respondents received the TRO on the same day that the Court issued it. However, respondents received the TRO only at 1:25 p.m. or three hours after the conclusion of the public auction. On 10 February 2003, this Court issued a Resolution confirming nunc pro tunc the TRO. On 29 March 2005, the Court heard the parties in oral arguments. In compliance with the directive issued during the hearing, MIAA, respondent City of Paraaque, and the Solicitor General subsequently submitted their respective Memoranda. MIAA admits that the MIAA Charter has placed the title to the Airport Lands and Buildings in the name of MIAA. However, MIAA points out that it cannot claim ownership over these properties since the real owner of the Airport Lands and Buildings is the Republic of the Philippines. The MIAA Charter mandates MIAA to devote the Airport Lands and Buildings for the benefit of the general public. Since the Airport Lands and Buildings are devoted to public use and public service, the ownership of these properties remains with the State. The

Airport Lands and Buildings are thus inalienable and are not subject to real estate tax by local governments. MIAA also points out that Section 21 of the MIAA Charter specifically exempts MIAA from the payment of real estate tax. MIAA insists that it is also exempt from real estate tax under Section 234 of the Local Government Code because the Airport Lands and Buildings are owned by the Republic. To justify the exemption, MIAA invokes the principle that the government cannot tax itself. MIAA points out that the reason for tax exemption of public property is that its taxation would not inure to any public advantage, since in such a case the tax debtor is also the tax creditor. Respondents invoke Section 193 of the Local Government Code, which expressly withdrew the tax exemption privileges of govern-ment-owned andcontrolled corporations upon the effectivity of the Local Government Code. Respondents also argue that a basic rule of statutory construction is that the express mention of one person, thing, or act excludes all others. An international airport is not among the exceptions mentioned in Section 193 of the Local Government Code. Thus, respondents assert that MIAA cannot claim that the Airport Lands and Buildings are exempt from real estate tax. Respondents also cite the ruling of this Court in Mactan International Airport v. Marcos8 where we held that the Local Government Code has withdrawn the exemption from real estate tax granted to international airports. Respondents further argue that since MIAA has already paid some of the real estate tax assessments, it is now estopped from claiming that the Airport Lands and Buildings are exempt from real estate tax. The Issue This petition raises the threshold issue of whether the Airport Lands and Buildings of MIAA are exempt from real estate tax under existing laws. If so exempt, then the real estate tax assessments issued by the City of Paraaque, and all proceedings taken pursuant to such assessments, are void. In such event, the other issues raised in this petition become moot. The Courts Ruling We rule that MIAAs Airport Lands and Buildings are exempt from real estate tax imposed by local governments.

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First, MIAA is not a government-owned or controlled corporation but an instrumentality of the National Government and thus exempt from local taxation. Second, the real properties of MIAA are owned by the Republic of the Philippines and thus exempt from real estate tax. 1.MIAA is Not a Government-Owned or Controlled Corporation Respondents argue that MIAA, being a government-owned or controlled corporation, is not exempt from real estate tax. Respondents claim that the deletion of the phrase any government-owned or controlled so exempt by its charter in Section 234(e) of the Local Government Code withdrew the real estate tax exemption of government-owned or controlled corporations. The deleted phrase appeared in Section 40(a) of the 1974 Real Property Tax Code enumerating the entities exempt from real estate tax. There is no dispute that a government-owned or controlled corporation is not exempt from real estate tax. However, MIAA is not a government-owned or controlled corporation. Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines a government-owned or controlled corporation as follows: SEC. 2. General Terms Defined.x x x x (13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock: x x x. (Emphasis supplied) A government-owned or controlled corporation must be organized as a stock or non-stock corporation. MIAA is not organized as a stock or non-stock corporation. MIAA is not a stock corporation because it has no capital stock divided into shares. MIAA has no stockholders or voting shares. Section 10 of the MIAA Charter9 provides: SECTION 10. Capital.The capital of the Authority to be contributed by the National Government shall be increased from Two and One-half Billion (P2,500,000,000.00) Pesos to Ten Billion (P10,000,000,000.00) Pesos to consist of:

(a) The value of fixed assets including airport facilities, runways and equipment and such other properties, movable and immovable[,] which may be contributed by the National Government or transferred by it from any of its agencies, the valuation of which shall be determined jointly with the Department of Budget and Management and the Commission on Audit on the date of such contribution or transfer after making due allowances for depreciation and other deductions taking into account the loans and other liabilities of the Authority at the time of the takeover of the assets and other properties; (b) That the amount of P605 million as of December 31, 1986 representing about seventy per centum (70%) of the unremitted share of the National Government from 1983 to 1986 to be remitted to the National Treasury as provided for in Section 11 of E. O. No. 903 as amended, shall be converted into the equity of the National Government in the Authority. Thereafter, the Government contribution to the capital of the Authority shall be provided in the General Appropriations Act. Clearly, under its Charter, MIAA does not have capital stock that is divided into shares. Section 3 of the Corporation Code10 defines a stock corporation as one whose capital stock is divided into shares and x x x authorized to distribute to the holders of such shares dividends x x x. MIAA has capital but it is not divided into shares of stock. MIAA has no stockholders or voting shares. Hence, MIAA is not a stock corporation. MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation Code defines a non-stock corporation as one where no part of its income is distributable as dividends to its members, trustees or officers. A non-stock corporation must have members. Even if we assume that the Government is considered as the sole member of MIAA, this will not make MIAA a non-stock corporation. Non-stock corporations cannot distribute any part of their income to their members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross operating income to the National Treasury.11 This prevents MIAA from qualifying as a non-stock corporation. Section 88 of the Corporation Code provides that non-stock corporations are organized for charitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like chambers. MIAA is not
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organized for any of these purposes. MIAA, a public utility, is organized to operate an international and domestic airport for public use. Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a government-owned or controlled corporation. What then is the legal status of MIAA within the National Government? MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental functions. MIAA is like any other government instrumentality, the only difference is that MIAA is vested with corporate powers. Section 2(10) of the Introductory Provisions of the Administrative Code defines a government instrumentality as follows: SEC. 2. General Terms Defined.x x x x (10) Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. x x x (Emphasis supplied) When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only governmental but also corporate powers. Thus, MIAA exercises the governmental powers of eminent domain,12 police authority13 and the levying of fees and charges.14 At the same time, MIAA exercises all the powers of a corporation under the Corporation Law, insofar as these powers are not inconsistent with the provisions of this Executive Order.15 Likewise, when the law makes a government instrumentality operationally autonomous, the instrumentality remains part of the National Government machinery although not integrated with the department framework. The MIAA Charter expressly states that transforming MIAA into a separate and autonomous body16 will make its operation more financially viable.17 Many government instrumentalities are vested with corporate powers but they do not become stock or non-stock corporations, which is a necessary condition before an agency or instrumentality is deemed a government-owned or controlled corporation. Examples are the Mactan International Airport Authority, the Philippine Ports Authority, the University of the Philippines and Bangko

Sentral ng Pilipinas. All these government instrumentalities exercise corporate powers but they are not organized as stock or non-stock corporations as required by Section 2(13) of the Introductory Provisions of the Administrative Code. These government instrumentalities are sometimes loosely called government corporate entities. However, they are not government-owned or controlled corporations in the strict sense as understood under the Administrative Code, which is the governing law defining the legal relationship and status of government entities. A government instrumentality like MIAA falls under Section 133(o) of the Local Government Code, which states: SEC. 133. Common Limitations on the Taxing Powers of Local Government Units.Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: xxxx (o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities and local government units. (Emphasis and italics supplied) Section 133(o) recognizes the basic principle that local governments cannot tax the national government, which historically merely delegated to local governments the power to tax. While the 1987 Constitution now includes taxation as one of the powers of local governments, local governments may only exercise such power subject to such guidelines and limitations as the Congress may provide.18 When local governments invoke the power to tax on national government instrumentalities, such power is construed strictly against local governments. The rule is that a tax is never presumed and there must be clear language in the law imposing the tax. Any doubt whether a person, article or activity is taxable is resolved against taxation. This rule applies with greater force when local governments seek to tax national government instrumentalities. Another rule is that a tax exemption is strictly construed against the taxpayer claiming the exemption. However, when Congress grants an exemption to a national government instrumentality from local taxation, such exemption is construed liberally in favor of the national government instrumentality. As this Court declared in Maceda v. Macaraig, Jr.:
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The reason for the rule does not apply in the case of exemptions running to the benefit of the government itself or its agencies. In such case the practical effect of an exemption is merely to reduce the amount of money that has to be handled by government in the course of its operations. For these reasons, provisions granting exemptions to government agencies may be construed liberally, in favor of non tax-liability of such agencies.19 There is, moreover, no point in national and local governments taxing each other, unless a sound and compelling policy requires such transfer of public funds from one government pocket to another. There is also no reason for local governments to tax national government instrumentalities for rendering essential public services to inhabitants of local governments. The only exception is when the legislature clearly intended to tax government instrumentalities for the delivery of essential public services for sound and compelling policy considerations. There must be express language in the law empowering local governments to tax national government instrumentalities. Any doubt whether such power exists is resolved against local governments. Thus, Section 133 of the Local Government Code states that unless otherwise provided in the Code, local governments cannot tax national government instrumentalities. As this Court held in Basco v. Philippine Amusements and Gaming Corporation: The states have no power by taxation or otherwise, to retard, impede, burden or in any manner control the operation of constitutional laws enacted by Congress to carry into execution the powers vested in the federal government. (Mc Culloch v. Maryland, 4 Wheat 316, 4 L Ed. 579) This doctrine emanates from the supremacy of the National Government over local governments. Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of power on the part of the States to touch, in that way (taxation) at least, the instrumentalities of the United States (Johnson v. Maryland, 254 US 51) and it can be agreed that no state or political subdivision can regulate a federal instrumentality in such a way as to prevent it from consummating its federal responsibilities, or even to seriously burden it in the accomplishment of them. (Antieau, Modern Constitutional Law, Vol. 2, p. 140, emphasis supplied)

Otherwise, mere creatures of the State can defeat National policies thru extermination of what local authorities may perceive to be undesirable activities or enterprise using the power to tax as a tool for regulation (U.S. v. Sanchez, 340 US 42). The power to tax which was called by Justice Marshall as the power to destroy (Mc Culloch v. Maryland, supra) cannot be allowed to defeat an instrumentality or creation of the very entity which has the inherent power to wield it.20 2.Airport Lands and Buildings of MIAA are Owned by the Republic a.Airport Lands and Buildings are of Public Dominion The Airport Lands and Buildings of MIAA are property of public dominion and therefore owned by the State or the Republic of the Philippines. The Civil Code provides: ARTICLE 419. Property is either of public dominion or of private ownership. ARTICLE 420. The following things are property of public dominion: (1)Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character; (2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. (Emphasis supplied) ARTICLE 421. All other property of the State, which is not of the character stated in the preceding article, is patrimonial property. ARTICLE 422. Property of public dominion, when no longer intended for public use or for public service, shall form part of the patrimonial property of the State. No one can dispute that properties of public dominion mentioned in Article 420 of the Civil Code, like roads, canals, rivers, torrents, ports and bridges constructed by the State, are owned by the State. The term ports includes seaports and airports. The MIAA Airport Lands and Buildings constitute a port constructed by the State. Under Article 420 of the Civil Code, the MIAA Airport Lands and Buildings are properties of public dominion and thus owned by the State or the Republic of the Philippines.
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The Airport Lands and Buildings are devoted to public use because they are used by the public for international and domestic travel and transportation. The fact that the MIAA collects terminal fees and other charges from the public does not remove the character of the Airport Lands and Buildings as properties for public use. The operation by the government of a tollway does not change the character of the road as one for public use. Someone must pay for the maintenance of the road, either the public indirectly through the taxes they pay the government, or only those among the public who actually use the road through the toll fees they pay upon using the road. The tollway system is even a more efficient and equitable manner of taxing the public for the maintenance of public roads. The charging of fees to the public does not determine the character of the property whether it is of public dominion or not. Article 420 of the Civil Code defines property of public dominion as one intended for public use. Even if the government collects toll fees, the road is still intended for public use if anyone can use the road under the same terms and conditions as the rest of the public. The charging of fees, the limitation on the kind of vehicles that can use the road, the speed restrictions and other conditions for the use of the road do not affect the public character of the road. The terminal fees MIAA charges to passengers, as well as the landing fees MIAA charges to airlines, constitute the bulk of the income that maintains the operations of MIAA. The collection of such fees does not change the character of MIAA as an airport for public use. Such fees are often termed users tax. This means taxing those among the public who actually use a public facility instead of taxing all the public including those who never use the particular public facility. A users tax is more equitablea principle of taxation mandated in the 1987 Constitution.21 The Airport Lands and Buildings of MIAA, which its Charter calls the principal airport of the Philippines for both international and domestic air traffic,22 are properties of public dominion because they are intended for public use. As properties of public dominion, they indisputably belong to the State or the Republic of the Philippines. b.Airport Lands and Buildings are Outside the Commerce of Man The Airport Lands and Buildings of MIAA are devoted to public use and thus are properties of public dominion. As properties of public dominion, the Airport Lands and Buildings are outside the commerce of man. The Court has ruled repeatedly that properties of public dominion are outside the commerce of

man. As early as 1915, this Court already ruled in Municipality of Cavite v. Rojas that properties devoted to public use are outside the commerce of man, thus: According to article 344 of the Civil Code: Property for public use in provinces and in towns comprises the provincial and town roads, the squares, streets, fountains, and public waters, the promenades, and public works of general service supported by said towns or provinces. The said Plaza Soledad being a promenade for public use, the municipal council of Cavite could not in 1907 withdraw or exclude from public use a portion thereof in order to lease it for the sole benefit of the defendant Hilaria Rojas. In leasing a portion of said plaza or public place to the defendant for private use the plaintiff municipality exceeded its authority in the exercise of its powers by executing a contract over a thing of which it could not dispose, nor is it empowered so to do. The Civil Code, article 1271, prescribes that everything which is not outside the commerce of man may be the object of a contract, and plazas and streets are outside of this commerce, as was decided by the supreme court of Spain in its decision of February 12, 1895, which says: Communal things that cannot be sold because they are by their very nature outside of commerce are those for public use, such as the plazas, streets, common lands, rivers, fountains, etc. (Emphasis supplied) 23 Again in Espiritu v. Municipal Council, the Court declared that properties of public dominion are outside the commerce of man: x x x Town plazas are properties of public dominion, to be devoted to public use and to be made available to the public in general. They are outside the commerce of man and cannot be disposed of or even leased by the municipality to private parties. While in case of war or during an emergency, town plazas may be occupied temporarily by private individuals, as was done and as was tolerated by the Municipality of Pozorrubio, when the emergency has ceased, said temporary occupation or use must also cease, and the town officials should see to it that the town plazas should ever be kept open to the public and free from encumbrances or illegal private constructions.24 (Emphasis supplied) The Court has also ruled that property of public dominion, being outside the commerce of man, cannot be the subject of an auction sale.25
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Properties of public dominion, being for public use, are not subject to levy, encumbrance or disposition through public or private sale. Any encumbrance, levy on execution or auction sale of any property of public dominion is void for being contrary to public policy. Essential public services will stop if properties of public dominion are subject to encumbrances, foreclosures and auction sale. This will happen if the City of Paraaque can foreclose and compel the auction sale of the 600-hectare runway of the MIAA for non-payment of real estate tax. Before MIAA can encumber26 the Airport Lands and Buildings, the President must first withdraw from public use the Airport Lands and Buildings. Sections 83 and 88 of the Public Land Law or Commonwealth Act No. 141, which remains to this day the existing general law governing the classification and disposition of lands of the public domain other than timber and mineral lands,27 provide: SECTION 83. Upon the recommendation of the Secretary of Agriculture and Natural Resources, the President may designate by proclamation any tract or tracts of land of the public domain as reservations for the use of the Republic of the Philippines or of any of its branches, or of the inhabitants thereof, in accordance with regulations prescribed for this purposes, or for quasi-public uses or purposes when the public interest requires it, including reservations for highways, rights of way for railroads, hydraulic power sites, irrigation systems, communal pastures or lequas communales, public parks, public quarries, public fishponds, working mens village and other improvements for the public benefit. SECTION 88. The tract or tracts of land reserved under the provisions of Section eighty-three shall be non-alienable and shall not be subject to occupation, entry, sale, lease, or other disposition until again declared alienable under the provisions of this Act or by proclamation of the President. (Emphasis and italics supplied) Thus, unless the President issues a proclamation withdrawing the Airport Lands and Buildings from public use, these properties remain properties of public dominion and are inalienable. Since the Airport Lands and Buildings are inalienable in their present status as properties of public dominion, they are not subject to levy on execution or foreclosure sale. As long as the Airport Lands and Buildings are reserved for public use, their ownership remains with the State or the Republic of the Philippines.

The authority of the President to reserve lands of the public domain for public use, and to withdraw such public use, is reiterated in Section 14, Chapter 4, Title I, Book III of the Administrative Code of 1987, which states: SEC. 14. Power to Reserve Lands of the Public and Private Domain of the Government.(1) The President shall have the power to reserve for settlement or public use, and for specific public purposes, any of the lands of the public domain, the use of which is not otherwise directed by law. The reserved land shall thereafter remain subject to the specific public purpose indicated until otherwise provided by law or proclamation; x x x x. (Emphasis supplied) There is no question, therefore, that unless the Airport Lands and Buildings are withdrawn by law or presidential proclamation from public use, they are properties of public dominion, owned by the Republic and outside the commerce of man. c.MIAA is a Mere Trustee of the Republic MIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic. Section 48, Chapter 12, Book I of the Administrative Code allows instrumentalities like MIAA to hold title to real properties owned by the Republic, thus: SEC. 48. Official Authorized to Convey Real Property.Whenever real property of the Government is authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the government by the following: (1) For property belonging to and titled in the name of the Republic of the Philippines, by the President, unless the authority therefor is expressly vested by law in another officer. (2)For property belonging to the Republic of the Philippines but titled in the name of any political subdivision or of any corporate agency or instrumentality, by the executive head of the agency or instrumentality. (Emphasis supplied) In MIAAs case, its status as a mere trustee of the Airport Lands and Buildings is clearer because even its executive head cannot sign the deed of conveyance on behalf of the Republic. Only the President of the Republic can sign such deed of conveyance.28 d.Transfer to MIAA was Meant to Implement a Reorganization
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The MIAA Charter, which is a law, transferred to MIAA the title to the Airport Lands and Buildings from the Bureau of Air Transportation of the Department of Transportation and Communications. The MIAA Charter provides: SECTION 3. Creation of the Manila International Airport Author-ity.x x x x The land where the Airport is presently located as well as the surrounding land area of approximately six hundred hectares, are hereby transferred, conveyed and assigned to the ownership and administration of the Authority, subject to existing rights, if any. The Bureau of Lands and other appropriate government agencies shall undertake an actual survey of the area transferred within one year from the promulgation of this Executive Order and the corresponding title to be issued in the name of the Authority. Any portion thereof shall not be disposed through sale or through any other mode unless specifically approved by the President of the Philippines. (Emphasis supplied) SECTION 22. Transfer of Existing Facilities and Intangible Assets.All existing public airport facilities, runways, lands, buildings and other property, movable or immovable, belonging to the Airport, and all assets, powers, rights, interests and privileges belonging to the Bureau of Air Transportation relating to airport works or air operations, including all equipment which are necessary for the operation of crash fire and rescue facilities, are hereby transferred to the Authority. (Emphasis supplied) SECTION 25. Abolition of the Manila International Airport as a Division in the Bureau of Air Transportation and Transitory Provisions.The Manila International Airport including the Manila Domestic Airport as a division under the Bureau of Air Transportation is hereby abolished. x x x x. The MIAA Charter transferred the Airport Lands and Buildings to MIAA without the Republic receiving cash, promissory notes or even stock since MIAA is not a stock corporation. The whereas clauses of the MIAA Charter explain the rationale for the transfer of the Airport Lands and Buildings to MIAA, thus: WHEREAS, the Manila International Airport as the principal airport of the Philippines for both international and domestic air traffic, is required to provide standards of airport accommodation and service comparable with the best airports in the world;

WHEREAS, domestic and other terminals, general aviation and other facilities, have to be upgraded to meet the current and future air traffic and other demands of aviation in Metro Manila; WHEREAS, a management and organization study has indicated that the objectives of providing high standards of accommodation and service within the context of a financially viable operation, will best be achieved by a separate and autonomous body; and WHEREAS, under Presidential Decree No. 1416, as amended by Presidential Decree No. 1772, the President of the Philippines is given continuing authority to reorganize the National Government, which authority includes the creation of new entities, agencies and instrumentalities of the Government[.] (Emphasis supplied) The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to MIAA was not meant to transfer beneficial ownership of these assets from the Republic to MIAA. The purpose was merely to reorganize a division in the Bureau of Air Transportation into a separate and autonomous body. The Republic remains the beneficial owner of the Airport Lands and Buildings. MIAA itself is owned solely by the Republic. No party claims any ownership rights over MIAAs assets adverse to the Republic. The MIAA Charter expressly provides that the Airport Lands and Buildings shall not be disposed through sale or through any other mode unless specifically approved by the President of the Philippines. This only means that the Republic retained the beneficial ownership of the Airport Lands and Buildings because under Article 428 of the Civil Code, only the owner has the right to x x x dispose of a thing. Since MIAA cannot dispose of the Airport Lands and Buildings, MIAA does not own the Airport Lands and Buildings. At any time, the President can transfer back to the Republic title to the Airport Lands and Buildings without the Republic paying MIAA any consideration. Under Section 3 of the MIAA Charter, the President is the only one who can authorize the sale or disposition of the Airport Lands and Buildings. This only confirms that the Airport Lands and Buildings belong to the Republic. e.Real Property Owned by the Republic is Not Taxable Section 234(a) of the Local Government Code exempts from real estate tax any [r]eal property owned by the Republic of the Philippines. Section 234(a) provides:
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SEC. 234. Exemptions from Real Property Tax.The following are exempted from payment of the real property tax: (a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person; x x x. (Emphasis supplied) This exemption should be read in relation with Section 133(o) of the same Code, which prohibits local governments from imposing [t]axes, fees or charges of any kind on the National Government, its agencies and instrumentalities x x x. The real properties owned by the Republic are titled either in the name of the Republic itself or in the name of agencies or instrumentalities of the National Government. The Administrative Code allows real property owned by the Republic to be titled in the name of agencies or instrumentalities of the national government. Such real properties remain owned by the Republic and continue to be exempt from real estate tax. The Republic may grant the beneficial use of its real property to an agency or instrumentality of the national government. This happens when title of the real property is transferred to an agency or instrumentality even as the Republic remains the owner of the real property. Such arrangement does not result in the loss of the tax exemption. Section 234(a) of the Local Government Code states that real property owned by the Republic loses its tax exemption only if the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person. MIAA, as a government instrumentality, is not a taxable person under Section 133(o) of the Local Government Code. Thus, even if we assume that the Republic has granted to MIAA the beneficial use of the Airport Lands and Buildings, such fact does not make these real properties subject to real estate tax. However, portions of the Airport Lands and Buildings that MIAA leases to private entities are not exempt from real estate tax. For example, the land area occupied by hangars that MIAA leases to private corporations is subject to real estate tax. In such a case, MIAA has granted the beneficial use of such land area for a consideration to a taxable person and therefore such land area is subject to real estate tax. In Lung Center of the Philippines v. Quezon City, the Court ruled: "Accordingly, we hold that the portions of the land leased to private entities as well as those parts of the hospital leased to private individuals are not exempt

from such taxes. On the other hand, the portions of the land occupied by the hospital and portions of the hospital used for its patients, whether paying or non-paying, are exempt from real property taxes.29 3.Refutation of Arguments of Minority The minority asserts that the MIAA is not exempt from real estate tax because Section 193 of the Local Government Code of 1991 withdrew the tax exemption of all persons, whether natural or juridical upon the effectivity of the Code. Section 193 provides: SEC. 193. Withdrawal of Tax Exemption Privileges.Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including governmentowned or controlled corporations, except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions are hereby withdrawn upon effectivity of this Code. (Emphasis supplied) The minority states that MIAA is indisputably a juridical person. The minority argues that since the Local Government Code withdrew the tax exemption of all juridical persons, then MIAA is not exempt from real estate tax. Thus, the minority declares: It is evident from the quoted provisions of the Local Government Code that the withdrawn exemptions from realty tax cover not just GOCCs, but all persons. To repeat, the provisions lay down the explicit proposition that the withdrawal of realty tax exemption applies to all persons. The reference to or the inclusion of GOCCs is only clarificatory or illustrative of the explicit provision. The term All persons encompasses the two classes of persons recognized under our laws, natural and juridical persons. Obviously, MIAA is not a natural person. Thus, the determinative test is not just whether MIAA is a GOCC, but whether MIAA is a juridical person at all. (Emphasis and underscoring in the original) The minority posits that the determinative test whether MIAA is exempt from local taxation is its statuswhether MIAA is a juridical person or not. The minority also insists that Sections 193 and 234 may be examined in isolation from Section 133(o) to ascertain MIAAs claim of exemption. The argument of the minority is fatally flawed. Section 193 of the Local Government Code expressly withdrew the tax exemption of all juridical persons
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[u]nless otherwise provided in this Code. Now, Section 133(o) of the Local Government Code expressly provides otherwise, specifically prohibiting local governments from imposing any kind of tax on national government instrumentalities. Section 133(o) states: SEC. 133. Common Limitations on the Taxing Powers of Local Government Units.Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: xxxx (o) Taxes, fees or charges of any kinds on the National Government, its agencies and instrumentalities, and local government units. (Emphasis and italics supplied) By express mandate of the Local Government Code, local governments cannot impose any kind of tax on national government instrumentalities like the MIAA. Local governments are devoid of power to tax the national government, its agencies and instrumentalities. The taxing powers of local governments do not extend to the national government, its agencies and instrumentalities, [u]nless otherwise provided in this Code as stated in the saving clause of Section 133. The saving clause refers to Section 234(a) on the exception to the exemption from real estate tax of real property owned by the Republic. The minority, however, theorizes that unless exempted in Section 193 itself, all juridical persons are subject to tax by local governments. The minority insists that the juridical persons exempt from local taxation are limited to the three classes of entities specifically enumerated as exempt in Section 193. Thus, the minority states: x x x Under Section 193, the exemption is limited to (a) local water districts; (b) cooperatives duly registered under Republic Act No. 6938; and (c) non-stock and non-profit hospitals and educational institutions. It would be belaboring the obvious why the MIAA does not fall within any of the exempt entities under Section 193. (Emphasis supplied) The minoritys theory directly contradicts and completely negates Section 133(o) of the Local Government Code. This theory will result in gross absurdities. It will make the national government, which itself is a juridical person, subject to tax by local governments since the national government is not included in the enumeration of exempt entities in Section 193. Under this

theory, local governments can impose any kind of local tax, and not only real estate tax, on the national government. Under the minoritys theory, many national government instrumentalities with juridical personalities will also be subject to any kind of local tax, and not only real estate tax. Some of the national government instrumentalities vested by law with juridical personalities are: Bangko Sentral ng Pilipinas,30 Philippine Rice Research Institute,31 Laguna Lake Development Authority,32 Fisheries Development Authority,33 Bases Conversion Development Authority,34 Philippine Ports Authority,35 Cagayan de Oro Port Authority,36 San Fernando Port Authority,37 Cebu Port Authority,38 and Philippine National Railways.39 The minoritys theory violates Section 133(o) of the Local Government Code which expressly prohibits local governments from imposing any kind of tax on national government instrumentalities. Section 133(o) does not distinguish between national government instrumentalities with or without juridical personalities. Where the law does not distinguish, courts should not distinguish. Thus, Section 133(o) applies to all national government instrumentalities, with or without juridical personalities. The determinative test whether MIAA is exempt from local taxation is not whether MIAA is a juridical person, but whether it is a national government instrumentality under Section 133(o) of the Local Government Code. Section 133(o) is the specific provision of law prohibiting local governments from imposing any kind of tax on the national government, its agencies and instrumentalities. Section 133 of the Local Government Code starts with the saving clause [u]nless otherwise provided in this Code. This means that unless the Local Government Code grants an express authorization, local governments have no power to tax the national government, its agencies and instrumentalities. Clearly, the rule is local governments have no power to tax the national government, its agencies and instrumentalities. As an exception to this rule, local governments may tax the national government, its agencies and instrumentalities only if the Local Government Code expressly so provides. The saving clause in Section 133 refers to the exception to the exemption in Section 234(a) of the Code, which makes the national government subject to real estate tax when it gives the beneficial use of its real properties to a taxable entity. Section 234(a) of the Local Government Code provides: SEC. 234. Exemptions from Real Property Tax.The following are exempted from payment of the real property tax:
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(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person. x x x. (Emphasis supplied) Under Section 234(a), real property owned by the Republic is exempt from real estate tax. The exception to this exemption is when the government gives the beneficial use of the real property to a taxable entity. The exception to the exemption in Section 234(a) is the only instance when the national government, its agencies and instrumentalities are subject to any kind of tax by local governments. The exception to the exemption applies only to real estate tax and not to any other tax. The justification for the exception to the exemption is that the real property, although owned by the Republic, is not devoted to public use or public service but devoted to the private gain of a taxable person. The minority also argues that since Section 133 precedes Sections 193 and 234 of the Local Government Code, the later provisions prevail over Section 133. Thus, the minority asserts: x x x Moreover, sequentially Section 133 antecedes Section 193 and 234. Following an accepted rule of construction, in case of conflict the subsequent provisions should prevail. Therefore, MIAA, as a juridical person, is subject to real property taxes, the general exemptions attaching to instrumentalities under Section 133(o) of the Local Government Code being qualified by Sections 193 and 234 of the same law. (Emphasis supplied) The minority assumes that there is an irreconcilable conflict between Section 133 on one hand, and Sections 193 and 234 on the other. No one has urged that there is such a conflict, much less has any one presented a persuasive argument that there is such a conflict. The minoritys assumption of an irreconcilable conflict in the statutory provisions is an egregious error for two reasons. First, there is no conflict whatsoever between Sections 133 and 193 because Section 193 expressly admits its subordination to other provisions of the Code when Section 193 states [u]nless otherwise provided in this Code. By its own words, Section 193 admits the superiority of other provisions of the Local Government Code that limit the exercise of the taxing power in Section 193. When a provision of law grants a power but withholds such power on certain

matters, there is no conflict between the grant of power and the withholding of power. The grantee of the power simply cannot exercise the power on matters withheld from its power. Second, Section 133 is entitled Common Limitations on the Taxing Powers of Local Government Units. Section 133 limits the grant to local governments of the power to tax, and not merely the exercise of a delegated power to tax. Section 133 states that the taxing powers of local governments shall not extend to the levy of any kind of tax on the national government, its agencies and instrumentalities. There is no clearer limitation on the taxing power than this. Since Section 133 prescribes the common limitations on the taxing powers of local governments, Section 133 logically prevails over Section 193 which grants local governments such taxing powers. By their very meaning and purpose, the common limitations on the taxing power prevail over the grant or exercise of the taxing power. If the taxing power of local governments in Section 193 prevails over the limitations on such taxing power in Section 133, then local governments can impose any kind of tax on the national government, its agencies and instrumentalitiesa gross absurdity. Local governments have no power to tax the national government, its agencies and instrumentalities, except as otherwise provided in the Local Government Code pursuant to the saving clause in Section 133 stating [u]nless otherwise provided in this Code. This exceptionwhich is an exception to the exemption of the Republic from real estate tax imposed by local governmentsrefers to Section 234(a) of the Code. The exception to the exemption in Section 234(a) subjects real property owned by the Republic, whether titled in the name of the national government, its agencies or instrumentalities, to real estate tax if the beneficial use of such property is given to a taxable entity. The minority also claims that the definition in the Administrative Code of the phrase government-owned or controlled corporation is not controlling. The minority points out that Section 2 of the Introductory Provisions of the Administrative Code admits that its definitions are not controlling when it provides: SEC. 2. General Terms Defined.Unless the specific words of the text, or the context as a whole, or a particular statute, shall require a different meaning: xxxx
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The minority then concludes that reliance on the Administrative Code definition is flawed. The minoritys argument is a non sequitur. True, Section 2 of the Administrative Code recognizes that a statute may require a different meaning than that defined in the Administrative Code. However, this does not automatically mean that the definition in the Administrative Code does not apply to the Local Government Code. Section 2 of the Administrative Code clearly states that unless the specific words x x x of a particular statute shall require a different meaning, the definition in Section 2 of the Administrative Code shall apply. Thus, unless there is specific language in the Local Government Code defining the phrase government-owned or controlled corporation differently from the definition in the Administrative Code, the definition in the Administrative Code prevails. The minority does not point to any provision in the Local Government Code defining the phrase government-owned or controlled corporation differently from the definition in the Administrative Code. Indeed, there is none. The Local Government Code is silent on the definition of the phrase government-owned or controlled corporation. The Administrative Code, however, expressly defines the phrase government-owned or controlled corporation. The inescapable conclusion is that the Administrative Code definition of the phrase government-owned or controlled corporation applies to the Local Government Code. The third whereas clause of the Administrative Code states that the Code incorporates in a unified document the major structural, functional and procedural principles and rules of governance. Thus, the Administrative Code is the governing law defining the status and relationship of government departments, bureaus, offices, agencies and instrumentalities. Unless a statute expressly provides for a different status and relationship for a specific government unit or entity, the provisions of the Administrative Code prevail. The minority also contends that the phrase government-owned or controlled corporation should apply only to corporations organized under the Corporation Code, the general incorporation law, and not to corporations created by special charters. The minority sees no reason why government corporations with special charters should have a capital stock. Thus, the minority declares: I submit that the definition of government-owned or controlled corporations under the Administrative Code refer to those corporations owned by the government or its instrumentalities which are created not by legislative

enactment, but formed and organized under the Corporation Code through registration with the Securities and Exchange Commission. In short, these are GOCCs without original charters. xxxx It might as well be worth pointing out that there is no point in requiring a capital structure for GOCCs whose full ownership is limited by its charter to the State or Republic. Such GOCCs are not empowered to declare dividends or alienate their capital shares. The contention of the minority is seriously flawed. It is not in accord with the Constitution and existing legislations. It will also result in gross absurdities. First, the Administrative Code definition of the phrase government-owned or controlled corporation does not distinguish between one incorporated under the Corporation Code or under a special charter. Where the law does not distinguish, courts should not distinguish. Second, Congress has created through special charters several governmentowned corporations organized as stock corporations. Prime examples are the Land Bank of the Philippines and the Development Bank of the Philippines. The special charter40 of the Land Bank of the Philippines provides: SECTION 81. Capital.The authorized capital stock of the Bank shall be nine billion pesos, divided into seven hundred and eighty million common shares with a par value of ten pesos each, which shall be fully subscribed by the Government, and one hundred and twenty million preferred shares with a par value of ten pesos each, which shall be issued in accordance with the provisions of Sections seventy-seven and eighty-three of this Code. (Emphasis supplied) Likewise, the special charter41 of the Development Bank of the Philippines provides: SECTION 7. Authorized Capital StockPar value.The capital stock of the Bank shall be Five Billion Pesos to be divided into Fifty Million common shares with par value of P100 per share. These shares are available for subscription by the National Government. Upon the effectivity of this Charter, the National Government shall subscribe to Twenty-Five Million common shares of stock worth Two Billion Five Hundred Million which shall be deemed paid for by the

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Government with the net asset values of the Bank remaining after the transfer of assets and liabilities as provided in Section 30 hereof. (Emphasis supplied) Other government-owned corporations organized as stock corporations under their special charters are the Philippine Crop Insurance Corporation,42 Philippine International Trading Corporation,43 and the Philippine National Bank44 before it was reorganized as a stock corporation under the Corporation Code. All these government-owned corporations organized under special charters as stock corporations are subject to real estate tax on real properties owned by them. To rule that they are not government-owned or controlled corporations because they are not registered with the Securities and Exchange Commission would remove them from the reach of Section 234 of the Local Government Code, thus exempting them from real estate tax. Third, the government-owned or controlled corporations created through special charters are those that meet the two conditions prescribed in Section 16, Article XII of the Constitution. The first condition is that the governmentowned or controlled corporation must be established for the common good. The second condition is that the government-owned or controlled corporation must meet the test of economic viability. Section 16, Article XII of the 1987 Constitution provides: SEC. 16. The Congress shall not, except by general law, provide for the formation, organization, or regulation of private corporations. Governmentowned or controlled corporations may be created or established by special charters in the interest of the common good and subject to the test of economic viability. (Emphasis and italics supplied) The Constitution expressly authorizes the legislature to create governmentowned or controlled corporations through special charters only if these entities are required to meet the twin conditions of common good and economic viability. In other words, Congress has no power to create government-owned or controlled corporations with special charters unless they are made to comply with the two conditions of common good and economic viability. The test of economic viability applies only to government-owned or controlled corporations that perform economic or commercial activities and need to compete in the market place. Being essentially economic vehicles of the State for the common goodmeaning for economic development purposesthese governmentowned or controlled corporations with special charters are usually organized as stock corporations just like ordinary private corporations.

In contrast, government instrumentalities vested with corporate powers and performing governmental or public functions need not meet the test of economic viability. These instrumentalities perform essential public services for the common good, services that every modern State must provide its citizens. These instrumentalities need not be economically viable since the government may even subsidize their entire operations. These instrumentalities are not the government-owned or controlled corporations referred to in Section 16, Article XII of the 1987 Constitution. Thus, the Constitution imposes no limitation when the legislature creates government instrumentalities vested with corporate powers but performing essential governmental or public functions. Congress has plenary authority to create government instrumentalities vested with corporate powers provided these instrumentalities perform essential government functions or public services. However, when the legislature creates through special charters corporations that perform economic or commercial activities, such entities known as government-owned or controlled corporationsmust meet the test of economic viability because they compete in the market place. This is the situation of the Land Bank of the Philippines and the Development Bank of the Philippines and similar government-owned or controlled corporations, which derive their income to meet operating expenses solely from commercial transactions in competition with the private sector. The intent of the Constitution is to prevent the creation of government-owned or controlled corporations that cannot survive on their own in the market place and thus merely drain the public coffers. Commissioner Blas F. Ople, proponent of the test of economic viability, explained to the Constitutional Commission the purpose of this test, as follows: MR. OPLE: Madam President, the reason for this concern is really that when the government creates a corporation, there is a sense in which this corporation becomes exempt from the test of economic performance. We know what happened in the past. If a government corporation loses, then it makes its claim upon the taxpayers money through new equity infusions from the government and what is always invoked is the common good. That is the reason why this year, out of a budget of P115 billion for the entire government, about P28 billion of this will go into equity infusions to support a few government financial institutions. And this is all taxpayers money which could have been relocated to agrarian reform, to social services like health and

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education, to augment the salaries of grossly underpaid public employees. And yet this is all going down the drain. Therefore, when we insert the phrase ECONOMIC VIABILITY together with the common good, this becomes a restraint on future enthusiasts for state capitalism to excuse themselves from the responsibility of meeting the market test so that they become viable. And so, Madam President, I reiterate, for the committees consideration and I am glad that I am joined in this proposal by Commissioner Foz, the insertion of the standard of ECONOMIC VIABILITY OR THE ECONOMIC TEST, together with the common good.45 Father Joaquin G. Bernas, a leading member of the Constitutional Commission, explains in his textbook The 1987 Constitution of the Republic of the Philippines: A Commentary: The second sentence was added by the 1986 Constitutional Commission. The significant addition, however, is the phrase in the interest of the common good and subject to the test of economic viability. The addition includes the ideas that they must show capacity to function efficiently in business and that they should not go into activities which the private sector can do better. Moreover, economic viability is more than financial viability but also includes capability to make profit and generate benefits not quantifiable in financial terms.46 (Emphasis supplied) Clearly, the test of economic viability does not apply to government entities vested with corporate powers and performing essential public services. The State is obligated to render essential public services regardless of the economic viability of providing such service. The non-economic viability of rendering such essential public service does not excuse the State from withholding such essential services from the public. However, government-owned or controlled corporations with special charters, organized essentially for economic or commercial objectives, must meet the test of economic viability. These are the government-owned or controlled corporations that are usually organized under their special charters as stock corporations, like the Land Bank of the Philippines and the Development Bank of the Philippines. These are the government-owned or controlled corporations, along with government-owned or controlled corporations organized under the Corporation Code, that fall under the definition of governmentowned or controlled corporations in Section 2(10) of the Administrative Code.

The MIAA need not meet the test of economic viability because the legislature did not create MIAA to compete in the market place. MIAA does not compete in the market place because there is no competing international airport operated by the private sector. MIAA performs an essential public service as the primary domestic and international airport of the Philippines. The operation of an international airport requires the presence of personnel from the following government agencies: 1. The Bureau of Immigration and Deportation, to document the arrival and departure of passengers, screening out those without visas or travel documents, or those with hold departure orders; 2. The Bureau of Customs, to collect import duties or enforce the ban on prohibited importations; 3. The quarantine office of the Department of Health, to enforce health measures against the spread of infectious diseases into the country; 4. The Department of Agriculture, to enforce measures against the spread of plant and animal diseases into the country; 5. The Aviation Security Command of the Philippine National Police, to prevent the entry of terrorists and the escape of criminals, as well as to secure the airport premises from terrorist attack or seizure; 6. The Air Traffic Office of the Department of Transportation and Communications, to authorize aircraft to enter or leave Philippine airspace, as well as to land on, or take off from, the airport; and 7. The MIAA, to provide the proper premisessuch as runway and buildings for the government personnel, passengers, and airlines, and to manage the airport operations. All these agencies of government perform government functions essential to the operation of an international airport. MIAA performs an essential public service that every modern State must provide its citizens. MIAA derives its revenues principally from the mandatory fees and charges MIAA imposes on passengers and airlines. The terminal fees that MIAA charges every passenger are regulatory or administrative fees47 and not income from commercial transactions.

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MIAA falls under the definition of a government instrumentality under Section 2(10) of the Introductory Provisions of the Administrative Code, which provides: SEC. 2. General Terms Defined.x x x x (10) Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. x x x (Emphasis supplied) The fact alone that MIAA is endowed with corporate powers does not make MIAA a government-owned or controlled corporation. Without a change in its capital structure, MIAA remains a government instrumentality under Section 2(10) of the Introductory Provisions of the Administrative Code. More importantly, as long as MIAA renders essential public services, it need not comply with the test of economic viability. Thus, MIAA is outside the scope of the phrase governmentowned or controlled corporations under Section 16, Article XII of the 1987 Constitution. The minority belittles the use in the Local Government Code of the phrase government-owned or controlled corporation as merely clarificatory or illustrative. This is fatal. The 1987 Constitution prescribes explicit conditions for the creation of government-owned or controlled corporations. The Administrative Code defines what constitutes a government-owned or controlled corporation. To belittle this phrase as clarificatory or illustrative is grave error. To summarize, MIAA is not a government-owned or controlled corporation under Section 2(13) of the Introductory Provisions of the Administrative Code because it is not organized as a stock or non-stock corporation. Neither is MIAA a government-owned or controlled corporation under Section 16, Article XII of the 1987 Constitution because MIAA is not required to meet the test of economic viability. MIAA is a government instrumentality vested with corporate powers and performing essential public services pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code. As a government instrumentality, MIAA is not subject to any kind of tax by local governments under Section 133(o) of the Local Government Code. The exception to the exemption in Section 234(a) does not apply to MIAA because MIAA is not a taxable entity under the Local Government Code. Such exception applies only if the beneficial use of real property owned by the Republic is given to a taxable entity.

Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and thus are properties of public dominion. Properties of public dominion are owned by the State or the Republic. Article 420 of the Civil Code provides: Art. 420. The following things are property of public dominion: (1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character; (2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. (Emphasis supplied) The term ports x x x constructed by the State includes airports and seaports. The Airport Lands and Buildings of MIAA are intended for public use, and at the very least intended for public service. Whether intended for public use or public service, the Airport Lands and Buildings are properties of public dominion. As properties of public dominion, the Airport Lands and Buildings are owned by the Republic and thus exempt from real estate tax under Section 234(a) of the Local Government Code. 4. Conclusion Under Section 2(10) and (13) of the Introductory Provisions of the Administrative Code, which governs the legal relation and status of government units, agencies and offices within the entire government machinery, MIAA is a government instrumentality and not a government-owned or controlled corporation. Under Section 133(o) of the Local Government Code, MIAA as a government instrumentality is not a taxable person because it is not subject to [t]axes, fees or charges of any kind by local governments. The only exception is when MIAA leases its real property to a taxable person as provided in Section 234(a) of the Local Government Code, in which case the specific real property leased becomes subject to real estate tax. Thus, only portions of the Airport Lands and Buildings leased to taxable persons like private parties are subject to real estate tax by the City of Paraaque. Under Article 420 of the Civil Code, the Airport Lands and Buildings of MIAA, being devoted to public use, are properties of public dominion and thus owned by the State or the Republic of the Philippines. Article 420 specifically mentions ports x x x constructed by the
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State, which includes public airports and seaports, as properties of public dominion and owned by the Republic. As properties of public dominion owned by the Republic, there is no doubt whatsoever that the Airport Lands and Buildings are expressly exempt from real estate tax under Section 234(a) of the Local Government Code. This Court has also repeatedly ruled that properties of public dominion are not subject to execution or foreclosure sale. WHEREFORE, we GRANT the petition. We SET ASIDE the assailed Resolutions of the Court of Appeals of 5 October 2001 and 27 September 2002 in CA-G.R. SP No. 66878. We DECLARE the Airport Lands and Buildings of the Manila International Airport Authority EXEMPT from the real estate tax imposed by the City of Paraaque. We declare VOID all the real estate tax assessments, including the final notices of real estate tax delinquencies, issued by the City of Paraaque on the Airport Lands and Buildings of the Manila International Airport Authority, except for the portions that the Manila International Airport Authority has leased to private parties. We also declare VOID the assailed auction sale, and all its effects, of the Airport Lands and Buildings of the Manila International Airport Authority. No costs. SO ORDERED. Panganiban (C.J.), Puno, Quisumbing, Ynares-Santiago, SandovalGutierrez, Corona, Carpio-Morales, Chico-Nazario, Garcia and Velasco, Jr., JJ., concur. Austria-Martinez, J., I agree with the separate opinion of J. Tin-ga. Callejo, Sr., J., I concur with the separate opinion of J. Tinga. Azcuna, J., On Leave. Tinga, J., Please see dissenting opinion.

The legally correct resolution of this petition would have had the added benefit of an utterly fair and equitable resulta recognition of the constitutional and statutory power of the City of Paraaque to impose real property taxes on the Manila International Airport Authority (MIAA), but at the same time, upholding a statutory limitation that prevents the City of Paraaque from seizing and conducting an execution sale over the real properties of MIAA. In the end, all that the City of Paraaque would hold over the MIAA is a limited lien, unenforceable as it is through the sale or disposition of MIAA properties. Not only is this the legal effect of all the relevant constitutional and statutory provisions applied to this case, it also leaves the room for negotiation for a mutually acceptable resolution between the City of Paraaque and MIAA. Instead, with blind but measured rage, the majority today veers wildly offcourse, shattering statutes and judicial precedents left and right in order to protect the precious Ming vase that is the Manila International Airport Authority (MIAA). While the MIAA is left unscathed, it is surrounded by the wreckage that once was the constitutional policy, duly enacted into law, that was local autonomy. Make no mistake, the majority has virtually declared war on the seventy nine (79) provinces, one hundred seventeen (117) cities, and one thousand five hundred (1,500) municipalities of the Philippines.1 The icing on this inedible cake is the strained and purposely vague rationale used to justify the majority opinion. Decisions of the Supreme Court are expected to provide clarity to the parties and to students of jurisprudence, as to what the law of the case is, especially when the doctrines of long standing are modified or clarified. With all due respect, the decision in this case is plainly so, so wrong on many levels. More egregious, in the majoritys resolve to spare the Manila International Airport Authority (MIAA) from liability for real estate taxes, no clear-cut rule emerges on the important question of the power of local government units (LGUs) to tax government corporations, instrumentalities or agencies. The majority would overturn sub silencio, among others, at least one dozen precedents enumerated below: 1) Mactan-Cebu International Airport Authority v. Hon. Marcos,2 the leading case penned in 1997 by recently retired Chief Justice Davide, which held that the express withdrawal by the Local Government Code of previously granted exemptions from realty taxes applied to instrumentalities and governmentowned or controlled corporations (GOCCs) such as the Mactan-Cebu International Airport Authority (MCIAA). The majority invokes the ruling in
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DISSENTING OPINION TINGA, J.:

Basco v. Pagcor,3 a precedent discredited in Mactan, and a vanguard of a doctrine so noxious to the concept of local government rule that the Local Government Code was drafted precisely to counter such philosophy. The efficacy of several rulings that expressly rely on Mactan, such as PHILRECA v. DILG Secretary,4 City Government of San Pablo v. Hon. Reyes5 is now put in question. 2) The rulings in National Power Corporation v. City of Cabanatuan,6 wherein the Court, through Justice Puno, declared that the National Power Corporation, a GOCC, is liable for franchise taxes under the Local Government Code, and succeeding cases that have relied on it such as Batangas Power Corp. v. Batangas City7 The majority now states that deems instrumentalities as defined under the Administrative Code of 1987 as purportedly beyond the reach of any form of taxation by LGUs, stating [l]ocal governments are devoid of power to tax the national government, its agencies and instrumen-talities.8 Unfortunately, using the definition employed by the majority, as provided by Section 2(d) of the Administrative Code, GOCCs are also considered as instrumentalities, thus leading to the astounding conclusion that GOCCs may not be taxed by LGUs under the Local Government Code. 3) Lung Center of the Philippines v. Quezon City,9 wherein a unanimous en banc Court held that the Lung Center of the Philippines may be liable for real property taxes. Using the majoritys reasoning, the Lung Center would be properly classified as an instrumentality which the majority now holds as exempt from all forms of local taxation.10 4) City of Davao v. RTC,11 where the Court held that the Government Service Insurance System (GSIS) was liable for real property taxes for the years 1992 to 1994, its previous exemption having been withdrawn by the enactment of the Local Government Code.12 This decision, which expressly relied on Mactan, would be directly though silently overruled by the majority. 5) The common essence of the Courts rulings in the two Philippine Ports Authority v. City of Iloilo,13 cases penned by Justices Callejo and Azcuna respectively, which relied in part on Mactan in holding the Philippine Ports Authority (PPA) liable for realty taxes, notwithstanding the fact that it is a GOCC. Based on the reasoning of the majority, the PPA cannot be considered a GOCC. The reliance of these cases on Mactan, and its rationale for holding governmental entities like the PPA liable for local government taxation is mooted by the majority.

6) The 1963 precedent of Social Security System Employees Association v. Soriano,14 which declared the Social Security Commission (SSC) as a GOCC performing proprietary functions. Based on the rationale employed by the majority, the Social Security System is not a GOCC. Or perhaps more accurately, no longer a GOCC. 7) The decision penned by Justice (now Chief Justice) Panganiban, Light Rail Transit Authority v. Central Board of Assessment.15 The characterization therein of the Light Rail Transit Authority (LRTA) as a service-oriented commercial endeavor whose patrimonial property is subject to local taxation is now rendered inconsequential, owing to the majoritys thinking that an entity such as the LRTA is itself exempt from local government taxation,16 irrespective of the functions it performs. Moreover, based on the majoritys criteria, LRTA is not a GOCC. 8) The cases of Teodoro v. National Airports Corporation17 and Civil Aeronautics Administration v. Court of Appeals.18 wherein the Court held that the predecessor agency of the MIAA, which was similarly engaged in the operation, administration and management of the Manila International Agency, was engaged in the exercise of proprietary, as opposed to sovereign functions. The majority would hold otherwise that the property maintained by MIAA is actually patrimonial, thus implying that MIAA is actually engaged in sovereign functions. 9) My own majority in Phividec Industrial Authority v. Capitol Steel,19 wherein the Court held that the Phividec Industrial Authority, a GOCC, was required to secure the services of the Office of the Government Corporate Counsel for legal representation.20 Based on the reasoning of the majority, Phividec would not be a GOCC, and the mandate of the Office of the Government Corporate Counsel extends only to GOCCs. 10) Two decisions promulgated by the Court just last month (June 2006), National Power Corporation v. Province of Isabela21 and GSIS v. City Assessor of Iloilo City.22 In the former, the Court pronounced that [a]lthough as a general rule, LGUs cannot impose taxes, fees, or charges of any kind on the National Government, its agencies and instrumentalities, this rule admits of an exception, i.e., when specific provisions of the LGC authorize the LGUs to impose taxes, fees or charges on the aforementioned entities. Yet the majority now rules that the exceptions in the LGC no longer hold, since local governments are devoid of power to tax the national government, its agencies

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and instrumentalities.23 The ruling in the latter case, which held the GSIS as liable for real property taxes, is now put in jeopardy by the majoritys ruling. There are certainly many other precedents affected, perhaps all previous jurisprudence regarding local government taxation vis-a-vis government entities, as well as any previous definitions of GOCCs, and previous distinctions between the exercise of governmental and proprietary functions (a distinction laid down by this Court as far back as 191624). What is the reason offered by the majority for overturning or modifying all these precedents and doctrines? None is given, for the majority takes comfort instead in the pretense that these precedents never existed. Only children should be permitted to subscribe to the theory that something bad will go away if you pretend hard enough that it does not exist. I. Case Should Have Been Decided Following Mactan Precedent The core issue in this case, whether the MIAA is liable to the City of Paraaque for real property taxes under the Local Government Code, has already been decided by this Court in the Mactan case, and should have been resolved by simply applying precedent. Mactan Explained A brief recall of the Mactan case is in order. The Mactan-Cebu International Airport Authority (MCIAA) claimed that it was exempt from payment of real property taxes to the City of Cebu, invoking the specific exemption granted in Section 14 of its charter, Republic Act No. 6958, and its status as an instrumentality of the government performing governmental functions.25 Particularly, MCIAA invoked Section 133 of the Local Government Code, precisely the same provision utilized by the majority as the basis for MIAAs exemption. Section 133 reads: Sec. 133. Common Limitations on the Taxing Powers of Local Government Units.Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following: xxx (o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities and local government units. (emphasis and italics supplied)

However, the Court in Mactan noted that Section 133 qualified the exemption of the National Government, its agencies and instrumentalities from local taxation with the phrase unless otherwise provided herein. It then considered the other relevant provisions of the Local Government Code, particularly the following: SEC. 193. Withdrawal of Tax Exemption Privileges.Unless otherwise provided in this Code, tax exemption or incentives granted to, or enjoyed by all persons, whether natural or juridical, including government-owned and controlled corporations, except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code.26 SECTION 232. Power to Levy Real Property Tax.A province or city or a municipality within the Metropolitan Manila area may levy an annual ad valorem tax on real property such as land, building, machinery, and other improvements not hereafter specifically exempted.27 SECTION 234. Exemptions from Real Property Tax.The following are exempted from payment of the real property tax: (a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person: (b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, non-profit or religious cemeteries and all lands, buildings, and improvements actually, directly, and exclusively used for religious charitable or educational purposes; (c) All machineries and equipment that are actually, directly and exclusively used by local water districts and government-owned and controlled corporations engaged in the distribution of water and/or generation and transmission of electric power; (d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and (e) Machinery and equipment used for pollution control and environmental protection.

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Except as provided herein, any exemption from payment of real property tax previously granted to, or presently enjoyed by, all persons, whether natural or juridical, including all government-owned or controlled corporations are hereby withdrawn upon the effectivity of this Code.28 Clearly, Section 133 was not intended to be so absolute a prohibition on the power of LGUs to tax the National Government, its agencies and instrumentalities, as evidenced by these cited provisions which otherwise provided. But what was the extent of the limitation under Section 133? This is how the Court, correctly to my mind, defined the parameters in Mactan: The foregoing sections of the LGC speak of: (a) the limitations on the taxing powers of local government units and the exceptions to such limitations; and (b) the rule on tax exemptions and the exceptions thereto. The use of exceptions or provisos in these sections, as shown by the following clauses: (1) unless otherwise provided herein in the opening paragraph of Section 133; (2) Unless otherwise provided in this Code in Section 193; (3) not hereafter specifically exempted in Section 232; and (4) Except as provided herein in the last paragraph of Section 234 initially hampers a ready understanding of the sections. Note, too, that the aforementioned clause in Section 133 seems to be inaccurately worded. Instead of the clause unless otherwise provided herein, with the herein to mean, of course, the section, it should have used the clause unless otherwise provided in this Code. The former results in absurdity since the section itself enumerates what are beyond the taxing powers of local government units and, where exceptions were intended, the exceptions are explicitly indicated in the next. For instance, in item (a) which excepts income taxes when levied on banks and other financial institutions; item (d) which excepts wharfage on wharves constructed and maintained by the local government unit concerned; and item (1) which excepts taxes, fees and charges for the registration and issuance of licenses or permits for the driving of tricycles. It may also be observed that within the body itself of the section, there are exceptions which can be found only in other parts of the LGC, but the section interchangeably uses therein the clause, except as otherwise provided herein as in items (c) and (i), or the clause except as provided in this Code in item (j). These clauses would be obviously unnecessary or mere surplusages if the opening

clause of the section were Unless otherwise provided in this Code instead of Unless otherwise provided herein. In any event, even if the latter is used, since under Section 232 local government units have the power to levy real property tax, except those exempted therefrom under Section 234, then Section 232 must be deemed to qualify Section 133. Thus, reading together Sections 133, 232, and 234 of the LGC, we conclude that as a general rule, as laid down in Section 133, the taxing powers of local government units cannot extend to the levy of, inter alia, taxes, fees and charges of any kind on the National Government, its agencies and instrumentalities, and local government units; however, pursuant to Section 232, provinces, cities, and municipalities in the Metropolitan Manila Area may impose the real property tax except on, inter alia, real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person, as provided in item (a) of the first paragraph of Section 234. As to tax exemptions or incentives granted to or presently enjoyed by natural or judicial persons, including government-owned and controlled corporations, Section 193 of the LGC prescribes the general rule, viz., they are withdrawn upon the effectivity of the LGC, except those granted to local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, and unless otherwise provided in the LGC. The latter proviso could refer to Section 234 which enumerates the properties exempt from real property tax. But the last paragraph of Section 234 further qualifies the retention of the exemption insofar as real property taxes are concerned by limiting the retention only to those enumerated therein; all others not included in the enumeration lost the privilege upon the effectivity of the LGC. Moreover, even as to real property owned by the Republic of the Philippines or any of its political subdivisions covered by item (a) of the first paragraph of Section 234, the exemption is withdrawn if the beneficial use of such property has been granted to a taxable person for consideration or otherwise. Since the last paragraph of Section 234 unequivocally withdrew, upon the effectivity of the LGC, exemptions from payment of real property taxes granted to natural or juridical persons, including government-owned or controlled corporations, except as provided in the said section, and the petitioner is, undoubtedly, a governmentowned corporation, it necessarily follows that its exemption from such tax granted it in Section 14 of its Charter, R.A. No. 6958, has been withdrawn. Any claim to the contrary can only be justified if the
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petitioner can seek refuge under any of the exceptions provided in Section 234, but not under Section 133, as it now asserts, since, as shown above, the said section is qualified by Sections 232 and 234.29 The Court in Mactan acknowledged that under Section 133, instrumentalities were generally exempt from all forms of local government taxation, unless otherwise provided in the Code. On the other hand, Section 232 otherwise provided insofar as it allowed LGUs to levy an ad valorem real property tax, irrespective of who owned the property. At the same time, the imposition of real property taxes under Section 232 is in turn qualified by the phrase not hereinafter specifically exempted. The exemptions from real property taxes are enumerated in Section 234, which specifically states that only real properties owned by the Republic of the Philippines or any of its political subdivisions are exempted from the payment of the tax. Clearly, instrumentalities or GOCCs do not fall within the exceptions under Section 234.30 Mactan Overturned the Precedents Now Relied Upon by the Majority But the petitioners in Mactan also raised the Courts ruling in Basco v. PAGCOR,31 decided before the enactment of the Local Government Code. The Court in Basco declared the PAGCOR as exempt from local taxes, justifying the exemption in this wise: Local governments have no power to tax instrumentalities of the National Government. PAGCOR is a government owned or controlled corporation with an original charter, PD 1869. All of its shares of stocks are owned by the National Government. In addition to its corporate powers (Sec. 3, Title II, PD 1869) it also exercises regulatory powers x x x PAGCOR has a dual role, to operate and to regulate gambling casinos. The latter role is governmental, which places it in the category of an agency or instrumentality of the Government. Being an instrumentality of the Government, PAGCOR should be and actually is exempt from local taxes. Otherwise, its operation might be burdened, impeded or subjected to control by a mere Local government. The states have no power by taxation or otherwise, to retard impede, burden or in any manner control the operation of constitutional laws enacted by Congress to carry into execution the powers vested in the federal government. (McCulloch v. Marland, 4 Wheat 316, 4 L Ed. 579)

This doctrine emanates from the supremacy of the National Government over local governments. Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of power on the part of the States to touch, in that way (taxation) at least, the instrumentalities of the United States (Johnson v. Maryland, 254 US 51) and it can be agreed that no state or political subdivision can regulate a federal instrumentality in such a way as to prevent it from consummating its federal responsibilities, or even to seriously burden it in the accomplishment of them. (Antieau, Modern Constitutional Law, Vol. 2, p. 140, emphasis supplied) Otherwise, mere creatures of the State can defeat National policies thru extermination of what local authorities may perceive to be undesirable activates or enterprise using the power to tax as a tool for regulation. (U.S. v. Sanchez, 340 US 42) The power to tax which was called by Justice Marshall as the power to destroy (McCulloch v. Maryland, supra) cannot be allowed to defeat an instrumentality or creation of the very entity which has the inherent power to wield it.32 Basco is as strident a reiteration of the old guard view that frowned on the principle of local autonomy, especially as it interfered with the prerogatives and privileges of the national government. Also consider the following citation from Maceda v. Macaraig,33 decided the same year as Basco. Discussing the rule of construction of tax exemptions on government instrumentalities, the sentiments are of a similar vein. Moreover, it is a recognized principle that the rule on strict interpretation does not apply in the case of exemptions in favor of a government political subdivision or instrumentality. The basis for applying the rule of strict construction to statutory provisions granting tax exemptions or deductions, even more obvious than with reference to the affirmative or levying provisions of tax statutes, is to minimize differential treatment and foster impartiality, fairness, and equality of treatment among tax payers. The reason for the rule does not apply in the case of exemptions running to the benefit of the government itself or its agencies. In such case the practical effect of an exemption is merely to reduce the amount of money that has to be handled by government in the course of its operations. For these reasons,
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provisions granting exemptions to government agencies may be construed liberally, in favor of non tax-liability of such agencies. In the case of property owned by the state or a city or other public corporations, the express exemption should not be construed with the same degree of strictness that applies to exemptions contrary to the policy of the state, since as to such property exemption is the rule and taxation the exception.34 Strikingly, the majority cites these two very cases and the stodgy rationale provided therein. This evinces the perspective from which the majority is coming from. It is admittedly a viewpoint once shared by this Court, and en vogue prior to the enactment of the Local Government Code of 1991. However, the Local Government Code of 1991 ushered in a new ethos on how the art of governance should be practiced in the Philippines, conceding greater powers once held in the private reserve of the national government to LGUs. The majority might have private qualms about the wisdom of the policy of local autonomy, but the members of the Court are not expected to substitute their personal biases for the legislative will, especially when the 1987 Constitution itself promotes the principle of local autonomy.

Section 3. The Congress shall enact a local government code which shall provide for a more responsive and accountable local government structure instituted through a system of decentralization with effective mechanisms of recall, initiative, and referendum, allocate among the different local government units their powers, responsibilities, and resources, and provide for the qualifications, election, appointment and removal, term, salaries, powers and functions and duties of local officials, and all other matters relating to the organization and operation of the local units. xxx Section 5. Each local government unit shall have the power to create its own sources of revenues and to levy taxes, fees, and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local governments. xxx The Court in Mactan recognized that a new day had dawned with the enactment of the 1987 Constitution and the Local Government Code of 1991. Thus, it expressly rejected the contention of the MCIAA that Basco was applicable to them. In doing so, the language of the Court was dramatic, if only to emphasize how monumental the shift in philosophy was with the enactment of the Local Government Code: Accordingly, the position taken by the [MCIAA] is untenable. Reliance on Basco v. Philippine Amusement and Gaming Corporation is unavailing since it was decided before the effectivity of the [Local Government Code]. Besides, nothing can prevent Congress from decreeing that even instrumentalities or agencies of the Government performing governmental functions may be subject to tax. Where it is done precisely to fulfill a constitutional mandate and national policy, no one can doubt its wisdom.35 (emphasis supplied) The Court Has Repeatedly Reaffirmed Mactan Over the Precedents Now Relied Upon By the Majority Since then and until today, the Court has been emphatic in declaring the Basco doctrine as dead. The notion that instrumentalities may be subjected to local taxation by LGUs was again affirmed in National Power Corporation v. City of Cabanatuan,36 which was penned by Justice Puno. NPC or Napocor, invoking its continued exemption from payment of franchise taxes to the City of
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Article II. Declaration of Principles and State Policies

xxx

Sec. 25. The State shall ensure the autonomy of local governments. Article X. Local Government

xxx

Sec. 2. The territorial and political subdivisions shall enjoy local autonomy.

Cabanatuan, alleged that it was an instrumentality of the National Government which could not be taxed by a city government. To that end, Basco was cited by NPC. The Court had this to say about Basco. x x x [T]he doctrine in Basco vs. Philippine Amusement and Gaming Corporation relied upon by the petitioner to support its claim no longer applies. To emphasize, the Basco case was decided prior to the effectivity of the LGC, when no law empowering the local government units to tax instrumentalities of the National Government was in effect. However, as this Court ruled in the case of Mactan Cebu International Airport Authority (MCIAA) vs. Marcos, nothing prevents Congress from decreeing that even instrumentalities or agencies of the government performing governmental functions may be subject to tax. In enacting the LGC, Congress exercised its prerogative to tax instrumentalities and agencies of government as it sees fit. Thus, after reviewing the specific provisions of the LGC, this Court held that MCIAA, although an instrumentality of the national government, was subject to real property tax.37 In the 2003 case of Philippine Ports Authority v. City of Iloilo,38 the Court, in the able ponencia of Justice Azcuna, affirmed the levy of realty taxes on the PPA. Although the taxes were assessed under the old Real Property Tax Code and not the Local Government Code, the Court again cited Mactan to refute PPAs invocation of Basco as the basis of its exemption. [Basco] did not absolutely prohibit local governments from taxing government instrumentalities. In fact we stated therein: The power of local government to impose taxes and fees is always subject to limitations which Congress may provide by law. Since P.D. 1869 remains an operative law until amended, repealed or revoked. . . its exemption clause remains an exemption to the exercise of the power of local governments to impose taxes and fees. Furthermore, in the more recent case of Mactan Cebu International Airport Authority v. Marcos, where the Basco case was similarly invoked for tax exemption, we stated: [N]othing can prevent Congress from decreeing that even instrumentalities or agencies of the Government performing governmental functions may be subject to tax. Where it is done precisely to fulfill a constitutional mandate and national policy, no one can doubt its wisdom. The fact that tax exemptions of government-owned or controlled corporations have been expressly withdrawn by the present Local Government Code clearly

attests against petitioners claim of absolute exemption of government instrumentalities from local taxation.39 Just last month, the Court in National Power Corporation v. Province of Isabela40 again rejected Basco in emphatic terms. Held the Court, through Justice Callejo, Sr.: Thus, the doctrine laid down in the Basco case is no longer true. In the Cabanatuan case, the Court noted primarily that the Basco case was decided prior to the effectivity of the LGC, when no law empowering the local government units to tax instrumentalities of the National Government was in effect. It further explained that in enacting the LGC, Congress empowered the LGUs to impose certain taxes even on instrumentalities of the National Government.41 The taxability of the PPA recently came to fore in Philippine Ports Authority v. City of Iloilo42 case, a decision also penned by Justice Callejo, Sr., wherein the Court affirmed the sale of PPAs properties at public auction for failure to pay realty taxes. The Court again reiterated that it was the intention of Congress to withdraw the tax exemptions granted to or presently enjoyed by all persons, including government-owned or controlled corporations, upon the effectivity of the Code.43 The Court in the second Public Ports Authority case likewise cited Mactan as providing the raison detre for the withdrawal of the exemption, namely, the State policy to ensure autonomy to local governments and the objective of the [Local Government Code] that they enjoy genuine and meaningful local autonomy to enable them to attain their fullest development as self-reliant communities. . . .44 Last year, the Court, in City of Davao v. RTC,45 affirmed that the legislated exemption from real property taxes of the Government Service Insurance System (GSIS) was removed under the Local Government Code. Again, Mactan was relied upon as the governing precedent. The removal of the tax exemption stood even though the then GSIS law46 prohibited the removal of GSIS tax exemptions unless the exemption was specifically repealed, and a provision is enacted to substitute the declared policy of exemption from any and all taxes as an essential factor for the solvency of the fund.47 The Court, citing established doctrines in statutory construction and Duarte v. Dade48 ruled that such proscription on future legislation was itself prohibited, as the legislature cannot bind a future legislature to a particular mode of repeal.49 And most recently, just less than one month ago, the Court, through Justice Corona in Government Service Insurance System v. City Assessor of Iloilo50
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again affirmed that the Local Government Code removed the previous exemption from real property taxes of the GSIS. Again Mactan was cited as having expressly withdrawn the [tax] exemption of the [GOCC].51 Clearly then, Mactan is not a stray or unique precedent, but the basis of a jurisprudential rule employed by the Court since its adoption, the doctrine therein consistent with the Local Government Code. Corollarily, Basco, the polar opposite of Mactan has been emphatically rejected and declared inconsistent with the Local Government Code. II. Majority, in Effectively Overturning Mactan, Refuses to Say Why Mactan Is Wrong The majority cites Basco in support. It does not cite Mactan, other than an incidental reference that it is relied upon by the respondents.52 However, the ineluctable conclusion is that the majority rejects the rationale and ruling in Mactan. The majority provides for a wildly different interpretation of Section 133, 193 and 234 of the Local Government Code than that employed by the Court in Mactan. Moreover, the parties in Mactan and in this case are similarly situated, as can be obviously deducted from the fact that both petitioners are airport authorities operating under similarly worded charters. And the fact that the majority cites doctrines contrapuntal to the Local Government Code as in Basco and Maceda evinces an intent to go against the Courts jurisprudential trend adopting the philosophy of expanded local government rule under the Local Government Code. Before I dwell upon the numerous flaws of the majority, a brief comment is necessitated on the majoritys studied murkiness vis--vis the Mactan precedent. The majority is obviously inconsistent with Mactan and there is no way these two rulings can stand together. Following basic principles in statutory construction, Mactan will be deemed as giving way to this new ruling. However, the majority does not bother to explain why Mactan is wrong. The interpretation in Mactan of the relevant provisions of the Local Government Code is elegant and rational, yet the majority refuses to explain why this reasoning of the Court in Mactan is erroneous. In fact, the majority does not even engage Mactan in any meaningful way. If the majority believes that Mactan may still stand despite this ruling, it remains silent as to the viable distinctions between these two cases. The majoritys silence on Mactan is baffling, considering how different this new ruling is with the ostensible precedent. Perhaps the majority does not simply

know how to dispense with the ruling in Mactan. If Mactan truly deserves to be discarded as precedent, it deserves a more honorable end than death by amnesia or ignonominous disregard. The majority could have devoted its discussion in explaining why it thinks Mactan is wrong, instead of pretending that Mactan never existed at all. Such an approach might not have won the votes of the minority, but at least it would provide some degree of intellectual clarity for the parties, LGUs and the national government, students of jurisprudence and practitioners. A more meaningful debate on the matter would have been possible, enriching the study of law and the intellectual dynamic of this Court. There is no way the majority can be justified unless Mactan is overturned. The MCIAA and the MIAA are similarly situated. They are both, as will be demonstrated, GOCCs, commonly engaged in the business of operating an airport. They are the owners of airport properties they respectively maintain and hold title over these properties in their name.53 These entities are both owned by the State, and denied by their respective charters the absolute right to dispose of their properties without prior approval elsewhere.54 Both of them are not empowered to obtain loans or encumber their properties without prior approval the prior approval of the President.55 III. Instrumentalities, Agencies And GOCCs Generally Liable for Real Property Tax I shall now proceed to demonstrate the errors in reasoning of the majority. A bulwark of my position lies with Mactan, which will further demonstrate why the majority has found it inconvenient to even grapple with the precedent that is Mactan in the first place. Mactan held that the prohibition on taxing the national government, its agencies and instrumentalities under Section 133 is qualified by Section 232 and Section 234, and accordingly, the only relevant exemption now applicable to these bodies is as provided under Section 234(o), or on real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person. It should be noted that the express withdrawal of previously granted exemptions by the Local Government Code do not even make any distinction as to whether the exempt person is a governmental entity or not. As Sections 193 and 234 both state, the withdrawal applies to all persons, including
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[GOCCs], thus encompassing the two classes of persons recognized under our laws, natural persons56 and juridical persons.57 The fact that the Local Government Code mandates the withdrawal of previously granted exemptions evinces certain key points. If an entity was previously granted an express exemption from realproperty taxes in the first place, the obvious conclusion would be that such entity would ordinarily be l iable for such taxes without the exemption. If such entities were already deemed exempt due to some overarching principle of law, then it would be a redundancy or surplusage to grant an exemption to an already exempt entity. This fact militates against the claim that MIAA is preternaturally exempt from realty taxes, since it required the enactment of an express exemption from such taxes in its charter. Amazingly, the majority all but ignores the disquisition in Mactan and asserts that government instrumentalities are not taxable persons unless they lease their properties to a taxable person. The general rule laid down in Section 232 is given short shrift. In arriving at this conclusion, several leaps in reasoning are committed. Majoritys Flawed Definition of GOCCs. The majority takes pains to assert that the MIAA is not a GOCC, but rather an instrumentality. However, and quite grievously, the supposed foundation of this assertion is an adulteration. The majority gives the impression that a government instrumentality is a distinct concept from a government corporation.58 Most tellingly, the majority selectively cites a portion of Section 2(10) of the Administrative Code of 1987, as follows: Instrumentality refers to any agency of the National Government not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. x x x59 (emphasis omitted) However, Section 2(10) of the Administrative Code, when read in full, makes an important clarification which the majority does not show. The portions omitted by the majority are highlighted below:

(10) Instrumentality refers to any agency of the National Government not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. This term includes regulatory agencies, chartered institutions and government-owned or controlled corporations.60 Since Section 2(10) makes reference to agency of the National Government, Section 2(4) is also worth citing in full: (4) Agency of the Government refers to any of the various units of the Government, including a department, bureau, office, instrumentality, or government-owned or controlled corporation, or a local government or a distinct unit therein. (emphasis supplied)61 Clearly then, based on the Administrative Code, a GOCC may be an instrumentality or an agency of the National Government. Thus, there actually is no point in the majoritys assertion that MIAA is not a GOCC, since based on the majoritys premise of Section 133 as the key provision, the material question is whether MIAA is either an instrumentality, an agency, or the National Government itself. The very provisions of the Administrative Code provide that a GOCC can be either an instrumentality or an agency, so why even bother to extensively discuss whether or not MIAA is a GOCC? Indeed as far back as the 1927 case of Government of the Philippine Islands v. Springer,62 the Supreme Court already noted that a corporation of which the government is the majority stockholder remains an agency or instrumentality of government.63 Ordinarily, the inconsequential verbiage stewing in judicial opinions deserve little rebuttal. However, the entire discussion of the majority on the definition of a GOCC, obiter as it may ultimately be, deserves emphatic refutation. The views of the majority on this matter are very dangerous, and would lead to absurdities, perhaps unforeseen by the majority. For in fact, the majority effectively declassifies many entities created and recognized as GOCCs and would give primacy to the Administrative Code of 1987 rather than their respective charters as to the definition of these entities. Majority Ignores the Power of Congress to Legislate and Define Chartered Corporations

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First, the majority declares that, citing Section 2(13) of the Administrative Code, a GOCC must be organized as a stock or non-stock corporation, as defined under the Corporation Code. To insist on this as an absolute rule fails on bare theory. Congress has the undeniable power to create a corporation by legislative charter, and has been doing so throughout legislative history. There is no constitutional prohibition on Congress as to what structure these chartered corporations should take on. Clearly, Congress has the prerogative to create a corporation in whatever form it chooses, and it is not bound by any traditional format. Even if there is a definition of what a corporation is under the Corporation Code or the Administrative Code, these laws are by no means sacrosanct. It should be remembered that these two statutes fall within the same level of hierarchy as a congressional charter, since they all are legislative enactments. Certainly, Congress can choose to disregard either the Corporation Code or the Administrative Code in defining the corporate structure of a GOCC, utilizing the same extent of legislative powers similarly vesting it the putative ability to amend or abolish the Corporation Code or the Administrative Code. These principles are actually recognized by both the Administrative Code and the Corporation Code. The definition of GOCCs, agencies and instrumentalities under the Administrative Code are laid down in the section entitled General Terms Defined, which qualifies: Sec. 2. General Terms Defined.Unless the specific words of the text, or the context as a whole, or a particular statute, shall require a different meaning: (emphasis supplied) xxx Similar in vein is Section 6 of the Corporation Code which provides: SEC. 4. Corporations created by special laws or charters.Corporations created by special laws or charters shall be governed primarily by the provisions of the special law or charter creating them or applicable to them, supplemented by the provisions of this Code, insofar as they are applicable. (emphasis supplied) Thus, the clear doctrine emergesthe law that governs the definition of a corporation or entity created by Congress is its legislative charter. If the legislative enactment defines an entity as a corporation, then it is a corporation, no matter if the Corporation Code or the Administrative Code seemingly provides otherwise. In case of conflict between the legislative charter of a

government corporation, on one hand, and the Corporate Code and the Administrative Code, on the other, the former always prevails. Majority, in Ignoring the Legislative Charters, Effectively Classifies Duly Established GOCCs, With Disastrous and Far Reaching Legal Consequences Second, the majority claims that MIAA does not qualify either as a stock or non-stock corporation, as defined under the Corporation Code. It explains that the MIAA is not a stock corporation because it does not have any capital stock divided into shares. Neither can it be considered as a non-stock corporation because it has no members, and under Section 87, a non-stock corporation is one where no part of itsincome is distributable as dividends to its members, trustees or officers. This formulation of course ignores Section 4 of the Corporation Code, which again provides that corporations created by special laws or charters shall be governed primarily by the provisions of the special law or charter, and not the Corporation Code. That the MIAA cannot be considered a stock corporation if only because it does not have a stock structure is hardly a plausible proposition. Indeed, there is no point in requiring a capital stock structure for GOCCs whose full ownership is limited by its charter to the State or Republic. Such GOCCs are not empowered to declare dividends or alienate their capital shares. Admittedly, there are GOCCs established in such a manner, such as the National Power Corporation (NPC), which is provided with authorized capital stock wholly subscribed and paid for by the Government of the Philippines, divided into shares but at the same time, is prohibited from transferring, negotiating, pledging, mortgaging or otherwise giving these shares as security for payment of any obligation.64 However, based on the Corporation Code definition relied upon by the majority, even the NPC cannot be considered as a stock corporation. Under Section 3 of the Corporation Code, stock corporations are defined as being authorized to distribute to the holders of its shares dividends or allotments of the surplus profits on the basis of the shares held.65 On the other hand, Section 13 of the NPCs charter states that the Corporation shall be non-profit and shall devote all its returns from its capital investment, as well as excess revenues from its operation, for expansion.66 Can the holder of the shares of NPC, the National Government, receive its surplus profits on the basis of its shares held? It cannot, according to the NPC charter, and hence, following Section 3 of the Corporation Code, the NPC is not a stock corporation, if the majority is to be believed.
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The majority likewise claims that corporations without members cannot be deemed non-stock corporations. This would seemingly exclude entities such as the NPC, which like MIAA, has no ostensible members. Moreover, non-stock corporations cannot distribute any part of its income as dividends to its members, trustees or officers. The majority faults MIAA for remitting 20% of its gross operating income to the national government. How about the Philippine Health Insurance Corporation, created with the status of a tax-exempt government corporation attached to the Department of Health under Rep. Act No. 7875.67 It too cannot be considered as a stock corporation because it has no capital stock structure. But using the criteria of the majority, it is doubtful if it would pass muster as a non-stock corporation, since the PHIC or Philhealth, as it is commonly known, is expressly empowered to collect, deposit, invest, administer and disburse the National Health Insurance Fund.68 Or how about the Social Security System, which under its revised charter, Republic Act No. 8282, is denominated as a corporate body.69 The SSS has no capital stock structure, but has capital comprised of contributions by its members, which are eventually remitted back to its members. Does this disqualify the SSS from classification as a GOCC, notwithstanding this Courts previous pronouncement in Social Security System Employees Association v. Soriano?70 In fact, Republic Act No. 7656, enacted in 1993, requires that all GOCCs, whether stock or non-stock,71 declare and remit at least fifty percent (50%) of their annual net earnings as cash, stock or property dividends to the National Government.72 But according to the majority, non-stock corporations are prohibited from declaring any part of its income as dividends. But if Republic Act No. 7656 requires even non-stock corporations to declare dividends from income, should it not follow that the prohibition against declaration of dividends by non-stock corporations under the Corporation Code does not apply to government-owned or controlled corporations? For if not, and the majoritys illogic is pursued, Republic Act No. 7656, passed in 1993, would be fatally flawed, as it would contravene the Administrative Code of 1987 and the Corporation Code. In fact, the ruinous effects of the majoritys hypothesis on the nature of GOCCs can be illustrated by Republic Act No. 7656. Following the majoritys definition of a GOCC and in accordance with Republic Act No. 7656, here are but a few entities which are not obliged to remit fifty (50%) of its annual net earnings to the National Government as they are excluded from the scope of Republic Act No. 7656:

1)Philippine Ports Authority73has no capital stock,74 no members, and obliged to apply the balance of its income or revenue at the end of each year in a general reserve.75 2)Bases Conversion Development Authority76has no capital stock,77 no members. 3)Philippine Economic Zone Authority78no capital stock,79 no members. 4)Light Rail Transit Authority80no capital stock,81 no members. 5)Bangko Sentral ng Pilipinas82no capital stock,83 no members, required to remit fifty percent (50%) of its net profits to the National Treasury.84 6)National Power Corporation85has capital stock but is prohibited from distributing to the holders of its shares dividends or allotments of the surplus profits on the basis of the shares held;86 no members. 7)Manila International Airport Authorityno capital stock,87 no members,88 mandated to remit twenty percent (20%) of its annual gross operating income to the National Treasury.89 Thus, for the majority, the MIAA, among many others, cannot be considered as within the coverage of Republic Act No. 7656. Apparently, President Fidel V. Ramos disagreed. How else then could Executive Order No. 483, signed in 1998 by President Ramos, be explained? The issuance provides: WHEREAS, Section 1 of Republic Act No. 7656 provides that: Section 1. Declaration of Policy.It is hereby declared the policy of the State that in order for the National Government to realize additional revenues, government-owned and/or controlled corporations, without impairing their viability and the purposes for which they have been established, shall share a substantial amount of their net earnings to the National Government. WHEREAS, to support the viability and mandate of government-owned and/or controlled corporations [GOCCs], the liquidity, retained earnings position and medium-term plans and programs of these GOCCs were considered in the determination of the reasonable dividend rates of such corporations on their 1997 net earnings. WHEREAS, pursuant to Section 5 of RA 7656, the Secretary of Finance recommended the adjustment on the percentage of annual net earnings that
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shall be declared by the Manila International Airport Authority [MIAA] and Phividec Industrial Authority [PIA] in the interest of national economy and general welfare. NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Philippines, by virtue of the powers vested in me by law, do hereby order: SECTION 1. The percentage of net earnings to be declared and remitted by the MIAA and PIA as dividends to the National Government as provided for under Section 3 of Republic Act No. 7656 is adjusted from at least fifty percent [50%] to the rates specified hereunder: 1. Manila International Airport Authority35% [cash] 2. Phividec Industrial Authority25% [cash] SECTION 2. The adjusted dividend rates provided for under Section 1 are only applicable on 1997 net earnings of the concerned governmentowned and/or controlled corporations. Obviously, it was the opinion of President Ramos and the Secretary of Finance that MIAA is a GOCC, for how else could it have come under the coverage of Republic Act No. 7656, a law applicable only to GOCCs? But, the majority apparently disagrees, and resultantly holds that MIAA is not obliged to remit even the reduced rate of thirty five percent (35%) of its net earnings to the national government, since it cannot be covered by Republic Act No. 7656. All this mischief because the majority would declare the Administrative Code of 1987 and the Corporation Code as the sole sources of law defining what a government corporation is. As I stated earlier, I find it illogical that chartered corporations are compelled to comply with the templates of the Corporation Code, especially when the Corporation Code itself states that these corporations are to be governed by their own charters. This is especially true considering that the very provision cited by the majority, Section 87 of the Corporation Code, expressly says that the definition provided therein is laid down for the purposes of this [Corporation] Code. Read in conjunction with Section 4 of the Corporation Code which mandates that corporations created by charter be governed by the law creating them, it is clear that contrary to the majority, MIAA is not disqualified from classification as a non-stock corporation by reason of Section 87, the provision not being applicable to corporations created by special laws or charters. In fact, I see no real impediment why the MIAA and similarly situated corporations such as the PHIC, the SSS, the

Philippine Deposit Insurance Commission, or maybe even the NPC could at the very least, be deemed as no stock corporations (as differentiated from nonstock corporations). The point, stripped to bare simplicity, is that entity created by legislative enactment is a corporation if the legislature says so. After all, it is the legislature that dictates what a corporation is in the first place. This is better illustrated by another set of entities created before martial law. These include the Mindanao Development Authority,90 the Northern Samar Development Authority,91 the Ilocos Sur Development Authority,92 the Southeastern Samar Development Au-thority93 and the Mountain Province Development Authority.94 An examination of the first section of the statutes creating these entities reveal that they were established to foster accelerated and balanced growth of their respective regions, and towards such end, the charters commonly provide that it is recognized that a government corporation should be created for the purpose, and accordingly, these charters hereby created a body corporate.95 However, these corporations do not have capital stock nor members, and are obliged to return the unexpended balances of their appropriations and earnings to a revolving fund in the National Treasury. The majority effectively declassifies these entities as GOCCs, never mind the fact that their very charters declare them to be GOCCs. I mention these entities not to bring an element of obscurantism into the fray. I cite them as examples to emphasize my fundamental pointthat it is the legislative charters of these entities, and not the Administrative Code, which define the class of personality of these entities created by Congress. To adopt the view of the majority would be, in effect, to sanction an implied repeal of numerous congressional charters for the purpose of declassifying GOCCs. Certainly, this could not have been the intent of the crafters of the Administrative Code when they drafted the Definition of Terms incorporated therein. MIAA Is Without Doubt, A GOCC Following the charters of government corporations, there are two kinds of GOCCs, namely: GOCCs which are stock corporations and GOCCs which are no stock corporations (as distinguished from non-stock corporation). Stock GOCCs are simply those which have capital stock while no stock GOCCs are those which have no capital stock. Obviously these definitions are different from the definitions of the terms in the Corporation Code. Verily, GOCCs which

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are not incorporated with the Securities and Exchange Commission are not governed by the Corporation Code but by their respective charters. For the MIAAs part, its charter is replete with provisions that indubitably classify it as a GOCC. Observe the following provisions from MIAAs charter: SECTION 3. Creation of the Manila International Airport Authority.There is hereby established a body corporate to be known as the Manila International Airport Authority which shall be attached to the Ministry of Transportation and Communications. The principal office of the Authority shall be located at the New Manila International Airport. The Authority may establish such offices, branches, agencies or subsidiaries as it may deem proper and necessary; Provided, That any subsidiary that may be organized shall have the prior approval of the President. The land where the Airport is presently located as well as the surrounding land area of approximately six hundred hectares, are hereby transferred, conveyed and assigned to the ownership and administration of the Authority, subject to existing rights, if any. The Bureau of Lands and other appropriate government agencies shall undertake an actual survey of the area transferred within one year from the promulgation of this Executive Order and the corresponding title to be issued in the name of the Authority. Any portion thereof shall not be disposed through sale or through any other mode unless specifically approved by the President of the Philippines. xxx SECTION 5. Functions, Powers, and Duties.The Authority shall have the following functions, powers and duties: xxx (d) To sue and be sued in its corporate name; (e) To adopt and use a corporate seal; (f) To succeed by its corporate name; (g) To adopt its by-laws, and to amend or repeal the same from time to time; (h) To execute or enter into contracts of any kind or nature;

(i) To acquire, purchase, own, administer, lease, mortgage, sell or otherwise dispose of any land, building, airport facility, or property of whatever kind and nature, whether movable or immovable, or any interest therein; (j) To exercise the power of eminent domain in the pursuit of its purposes and objectives; xxx (o)To exercise all the powers of a corporation under the Corporation Law, insofar as these powers are not inconsistent with the provisions of this Executive Order. xxx SECTION 16. Borrowing Power.The Authority may, after consultation with the Minister of Finance and with the approval of the President of the Philippines, as recommended by the Minister of Transportation and Communications, raise funds, either from local or international sources, by way of loans, credits or securities, and other borrowing instruments, with the power to create pledges, mortgages and other voluntary liens or encumbrances on any of its assets or properties. All loans contracted by the Authority under this Section, together with all interests and other sums payable in respect thereof, shall constitute a charge upon all the revenues and assets of the Authority and shall rank equally with one another, but shall have priority over any other claim or charge on the revenue and assets of the Authority: Provided, That this provision shall not be construed as a prohibition or restriction on the power of the Authority to create pledges, mortgages, and other voluntary liens or encumbrances on any assets or property of the Authority. Except as expressly authorized by the President of the Philippines the total outstanding indebtedness of the Authority in the principal amount, in local and foreign currency, shall not at any time exceed the net worth of the Authority at any given time. xxx The President or his duly authorized representative after consultation with the Minister of Finance may guarantee, in the name and on behalf of the Republic of the Philippines, the payment of the loans or other indebtedness of the Authority up to the amount herein authorized.
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These cited provisions establish the fitness of MIAA to be the subject of legal relations.96 MIAA under its charter may acquire and possess property, incur obligations, and bring civil or criminal actions. It has the power to contract in its own name, and to acquire title to real or personal property. It likewise may exercise a panoply of corporate powers and possesses all the trappings of corporate personality, such as a corporate name, a corporate seal and by-laws. All these are contained in MIAAs charter which, as conceded by the Corporation Code and even the Administrative Code, is the primary law that governs the definition and organization of the MIAA. In fact, MIAA itself believes that it is a GOCC represents itself as such. It said so itself in the very first paragraph of the present petition before this Court.97 So does, apparently, the Department of Budget and Management, which classifies MIAA as a government owned & controlled corporation on its internet website.98 There is also the matter of Executive Order No. 483, which evinces the belief of the then-president of the Philippines that MIAA is a GOCC. And the Court before had similarly characterized MIAA as a government-owned and controlled corporation in the earlier Why then the hesitance to declare MIAA a GOCC? As the majority repeatedly asserts, it is because MIAA is actually an instrumentality. But the very definition relied upon by the majority of an instrumentality under the Administrative Code clearly states that a GOCC is likewise an instrumentality or an agency. The question of whether MIAA is a GOCC might not even be determinative of this Petition, but the effect of the majoritys disquisition on that matter may even be more destructive than the ruling that MIAA is exempt from realty taxes. Is the majority ready to live up to the momentous consequences of its flawed reasoning? Novel Proviso in 1987 Constitution Prescribing Standards in the Creation of GOCCs Necessarily Applies only to GOCCs Created After 1987. One last point on this matter on whether MIAA is a GOCC. The majority triumphantly points to Section 16, Article XII of the 1987 Constitution, which mandates that the creation of GOCCs through special charters be in the interest of the common good and subject to the test of economic viability. For the majority, the test of economic viability does not apply to government entities vested with corporate powers and performing essential public services. But this test of economic viability is new to the constitutional framework. No such test was imposed in previous Constitutions, including the 1973 Constitution which was the fundamental law in force when the MIAA was created. How then could the MIAA, or any GOCC created before 1987 be

expected to meet this new precondition to the creation of a GOCC? Does the dissent seriously suggest that GOCCs created before 1987 may be declassified on account of their failure to meet this economic viability test? Instrumentalities and Agencies Also Generally Liable for Real Property Taxes Next, the majority, having bludgeoned its way into asserting that MIAA is not a GOCC, then argues that MIAA is an instrumentality. It cites incompletely, as earlier stated, the provision of Section 2(10) of the Administrative Code. A more convincing view offered during deliberations, but which was not adopted by the ponencia, argued that MIAA is not an instrumentality but an agency, considering the fact that under the Administrative Code, the MIAA is attached within the department framework of the Department of Transportation and Communications.100 Interestingly, Executive Order No. 341, enacted by President Arroyo in 2004, similarly calls MIAA an agency. Since instrumentalities are expressly defined as an agency not integrated within the department framework, that view concluded that MIAA cannot be deemed an instrumentality. Still, that distinction is ultimately irrelevant. Of course, as stated earlier, the Administrative Code considers GOCCs as agencies,101 so the fact that MIAA is an agency does not exclude it from classification as a GOCC. On the other hand, the majority justifies MIAAs purported exemption on Section 133 of the Local Government Code, which similarly situates agencies and instrumentalities as generally exempt from the taxation powers of LGUs. And on this point, the majority again evades Mactan and somehow concludes that Section 133 is the general rule, notwithstanding Sections 232 and 234(a) of the Local Government Code. And the majoritys ultimate conclusion? By express mandate of the Local Government Code, local governments cannot impose any kind of tax on national government instrumentalities like the MIAA. Local governments are devoid of power to tax the national government, its agencies and instrumentalities.102 The Courts interpretation of the Local Government Code in Mactan renders the law integrally harmonious and gives due accord to the respective prerogatives of the national government and LGUs. Sections 133 and 234(a) ensure that the Republic of the Philippines or its political subdivisions shall not be subjected to any form of local government taxation, except realty taxes if the beneficial use of the property owned has been granted for consideration to a taxable entity or person. On the other hand, Section 133 likewise assures that government instrumentalities such as GOCCs may not be arbitrarily taxed by
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LGUs, since they could be subjected to local taxation if there is a specific proviso thereon in the Code. One such proviso is Section 137, which as the Court found in National Power Corporation,103 permits the imposition of a franchise tax on businesses enjoying a franchise, even if it be a GOCC such as NPC. And, as the Court acknowledged in Mactan, Section 232 provides another exception on the taxability of instrumentalities. The majority abjectly refuses to engage Section 232 of the Local Government Code although it provides the indubitable general rule that LGUs may levy an annual ad valorem tax on real property such as land, building, machinery, and other improvements not hereafter specifically exempted. The specific exemptions are provided by Section 234. Section 232 comes sequentially after Section 133(o),104 and even if the sequencing is irrelevant, Section 232 would fall under the qualifying phrase of Section 133, Unless otherwise provided herein. It is sad, but not surprising that the majority is not willing to consider or even discuss the general rule, but only the exemptions under Section 133 and Section 234. After all, if the majority is dead set in ruling for MIAA no matter what the law says, why bother citing what the law does say. Constitution, Laws and Jurisprudence Have Long Explained the Rationale Behind the Local Taxation of GOCCs.

(b) In case of doubt, any tax ordinance or revenue measure shall be construed strictly against the local government unit enacting it, and liberally in favor of the taxpayer. Any tax exemption, incentive or relief granted by any local government unit pursuant to the provisions of this Code shall be construed strictly against the person claiming it; x x x Yet the majority insists that there is no point in national and local governments taxing each other, unless a sound and compelling policy requires such transfer of public funds from one government pocket to another.105 I wonder whether the Constitution satisfies the majoritys desire for a sound and compelling policy. To repeat: Article II. Declaration of Principles and State Policies xxx Sec. 25. The State shall ensure the autonomy of local governments. Article X. Local Government

xxx This blithe disregard of precedents, almost all of them unanimously decided, is nowhere more evident than in the succeeding discussion of the majority, which asserts that the power of local governments to tax national government instrumentalities be construed strictly against local governments. The Maceda case, decided before the Local Government Code, is cited, as is Basco. This section of the majority employs deliberate pretense that the Code never existed, or that the fundamentals of local autonomy are of limited effect in our country. Why is it that the Local Government Code is barely mentioned in this section of the majority? Because Section 5 of the Code, purposely omitted by the majority provides for a different rule of interpretation than that asserted: Section 50. Rules of Interpretation.In the interpretation of the provisions of this Code, the following rules shall apply: (a) Any provision on a power of a local government unit shall be liberally interpreted in its favor, and in case of doubt, any question thereon shall be resolved in favor of devolution of powers and of the lower local government unit. Any fair and reasonable doubt as to the existence of the power shall be interpreted in favor of the local government unit concerned; Sec. 2. The territorial and political subdivisions shall enjoy local autonomy. xxx Section 5. Each local government unit shall have the power to create its own sources of revenues and to levy taxes, fees, and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local governments. Or how about the Local Government Code, presumably an expression of sound and compelling policy considering that it was enacted by the legislature, that veritable source of all statutes: SEC. 129. Power to Create Sources of Revenue.Each local government unit shall exercise its power to create its own sources of revenue and to levy taxes, fees, and charges subject to the provisions herein, consistent with the basic policy of local autonomy. Such taxes, fees, and charges shall accrue exclusively to the local government units.
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Justice Puno, in National Power Corporation v. City of Cabanatuan,106 provides a more sound and compelling policy considerations that would warrant sustaining the taxability of governmentowned entities by local government units under the Local Government Code. Doubtless, the power to tax is the most effective instrument to raise needed revenues to finance and support myriad activities of the local government units for the delivery of basic services essential to the promotion of the general welfare and the enhancement of peace, progress, and prosperity of the people. As this Court observed in the Mactan case, the original reasons for the withdrawal of tax exemption privileges granted to government-owned or controlled corporations and all other units of government were that such privilege resulted in serious tax base erosion and distortions in the tax treatment of similarly situated enterprises. With the added burden of devolution, it is even more imperative for government entities to share in the requirements of development, fiscal or otherwise, by paying taxes or other charges due from them.107 I dare not improve on Justice Punos exhaustive disquisition on the statutory and jurisprudential shift brought about the acceptance of the principles of local autonomy: In recent years, the increasing social challenges of the times expanded the scope of state activity, and taxation has become a tool to realize social justice and the equitable distribution of wealth, economic progress and the protection of local industries as well as public welfare and similar objectives. Taxation assumes even greater significance with the ratification of the 1987 Constitution. Thenceforth, the power to tax is no longer vested exclusively on Congress; local legislative bodies are now given direct authority to levy taxes, fees and other charges pursuant to Article X, section 5 of the 1987 Constitution, viz.: Section 5. Each Local Government unit shall have the power to create its own sources of revenue, to levy taxes, fees and charges subject to such guidelines and limitations as the Congress may provide, consistent with the basic policy of local autonomy. Such taxes, fees and charges shall accrue exclusively to the Local Governments. This paradigm shift results from the realization that genuine development can be achieved only by strengthening local autonomy and promoting decentralization of governance. For a long time, the countrys highly centralized government structure has bred a culture of dependence among local government leaders upon the national leadership. It has also dampened the

spirit of initiative, innovation and imaginative resilience in matters of local development on the part of local government leaders. 35 The only way to shatter this culture of dependence is to give the LGUs a wider role in the delivery of basic services, and confer them sufficient powers to generate their own sources for the purpose. To achieve this goal, section 3 of Article X of the 1987 Constitution mandates Congress to enact a local government code that will, consistent with the basic policy of local autonomy, set the guidelines and limitations to this grant of taxing powers, viz.: Section 3. The Congress shall enact a local government code which shall provide for a more responsive and accountable local government structure instituted through a system of decentralization with effective mechanisms of recall, initiative, and referendum, allocate among the different local government units their powers, responsibilities, and resources, and provide for the qualifications, election, appointment and removal, term, salaries, powers and functions and duties of local officials, and all other matters relating to the organization and operation of the local units. To recall, prior to the enactment of the Rep. Act No. 7160, also known as the Local Government Code of 1991 (LGC), various measures have been enacted to promote local autonomy. These include the Barrio Charter of 1959, the Local Autonomy Act of 1959, the Decentralization Act of 1967 and the Local Government Code of 1983. Despite these initiatives, however, the shackles of dependence on the national government remained. Local government units were faced with the same problems that hamper their capabilities to participate effectively in the national development efforts, among which are: (a) inadequate tax base, (b) lack of fiscal control over external sources of income, (c) limited authority to prioritize and approve development projects, (d) heavy dependence on external sources of income, and (e) limited supervisory control over personnel of national line agencies. Considered as the most revolutionary piece of legislation on local autonomy, the LGC effectively deals with the fiscal constraints faced by LGUs. It widens the tax base of LGUs to include taxes which were prohibited by previous laws such as the imposition of taxes on forest products, forest concessionaires, mineral products, mining operations, and the like. The LGC likewise provides enough flexibility to impose tax rates in accordance with their needs and capabilities. It does not prescribe graduated fixed rates but merely specifies the minimum and maximum tax rates and leaves the determination of the actual rates to the respective sanggunian.108
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And the Courts ruling through Justice Azcuna in Philippine Ports Authority v. City of Iloilo,109 provides especially clear and emphatic rationale: In closing, we reiterate that in taxing government-owned or controlled corporations, the State ultimately suffers no loss. In National Power Corp. v. Presiding Judge, RTC, Br. XXV, 38 we elucidated: Actually, the State has no reason to decry the taxation of NPCs properties, as and by way of real property taxes. Real property taxes, after all, form part and parcel of the financing apparatus of the Government in development and nationbuilding, particularly in the local government level. xxx xxx xxx

subject to tax by local governments since the national government is not included in the enumeration of exempt entities in Section 193.111 Nothing is farther from the truth. I have never advanced any theory of the sort imputed in the majority. My main thesis on the matter merely echoes the explicit provision of Section 193 that unless otherwise provided in the Local Government Code (LGC) all tax exemptions enjoyed by all persons, whether natural or juridical, including GOCCs, were withdrawn upon the effectivity of the Code. Since the provision speaks of withdrawal of tax exemptions of persons, it follows that the exemptions theretofore enjoyed by MIAA which is definitely a person are deemed withdrawn upon the advent of the Code. On the other hand, the provision does not address the question of who are beyond the reach of the taxing power of LGUs. In fine, the grant of tax exemption or the withdrawal thereof assumes that the person or entity involved is subject to tax. Thus, Section 193 does not apply to entities which were never given any tax exemption. This would include the national government and its political subdivisions which, as a general rule, are not subjected to tax in the first place.112 Corollarily, the national government and its political subdivisions do not need tax exemptions. And Section 193 which ordains the withdrawal of tax exemptions is obviously irrelevant to them. Section 193 is in point for the disposition of this case as it forecloses dependence for the grant of tax exemption to MIAA on Section 21 of its charter. Even the majority should concede that the charter section is now ineffectual, as Section 193 withdraws the tax exemptions previously enjoyed by all juridical persons. With Section 193 mandating the withdrawal of tax exemptions granted to all persons upon the effectivity of the LGC, for MIAA to continue enjoying exemption from realty tax, it will have to rely on a basis other than Section 21 of its charter. Lung Center of the Philippines v. Quezon City113 provides another illustrative example of the jurisprudential havoc wrought about by the majority. Pursuant to its charter, the Lung Center was organized as a trust administered by an eponymous GOCC organized with the SEC.114 There is no doubt it is a GOCC, even by the majoritys reckoning. Applying the Administrative Code, it is also considered as an agency, the term encompassing even GOCCs. Yet since the Administrative Code definition of instrumentalities encompasses agencies, especially those not attached to a line department such as the Lung Center, it also follows that the Lung Center is an instrumentality, which for the
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To all intents and purposes, real property taxes are funds taken by the State with one hand and given to the other. In no measure can the government be said to have lost anything. Finally, we find it appropriate to restate that the primary reason for the withdrawal of tax exemption privileges granted to government-owned and controlled corporations and all other units of government was that such privilege resulted in serious tax base erosion and distortions in the tax treatment of similarly situated enterprises, hence resulting in the need for these entities to share in the requirements of development, fiscal or otherwise, by paying the taxes and other charges due from them.110 How does the majority counter these seemingly valid rationales which establish the soundness of a policy consideration subjecting national instrumentalities to local taxation? Again, by simply ignoring that these doctrines exist. It is unfortunate if the majority deems these cases or the principles of devolution and local autonomy as simply too inconvenient, and relies instead on discredited precedents. Of course, if the majority faces the issues squarely, and expressly discusses why Basco was right and Mactan was wrong, then this entire endeavor of the Court would be more intellectually satisfying. But, this is not a game the majority wants to play. Mischaracterization of My Views on the Tax Exemption Enjoyed by the National Government Instead, the majority engages in an extended attack pertaining to Section 193, mischaracterizing my views on that provision as if I had been interpreting the provision as making the national government, which itself is a juridical person,

majority is exempt from all local government taxes, especially real estate taxes. Yet just in 2004, the Court unanimously held that the Lung Center was not exempt from real property taxes. Can the majority and Lung Center be reconciled? I do not see how, and no attempt is made to demonstrate otherwise. Another key point. The last paragraph of Section 234 specifically asserts that any previous exemptions from realty taxes granted to or enjoyed by all persons, including all GOCCs, are thereby withdrawn. The majoritys interpretation of Sections 133 and 234(a) however necessarily implies that all instrumentalities, including GOCCs, can never be subjected to real property taxation under the Code. If that is so, what then is the sense of the last paragraph specifically withdrawing previous tax exemptions to all persons, including GOCCs when juridical persons such as MIAA are anyway, to his view, already exempt from such taxes under Section 133? The majoritys interpretation would effectively render the express and emphatic withdrawal of previous exemptions to GOCCs inutile. Ut magis valeat quam pereat. Hence, where a statute is susceptible of more than one interpretation, the court should adopt such reasonable and beneficial construction which will render the provision thereof operative and effective, as well as harmonious with each other.115 But, the majority seems content rendering as absurd the Local Government Code, since it does not have much use anyway for the Codes general philosophy of fiscal autonomy, as evidently seen by the continued reliance on Basco or Maceda. Local government rule has never been a grant of emancipation from the national government. This is the favorite bugaboo of the opponents of local autonomythe fallacy that autonomy equates to independence. Thus, the conclusion of the majority is that under Section 133(o), MIAA as a government instrumentality is beyond the reach of local taxation because it is not subject to taxes, fees or charges of any kind. Moreover, the taxation of national instrumentalities and agencies by LGUs should be strictly construed against the LGUs, citing Maceda and Basco. No mention is made of the subsequent rejection of these cases in jurisprudence following the Local Government Code, including Mactan. The majority is similarly silent on the general rule under Section 232 on real property taxation or Section 5 on the rules of construction of the Local Government Code.

V. MIAA, and not the National Government Is the Owner of the Subject Taxable Properties Section 232 of the Local Government Code explicitly provides that there are exceptions to the general rule on rule property taxation, as hereafter specifically exempted. Section 234, certainly hereafter, provides indubitable basis for exempting entities from real property taxation. It provides the most viable legal support for any claim that an governmental entity such as the MIAA is exempt from real property taxes. To repeat: SECTION 234. Exemptions from Real Property Tax.The following are exempted from payment of the real property tax: xxx (a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person: The majority asserts that the properties owned by MIAA are owned by the Republic of the Philippines, thus placing them under the exemption under Section 234. To arrive at this conclusion, the majority employs four main arguments. MIAA Property Is Patrimonial And Not Part of Public Dominion The majority claims that the Airport Lands and Buildings are property of public dominion as defined by the Civil Code, and therefore owned by the State or the Republic of the Philippines. But as pointed out by Justice Azcuna in the first PPA case, if indeed a property is considered part of the public dominion, such property is owned by the general public and cannot be declared to be owned by a public corporation, such as [the PPA]. Relevant on this point are the following provisions of the MIAA charter: Section 3. Creation of the Manila International Airport Authority. xxx The land where the Airport is presently located as well as the surrounding land area of approximately six hundred hectares, are hereby transferred, conveyed and assigned to the ownership and administration of the Authority, subject to existing rights, if any. x x x Any portion thereof shall not be disposed through
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sale or through any other mode unless specifically approved by the President of the Philippines. Section 22. Transfer of Existing Facilities and Intangible Assets.All existing public airport facilities, runways, lands, buildings and other property, movable or immovable, belonging to the Airport, and all assets, powers rights, interests and privileges belonging to the Bureau of Air Transportation relating to airport works or air operations, including all equipment which are necessary for the operation of crash fire and rescue facilities, are hereby transferred to the Authority. Clearly, it is the MIAA, and not either the State, the Republic of the Philippines or the national government that asserts legal title over the Airport Lands and Buildings. There was an express transfer of ownership between the MIAA and the national government. If the distinction is to be blurred, as the majority does, between the State/Republic/Government and a body corporate such as the MIAA, then the MIAA charter showcases the remarkable absurdity of an entity transferring property to itself. Nothing in the Civil Code or the Constitution prohibits the State from transferring ownership over property of public dominion to an entity that it similarly owns. It is just like a family transferring ownership over the properties its members own into a family corporation. The family exercises effective control over the administration and disposition of these properties. Yet for several purposes under the law, such as taxation, it is the corporation that is deemed to own those properties. A similar situation obtains with MIAA, the State, and the Airport Lands and Buildings. The second Public Ports Authority case, penned by Justice Callejo, likewise lays down useful doctrines in this regard. The Court refuted the claim that the properties of the PPA were owned by the Republic of the Philippines, noting that PPAs charter expressly transferred ownership over these properties to the PPA, a situation which similarly obtains with MIAA. The Court even went as far as saying that the fact that the PPA had not been issued any Torrens title over the port and port facilities and appurtenances is of no legal consequence. A Torrens title does not, by itself, vest ownership; it is merely an evidence of title over properties. x x x It has never been recognized as a mode of acquiring ownership over real properties.116 The Court further added:

x x x The bare fact that the port and its facilities and appurtenances are accessible to the general public does not exempt it from the payment of real property taxes. It must be stressed that the said port facilities and appurtenances are the petitioners corporate patrimonial properties, not for public use, and that the operation of the port and its facilities and the administration of its buildings are in the nature of ordinary business. The petitioner is clothed, under P.D. No. 857, with corporate status and corporate powers in the furtherance of its proprietary interests x x x The petitioner is even empowered to invest its funds in such government securities approved by the Board of Directors, and derives its income from rates, charges or fees for the use by vessels of the port premises, appliances or equipment. x x x Clearly then, the petitioner is a profit-earning corporation; hence, its patrimonial properties are subject to tax.117 There is no doubt that the properties of the MIAA, as with the PPA, are in a sense, for public use. A similar argument was propounded by the Light Rail Transit Authority in Light Rail Transit Authority v. Central Board of Assessment, 118 which was cited in Philippine Ports Authority and deserves renewed emphasis. The Light Rail Transit Authority (LRTA), a body corporate, provides valuable transportation facilities to the paying public.119 It claimed that its carriage-ways and terminal stations are immovably attached to governmentowned national roads, and to impose real property taxes thereupon would be to impose taxes on public roads. This view did not persuade the Court, whose decision was penned by Justice (now Chief Justice) Panganiban. It was noted: Though the creation of the LRTA was impelled by public serviceto provide mass transportation to alleviate the traffic and transportation situation in Metro Manilaits operation undeniably partakes of ordinary business. Petitioner is clothed with corporate status and corporate powers in the furtherance of its proprietary objectives. Indeed, it operates much like any private corporation engaged in the mass transport industry. Given that it is engaged in a serviceoriented commercial endeavor, its carriageways and terminal stations are patrimonial property subject to tax, notwithstanding its claim of being a government-owned or controlled corporation. xxx Petitioner argues that it merely operates and maintains the LRT system, and that the actual users of the carriageways and terminal stations are the commuting public. It adds that the public use character of the LRT is not negated by the fact that revenue is obtained from the latter's operations.
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We do not agree. Unlike public roads which are open for use by everyone, the LRT is accessible only to those who pay the required fare. It is thus apparent that petitioner does not exist solely for public service, and that the LRT carriageways and terminal stations are not exclusively for public use. Although petitioner is a public utility, it is nonetheless profit-earning. It actually uses those carriageways and terminal stations in its public utility business and earns money therefrom.120 xxx Even granting that the national government indeed owns the carriageways and terminal stations, the exemption would not apply because their beneficial use has been granted to petitioner, a taxable entity.121 There is no substantial distinction between the properties held by the PPA, the LRTA, and the MIAA. These three entities are in the business of operating facilities that promote public transportation. The majority further asserts that MIAAs properties, being part of the public dominion, are outside the commerce of man. But if this is so, then why does Section 3 of MIAAs charter authorize the President of the Philippines to approve the sale of any of these properties? In fact, why does MIAAs charter in the first place authorize the transfer of these airport properties, assuming that indeed these are beyond the commerce of man? No Trust has been Created Over MIAA Properties For the Benefit of the Republic The majority posits that while MIAA might be holding title over the Airport Lands and Buildings, it is holding it in trust for the Republic. A provision of the Administrative Code is cited, but said provision does not expressly provide that the property is held in trust. Trusts are either express or implied, and only those situations enumerated under the Civil Code would constitute an implied trust. MIAA does not fall within this enumeration, and neither is there a provision in MIAAs charter expressly stating that these properties are being held in trust. In fact, under its charter, MIAA is obligated to retain up to eighty percent (80%) of its gross operating income, not an inconsequential sum assuming that the beneficial owner of MIAAs properties is actually the Republic, and not the MIAA. Also, the claim that beneficial ownership over the MIAA remains with the government and not MIAA is ultimately irrelevant. Section 234(a) of the Local

Government Code provides among those exempted from paying real property taxes are [r]eal property owned by the [Republic]. . . except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person. In the context of Section 234(a), the identity of the beneficial owner over the properties is not determinative as to whether the exemption avails. It is the identity of the beneficial user of the property owned by the Republic or its political subdivisions that is crucial, for if said beneficial user is a taxable person, then the exemption does not lie. I fear the majority confuses the notion of what might be construed as beneficial ownership of the Republic over the properties of MIAA as nothing more than what arises as a consequence of the fact that the capital of MIAA is contributed by the National Government.122 If so, then there is no difference between the States ownership rights over MIAA properties than those of a majority stockholder over the properties of a corporation. Even if such shareholder effectively owns the corporation and controls the disposition of its assets, the personality of the stockholder remains separately distinct from that of the corporation. A brief recall of the entrenched rule in corporate law is in order: The first consequence of the doctrine of legal entity regarding the separate identity of the corporation and its stockholders insofar as their obligations and liabilities are concerned, is spelled out in this general rule deeply entrenched in American jurisprudence: Unless the liability is expressly imposed by constitutional or statutory provisions, or by the charter, or by special agreement of the stockholders, stockholders are not personally liable for debts of the corporation either at law or equity. The reason is that the corporation is a legal entity or artificial person, distinct from the members who compose it, in their individual capacity; and when it contracts a debt, it is the debt of the legal entity or artificial personthe corporationand not the debt of the individual members. (13A Fletcher Cyc. Corp. Sec. 6213) The entirely separate identity of the rights and remedies of a corporation itself and its individual stockholders have been given definite recognition for a long time. Applying said principle, the Supreme Court declared that a corporation may not be made to answer for acts or liabilities of its stockholders or those of legal entities to which it may be connected, or vice versa. (Palay, Inc. v. Clave, et al., 124 SCRA 638) It was likewise declared in a similar case that a bonafide corporation should alone be liable for corporate acts duly authorized by its
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officers and directors. (Caram, Jr. v. Court of Appeals, et al., 151 SCRA, p. 372)123 It bears repeating that MIAA under its charter, is expressly conferred the right to exercise all the powers of a corporation under the Corporation Law, including the right to corporate succession, and the right to sue and be sued in its corporate name.124 The national government made a particular choice to divest ownership and operation of the Manila International Airport and transfer the same to such an empowered entity due to perceived advantages. Yet such transfer cannot be deemed consequence free merely because it was the State which contributed the operating capital of this body corporate. The majority claims that the transfer the assets of MIAA was meant merely to effect a reorganization. The imputed rationale for such transfer does not serve to militate against the legal consequences of such assignment. Certainly, if it was intended that the transfer should be free of consequence, then why was it effected to a body corporate, with a distinct legal personality from that of the State or Republic? The stated aims of the MIAA could have very well been accomplished by creating an agency without independent juridical personality. VI MIAA Performs Proprietary Functions Nonetheless, Section 234(f) exempts properties owned by the Republic of the Philippines or its political subdivisions from realty taxation. The obvious question is what comprises the Republic of the Philippines. I think the key to understanding the scope of the Republic is the phrase political subdivisions. Under the Constitution, political subdivisions are defined as the provinces, cities, municipalities and barangays.125 In correlation, the Administrative Code of 1987 defines local government as referring to the political subdivisions established by or in accordance with the Constitution. Clearly then, these political subdivisions are engaged in the exercise of sovereign functions and are accordingly exempt. The same could be said generally of the national government, which would be similarly exempt. After all, even with the principle of local autonomy, it is inherently noxious and selfdefeatist for local taxation to interfere with the sovereign exercise of functions. However, the exercise of proprietary functions is a different matter altogether. Sovereign and Proprietary Functions Distinguished Sovereign or constituent functions are those which constitute the very bonds of society and are compulsory in nature, while ministrant or proprietary functions

are those undertaken by way of advancing the general interests of society and are merely optional.126 An exhaustive discussion on the matter was provided by the Court in Bacani v. NACOCO:127 x x x This institution, when referring to the national government, has reference to what our Constitution has established composed of three great departments, the legislative, executive, and the judicial, through which the powers and functions of government are exercised. These functions are twofold: constituent and ministrant. The former are those which constitute the very bonds of society and are compulsory in nature; the latter are those that are undertaken only by way of advancing the general interests of society, and are merely optional. President Wilson enumerates the constituent functions as follows: (1) The keeping of order and providing for the protection of persons and property from violence and robbery. (2) The fixing of the legal relations between man and wife and between parents and children. (3) The regulation of the holding, transmission, and interchange of property, and the determination of its liabilities for debt or for crime. (4) The determination of contract rights between individuals. (5) The definition and punishment of crime. (6) The administration of justice in civil cases. (7) The determination of the political duties, privileges, and relations of citizens. (8) Dealings of the state with foreign powers: the preservation of the state from external danger or encroachment and the advancement of its international interests. (Malcolm, The Government of the Philippine Islands, p. 19.) The most important of the ministrant functions are: public works, public education, public charity, health and safety regulations, and regulations of trade and industry. The principles determining whether or not a government shall exercise certain of these optional functions are: (1) that a government should do for the public welfare those things which private capital would not naturally undertake and (2) that a government should do these things which by its very nature it is better equipped to administer for the public welfare than is
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any private individual or group of individuals. (Malcolm, The Government of the Philippine Islands, pp. 19-20.) From the above we may infer that, strictly speaking, there are functions which our government is required to exercise to promote its objectives as expressed in our Constitution and which are exercised by it as an attribute of sovereignty, and those which it may exercise to promote merely the welfare, progress and prosperity of the people. To this latter class belongs the organization of those corporations owned or controlled by the government to promote certain aspects of the economic life of our people such as the National Coconut Corporation. These are what we call government-owned or controlled corporations which may take on the form of a private enterprise or one organized with powers and formal characteristics of a private corporations under the Corporation Law.128 The Court in Bacani rejected the proposition that the National Coconut Corporation exercised sovereign functions: Does the fact that these corporations perform certain functions of government make them a part of the Government of the Philippines? The answer is simple: they do not acquire that status for the simple reason that they do not come under the classification of municipal or public corporation. Take for instance the National Coconut Corporation. While it was organized with the purpose of adjusting the coconut industry to a position independent of trade preferences in the United States and of providing Facilities for the better curing of copra products and the proper utilization of coconut by-products, a function which our government has chosen to exercise to promote the coconut industry, however, it was given a corporate power separate and distinct from our government, for it was made subject to the provisions of our Corporation Law in so far as its corporate existence and the powers that it may exercise are concerned (sections 2 and 4, Commonwealth Act No. 518). It may sue and be sued in the same manner as any other private corporations, and in this sense it is an entity different from our government. As this Court has aptly said, The mere fact that the Government happens to be a majority stockholder does not make it a public corporation (National Coal Co. vs. Collector of Internal Revenue, 46 Phil., 586-587). By becoming a stockholder in the National Coal Company, the Government divested itself of its sovereign character so far as respects the transactions of the corporation. . . . Unlike the Government, the corporation may be sued without its consent, and is subject to taxation. Yet the National Coal Company remains an agency or instrumentality of government. (Government of the Philippine Islands vs. Springer, 50 Phil. 288)

The following restatement of the entrenched rule by former SEC Chairperson Rosario Lopez bears noting: The fact that government corporations are instrumentalities of the State does not divest them with immunity from suit. (Malong v. PNR, 138 SCRA p. 63) It is settled that when the government engages in a particular business through the instrumentality of a corporation, it divests itself pro hoc vice of its sovereign character so as to subject itself to the rules governing private corporations, (PNB v. Pabolan, 82 SCRA 595) and is to be treated like any other corporation. (PNR v. Union de Maquinistas Fogonero y Motormen, 84 SCRA 223) In the same vein, when the government becomes a stockholder in a corporation, it does not exercise sovereignty as such. It acts merely as a corporator and exercises no other power in the management of the affairs of the corporation than are expressly given by the incorporating act. Nor does the fact that the government may own all or a majority of the capital stock take from the corporation its character as such, or make the government the real party in interest. (Amtorg Trading Corp. v. US, 71 F2d 524, 528)129 MIAA Performs Proprietary Functions No Matter How Vital to the Public Interest The simple truth is that, based on these accepted doctrinal tests, MIAA performs proprietary functions. The operation of an airport facility by the State may be imbued with public interest, but it is by no means indispensable or obligatory on the national government. In fact, as demonstrated in other countries, it makes a lot of economic sense to leave the operation of airports to the private sector. The majority tries to becloud this issue by pointing out that the MIAA does not compete in the marketplace as there is no competing international airport operated by the private sector; and that MIAA performs an essential public service as the primary domestic and international airport of the Philippines. This premise is false, for one. On a local scale, MIAA competes with other international airports situated in the Philippines, such as Davao International Airport and MCIAA. More pertinently, MIAA also competes with other international airports in Asia, at least. International airlines take into account the quality and conditions of various international airports in determining the number of flights it would assign to a particular airport, or even in choosing a hub through which destinations necessitating connecting flights would pass through.
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Even if it could be conceded that MIAA does not compete in the market place, the example of the Philippine National Railways should be taken into account. The PNR does not compete in the marketplace, and performs an essential public service as the operator of the railway system in the Philippines. Is the PNR engaged in sovereign functions? The Court, in Malong v. Philippine National Railways,130held that it was not.131 Even more relevant to this particular case is Teodoro v. National Airports Corporation,132 concerning the proper appreciation of the functions performed by the Civil Aeronautics Administration (CAA), which had succeeded the defunction National Airports Corporation. The CAA claimed that as an unincorporated agency of the Republic of the Philippines, it was incapable of suing and being sued. The Court noted: Among the general powers of the Civil Aeronautics Administration are, under Section 3, to execute contracts of any kind, to purchase property, and to grant concession rights, and under Section 4, to charge landing fees, royalties on sales to aircraft of aviation gasoline, accessories and supplies, and rentals for the use of any property under its management. These provisions confer upon the Civil Aeronautics Administration, in our opinion, the power to sue and be sued. The power to sue and be sued is implied from the power to transact private business. And if it has the power to sue and be sued on its behalf, the Civil Aeronautics Administration with greater reason should have the power to prosecute and defend suits for and against the National Airports Corporation, having acquired all the properties, funds and choses in action and assumed all the liabilities of the latter. To deny the National Airports Corporation's creditors access to the courts of justice against the Civil Aeronautics Administration is to say that the government could impair the obligation of its corporations by the simple expedient of converting them into unincorporated agencies.133 xxx Eventually, the charter of the CAA was revised, and it among its expanded functions was [t]o administer, operate, manage, control, maintain and develop the Manila International Airport.134 Notwithstanding this expansion, in the 1988 case of CAA v. Court of Appeals135 the Court reaffirmed the ruling that the CAA was engaged in private or non-governmental functions.136 Thus, the Court had already ruled that the predecessor agency of MIAA, the CAA was engaged in private or non-governmental functions. These are more

precedents ignored by the majority. The following observation from the Teodoro case very well applies to MIAA. The Civil Aeronautics Administration comes under the category of a private entity. Although not a body corporate it was created, like the National Airports Corporation, not to maintain a necessary function of government, but to run what is essentially a business, even if revenues be not its prime objective but rather the promotion of travel and the convenience of the traveling public. It is engaged in an enterprise which, far from being the exclusive prerogative of state, may, more than the construction of public roads, be undertaken by private concerns.137 If the determinative point in distinguishing between sovereign functions and proprietary functions is the vitality of the public service being performed, then it should be noted that there is no more important public service performed than that engaged in by public utilities. But notably, the Constitution itself authorizes private persons to exercise these functions as it allows them to operate public utilities in this country.138 If indeed such functions are actually sovereign and belonging properly to the government, shouldnt it follow that the exercise of these tasks remain within the exclusive preserve of the State? There really is no prohibition against the government taxing itself,139 and nothing obscene with allowing government entities exercising proprietary functions to be taxed for the purpose of raising the coffers of LGUs. On the other hand, it would be an even more noxious proposition that the government or the instrumentalities that it owns are above the law and may refuse to pay a validly imposed tax. MIAA, or any similar entity engaged in the exercise of proprietary, and not sovereign functions, cannot avoid the adverse-effects of tax evasion simply on the claim that it is imbued with some of the attributes of government. VII. MIAA Property Not Subject to Execution Sale Without Consent of the President. Despite the fact that the City of Paraaque ineluctably has the power to impose real property taxes over the MIAA, there is an equally relevant statutory limitation on this power that must be fully upheld. Section 3 of the MIAA charter states that [a]ny portion [of the [lands transferred, conveyed and assigned to the ownership and administration of the MIAA] shall not be disposed through sale or through any other mode unless specifically approved by the President of the Philippines.140
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Nothing in the Local Government Code, even with its wide grant of powers to LGUs, can be deemed as repealing this prohibition under Section 3, even if it effectively forecloses one possible remedy of the LGU in the collection of delinquent real property taxes. While the Local Government Code withdrew all previous local tax exemptions of the MIAA and other natural and juridical persons, it did not similarly withdraw any previously enacted prohibitions on properties owned by GOCCs, agencies or instrumentalities. Moreover, the resulting legal effect, subjecting on one hand the MIAA to local taxes but on the other hand shielding its properties from any form of sale or disposition, is not contradictory or paradoxical, onerous as its effect may be on the LGU. It simply means that the LGU has to find another way to collect the taxes due from MIAA, thus paving the way for a mutually acceptable negotiated solution.141 There are several other reasons this statutory limitation should be upheld and applied to this case. It is at this juncture that the importance of the Manila Airport to our national life and commerce may be accorded proper consideration. The closure of the airport, even by reason of MIAAs legal omission to pay its taxes, will have an injurious effect to our national economy, which is ever reliant on air travel and traffic. The same effect would obtain if ownership and administration of the airport were to be transferred to an LGU or some other entity which were not specifically chartered or tasked to perform such vital function. It is for this reason that the MIAA charter specifically forbids the sale or disposition of MIAA properties without the consent of the President. The prohibition prevents the peremptory closure of the MIAA or the hampering of its operations on account of the demands of its creditors. The airport is important enough to be sheltered by legislation from ordinary legal processes. Section 3 of the MIAA charter may also be appreciated as within the proper exercise of executive control by the President over the MIAA, a GOCC which despite its separate legal personality, is still subsumed within the executive branch of government. The power of executive control by the President should be upheld so long as such exercise does not contravene the Constitution or the law, the President having the corollary duty to faithfully execute the Constitution and the laws of the land.142 In this case, the exercise of executive control is precisely recognized and authorized by the legislature, and it should be upheld even if it comes at the expense of limiting the power of local government units to collect real property taxes. Had this petition been denied instead with Mactan as basis, but with the caveat that the MIAA properties could not be subject of execution sale without the consent of the President, I suspect that the parties would feel little distress.

Through such action, both the Local Government Code and the MIAA charter would have been upheld. The prerogatives of LGUs in real property taxation, as guaranteed by the Local Government Code, would have been preserved, yet the concerns about the ruinous effects of having to close the Manila International Airport would have been averted. The parties would then be compelled to try harder at working out a compromise, a task, if I might add, they are all too willing to engage in.143 Unfortunately, the majority will cause precisely the opposite result of unremitting hostility, not only to the City of Paraaque, but to the thousands of LGUs in the country. VIII. Summary of Points My points may be summarized as follows: 1)Mactan and a long line of succeeding cases have already settled the rule that under the Local Government Code, enacted pursuant to the constitutional mandate of local autonomy, all natural and juridical persons, even those GOCCs, instrumentalities and agencies, are no longer exempt from local taxes even if previously granted an exemption. The only exemptions from local taxes are those specifically provided under the Local Government Code itself, or those enacted through subsequent legislation. 2) Under the Local Government Code, particularly Section 232, instrumentalities, agencies and GOCCs are generally liable for real property taxes. The only exemptions therefrom under the same Code are provided in Section 234, which include real property owned by the Republic of the Philippines or any of its political subdivisions. 3) The subject properties are owned by MIAA, a GOCC, holding title in its own name. MIAA, a separate legal entity from the Republic of the Philippines, is the legal owner of the properties, and is thus liable for real property taxes, as it does not fall within the exemptions under Section 234 of the Local Government Code. 4) The MIAA charter expressly bars the sale or disposition of MIAA properties. As a result, the City of Paraaque is prohibited from seizing or selling these properties by public auction in order to satisfy MIAAs tax liability. In the end, MIAA is encumbered only by a limited lien possessed by the City of Paraaque. On the other hand, the majoritys flaws are summarized as follows:

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1) The majority deliberately ignores all precedents which run counter to its hypothesis, including Mactan. Instead, it relies and directly cites those doctrines and precedents which were overturned by Mactan. By imposing a different result than that warranted by the precedents without explaining why Mactan or the other precedents are wrong, the majority attempts to overturn all these ruling sub silencio and without legal justification, in a manner that is not sanctioned by the practices and traditions of this Court. 2) The majority deliberately ignores the policy and philosophy of local fiscal autonomy, as mandated by the Constitution, enacted under the Local Government Code, and affirmed by precedents. Instead, the majority asserts that there is no sound rationale for local governments to tax national government instrumentalities, despite the blunt existence of such rationales in the Constitution, the Local Government Code, and precedents. 3) The majority, in a needless effort to justify itself, adopts an extremely strained exaltation of the Administrative Code above and beyond the Corporation Code and the various legislative charters, in order to impose a wholly absurd definition of GOCCs that effectively declassifies innumerable existing GOCCs, to catastrophic legal consequences. 4) The majority asserts that by virtue of Section 133(o) of the Local Government Code, all national government agencies and instrumentalities are exempt from any form of local taxation, in contravention of several precedents to the contrary and the proviso under Section 133, unless otherwise provided herein [the Local Government Code]. 5) The majority erroneously argues that MIAA holds its properties in trust for the Republic of the Philippines, and that such properties are patrimonial in character. No express or implied trust has been created to benefit the national government. The legal distinction between sovereign and proprietary functions, as affirmed by jurisprudence, likewise preclude the classification of MIAA properties as patrimonial. IX. Epilogue If my previous discussion still fails to convince on how wrong the majority is, then the following points are well-worth considering. The majority cites the Bangko Sentral ng Pilipinas (Bangko Sentral) as a government instrumentality that exercises corporate powers but not organized as a stock or non-stock corporation. Correspondingly for the majority, the Bangko ng Sentral is exempt

from all forms of local taxation by LGUs by virtue of the Local Government Code. Section 125 of Rep. Act No. 7653, The New Central Bank Act, states: SECTION 125. Tax Exemptions.The Bangko Sentral shall be exempt for a period of five (5) years from the approval of this Act from all national, provincial, municipal and city taxes, fees, charges and assessments. The New Central Bank Act was promulgated after the Local Government Code if the BSP is already preternaturally exempt from local taxation owing to its personality as a government instrumentality, why then the need to make a new grant of exemption, which if the majority is to be believed, is actually a redundancy. But even more tellingly, does not this provision evince a clear intent that after the lapse of five (5) years, that the Bangko Sentral will be liable for provincial, municipal and city taxes? This is the clear congressional intent, and it is Congress, not this Court which dictates which entities are subject to taxation and which are exempt. Perhaps this notion will offend the majority, because the Bangko Sentral is not even a government owned corporation, but a government instrumentality, or perhaps loosely, a government corporate entity. How could such an entity like the Bangko Sentral, which is not even a government owned corporation, be subjected to local taxation like any mere mortal? But then, see Section 1 of the New Central Bank Act: SECTION 1. Declaration of Policy.The State shall maintain a central monetary authority that shall function and operate as an independent and accountable body corporate in the discharge of its mandated responsibilities concerning money, banking and credit. In line with this policy, and considering its unique functions and responsibilities, the central monetary authority established under this Act, while being a government-owned corporation, shall enjoy fiscal and administrative autonomy. Apparently, the clear legislative intent was to create a government corporation known as the Bangko Sentral ng Pilipinas. But this legislative intent, the sort that is evident from the text of the provision and not the one that needs to be unearthed from the bowels of the archival offices of the House and the Senate, is for naught to the majority, as it contravenes the Administrative Code of 1987, which after all, is the governing law defining the status and relationship of government agencies and instrumentalities and thus superior to the legislative charter in determining the personality of a chartered entity. Its like saying that
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the architect who designed a school building is better equipped to teach than the professor because at least the architect is familiar with the geometry of the classroom. Consider further the example of the Philippine Institute of Traditional and Alternative Health Care (PITAHC), created by Republic Act No. 8243 in 1997. It has similar characteristics as MIAA in that it is established as a body corporate,144 and empowered with the attributes of a corporation,145 including the power to purchase or acquire real properties.146 However the PITAHC has no capital stock and no members, thus following the majority, it is not a GOCC. The state policy that guides PITAHC is the development of traditional and alternative health care,147 and its objectives include the promotion and advocacy of alternative, preventive and curative health care modalities that have been proven safe, effective and cost effective.148 Alternative health care modalities include other forms of non-allophatic, occasionally non-indigenous or imported healing methods which include, among others reflexology, acupuncture, massage, acupressure and chiropractics.149 Given these premises, there is no impediment for the PITAHC to purchase land and construct thereupon a massage parlor that would provide a cheaper alternative to the opulent spas that have proliferated around the metropolis. Such activity is in line with the purpose of the PITAHC and with state policy. Is such massage parlor exempt from realty taxes? For the majority, it is, for PITAHC is an instrumentality or agency exempt from local government taxation, which does not fall under the exceptions under Section 234 of the Local Government Code. Hence, this massage parlor would not just be a shelter for frazzled nerves, but for taxes as well. Ridiculous? One might say, certainly a decision of the Supreme Court cannot be construed to promote an absurdity. But precisely the majority, and the faulty reasoning it utilizes, opens itself up to all sorts of mischief, and certainly, a taxexempt massage parlor is one of the lesser evils that could arise from the majority ruling. This is indeed a very strange and very wrong decision. I dissent. Petition granted, assailed resolutions set aside. Note.A local government unit (LGU), seeking relief in order to protect or vindicate an interest of its own, and of the other LGUs, pertaining to their

interest in their share in the national taxes or the Internal Revenue Allotment (IRA), has the requisite standing to bring suit. (Province of Batangas vs. Romulo, 429 SCRA 736 [2004]) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Manila International Airport Authority vs. Court of Appeals, 495 SCRA 591(2006)]

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G.R. No. 120652. February 11, 1998.* EUGENIO DE LA CRUZ, petitioner, vs. COURT OF APPEALS, and CRISTINA MADLANGSAKAY VILLANUEVA, respondents.
Land Titles; Actions; Reconveyance; In an action for reconveyance, what is sought is the transfer of the property which has been wrongfully or erroneously registered in another persons name, to its rightful and legal owner, or to one with a better right.The several decades when petitioner possessed and occupied the land in question may not be considered in his favor after all. In an action for reconveyance, what is sought is the transfer of the property which has been wrongfully or erroneously registered in another persons name, to its rightful and legal owner, or to one with a better right. This (sic) is what reconveyance is all about. Same; Same; Same; Natural Resources; Although the classification of lands is a government prerogative which it may opt to exercise to the detriment of another, still, private interests regarding the same are not prejudiced and the possessor in good faith is respected in his right not to be disturbed.Unfortunately for him, Republic vs. Court of Appeals and Miguel Marcelo, et al. is inapplicable in the present case. In said case, the disputed land was classified after the possession and cultivation in good faith of the applicant. The Court stated that the primary right of a private individual who possessed and cultivated the land in good faith much prior to such classification must be recognized and should not be prejudiced by after-events which could not have been anticipated. Land Classification Project No. 3 was certified by the Director of Lands on December 22, 1924, whereas the possession thereof commenced as early as 1909. Petitioner therein was not deprived of his possessory rights by the subsequent classification of the land. Although the classification of lands is a government prerogative which it may opt to exercise to the detriment of another, still, private interests regarding the same are not prejudiced and the possessor in good faith is respected in his right not to be disturbed. This was the auspicious situation of petitioner in the abovecited case. Same; Same; Same; Same; A positive act of the Government is needed to declassify land which is classified as forest, and to convert it into alienable or disposable land or for other purposes. Here, petitioner possessed and occupied the land after it had been declared by the Government as part of the forest zone. In fact, the land remained part of the forest reserve until such time that it was reclassified into alienable or disposable land at the behest of the Ramoses. As succinctly stated by this Court in Director of Lands vs. Court of Appeals, a positive act of the Government is needed to declassify land which is classified as forest, and to convert it into alienable or disposable land for other purposes. Until such lands have been properly declared to be available for other purposes, there is no disposable land to speak of. Absent the fact of declassification prior to the possession and cultivation in good faith by petitioner, the property occupied by him remained classified as forest or timberland, which he could not have acquired by prescription. Same; Same; Same; Same; Prescription; It is an iron-clad dictum that prescription can never lie against the Government.Neither may the rewards of prescription be successfully invoked by petitioner, as it is an iron-clad dictum that prescription can never lie against the Government. The lengthy occupation of the disputed land by petitioner cannot be counted in his favor, as it

remained part of the patrimonial property of the State, which property, as stated earlier, is inalienable and indisposable. Same; Same; Same; Same; Forest lands or forest reserves are not capable of private appropriation, and possession thereof, however long, cannot convert them into private property.Further, jurisprudence is replete with cases which iterate that forest lands or forest reserves are not capable of private appropriation, and possession thereof, however long, cannot convert them into private property. Possession of the residential lot by petitioner, whether spanning decades or centuries, could never ripen into ownership. This Court is constrained to abide by the latin maxim (d)ura lex, sed lex. Same; Same; Same; Same; The classification of forest land, or any land for that matter, is descriptive of its legal nature or status, and does not have to be descriptive of what the land actually looks like.The fact that the disputed land was used for a dual private purpose, namely, as a residential lot and as part of the ricemill business of private respondents parents, is immaterial. As held in Heirs of Jose Amunategui vs. Director of Forestry, the classification of forest land, or any land for that matter, is descriptive of its legal nature or status, and does not have to be descriptive of what the land actually looks like.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court. Sixto T. Antonio for petitioner. F.C. Burgos Law Office for private respondent. ROMERO, J.:

The oft-debated issue of ownership based on acquisitive prescription submits itself before the Court anew, involving a four hundred and seven (407) square meter residential lot located at Barangay San Jose, Bulacan, Bulacan. Petitioner Eugenio De la Cruz claims to be the owner and actual possessor of the lot, having possessed and occupied it openly, publicly, notoriously, adversely against the whole world, and in the concept of an owner, for more than thirty years,1 at the commencement of this controversy on September 28, 1987. Private respondent Cristina Madlangsakay Villanueva is a purchaser of the same lot from the Ramos brothers, Rogelio and Augusto, Jr., who claim to be successors-in-interest of a previous possessor of the same.

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In October 1959, petitioner contracted a loan from the parents of private respondent, Anastacio Sakay and Lourdes Manuel, in the amount of one thousand pesos (P1,000.00), mortgaging the disputed land as security. Sometime in 1973, the land became the subject of an application for registration under the Land Registration Act (Act No. 496)2 by the Ramos brothers. They insisted that, under said Act, they had a better claim than petitioner, being successors-in-interest of a previous possessor of the land. Petitioner seasonably opposed the application which, after trial, was denied on the ground that the land, not having been reclassified for other purposes, remained part of the forest reserve, hence, inalienable.3 Consequently, the opposition was dismissed. Shortly thereafter, the brothers successfully pursued the reclassification of the land and were granted ownership of the same. It was after this occurrence that private respondent came to purchase the disputed land from the Ramoses. Oblivious of the Ramoses success in claiming the land, petitioner was later surprised to learn that its ownership had been bestowed upon them, and that it was subsequently sold to private respondent. Petitioner, as plaintiff in Civil Case No. 520-M-87, entitled Eugenio De la Cruz versus Cristina Madlangsakay Villanueva, filed a complaint on September 28, 1987 for reconveyance with damages against private respondent, defendant therein. The complaint was dismissed. On appeal, plaintiff-appellant elucidated that an uncle of his had given the land to his mother, after having purchased it from a Cecilio Espiritu in 1930.4 He sought a reversal of the decision of the lower court, praying for a reconveyance of the land in his favor. The appealed decision was affirmed in toto by the appellate court. A motion for reconsideration, for lack of merit, did not prosper. The persistent petitioner, filing this petition for review, opined that the questioned decision of the trial court was incompatible with the ruling in Republic vs. Court of Appeals and Miguel Marcelo, et al.,5 where this Court held that the primary right of a private individual who possessed and cultivated the land in good faith, much prior to its classification, must be recognized and should not be prejudiced by after-events which could not have been anticipated.6 He relies on the equitable principle of estoppel, alleging that, by virtue of the contract of mortgage, private respondent and her parents thereby tacitly acknowledged him as the true and lawful owner of the mortgaged property. As such, they are estopped from claiming for themselves the disputed land. He prays for the reconveyance of the lot in his favor; moral damages in the amount of ten thousand pesos (P10,000.00); exemplary damages of like

amount; and attorneys fees of twenty thousand pesos (P20,000.00), plus one thousand pesos (P1,000.00) per court appearance and the costs of the suit.7 This petition cannot be given due course. The several decades when petitioner possessed and occupied the land in question may not be considered in his favor after all. In an action for reconveyance, what is sought is the transfer of the property which has been wrongfully or erroneously registered in another persons name, to its rightful and legal owner, or to one with a better right. This (sic) is what reconveyance is all about.8 The crucial point for resolution is this: Is petitioner vested with a better right over the residential lot to which he devoted an abundance of time, effort and resources in fencing and cultivating the same? It is sad that even the magnanimous compassion of this Court cannot offer him any spark of consolation for his assiduous preservation and enhancement of the property. We answer in the negative. Unfortunately for him, Republic vs. Court of Appeals and Miguel Marcelo, et al.9 is inapplicable in the present case. In said case, the disputed land was classified after the possession and cultivation in good faith of the applicant. The Court stated that the primary right of a private individual who possessed and cultivated the land in good faith much prior to such classification must be recognized and should not be prejudiced by after-events which could not have been anticipated.10 Land Classification Project No. 3 was certified by the Director of Lands on December 22, 1924, whereas the possession thereof commenced as early as 1909.11 Petitioner therein was not deprived of his possessory rights by the subsequent classification of the land. Although the classification of lands is a government prerogative which it may opt to exercise to the detriment of another, still, private interests regarding the same are not prejudiced and the possessor in good faith is respected in his right not to be disturbed. This was the auspicious situation of petitioner in the abovecited case. Here, petitioner possessed and occupied the land after it had been declared by the Government as part of the forest zone. In fact, the land remained part of the forest reserve until such time that it was reclassified into alienable or disposable land at the behest of the Ramoses. As succinctly stated by this Court in Director of Lands vs. Court of Appeals,12 a positive act of the Government is needed to declassify land which is classified as forest, and to
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convert it into alienable or disposable land for other purposes. Until such lands have been properly declared to be available for other purposes, there is no disposable land to speak of.13 Absent the fact of declassification prior to the possession and cultivation in good faith by petitioner, the property occupied by him remained classified as forest or timberland, which he could not have acquired by prescription.14 Clearly, the effort to apply Republic vs. Court of Appeals and Miguel Marcelo, et al. in the case at bar is futile. No similarity of facts or events exist which would merit its application to the case presented by petitioner. Neither may the rewards of prescription be successfully invoked by petitioner, as it is an iron-clad dictum that prescription can never lie against the Government. The lengthy occupation of the disputed land by petitioner cannot be counted in his favor, as it remained part of the patrimonial property of the State, which property, as stated earlier, is inalienable and indisposable. Under Article 1113 of the Civil Code: All things which are within the commerce of men are susceptible of prescription, unless otherwise provided. Property of the State or any of its subdivisions not patrimonial in character shall not be the object of prescription. (Italics supplied). Further, jurisprudence is replete with cases which iterate that forest lands or forest reserves are not capable of private appropriation, and possession thereof, however long, cannot convert them into private property.15 Possession of the residential lot by petitioner, whether spanning decades or centuries, could never ripen into ownership. This Court is constrained to abide by the latin maxim (d)ura lex, sed lex.16 The fact that the disputed land was used for a dual private purpose, namely, as a residential lot and as part of the rice-mill business of private respondents parents, is immaterial. As held in Heirs of Jose Amunategui vs. Director of Forestry,17 the classification of forest land, or any land for that matter, is descriptive of its legal nature or status, and does not have to be descriptive of what the land actually looks like. Recourse to the principle of estoppel must likewise fail. Petitioner invokes this principle in light of the contract of mortgage between him and the parents of private respondent. While it is true that the mortgagees, having entered into a contract with petitioner as mortgagor, are estopped from questioning the latters ownership of the mortgaged property and his concomitant capacity to

alienate or encumber the same,18 it must be considered that, in the first place, petitioner did not possess such capacity to encumber the land at the time for the stark reason that it had been classified as a forest land and remained a part of the patrimonial property of the State. Assuming, without admitting, that the mortgagees cannot subsequently question the fact of ownership of petitioner after having dealt with him in that capacity, still, petitioner was never vested with the proprietary power to encumber the property. In fact, even if the mortgagees continued to acknowledge petitioner as the owner of the disputed land, in the eyes of the law, the latter can never be presumed to be owner. WHEREFORE, considering the foregoing, we are bound by the findings of the appellate court and are constrained to AFFIRM the same in toto. No pronouncement as to costs. SO ORDERED. Narvasa (C.J., Chairman), Kapunan, Francisco and Purisima, JJ., concur. Reviewed decision affirmed in toto. Notes.An attorney who discovers the futility of his clients application for land registration because the land applied for is forest land must inform his client that he has withdrawn the application. (Santos vs. Panganiban, Jr., 120 SCRA 799 [1983]) It is difficult for a man, scavenging on the garbage dump or fishing in the murky waters of the Pasig River and the Laguna Lake or making a clearing in the forest to understand why protecting birds, fish, and trees is more important than protecting him and keeping his family alive. (Laguna Lake Development Authority vs. Court of Appeals, 251 SCRA 42 [1995]) Where the land applied for is part of the public forest, the land registration court acquires no jurisdiction over the land, which is not yet alienable and disposable. (Republic vs. Court of Appeals, 258 SCRA 223 [1996]) o0o

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No. L-40474. August 29, 1975.* CEBU OXYGEN & ACETYLENE CO., INC., petitioner, vs. HON. PASCUAL A. BERCILLES, Presiding Judge, Branch XV, 14th Judicial District, and JOSE L. ESPELETA, Assistant Provincial Fiscal, Province of Cebu, representing the Solicitor Generals Office and the Bureau of Lands, respondents.
Municipal corporations; Authority of city council to close city streets and to vacate or withdraw the same from public use discretionary.The city council is the authority competent to determine whether or not a certain property is still necessary for public use. Such power to vacate a street or alley is discretionary. And the discretion will not ordinarily be controlled or interfered with by the courts, absent a plain case of abuse or fraud or collusion. Faithfulness to the public trust will be presumed. So the fact that some private interests may be served incidentally will not invalidate the vacation ordinance. Property; Property of public dominion withdrawn from public use becomes patrimonial property.Article 422 of the Civil Code expressly provides that Property of public dominion, when no longer intended for public use or for public service, shall form part of the patrimonial property of the State. Besides, the Revised Charter of the City of Cebu heretofore quoted, in very clear and unequivocal terms, states that: Property thus withdrawn from public servitude may be used or conveyed for any purpose for which other real property belonging to the City may be lawfully used or conveyed. Same; Same; Patrimonial property can be the object of an ordinary contract.Since that portion of the city street subject of petitioners application for registration of title was withdrawn from public use, it follows that such withdrawn portion becomes patrimonial property which can be the object of an ordinary contract.

This is a petition for the review of the order of the Court of First Instance of Cebu dismissing petitioners application for registration of title over a parcel of land situated in the City of Cebu. The parcel of land sought to be registered was originally a portion of M. Borces Street, Mabolo, Cebu City. On September 23, 1968, the City Council of Cebu, through Resolution No. 2193, approved on October 3, 1968, declared the terminal portion of M. Borces Street, Mabolo, Cebu City, as an abandoned road, the same not being included in the City Development Plan.1 Subsequently, on December 19, 1968, the City Council of Cebu passed Resolution No. 2755, authorizing the Acting City Mayor to sell the land through a public bidding.2 Pursuant thereto, the lot was awarded to the herein petitioner being the highest bidder and on March 3, 1969, the City of Cebu, through the Acting City Mayor, executed a deed of absolute sale to the herein petitioner for a total consideration of P10,800.00.3 By virtue of the aforesaid deed of absolute sale, the petitioner filed an application with the Court of First Instance of Cebu to have its title to the land registered.4 On June 26, 1974, the Assistant Provincial Fiscal of Cebu filed a motion to dismiss the application on the ground that the property sought to be registered being a public road intended for public use is considered part of the public domain and therefore outside the commerce of man. Consequently, it cannot be subject to registration by any private individual.5 After hearing the parties, on October 11, 1974 the trial court issued an order dismissing the petitioners application for registration of title.6 Hence, the instant petition for review. For the resolution of this case, the petitioner poses the following questions: (1) Does the City Charter of Cebu City (Republic Act No. 3857) under Section 31, paragraph 34, give the City of Cebu the valid right to declare a road as abandoned? and (2) Does the declaration of the road, as abandoned, make it the patrimonial property of the City of Cebu which may be the object of a common contract? (1) The pertinent portions of the Revised Charter of Cebu City provides: Section 31. Legislative Powers. Any provision of law and executive order to the contrary notwithstanding, the City Council shall have the following legislative powers:
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PETITION for review of an order of the Court of First Instance of Cebu. Bercilles, J.

The facts are stated in the opinion of the Court. Jose Antonio B. Conde for petitioner. Acting Solicitor General Hugo E. Gutierrez, Jr., Assistant Solicitor General Octavio R. Ramirez and Trial Attorney David R. Hilario for respondents. CONCEPCION, Jr., J.:

xxx

xxx

xxx

xxx

Accordingly, the withdrawal of the property in question from public use and its subsequent sale to the petitioner is valid. Hence, the petitioner has a registerable title over the lot in question. WHEREFORE, the order dated October 11, 1974, rendered by the respondent court in Land Reg. Case No. N-948, LRC Rec. No. N-44531 is hereby set aside, and the respondent court is hereby ordered to proceed with the hearing of the petitioners application for registration of title. SO ORDERED. Makalintal, C.J., Fernando, Barredo and Aquino, JJ., concur. Order set aside.

(34) x x x; to close any city road, street or alley, boulevard, avenue, park or square. Property thus withdrawn from public servitude may be used or conveyed for any purpose for which other real property belonging to the City may be lawfully used or conveyed. From the foregoing, it is undoubtedly clear that the City of Cebu is empowered to close a city road or street. In the case of Favis vs. City of Baguio,7 where the power of the city Council of Baguio City to close city streets and to vacate or withdraw the same from public use was similarly assailed, this court said: 5. So it is, that appellant may not challenge the city councils act of withdrawing a strip of Lapu-Lapu Street at its dead end from public use and converting the remainder thereof into an alley. These are acts well within the ambit of the power to close a city street. The city council, it would seem to us, is the authority competent to determine whether or not a certain property is still necessary for public use. Such power to vacate a street or alley is discretionary. And the discretion will not ordinarily be controlled or interfered with by the courts, absent a plain case of abuse or fraud or collusion. Faithfulness to the public trust will be presumed. So the fact that some private interests may be served incidentally will not invalidate the vacation ordinance. (2) Since that portion of the city street subject of petitioners application for registration of title was withdrawn from public use, it follows that such withdrawn portion becomes patrimonial property which can be the object of an ordinary contract. Article 422 of the Civil Code expressly provides that Property of public dominion, when no longer intended for public use or for public service, shall form part of the patrimonial property of the State. Besides, the Revised Charter of the City of Cebu heretofore quoted, in very clear and unequivocal terms, states that: Property thus withdrawn from public servitude may be used or conveyed for any purpose for which other real property belonging to the City may be lawfully used or conveyed.

Notes.a) Extent of legislative control over properties of municipal corporations.The principle itself is simple: If the property is owned by the municipality (meaning municipal corporation) in its public and governmental capacity, the property is public and Congress has absolute control over it. But if the property is owned in its private or proprietary capacity, then it is patrimonial and Congress has no absolute control. The municipal cannot be deprived of it without due process and payment of just compensation. (Province of Zamboanga del Norte vs. City of Zamboanga, L-24440, March 28, 1968). b) Material factors to consider in vacating a street.Deemed as material factors which a municipality must consider in deliberating upon the advisability of closing a street are: the topography of the property surrounding the street in the light of ingress and egress to other streets; the relationship of the street in the road system throughout the subdivision; the problem posed by the dead end of the street; the width of the street; the cost of rebuilding and maintaining the street as contrasted to its ultimate value to all of the property in the vicinity; the inconvenience of those visiting the subdivision; and whether the closing of the street would cut off any property owners from access to a street. (Favis vs. City of Baguio, L-29910, April 25, 1969). o0o

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G.R. No. 171304. October 10, 2007.* IN THE MATTER OF REVERSION/RECALL OF RECONSTITUTED OCT NO. 0-116 DECREE NO. 3999 OF LOT 4239; DECREE NO. 59327; OCT NO. 388; IN THE TARLAC REGISTRY OF DEEDSHEIRS OF THE LATE SPS. TIMOTEA L. PALAGANAS, WIFE OF RAMON PARAGAS, ET AL.; GLORIFICADOR D. PALAGANAS; ROSELYN E. MENDOZA and DANILO M. MARCELO, representing in this act as Attorneys-in-Fact, petitioners, vs. REGISTRY OF DEEDSTARLAC CITY; RTC-BR. 67 PANIQUI, TARLAC; and MUNICIPALITY OF PANIQUI TARLAC, respondents.
Civil Procedure; Annulment of Judgments; Section 2, Rule 47 of the 1997 Rules of Civil Procedure provides that the annulment of a judgment may be based only on the grounds of extrinsic fraud and lack of jurisdiction.Section 2, Rule 47 of the 1997 Rules of Civil Procedure provides that the annulment of a judgment may be based only on the grounds of extrinsic fraud and lack of jurisdiction. A perusal of the records of the case reveals that petitioners did not allege, much less prove, either extrinsic fraud or lack of jurisdiction by the RTC in Land Case No. 274-P93. Petitioners claim was that municipal officials ordered their alleged ascendants to vacate the subject property way back in 1910 to build a school, a public market and a cemetery thereon, and that the municipality was subsequently issued OCTs after a judicial confirmation of its title in 1911 and 1915. Petitioners allege that their ascendants were defrauded when they were not given a chance or opportunity to appear or answer and present their side at the cadastral proceedings involving the subject property. It is apparent that what petitioners are actually challenging are the cadastral proceedings in which the OCTs over the subject property were issued in the name of the Municipality of Paniqui. Their Petition was, however, directed against the Decision of the RTC 78 years later decreeing reconstitution of said OCTs. Parties; Petitioners are not the real parties-in-interest as provided in Section 2, Rule 3 of the Rules of Court.This brings us to the final reason for the denial of the present petition. The records of the case are bereft of any proof on the part of petitioners that they are indeed the successors-in-interest of the supposed former owners of the subject property. Bearing the same surnames as the individuals indicated in the technical descriptions of the OCTs being reconstituted is woefully inadequate to prove their relationship. As petitioners failed to establish that they are the descendants of the supposed former owners of the subject property, the case at bar cannot be prosecuted in their name, as they are not the real parties-in-interest as provided in Section 2, Rule 3 of the Rules of Court. A real party-in-interest is one who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. By real interest is meant a present substantial interest, as distinguished from a mere expectancy; or a future, contingent, subordinate, or consequential interest. Rule 3, Section 2, of the Rules of Court provides explicitly that every action must be prosecuted and defended in the name of the real party-in-interest. Petitioners failure to prove such real interest constrained the Court of Appeals to dismiss the petition. Civil Law; Laches; Laches is the negligence or omission to assert a right within a reasonable time, warranting the presumption that the party entitled to assert it has either abandoned or

declined to assert it.We likewise affirm the finding of the Court of Appeals that the claim of petitioners had already been barred by laches. Laches is defined as 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 it has either abandoned or declined to assert it.

PETITION for review on certiorari of the resolutions of the Court of Appeals.

The facts are stated in the opinion of the Court. CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the reversal of (1) the 29 April 2005 Resolution1 of the Court of Appeals in CA-G.R. SP UDK No. 5314, which dismissed petitioners Petition for Annulment of Judgment and (2) the 5 August 2005 Resolution2 of the appellate court which denied petitioners Motion for Reconsideration. The Petition for Annulment of Judgment filed by the petitioners with the Court of Appeals was, in turn, directed against the 29 October 1993 Decision3 of the Regional Trial Court (RTC) of Tarlac, Branch 67, in Land Case No. 274-P93, which ordered the reconstitution of the Original Certificates of Title (OCTs) in the name of the Municipality of Paniqui, Tarlac over the subject property. The factual and procedural antecedents of the case are as follows: Sometime in 1910, officials of the Municipal Government of Paniqui, headed by Maximo Parazo, built a school, a public market, and a cemetery on an untitled parcel of land. Thereafter, OCTs No. R0-532 (O-116) and No. 388 were issued on 17 February 1911 and 7 June 1915, respectively, in the name of the Municipal Government of Paniqui, by virtue of the judicial confirmation of its title to the subject property. OCTs No. R0-532 (O-116) and No. 388 covered the property being claimed by petitioners. On 29 October 1993, pursuant to a Verified Petition for Reconstitution filed by the Municipality of Paniqui, represented by Mayor Cesar E. Cuchapin, the RTC issued a Decision resolving that OCTs No. R0-532 (O-116) and No. 388 were indeed lost, and ordering the cancellation and the reconstitution of the same as Transfer Certificates of Title (TCTs) No. 259969, No. 259970, No. 260900, No.
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260901, No. 260902, No. 260903, and No. 336772 of the Registry of Deeds of Tarlac City, registered in the name of the Municipality of Paniqui. On 3 February 2005, the Municipality of Paniqui demolished its old Public Market in order to build a new one. Around this time, a former Board Member of the municipality inadvertently showed a close friend of the petitioners the cancelled OCTs No. RO-532 (O-116) and No. 338 covering the lot where the public market is located. The said OCTs allegedly named the petitioners ascendants as the former owners of the subject property. On 28 March 2005, petitioners filed the Petition for An-nulment of Judgment4 with the Court of Appeals, praying for the cancellation of the TCTs and for the reconveyance in their favor of the title to the parcels of land. Petitioners based their petition on the claim that their alleged ascendants were the original pioneers/settlers/occupants of the land in question since 1843 as its indigenous inhabitants. In 1910, however, officials of the Municipal Government of Paniqui, headed by Maximo Parazo, ordered the occupants of the land to vacate their property so that the municipality could build thereon a school, a public market, and a cemetery. According to petitioners, their ascendants were not given a chance or opportunity to appear or answer and present their side at the cadastral proceedings involving the subject properties, from which resulted the issuance of the OCTs in the name of the Municipality of Paniqui. On 29 April 2005, the Court of Appeals issued the first assailed Resolution, wherein it dismissed the Petition for An-nulment of Judgment on the following grounds: 1. The Petition was not verified, contrary to Section 4, Rule 47 of the Rules of Court; 2. The attached copy of the assailed RTC Decision is a mere photocopy and not a certified true copy, also contrary to Section 4, Rule 47 of the Rules of Court; 3. The corresponding Special Powers of Attorney of the alleged Attorneys-inFact were not attached; and 4. Petitioners failed to indicate the material dates pertinent to the filing of the Petition, hence, failing to prove that the same was brought within four years

from the discovery of the extrinsic fraud alleged in the assailed 29 October 1993 Decision, contrary to Section 3, Rule 47 of the Rules of Court. Petitioners filed a Motion for Reconsideration of the dismissal of their Petition, attaching thereto the following: 1. a copy of page 7 of the Petition containing the Verification of the same;5 2. a photocopy of the assailed 29 October 1993 RTC Decision;6 3. Special Power of Attorney of petitioners Conrado Rivera and Perseveranda Domingo, appointing and constituting Glorificador D. Palaganas, Roselynne E. Men-doza, and Danilo M. Marcelo as their Attorneys-in-Fact;7 and 4. Special Power of Attorney of petitioners Jose Velasquez, Demetria de Vera and Luz P. Labutong, appointing and constituting Paciano P. Paragas and Benedicto P. Manuel as their Attorneys-in-Fact.8 The Court of Appeals, noting that the attached copy of the assailed RTC Decision is still only a photocopy of a certified xerox copy, held that even if the technicalities were brushed aside, the Petition would still be dismissed for lack of substantial merit, for the following reasons: 1. Petitioners failed to show that they are the real parties-in-interest authorized to institute the Petition for Annulment of Judgment. The Petition did not establish that the petitioners are truly the successors-in-interest of the individuals indicated in the technical descriptions of OCT No. R0-532 (0-116) and OCT No. 388. Although the surnames appearing in the technical descriptions are the same as those of some of the petitioners, there was no allegation of how the alleged original inhabitants and the petitioners were related nor was any proof thereof presented; 2. Petitioners failed to allege fraud in connection with the proceedings in Land Case No. 274-P93 which culminated in the rendition of the assailed Decision dated 29 October 1993 by the RTC. The fraud averred by the petitioners was allegedly committed in the cadastral proceedings for the judicial confirmation of title to the subject property conducted on 17 February 1911, 7 June 1915 and 20 September 1917, and not in the rendition of the judgment dated 29 October 1993 by the RTC in Land Case No. 274-P93 which petitioners seek to annul; and 3. The claim of petitioners had already been barred by laches. Although petitioners discovered their supposed right to the disputed property only
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recently, their alleged ascendants should have instituted an action against the Municipal Government of Paniqui, Tarlac, or against Maximo Parazo for the purportedly unlawful taking of the property way back in the 1920s. The petitioners make no allegation as to any action taken by the alleged ascendants to recover the subject property. The Motion for Reconsideration thus having been denied for lack of merit, petitioners filed the present Petition for Review on Certiorari. Section 2, Rule 47 of the 1997 Rules of Civil Procedure provides that the annulment of a judgment may be based only on the grounds of extrinsic fraud and lack of jurisdiction.9 A perusal of the records of the case reveals that petitioners did not allege, much less prove, either extrinsic fraud or lack of jurisdiction by the RTC in Land Case No. 274-P93. Petitioners claim was that municipal officials ordered their alleged ascendants to vacate the subject property way back in 1910 to build a school, a public market and a cemetery thereon, and that the municipality was subsequently issued OCTs after a judicial confirmation of its title in 1911 and 1915. Petitioners allege that their ascendants were defrauded when they were not given a chance or opportunity to appear or answer and present their side at the cadastral proceedings involving the subject property. It is apparent that what petitioners are actually challenging are the cadastral proceedings in which the OCTs over the subject property were issued in the name of the Municipality of Paniqui. Their Petition was, however, directed against the Decision of the RTC 78 years later decreeing reconstitution of said OCTs. Even if we consider that the petition for annulment was, in effect, filed against the 1911 and 1915 judicial decrees confirming the title of the Municipality of Paniqui over the subject property, as petitioners imply in their Memorandum, their petition must still be dismissed. Petitioners failed to prove either extrinsic fraud or lack of jurisdiction, the grounds for a petition for annulment of judgment, even with respect to the 1911 and 1915 Decrees. There is extrinsic fraud when the unsuccessful party had been prevented from exhibiting fully his case, by fraud or deception practiced on him by his opponent, as by keeping him away from court, or where the defendant never had knowledge of the suit, being kept in ignorance by the acts of the plaintiff.10 Petitioners presented no proof to substantiate their allegation that their ascendants were not given a chance or opportunity to appear or answer and present their side at the cadastral proceedings involving the subject property.

Likewise, petitioners presented neither any evidence nor any legal argument in support of their claim of lack of jurisdiction of the court which took cognizance of the cadastral proceedings in which the OCTs over the subject property were issued in the name of the Municipality of Paniqui. In order to cover up for the lack of evidence to prove the grounds for an annulment of judgment, petitioners relied on an erroneous interpretation of a very old case. Citing the 1906 case, Nicolas v. Jose,11 petitioners claim that extrinsic fraud and lack of jurisdiction are shown by the mere fact that a municipality had a real property devoted to public use registered in its name.12 In Nicolas, the then Municipality of Cavite sought to be inscribed as the owner of a certain track of land situated within said municipality. Finding that the property in question is a public square, this Court, applying a provision in the Spanish Civil Code, held that: The evidence shows, and the court below so found, that at the time the Kiosko Cafe and the theater were built, they were built upon a public street or square known as the Paseo Plaza de la Soledad. xxxx The question remains as to whether the municipality is entitled to have the land upon which the Kiosko Caf stands registered in its name. Article 344 of the Civil Code is as follows: Property for public use in provinces and in towns comprises the provincial and town roads, the squares, streets, fountains, and public waters, the promenades, and public works of general service supported by the said towns or provinces. All other property possessed by either is patrimonial, and shall be governed by the provisions of this code, unless otherwise prescribed in special laws. The land in question, upon which this Kiosko Caf stands, being dedicated to public use, we do not think it is subject to inscription by the municipality. Article 25 of the regulations for the execution of the Mortgage Law prohibits the inscription of public streets in the old registry. Public streets are not bienes patrimoniales of the municipality so long as they are destined to public use.13 Properties of local government units under the Spanish Civil Code were limited to properties for public use and patrimonial property.14 The same is still true under the 1950 Civil Code which governs us today. The principle has remained
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constant: property for public use can be used by everybody, even by strangers or aliens, in accordance with its nature; but nobody can exercise over it the rights of a private owner.15 As aptly held by this court in The Province of Zamboanga del Norte v. City of Zamboanga:16 The Civil Code classification is embodied in its Arts. 423 and 424 which provide: ART. 423. The property of provinces, cities and municipalities, is divided into property for public use and patrimonial property. ART. 424. Property for public use, in the provinces, cities, and municipalities, consists of the provincial roads, city streets, municipal streets, the squares, fountains, public waters, promenades, and public works for public service paid for by said provinces, cities, or municipalities. All other property possessed by any of them is patrimonial and shall be governed by this Code, without prejudice to the provisions of special laws. Applying the above cited norm, all the properties in question, except the two (2) lots used as High School playgrounds, could be considered as patrimonial properties of the former Zamboanga province. Even the capitol site, the hospital and leprosarium sites, and the school sites will be considered patrimonial for they are not for public use. They would not fall under the phrase public works for public service for it has been held that under the ejusdem generis rule, such public works must be for free and indiscriminate use by anyone, just like the preceeding enumerated properties in the first paragraph of Art. 424. The playgrounds, however, would fit into this category.17 While this Court in Province of Zamboanga del Norte ended up using the Municipal Corporation Law classification instead of that of the Civil Code classification,18 Nicolas has settled the application of the Civil Code classification with respect to the provision of the then-in-effect regulations for the execution of the Mortgage Law. In the case at bar, a school, a public market, and a cemetery were built upon the subject property. Unlike a public square as that in Nicolas or a playground as that in the Province of Zamboanga del Norte, schools, public markets and cemeteries are not for the free and indiscriminate use of everyone. The determination of the persons allowed to study in such schools, or put up stalls in the public market, or bury their dead in public cemeteries are regulated by the government. As such, the subject property is, under the Civil Code

classification, patrimonial property, and the Municipality may have the same registered in its name. As neither extrinsic fraud nor lack of jurisdiction had been proven by petitioners, we hold that the Court of Appeals was correct in dismissing petitioners Petition for Annulment of Judgment. We likewise affirm the finding of the Court of Appeals that the claim of petitioners had already been barred by laches. Laches is defined as 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 it has either abandoned or declined to assert it.19 The recent discovery by petitioners of their supposed right to the disputed property notwithstanding, petitioners alleged ascendants should have instituted an action against the Municipal Government of Paniqui or against Maximo Parazo for the allegedly unlawful taking of the property way back in the 1920s. As asserted by petitioners themselves, the Municipality of Paniqui had openly taken over the property and exercised rights over the same. The period of the omission of peti-tioners purported predecessors-in-interest since the taking of the property in 1910 up to the filing of the petition is certainly an unreasonable time. Being the purported successors-in-interest of the former owners of the subject property, petitioners merely stepped into the shoes of their predecessors-in-interest, and are bound by their actions and inactions.20 This brings us to the final reason for the denial of the present petition. The records of the case are bereft of any proof on the part of petitioners that they are indeed the successors-in-interest of the supposed former owners of the subject property. Bearing the same surnames as the individuals indicated in the technical descriptions of the OCTs being reconstituted is woefully inadequate to prove their relationship. As petitioners failed to establish that they are the descendants of the supposed former owners of the subject property, the case at bar cannot be prosecuted in their name, as they are not the real parties-in-interest as provided in Section 2, Rule 3 of the Rules of Court. A real party-in-interest is one who stands to be benefited or injured by the judgment in the suit, or the party entitled to the avails of the suit. By real interest is meant a present substantial interest, as distinguished from a mere expectancy; or a future, contingent, subordinate, or consequential inter-est.21
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Rule 3, Section 2, of the Rules of Court provides explicitly that every action must be prosecuted and defended in the name of the real party-in-interest. Petitioners failure to prove such real interest constrained the Court of Appeals to dismiss the petition. WHEREFORE, the Petition is DENIED. The 29 April 2005 Resolution of the Court of Appeals dismissing petitioners Petition for Annulment of Judgment in CA-G.R. SP UDK No. 5314 and the 5 August 2005 Resolution of the same court denying petitioners Motion for Reconsideration are AFFIRMED. SO ORDERED. Ynares-Santiago (Chairperson), Austria-Martinez, Car-pio-Morales and Reyes, JJ., concur. Petition denied, resolutions affirmed. Note.The overriding consideration when extrinsic fraud is alleged, is that the fraudulent scheme of the prevailing litigant prevented a party from having his day in court. (To-lentino vs. Leviste, 443 SCRA 274 [2004]) o0o

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No. L-11964. April 28, 1962. REGISTER OF DEEDS OF MANILA, petitioner-appellee, vs. CHINA BANKING CORPORATION, respondent-appellant. Banks; Acquisition of real estate in satisfaction of debts; Meaning of "debts" in Section 25, Republic Act 337.Paragraph (c), Section 25 of Republic Act 337 allows a commercial bank to purchase and hold such real estate as shall be conveyed to it in satisfaction of debts previously contracted in the course of its dealings. The "debts" referred to in this provision are only those resulting from previous loans and other similar transactions made or entered into by a commercial bank in the ordinary course of its business as such. Constitutional law; Acquisition of private agricultural land by aliens; Section 4, Title XIII of the Constitution absolute terms.The prohibition contained in Section 5, Title XIII of the Constitution, which provides that "Save in cases of hereditary succession, no private agricultural land shall be transferred or assigned except to individuals, corporations or associations qualified to acquire or hold lands of the public domain in the Philippines", is absolute in terms and has for its purpose the preservation of the patrimony of the nation. It cannot be limited to the permanent acquisition of real estate by alienswhether natural or juridical persons. APPEAL from a resolution of the Land Registration Commission. The facts are stated in the opinion of the Court. Solicitor General for petitioner-appellee. Sycip- Salazar, Luna & Associates for respondent-appellant. Alfonso Ponce Enrile as Amicus Curiae. DIZON, J.:

charged with qualified theft, the money involved amounting to P275,000.00. On September 18, 1956, Pangilinan and his wife, Belen Sta. Ana, executed a public instrument entitled DEED OF TRANSFER whereby, after admitting his civil liability in favor of his employer, the China Banking Corporation, in relation to the offense aforesaid, he ceded and transferred to the latter, in satisfaction thereof, a parcel of land located in the City of Manila, registered in the name of "Belen Sta. Ana, married to Alfonso Pangilinan" (Transfer Certificate of Title No. 32230). On October 24, 1956 the deed was presented for registration to the Register of Deeds of the City of Manila, but because the transfereethe China Banking Corporationwas alien-owned and, as such, barred from acquiring lands in the Philippines, in accordance with the provisions of Section 5, Article XIII of the Constitution of the Philippines, said officer submitted the matter of its registration to the Land Registration Commission for resolution. After granting the parties concerned ample opportunity to submit their views upon the issue, the Commission issued the resolution appealed from. Plainly stated, the question before Us is whether appellantan alien-owned bankcan acquire ownership of the residential lot covered by Transfer Certificate of Title No. 32230 by virtue of the deed of transfer mentioned heretofore (Vide pages 1-6 of the Record on Appeal). Maintaining the affirmative, appellant argues that: (a) the temporary holding of land by an alien-owned commercial bank under a public instrument such as the deed of transfer in question "bears no reasonable connection with the constitutional purpose" underlying the provisions of Section 5, Article XIII of the Constitution of the Philippines; hence, such holding or acquisition "was not within the contemplation of the framers of the Constitution"; (b) by judicial as well as by executive-administrative and legislative construction, the constitutional prohibition against alien landholding does not preclude enjoyment by aliens of temporary rights and land; (c) under the provisions of Section 25 of Republic Act No. 337 (General Banking Act) an alien or an alien-owned commercial bank may acquire land in the Philippines subject to the obligation of disposing of it within 4 , yea rs f rom the da te of quisition. Upon the other hand, the argument supporting the appealed resolution is that the privilege of acquiring real estate granted to commercial banks under the provisions of Section 25 of Republic Act No. 337 was not intended as an amendment, much less as a nullification of the constitutional prohibition against alien acquisition of lands in the Philippines, the same being merely an
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Appeal from a resolution of the Land Registration Commission holding "that the deed of transfer in favor of an alien bank, subject of the present Consulta, is unregisterable for being in contravention of the Constitution of the Philippines". In an information filed on June 16, 1953 in the Court of First Instance of Manila (Criminal Case No. 22908) Alfonso Pangilinan and one Guillermo Chua were

exception to the general rule, under existing banking and corporation laws, that banks and corporations can engage only in the particular business for which they were specifically created; that a mere statute, like the republic act relied upon by appellant, cannot amend the Constitution; that in connection with the particular constitutional prohibition involved herein, it is the character and nature of the possessionwhether in strict ownership or otherwiseand not the length of possessi on that is material, the result being that, if real property is to be held in ownership, an alien may not legally do so even for a single day. After considering the arguments adduced by appellant in its brief, jointly with those expounded in the briefs submitted by Alfonso Ponce Enrile and William H. Quasha and Associates, as amici curiae, on the one hand, and on the other, those relied upon in the brief submitted by the Office of the Solicitor General on behalf of the Commission, we are inclined to uphold, as we do uphold, the appealed resolution. To support its view appellant relies particularly upon paragraphs (c) and (d), Section 25 of Republic Act 337 which read as follows: "SEC. 25. Any commercial bank may purchase, hold, and convey real estate for the following purposes: "x x x xxx

and free from doubt that the "debts" referred to in this provision are only those resulting from previous loans and other similar transactions made or entered into by a commercial bank in the ordinary course of its business as such. Obviously, whatever "civil liability"arising from the criminal offense of qualified theftwas admitted in favor of appellant bank by its former employee, Alfonso Pangilinan, was not a debt resulting from a loan or a similar transaction had between the two parties in the ordinary course of banking business. Neither do the provisions of paragraph (d) of the same section apply to the present case because the deed of transfer in question can in no sense be considered as a sale made by virtue of a judgment, decree, mortgage, or trust deed held by appellant bank. In the same manner it cannot be said that the real property in question was purchased by appellant "to secure debts due to it", considering that, as stated heretofore, the term debt employed in the pertinent legal provision can logically refer only to such debts as may become payable to appellant bank as a result of a banking transaction. That the constitutional prohibition under consideration has for its purpose the preservation of the patrimony of the nation can not be denied, but appellant and the amici curiae claim that it should be liberally construed so that the prohibition be limited to the permanent acquisition of real estate by aliens whether natural or juridical persons. This, of course, would make legal the ownership acquired by appellant bank by virtue of the deed of transfer mentioned heretofore, subject to its obligation to dispose of it in accordance with law, within 4 , yea rs f rom date of its acquisition. We can not give assent to this contention, in view of the fact that the constitutional prohibition in question is absolute in terms. We have so held in Ong Sui Si Temple vs. The Register of Deeds of Manila (G. R. No. L-6776, prom. May 21, 1955) where we said, inter alia, the following: "We are of the opinion that the Court below has correctly held that in view of the absolute terms of section 5, Title XIII, of the Constitution, the provisions of Act 271 of the old Philippine Commission must be deemed repealed since the Constitution was enacted, in so far as incompatible therewith. In providing that 'Save in cases of hereditary succession no private agricultural land shall be transferred or assigned except to individuals, corporations or associations qualified to acquire or hold lands of the public domain in the Philippines', the Constitution makes no exception in favor of religious associations. Neither is there any such saving found in Sections 1 and 2 ) of Arti cle X III, restri cti ng the acqu is ition of pu cultural lands and other natural resources to
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"(c) Such shall be conveyed to it in satisfaction of debts previously contracted in the course of its dealings; "(d) Such as it shall purchase at sales under judgments, decrees, mortgages, or trust deeds held by it and such as it shall purchase to secure debts due to it. "But no such bank shall hold the possession of any real estate under mortgage or trust deed, or the title and possession of any real estate purchased to secure any debt due to it, for a longer period than five years." Assuming, arguendo, that under the provisions of the aforesaid Act any commercial bank, whether alien-owned or controlled or not, may purchase and hold real estate for the specific purposes and in the particular cases enumerated in Section 25 thereof, we find that the case before Us does not fall under anyone of them. Paragraph (c), Section 25 of Republic Act 337 allows a commercial bank to purchase and hold such real estate as shall be conveyed to it in satisfaction of debts previously contracted in the course of its dealings, We deem it quite clear

'corporations or associations at least sixty per centum of the capital of which is owned by such citizens' (of the Philippines)." (Italics ours) Even in the case of Smith Bell & Co. vs. Register of Deeds of Davao (50 O. G., 5239) where a lease of a parcel of land for a total period of 50 years in favor of an alien corporation was held to be registerable, the reason we gave for such ruling was that a leaseunlike a saledoes not involve the transfer of dominion over the land, the clear implication from this being that transfer of ownership over land, even for a limited period of time, is not permissible in view of the constitutional prohibition. The reason for this is manifestly the desire and purpose of the Constitution to place and keep in the hands of the people the ownership over private lands in order not to endanger the integrity of the nation. Inasmuch as when an alien buys land he acquires and will naturally exercise ownership over the same, either permanently or temporarily, to that extent his acquisition jeopardizes the purpose of the Constitution. Some may say that this construction is too narrow and unwise; to this we answer that it is not our privilege to determine the wisdom or lack of wisdom of this constitutional mandate. It is, rather, Our sworn duty to enforce it free from qualifications and distinctions that tend to render futile the constitutional intent. WHEREFORE, the resolution appealed from is hereby affirmed, with costs. Bengzon, C.J. , Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera and Paredes, JJ., concur. Padilla and Labrador, JJ., took no part. Resolution affirmed. _____________

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Register of Deeds of Manila vs. China Banking Corp., 4 SCRA 1146(1962)]

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G.R. No. 73246. March 2, 1993.* DIRECTOR OF LANDS AND DIRECTOR OF FOREST DEVELOPMENT, petitioners, vs. INTERMEDIATE APPELLATE COURT AND J. ANTONIO ARANETA, respondents.
Public Lands; Land Registration; The submission of the tracing cloth plan is a mandatory requirement for registration; Failure to submit it in evidence is fatal,In a very recent decision of this Court, entitled The Director of Lands v. The Honorable Intermediate Appellate Court and Lino Anit, We have ruled that the submission of the tracing cloth plan is a mandatory requirement for registration. Reiterating Our ruling in Director of Lands v. Reyes, We asserted that failure to submit in evidence the original tracing cloth plan is fatal it being a statutory requirement of mandatory character. Same; Same; Failure to object to such requirement cannot be waived either expressly or impliedly.It is of no import that petitioner failed to object to the presentation of the certified copy of the said plan. What is required is the original tracing cloth plan of the land applied for and objection to such requirement cannot be waived either expressly or impliedly. Same; Same; Court cannot go along with petitioners' position that the absence of republication of an amended application for registration is a jurisdictional flaw.However, We cannot go along with petitioners' position that the absence of republication of an amended application for registration is a jurisdictional flaw. We should distinguish. Amendments to the application may be due to change in parties or substantial change in the boundaries or increase in the area of the land applied for. Same; Same; Republication is required if the amendment is due to substantial change in the boundaries or increase in the area of the land applied for.In the former case, neither the Land Registration Act, as amended, nor Presidential Decree No. 1529, otherwise known as the Property Registration Decree, requires republication and registration may be allowed by the court at any stage of the proceeding upon just and reasonable terms. On the other hand, republication is required if the amendment is due to substantial change in the boundaries or increase in the area of the land applied for. Constitutional Law; Civil Law; Property; Our Constitution whether the 1973 or 1987 prohibits private corporations or associations from holding alienable lands of the public domain except by lease.As to the second assignment of error, We are inclined to agree with petitioners that the amendment of the application from the name of Pacific Farms, Inc., as applicant, to the name of J. Antonio Araneta, was a mere attempt to evade disqualification. Our Constitution, whether the 1973 or 1987, prohibits private corporations or associations from holding alienable lands of the public domain except by lease. Apparently realizing such prohibition, respondent amended its application to conform with the mandates of the law. Same; Same; Same; Under the Regalian Doctrine, all lands not otherwise appearing to be clearly within private ownership are presumed to belong to the State.This is in consonance with the Regalian doctrine that all lands of the public domain belong to the State, and that the

State is the source of any asserted right to ownership in land and charged with the conservation of such patrimony. Under the Regalian Doctrine, all lands not otherwise appearing to be clearly within private ownership are presumed to belong to the State. Hence, a positive act of the government is needed to declassify a forest land into alienable or disposable land for agricultural or other purposes. Same; Same; Same; Burden of proof in overcoming the presumption of state ownership is on the person applying for registration.The burden of proof in overcoming the presumption of state ownership of the lands of the public domain is on the person applying for registration that the land subject of the application is alienable or disposable. Same; Same; Same; The subject property being unclassified whatever possession the applicant may have had and however long cannot ripen into private ownership.Since the subject property is still unclassified, whatever possession the applicant may have had and however long, cannot ripen into private ownership. The conversion of subject property does not automatically render the property as alienable and disposable. Same; Same; Same; The classification of public lands is an exclusive prerogative of the Executive Department of the Government and not of the courts.In effect what the courts a quo have done is to release the subject property from the unclassified category, which is beyond their competence and jurisdiction. We reiterate that the classification of public lands is an exclusive prerogative of the Executive Department of the Government and not of the Courts. In the absence of such classification, the land remains unclassified until released therefrom and rendered open to disposition. Same; Same; Same; Tax declaration and receipts are not conclusive evidence of ownership or of the right to possess land when not supported by evidence.In any case tax declarations and receipts are not conclusive evidence of ownership or of the right to possess land when not supported by evidence. The fact that the disputed property may have been declared for taxation purposes in the names of the applicants or of their predecessors-in-interest way back in 1921 does not necessarily prove ownership. They are merely indicia of a claim of ownership.

PETITION for review of the decision of the then Intermediate Appellate Court. The facts are stated in the opinion of the Court. The Solicitor General for petitioners. Jimenez, Leynes & Associates for private respondent. NOCON, J.:

For review before Us is the decision of the Court of Appeals in the land registration case entitled J. Antonio Araneta v. The Director of Lands and
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Director of Forest Development, AC-G.R. CV No. 00636,1 affirming the lower court's approval of the application for registration of a parcel of land in favor of applicant therein, J. Antonio Araneta. Evidence show that the land involved is actually an island known as Tambac Island in Lingayen Gulf. Situated in the Municipality of Bani, Pangasinan, the area consists of 187,288 square meters, more or less. The initial application for registration was filed for Pacific Farms, Inc. under the provisions of the Land Registration Act, Act No. 496, as amended. The Republic of the Philippines, thru the Director of Lands opposed the application alleging that the applicant, Pacific Farms, Inc. does not possess a fee simple title to the land nor did its predecessors possess the land for at least thirty (30) years immediately preceding the filing of application. The opposition likewise specifically alleged that the applicant is a private corporation disqualified under the (1973) new Philippine Constitution from acquiring alienable lands of the public domain citing Section 11, Article 14.2 The Director of Forest Development also entered its opposition alleging that the land is within the unclassified public land and, hence, inalienable. Other private parties also filed their oppositions, but were subsequently withdrawn. In an amended application, Pacific Farms, Inc. filed a manifestation-motion to change the applicant from Pacific Farms, Inc. to J. Antonio Araneta. Despite the supposed amendment, there was no republication. Evidence presented by the applicant include the testimony of Placido Orlando, fishery guard of Pacific Farms, Inc., who said that he has known the disputed land since he attained the age of reason for some forty (40) years now; that when he first came to know the property it was then owned by and in the possession of Paulino Castelo, Juan Ambrosio and Julio Castelo, and later on the whole island was bought by Atty. Vicente Castelo who in turn sold it to J. Antonio Araneta. Deposition by oral examination of Araneta was also presented, together with documents of sale, tax declarations and receipts, and survey of property. Applicant, however, failed to present the tracing cloth plan and instead submitted to the court certified copies thereof. While this case is pending here in Court, respondent filed an Omnibus Motion for Substitution of private respondents.3 Apparently, Antonio Araneta had assigned his rights to and interest in Tambac Island to Amancio R. Garcia4

who in turn assigned his rights and interest in the same property to Johnny A. Khonghun whose nationality was not alleged in the pleadings. On October 4, 1979, the trial court rendered a decision adjudicating the subject property to J. Antonio Araneta. On appeal to the then Intermediate Appellate Court, the decision of the lower court was affirmed on December 12, 1985. Petitioners raised the following errors: I. The lower court erred in adjudicating the lands subject of registration to applicant-appellee despite his failure to present the original tracing cloth plan the submission of which is a statutory requirement of mandatory character. II. The lower court erred in not denying registration in favor of J. Antonio Araneta since the amendment of the application was simply an attempt to avoid the application of the constitutional provision disqualifying a private corporationthe Pacific Farms, Inc. in this casefrom acquiring lands of public domain. III. The lower court erred in not declaring the land known as the "Tambac Island" not subject of registration it being an island formed on the seas. IV. The lower court erred in adjudicating the land to the applicant under the provisions of Presidential Decree No. 1529, otherwise known as the Property Registration Decree, despite absence of any specific invocation of this law in the original and amended application. V. The lower court erred in not granting the government's motion for reconsideration at least to enable it to present proof of the status of the land as within the unclassified public forest, and hence beyond the court's jurisdiction to adjudicate as private property. VI. The lower court erred in not declaring that the applicant has failed to overthrow the presumption that the land is a portion of the public domain belonging to the Republic of the Philippines. From the foregoing it appears that the more important issues are: 1) whether the presentation of the tracing cloth plan is necessary; and 2) whether the land known as "Tambac Island" can be subject to registration. By mere consideration of the first assignment of error, We can right away glean the merit of the petition.
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Respondent claims that the tracing cloth plan is with the files of the Land Registration Commission, and the only evidence that can be presented to that fact is the request for the issuance of a certified copy thereof and the certified copy issued pursuant to the request.5 Respondent further argues that failure of the petitioners to object to the presentation of the certified copy of the tracing cloth plan was the basis of the trial court's denial of petitioner's motion for reconsideration. In a very recent decision of this Court, entitled The Director of Lands v. The Honorable Intermediate Appellate Court and Lino Anit,6 We have ruled that the submission of the tracing cloth plan is a mandatory requirement for registration. Reiterating Our ruling in Director of Lands v. Reyes,7 We asserted that failure to submit in evidence the original tracing cloth plan is fatal it being a statutory requirement of mandatory character. It is of no import that petitioner failed to object to the presentation of the certified copy of the said plan. What is required is the original tracing cloth plan of the land applied for and objection to such requirement cannot be waived either expressly or impliedly.8 This case is no different from the case of Director of Lands v. Reyes, supra wherein We said that if the original tracing cloth plan was indeed with the Land Registration Commission, there is no reason why the applicant cannot easily retrieve the same and submit it in evidence, it being an essential requirement for registration. As to the second assignment of error, We are inclined to agree with petitioners that the amendment of the application from the name of Pacific Farms, Inc., as applicant, to the name of J. Antonio Araneta, was a mere attempt to evade disqualification. Our Constitution, whether the 19739 or 1987,10 prohibits private corporations or associations from holding alienable lands of the public domain except by lease. Apparently realizing such prohibition, respondent amended its application to conform with the mandates of the law. However, We cannot go along with petitioners' position that the absence of republication of an amended application for registration is a jurisdictional flaw. We should distinguish. Amendments to the application may be due to change in parties or substantial change in the boundaries or increase in the area of the land applied for. In the former case, neither the Land Registration Act, as amended, nor Presidential Decree No. 1529, otherwise known as the Property Registration Decree, requires republication and registration may be allowed by the court at any stage of the proceeding upon just and reasonable terms.11 On the other

hand, republication is required if the amendment is due to substantial change in the boundaries or increase in the area of the land applied for. As to the fourth assignment of error, We do not see any relevant dispute in the lower court's application of Presidential Decree No. 1529, instead of Act No. 496, in adjudicating the land to the then applicant, assuming that the land involved is registrable. Both laws are existing and can stand together. P.D. 1529 was enacted to codify the various laws relative to registration of property, in order to facilitate effective implementation of said laws.12 The third, fifth and sixth assignment of errors are likewise meritorious and shall be discussed forthwith together. Respondent asserts that contrary to the allegation of petitioners, the reports of the District Land Officer of Dagupan City, Land Inspector Perfecto Daroy and Supervising Land Examiner Teodoro P. Nieva show that the subject property is an unclassified public land, not forest land. This claim is rather misleading. The report of Supervising Land Examiner Nieva specifically states that the "land is within the unclassified forest land" under the administrative jurisdiction of the then Bureau of Forest Development.13 This was based on the reports of Land Inspector Daroy and District Land Officer Feliciano Liggayu. Lands of the public domain are classified under three main categories, namely: Mineral, Forest and Disposable or Alienable Lands.14 Under the Commonwealth Constitution, only agricultural lands were allowed to be alienated. Their disposition was provided for under Commonwealth Act No. 141 (Secs. 6-7), which states that it is only the President, upon the recommendation of the proper department head, who has the authority to classify the lands of the public domain into alienable or disposable, timber and mineral lands. Mineral and Timber or forest lands are not subject to private ownership unless they are first reclassified as agricultural lands and so released for alienation.15 In the absence of such classification, the land remains as unclassified land until released therefrom and rendered open to disposition. Courts have no authority to do so.16 This is in consonance with the Regalian doctrine that all lands of the public domain belong to the State, and that the State is the source of any asserted right to ownership in land and charged with the conservation of such patrimony. Under the Regalian Doctrine, all lands not otherwise appearing to be clearly within private ownership are presumed to belong to the State. Hence, a positive act of the government is needed to declassify a forest land into alienable or disposable land for agricultural or other purposes.17
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The burden of proof in overcoming the presumption of state ownership of the lands of the public domain is on the person applying for registration that the land subject of the application is alienable or disposable.18 Unless the applicant succeeds in showing by convincing evidence that the property involved was acquired by him or his ancestors either by composition title from the Spanish Government or by possessory information title, or any other means for the proper acquisition of public lands, the property must be held to be part of the public domain. The applicant must present evidence and persuasive proof to substantiate his claim.19 In this particular case, respondent presented proof that as early as 1921, the subject property has been declared for tax purposes with receipts attached, in the names of respondent's predecessors-in-interest. Nevertheless, in that span of time there had been no attempt to register the same either under Act 496 or under the Spanish Mortgage Law. It is also rather intriguing that Vicente Castelo who acquired almost 90% of the property from Alejo Ambrosio, et al. on June 18, 1958 and from Julio Castelo on June 19, 1958 immediately sold the same to applicant J. Antonio Araneta on 3 July 1958. According to the report of Land Investigator Daroy, the land was declared for taxation purposes in the name of Vicente Castelo only in 1958 and the purported old tax declarations are not on file with the Provincial Assessor's Office. In any case tax declarations and receipts are not conclusive evidence of ownership or of the right to possess land when not supported by evidence.20 The fact that the disputed property may have been declared for taxation purposes in the names of the applicants or of their predecessors-in-interest way back in 1921 does not necessarily prove ownership. They are merely indicia of a claim of ownership.21 Respondent's contention that the BFD, LC Map No. 681, certified on August 8, 1927 which was the basis of the report and recommendation of the Land Examiner, is too antiquated; that it cannot be conclusively relied upon and was not even presented in evidence, is not well taken. As We have said in the case of Director of Lands v. CA:22 "And the fact that BF Map LC No. 673 dated March 1, 1927 showing subject property to be within unclassified region was not presented in evidence will not operate against the State considering the stipulation between the parties and

under the well-settled rule that the State cannot be estopped by the omission, mistake or error of its officials or agents, if omission there was, in fact." Respondent even admitted that Tambac Island is still an unclassified public land as of 1927 and remains to be unclassified. Since the subject property is still unclassified, whatever possession the applicant may have had and however long, cannot ripen into private ownership.23 The conversion of subject property does not automatically render the property as alienable and disposable. In effect what the courts a quo have done is to release the subject property from the unclassified category, which is beyond their competence and jurisdiction. We reiterate that the classification of public lands is an exclusive prerogative of the Executive Department of the Government and not of the Courts. In the absence of such classification, the land remains unclassified until released therefrom and rendered open to disposition.24 In fairness to respondent, the petitioners should seriously consider the matter of the reclassification of the land in question. The attempt of people to have disposable lands they have been tilling for generations titled in their name should not only be viewed with understanding attitude, but as a matter of policy encouraged.25 WHEREFORE, the petition is hereby GRANTED and the decisions of the courts a quo are REVERSED. SO ORDERED. Narvasa (C.J., Chairman), Padilla, Regalado and Campos, Jr., JJ., concur. Petition granted. Note.Tax receipts although not incontrovertible evidence of ownership, if accompanied by open, adverse and continous possession in the concept of owners, constitute evidence of great weight (Rojas vs. Court of Appeals, 192 SCRA 709). o0o Copyright 2012 Central Book Supply, Inc. All rights reserved. [Director of Lands vs. Intermediate Appellate Court, 219 SCRA 339(1993)]

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G.R. No. 113539. March 12, 1998.* CELSO R. HALILI and ARTHUR R. HALILI, petitioners, vs. COURT OF APPEALS, HELEN MEYERS GUZMAN, DAVID REY GUZMAN and EMILIANO CATANIAG, respondents.
Remedial Law; Appeals; Basic and long-settled is the doctrine that findings of fact of a trial judge, when affirmed by the Court of Appeals are binding upon the Supreme Court; Exceptions.Whether the land in dispute is rural or urban is a factual question which, as a rule, is not reviewable by this Court. Basic and long-settled is the doctrine that findings of fact of a trial judge, when affirmed by the Court of Appeals, are binding upon the Supreme Court. This admits of only a few exceptions, such as when the findings are grounded entirely on speculation, surmises or conjectures; when an inference made by the appellate court from its factual findings is manifestly mistaken, absurd or impossible; when there is grave abuse of discretion in the appreciation of facts; when the findings of the appellate court go beyond the issues of the case, run contrary to the admissions of the parties to the case or fail to notice certain relevant facts which, if properly considered, will justify a different conclusion; when there is a misappreciation of facts; when the findings of fact are conclusions without mention of the specific evidence on which they are based, are premised on the absence of evidence or are contradicted by evidence on record. Constitutional Law; Property; Jurisprudence is consistent that if land is invalidly transferred to an alien who subsequently becomes a citizen or transfers it to a citizen, the flaw in the original transaction is considered cured and the title of the transferee is rendered valid.In fine, nonFilipinos cannot acquire or hold title to private lands or to lands of the public domain, except only by way of legal succession. But what is the effect of a subsequent sale by the disqualified alien vendee to a qualified Filipino citizen? This is not a novel question. Jurisprudence is consistent that if land is invalidly transferred to an alien who subsequently becomes a citizen or transfers it to a citizen, the flaw in the original transaction is considered cured and the title of the transferee is rendered valid.

The factual findings of a trial court, when affirmed by the Court of Appeals, may no longer be reviewed and reversed by this Court in a petition for review under Rule 45 of the Rules of Court. The transfer of an interest in a piece of land to an alien may no longer be assailed on constitutional grounds after the entire parcel has been sold to a qualified citizen. The Case These familiar and long-settled doctrines are applied by this Court in denying this petition under Rule 45 to set aside the Decision1 of the Court of Appeals2 in CA-GR CV No. 37829 promulgated on September 14, 1993, the dispositive portion of which states:3 WHEREFORE, and upon all the foregoing, the Decision of the court below dated March 10, 1992 dismissing the complaint for lack of merit is AFFIRMED without pronouncement as to costs. The Facts The factual antecedents, as narrated by Respondent Court, are not disputed by the parties. We reproduce them in part, as follows: Simeon de Guzman, an American citizen, died sometime in 1968, leaving real properties in the Philippines. His forced heirs were his widow, defendant appellee [herein private respondent] Helen Meyers Guzman, and his son, defendant appellee [also herein private respondent] David Rey Guzman, both of whom are also American citizens. On August 9, 1989, Helen executed a deed of quitclaim (Annex A-Complaint), assigning[,] transferring and conveying to David Rey all her rights, titles and interests in and over six parcels of land which the two of them inherited from Simeon. Among the said parcels of land is that now in litigation, x x x situated in Bagbaguin, Sta. Maria, Bulacan, containing an area of 6,695 square meters, covered by Transfer Certificate of Title No. T170514 of the Registry of Deeds of Bulacan. The quitclaim having been registered, TCT No. T-170514 was cancelled and TCT No. T120259 was issued in the name of appellee David Rey Guzman. On February 5, 1991, David Rey Guzman sold said parcel of land to defendant-appellee [also herein private respondent] Emiliano Cataniag, upon which TCT No. T-120259 was cancelled and TCT No. T-130721(M) was issued in the latters name.4
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PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court. Anecio R. Guades for petitioners. Dy, Leyretana, Macababbad & Agravante Law Offices for private respondents. PANGANIBAN, J.:

Petitioners, who are owners of the adjoining lot, filed a complaint before the Regional Trial Court of Malolos, Bulacan, questioning the constitutionality and validity of the two conveyancesbetween Helen Guzman and David Rey Guzman, and between the latter and Emiliano Cataniagand claiming ownership thereto based on their right of legal redemption under Art. 16215 of the Civil Code. In its decision6 dated March 10, 1992,7 the trial court dismissed the complaint. It ruled that Helen Guzmans waiver of her inheritance in favor of her son was not contrary to the constitutional prohibition against the sale of land to an alien, since the purpose of the waiver was simply to authorize David Rey Guzman to dispose of their properties in accordance with the Constitution and the laws of the Philippines, and not to subvert them. On the second issue, it held that the subject land was urban; hence, petitioners had no reason to invoke their right of redemption under Art. 1621 of the Civil Code. The Halilis sought a reversal from the Court of Appeals which, however, denied their appeal. Respondent Court affirmed the factual finding of the trial court that the subject land was urban. Citing Tejido vs. Zamacoma8 and Yap vs. Grageda,9 it further held that, although the transfer of the land to David Rey may have been invalid for being contrary to the Constitution, there was no more point in allowing herein petitioners to recover the property, since it has passed on to and was thus already owned by a qualified person. Hence, this petition.10 Issues The petition submits the following assignment of errors: x x x the Honorable Court of Appeals 1. Erred in affirming the conclusion of the trial court that the land in question is urban, not rural 2. Erred in denying petitioners right of redemption under Art. 1621 of the Civil Code 3. Having considered the conveyance from Helen Meyers Guzman to her son David Rey Guzman illegal, erred in not declaring the same null and void[.]11 The Courts Ruling The petition has no merit.

First Issue: The Land Is Urban; Thus, No Right of Redemption The first two errors assigned by petitioners being interrelatedthe determination of the first being a prerequisite to the resolution of the second shall be discussed together. Subject Land Is Urban Whether the land in dispute is rural or urban is a factual question which, as a rule, is not reviewable by this Court.12 Basic and long-settled is the doctrine that findings of fact of a trial judge, when affirmed by the Court of Appeals, are binding upon the Supreme Court. This admits of only a few exceptions, such as when the findings are grounded entirely on speculation, surmises or conjectures; when an inference made by the appellate court from its factual findings is manifestly mistaken, absurd or impossible; when there is grave abuse of discretion in the appreciation of facts; when the findings of the appellate court go beyond the issues of the case, run contrary to the admissions of the parties to the case or fail to notice certain relevant facts which, if properly considered, will justify a different conclusion; when there is a misappreciation of facts; when the findings of fact are conclusions without mention of the specific evidence on which they are based, are premised on the absence of evidence or are contradicted by evidence on record.13 The instant case does not fall within any of the aforecited exceptions. In fact, the conclusion of the trial courtthat the subject property is urban landis based on clear and convincing evidence, as shown in its decision which disposed thus: x x x As observed by the court, almost all the roadsides along the national ghighway [sic] of Bagbaguin, Sta. Maria, Bulacan, are lined up with residential, commercial or industrial establishments. Lined up along the Bagbaguin Road are factories of feeds, woodcrafts [sic] and garments, commercial stores for tires, upholstery materials, feeds supply and spare parts. Located therein likewise were the Pepsi-Cola Warehouse, the Cruz Hospital, three gasoline stations, apartment buildings for commercial purposes and construction firms. There is no doubt, therefore, that the community is a commercial area thriving in business activities. Only a short portion of said road [is] vacant. It is to be noted that in the Tax Declaration in the name of Helen Meyers Guzman[,] the subject land is termed agricultural[,] while in the letter addressed to defendant Emiliano Cataniag, dated October 3, 1991, the Land Regulatory Board attested
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that the subject property is commercial and the trend of development along the road is commercial. The Boards classification is based on the present condition of the property and the community thereat. Said classification is far more later [sic] than the tax declaration.14 No Ground to Invoke Right of Redemption In view of the finding that the subject land is urban in character, petitioners have indeed no right to invoke Art. 1621 of the Civil Code, which presupposes that the land sought to be redeemed is rural. The provision is clearly worded and admits of no ambiguity in construction: ART. 1621. The owners of adjoining lands shall also have the right of redemption when a piece of rural land, the area of which does not exceed one hectare, is alienated, unless the grantee does not own any rural land. xxx xxx x x x

The landmark case of Krivenko vs. Register of Deeds17 settled the issue as to who are qualified (and disqualified) to own public as well as private lands in the Philippines. Following a long discourse maintaining that the public agricultural lands mentioned in Section 1, Article XIII of the 1935 Constitution, include residential, commercial and industrial lands, the Court then stated: Under section 1 of Article XIII [now Sec. 2, Art. XII] of the Constitution, natural resources, with the exception of public agricultural land, shall not be alienated, and with respect to public agricultural lands, their alienation is limited to Filipino citizens. But this constitutional purpose conserving agricultural resources in the hands of Filipino citizens may easily be defeated by the Filipino citizens themselves who may alienate their agricultural lands in favor of aliens. It is partly to prevent this result that section 5 is included in Article XIII, and it reads as follows: Sec. 5. Save in cases of hereditary succession, no private agricultural land will be transferred or assigned except to individuals, corporations or associations qualified to acquire or hold lands of the public domain in the Philippines. This constitutional provision closes the only remaining avenue through which agricultural resources may leak into aliens hands. It would certainly be futile to prohibit the alienation of public agricultural lands to aliens if, after all, they may be freely so alienated upon their becoming private agricultural lands in the hands of Filipino citizens. Undoubtedly, as above indicated, section 5 [now Sec. 7] is intended to insure the policy of nationalization contained in section 1 [now Sec. 2]. Both sections must, therefore, be read together for they have the same purpose and the same subject matter. It must be noticed that the persons against whom the prohibition is directed in section 5 [now Sec. 7] are the very same persons who under section 1 [now Sec. 2] are disqualified to acquire or hold lands of the public domain in the Philippines. And the subject matter of both sections is the same, namely, the non transferability of agricultural land to aliens. x x x18 The Krivenko rule was recently reiterated in Ong Ching Po vs. Court of Appeals,19 which involves a sale of land to a Chinese citizen. The Court said: The capacity to acquire private lands is made dependent upon the capacity to acquire or hold lands of the public domain. Private land may be transferred or conveyed only to individuals or entities qualified to acquire lands of the public domain (II Bernas, the Constitution of the Philippines 439-440 [1988 ed.]). The 1935 Constitution reserved the right to participate in the disposition, exploitation, development and utilization of all lands of the public domain and
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Under this article, both landsthat sought to be redeemed and the adjacent lot belonging to the person exercising the right of redemptionmust be rural. If one or both are urban, the right cannot be invoked.15 The purpose of this provision, which is limited in scope to rural lands not exceeding one hectare, is to favor agricultural development.16 The subject land not being rural and, therefore, not agricultural, this purpose would not be served if petitioners are granted the right of redemption under Art. 1621. Plainly, under the circumstances, they cannot invoke it. Second Issue: Sale to Cataniag Valid Neither do we find any reversible error in the appellate courts holding that the sale of the subject land to Private Respondent Cataniag renders moot any question on the constitutionality of the prior transfer made by Helen Guzman to her son David Rey. True, Helen Guzmans deed of quitclaimin which she assigned, transferred and conveyed to David Rey all her rights, titles and interests over the property she had inherited from her husbandcollided with the Constitution, Article XII, Section 7 of which provides: SEC. 7. Save in cases of hereditary succession, no private lands shall be transferred or conveyed except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain.

other natural resources of the Philippines for Filipino citizens or corporations at least sixty percent of the capital of which was owned by Filipinos. Aliens, whether individuals or corporations, have been disqualified from acquiring public lands; hence, they have also been disqualified from acquiring private lands.20 In fine, non-Filipinos cannot acquire or hold title to private lands or to lands of the public domain, except only by way of legal succession.21 But what is the effect of a subsequent sale by the disqualified alien vendee to a qualified Filipino citizen? This is not a novel question. Jurisprudence is consistent that if land is invalidly transferred to an alien who subsequently becomes a citizen or transfers it to a citizen, the flaw in the original transaction is considered cured and the title of the transferee is rendered valid.22 Thus, in United Church Board of World Ministries vs. Sebastian,23 in which an alien resident who owned properties in the Philippines devised to an American non-stock corporation part of his shares of stock in a Filipino corporation that owned a tract of land in Davao del Norte, the Court sustained the invalidity of such legacy. However, upon proof that ownership of the American corporation has passed on to a 100 percent Filipino corporation, the Court ruled that the defect in the will was rectified by the subsequent transfer of the property. The present case is similar to De Castro vs. Tan.24 In that case, a residential lot was sold to a Chinese. Upon his death, his widow and children executed an extrajudicial settlement, whereby said lot was allotted to one of his sons who became a naturalized Filipino. The Court did not allow the original vendor to have the sale annulled and to recover the property, for the reason that the land has since become the property of a naturalized Filipino citizen who is constitutionally qualified to own land. Likewise, in the cases of Sarsosa vs. Cuenco,25 Godinez vs. Pak Luen,26 Vasquez vs. Li Seng Giap27 and Herrera vs. Luy Kim Guan,28 which similarly involved the sale of land to an alien who thereafter sold the same to a Filipino citizen, the Court again applied the rule that the subsequent sale can no longer be impugned on the basis of the invalidity of the initial transfer. The rationale of this principle was explained in Vasquez vs. Li Seng Giap thus: x x x [I]f the ban on aliens from acquiring not only agricultural but also urban lands, as construed by this Court in the Krivenko case, is to preserve the nations lands for future generations of Filipinos, that aim or purpose would not

be thwarted but achieved by making lawful the acquisition of real estate by aliens who became Filipino citizens by naturalization.29 Insular Life Assurance Co., Ltd. vs. NLRC (4th Division) Accordingly, since the disputed land is now owned by Private Respondent Cataniag, a Filipino citizen, the prior invalid transfer can no longer be assailed. The objective of the constitutional provisionto keep our land in Filipino handshas been served. WHEREFORE, the petition is hereby DENIED. The challenged Decision is AFFIRMED. Costs against petitioner. SO ORDERED. Davide, Jr. (Chairman), Bellosillo, Vitug and Quisumbing, JJ., concur. Petition denied; Challenged decision affirmed. Note.Conclusions and findings of the trial court are entitled to great weight on appeal and should not be disturbed unless for strong and valid reasons. (People vs. Deopante, 263 SCRA 691 [1996]) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Halili vs. Court of Appeals, 287 SCRA 465(1998)]

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[No. L-630. November 15, 1947] ALEXANDER A. KRIVENKO, petitioner and appellant, vs. THE REGISTER OF DEEDS, CITY OF MANILA, respondent and appellee.
1.CONSTITUTIONAL LAW; JUDICIAL POLICY; CONSTITUTIONAL QUESTION SHOULD BE AVOIDED IF POSSIBLE.The rule that a court should not pass upon a constitutional question if its decision may be made to rest upon other grounds, does not mean that to avoid a constitutional question, the court may decline to decide the case upon the merits. In the instant case, the only issue is a constitutional question which is unavoidable if the case is to be decided upon the merits. And the court cannot avoid. rendering its decision simply because it has to avoid the constitutional question. It cannot, for instance, grant appellant's motion withdrawing his appeal only because the constitutional issue should be avoided. Whether that motion should be, or should not be, granted, is a question involving different considerations. 2.ID.; APPEAL; WITHDRAWAL OF APPEAL DISCRETIONARY UPON THE COURT AFTER BRIEFS ARE PRESENTED.Withdrawal of appeal after briefs are presented, may or may not be granted in the discretion of the court, according to the rules. In the instant case, withdrawal was denied because under the circumstances. particularly the circular of the Department of Justice issued while this case was pending before this Court and ordering all registers of deeds to accept for registration all transfers of residential lots to aliens, together with the circumstance that probably a similar question may never come up again before this Court, the effect of the withdrawal would be offensive to the opinion reached by a majority of the members of the Court after long and exhaustive deliberations on the constitutional question. To allow the withdrawal under such circumstances is equivalent to tolerating an offense to the constitution, offense which may be permanent. 3.CLASSIFICATION OF LANDS or THE PUBLIC DOMAIN UNDER THE CONSTITUTION. When section 1, Article XIII, of the Constitution, with reference to lands of the public domain, makes mention of only agricultural, timber and mineral lands, it undoubtedly means that all lands of the public domain are classified into said three groups, namely, agricultural, timber and mineral. And this classification finds corroboration in the circumstance that at the time of the adoption of the Constitution, that was the basic classification existing in the public laws and judicial decision in the Philippines, and the term "public agricultural lands" under said classification has always been construed as referring to those lands that were neither timber nor mineral, and as including residential lands. It may safely be presumed, therefore, that what the members of the Constitutional Convention had in mind when they drafted the Constitution was this well-known classification and its technical meaning then prevailing, There seems to be no question among members of this Court that the phrase "public agricultural lands" appearing in section 1 of Article XIII of the Constitution includes residential lands. And this is in conformity with a legislative interpretation given after the adoption of the Constitution. Well known is the rule that "where the Legislature has revised a statute after a Constitution has been adopted, such a revision is to be regarded as a legislative construction that the statute so revised conf forms to the Constitution." Soon after the Constitution was adopted, the National

Assembly revised the Public Land Law and passed Commonwealth Act No. 141, and sections 58, 59 and 60 thereof permit the sale of residential lots to Filipino citizens or to associations or corporations controlled by such citizens, which is equivalent to a solemn declaration that residential lots are considered as agricultural lands, for, under the Constitution, only agricultural lands may be alienated. Furthermore, prior to the Constitution, under section 24 of Public Land Act No. 2874, aliens could acquire public agricultural lands used for industrial or residential purposes, but after the Constitution and under section 23 of Commonwealth Act No. 141, the right of aliens to acquire such kind of lands is completely stricken out, undoubtedly in pursuance of the constitutional limitation. And, again, prior to the Constitution, under section 57 of Public Land Act No. 2874, land of the public domain suitable for residence or industrial purposes could be sold or leased to aliens, but after the Constitution and under section 60 of Commonwealth Act No. 141, such land may only be leased, but not sold, to aliens, and the lease granted shall only be valid while the land is used for the purposes referred to. The exclusion of sale in the new Act is undoubtedly in pursuance of the constitutional limitation, and this again is another legislative construction that the term "public agricultural land" includes land for residence purposes. The legislative interpretation is also in harmony with the interpretation given by the Executive Department of the Government. Way back in 1939, Secretary of Justice Jose Abad Santos rendered an opinion holding that under the Constitution, the phrase "public agricultural lands" includes residential lands. 4.PRIVATE AGRICULTURAL LANDS UNDER THE CONSTITUTION.Under section 1 of Article XIII of the Constitution, "natural resources, with the exception of public agricultural land, shall not be alienated," and with respect to public agricultural lands, their alienation is limited to Filipino citizens. But this constitutional purpose of conserving agricultural resources in the hands of Filipino citizens may easily be def eated by the Filipino citizens themselves who may transfer their agricultural lands in favor of aliens. It is partly to prevent this result that section 5 is included in Article XIII, which reads: "Save in cases of hereditary succession, no private agricultural land shall be transferred or assigned except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain in the Philippines." This constitutional provision closes the only remaining avenue through which agricultural resources may leak into aliens' hands. It would certainly be futile to prohibit the alienation of public agricultural lands to aliens if, after all, they may be freely so alienated upon their becoming private agricultural lands in the hands of Filipino citizens. Undoubtedly, as above indicated, section 5 is intended to insure the policy of nationalization contained in section 1. Both sections must, therefore, be read together for they have the same purpose and the same subject matter. It must be noticed that the persons against whom the prohibition is directed in section 5 are the very same persons who under section 1 are disqualified to acquire or hold lands of the public domain in the Philippines. And the subject matter of both sections is the same, namely, the nontransferability of agricultural land to aliens. Since "agricultural land" under section 1 includes residential lots, the same technical meaning should be attached to "agricultural land" under section 5. It is a rule of statutory construction that a word or phrase repeated in a statute will bear the same meaning throughout the statute, unless a different intention appears. The only
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difference between "agricultural land" under section 1 and "agricultural land" under section 5, is that the former is public and the latter, private. But such difference refers to ownership and not to the class of land. The lands are the same in both sections, and, for the conservation of the national patrimony, what is important is the nature or class of the property regardless of whether it is owned by the State or by its citizens. If, as conceded by all the members of this Court, residential lands of the public domain should be considered as agricultural lands to be protected as part of the national patrimony, there can be no reason why residential lands of private ownership should not deserve the same consideration and protection. There is absolutely no difference in nature, character, value or importance. to the nation between a residential land of the public domain and a residential land of private ownership, and, therefore, both should equally be considered as agricultural lands to be protected as part of the national patrimony. Specially is this so where, as indicated above, the prohibition as to the alienation of public residential lots may become superfluous if the same prohibition is not equally applied to private residential lots. Indeed, the prohibition as to private residential lands will eventually become more important, for time will come when, in view of the constant disposition of public lands in favor of private individuals, almost all, if not all, the residential lands of the public domain shall have become private residential lands. The constitutional intent is made more patent and is strongly implemented by an Act of the National Assembly passed soon after the Constitution was approved. We are referring again to Commonwealth Act No. 141. Prior to the Constitution, there Were in the Public Land Act No. 2874 provisions contained in sections 120 and 121 thereof which granted to aliens the right to acquire private agricultural lands only by way of reciprocity. Then came the Constitution, and Commonwealth Act No. 141 was passed containing sections 122 and 123 which strike out completely the right of reciprocity granted to aliens. This, undoubtedly, is to conform to the absolute policy contained in section 5 of Article XIII of the Constitution, which, in prohibiting the alienation of private agricultural lands to aliens, grants them no right of reciprocity. 5.EFFECT UPON THE SPIRIT OF THE CONSTITUTION OF NOT CONSIDERING RESIDENTIAL LANDS AS AGRICULTURAL LANDS.If the term "private agricultural lands" is to be construed as not including residential lots or lands not strictly agricultural, the result would be that aliens may freely acquire and possess not only residential lots and houses for themselves but entire subdivisions, and whole towns and cities, and that they may validly buy and hold in their names lands of any area for building homes, factories, industrial plants, fisheries, hatcheries, schools, health and vacation resorts, markets, golf courses, playgrounds, airfields, and a host of other uses and purposes that are not, in apellant's words, strictly agricultural. That this is obnoxious to the conservative spirit of the Constitution is beyond question.

First Assistant Solicitor General Reyes and Solicitor Carreon for respondentappellee. Marcelino Lontok appeared as amicus curi. MORAN, C. J.:

Alexander A. Krivenko, alien, bought a residential lot from the Magdalena Estate, Inc., in December of 1941, the registration of which was interrupted by the war. In May, 1945, he sought to accomplish said registration but was denied by, the register of deeds of Manila on the ground that, being an alien, he cannot acquire land in this jurisdiction. Krivenko then brought the case to the fourth branch of the Court of First Instance of Manila by means of a consulta, and that court rendered judgment sustaining the refusal of the register of deeds, from which Krivenko appealed to this Court. There is no dispute as to these facts. The real point in issue is whether or not an alien under our Constitution may acquire residential land. It is said that the decision of the case on the merits is unnecessary, there being a motion to withdraw the appeal which should have been granted outright, and reference is made to the ruling laid down by this Court in another case to the effect that a court should not pass upon a constitutional question if its judgment may be made to rest upon other grounds. There is, we believe, a conf fusion of ideas in this reasoning. It cannot be denied that the constitutional question is unavoidable if we choose to decide this case upon the merits. Our judgment cannot to be made to rest upon other grounds if we have to render any judgment at all. And we cannot avoid our judgment simply because we have to avoid a constitutional question. We cannot, for instance, grant the motion withdrawing the appeal only because we wish to evade the constitutional issue. Whether the motion should be, or should not be, granted, is a question involving different considerations now to be stated. According to Rule 52, section 4, of the Rules of Court, it is discretionary upon this Court to grant a withdrawal of appeal after the briefs have been presented. At the time the motion for withdrawal was filed in this case, not only had the briefs been presented, but the case had already been voted and the majority decision was being prepared. The motion for withdrawal stated no reason whatsoever, and the Solicitor General was agreeable to it. While the motion was pending in this Court, came the new circular of the Department of Justice,
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APPEAL from a judgment of the Court of First Instance of Manila. De la Rosa, J. The facts are stated in the opinion of the court. Gibbs, Gibbs, Chuidian & Quasha for petitioner-appellant.

instructing all register of deeds to accept for registration all transfers of residential lots to aliens. The herein respondent-appellee was naturally one of the registers of deeds to obey the new circular, as against his own stand in this case which had been maintained by the trial court and firmly defended in this Court by the Solicitor General. If we grant the withdrawal, the result would be that petitioner-appellant Alexander A. Krivenko wins his case, not by a decision of this Court, but by the decision or circular of the Department of Justice, issued while this case was pending before this Court. Whether or not this is the reason why appellant seeks the withdrawal of his appeal and why the Solicitor General readily agrees to that withdrawal, is now immaterial. What is material and indeed very important, is whether or not we should allow interference with the regular and complete exercise by this Court of its constitutional functions, and whether or not after having held long deliberations and after having reached a clear and positive conviction as to what the constitutional mandate is, we may still allow our conviction to be silenced, and the constitutional mandate to be ignored or misconceived, with all the harmful consequences that might be brought upon the national patrimony. For it is but natural that the new circular be taken full advantage of by many, with the circumstance that perhaps the constitutional question may never come up again before this court, because both vendors and the vendees will have no interest but to uphold the validity of their transactions, and very unlikely will the register of deeds venture to disobey the orders of their superior. Thus, the possibility for this court to voice its conviction in a future case may be remote, with the result that our indifference of today might signify a permanent offense to the Constitution. All these circumstances were thoroughly considered and weighed by this Court for a number of days and the legal result of the last vote was a denial of the motion withdrawing the appeal. We are thus confronted, at this stage of the proceedings, with our duty to decide the case upon the merits, and by so doing, the constitutional question becomes unavoidable. We shall then proceed to decide that question. Article XIII, section 1, of the Constitution is as follows: "Article XIII.Conservation and utilization of natural resources. "SECTION 1. All agricultural, timber, and mineral lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, and other natural resources of the Philippines belong to the State, and their disposition, exploitation, development, or utilization shall be limited to citizens of the Philippines, or to corporations or associations at least sixty per

centum of the capital of which is owned by such citizens, subject to any existing right, grant, lease, or concession at the time of the inauguration of the Government established under this Constitution. Natural resources, with the exception of public agricultural land, shall not be alienated, and no license, concession, or lease for the exploitation, development, or utilization of any of the natural resources shall be granted for a period exceeding twenty-five years, renewable for another twenty-five years, except as to water rights for irrigation, water supply, fisheries, or industrial uses other than the development of water 'power' in which cases beneficial use may be the measure and the limit of the grant." The scope of this constitutional provision, according to its heading and its language, embraces all lands of any kind of the public domain, its purpose being to establish a permanent and fundamental policy for the conservation and utilization of all natural resources of the Nation. When, therefore, this provision, with reference to lands of the public domain, makes mention of only agricultural, timber and mineral lands, it means that all lands of the public domain are classified into said three groups, namely, agricultural, timber and mineral. And this classification finds corroboration in the circumstance that at the time of the adoption of the Constitution, that was the basic classification existing in the public laws and judicial decisions in the Philippines, and the term "public agricultural lands" under said classification had then acquired a technical meaning that was well-known to the members of the Constitutional Convention who were mostly members of the legal profession. As early as 1908, in the case of Mapa vs, Insular Government (10 Phil, 175, 182), this Court said that the phrase "agricultural public lands" as defined in the Act of Congress of July 1, 1902, which phrase is also to be found in several sections of the Public Land Act (No. 926), means "those public lands acquired from Spain which are neither mineral nor timber lands," This definition has been followed in a long line of decisions of this Court. (See Montano vs. Insular Government, 12 Phil., 572; Santiago vs. Insular Government, 12 Phil., 593; Ibaez de Aldecoa vs. Insular Government, 13 Phil., 159; Ramos vs. Director of Lands, 39 Phil, 175; Jocson vs. Director of Forestry, 39 Phil., 560; Ankron vs. Government of the Philippines, 40 Phil., 10.) And with respect to residential lands, it has been held that since they are neither mineral nor timber lands, of necessity they must be classified as agricultural. In Ibaez de Aldecoa vs. Insular Government (13 Phil., 159, 163), this Court said:

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"Hence, any parcel of land or building lot is susceptible of cultivation, and may be converted into a field, and planted with. all kinds of vegetation; for this reason, where land is not mining or f forestal in its nature, it must necessarily be included within the classification of agricultural land, not because it is actually used for the purposes of agriculture, but because it was originally agricultural and may again become so under other circumstances; besides, the Act of Congress contains only three classifications, and makes no special provision with respect to building lots or urban lands that have ceased to be agricultural land." In other words, the Court ruled that in determining whether a parcel of land is agricultural, the test is not only whether it is actually agricultural, but also its susceptibility to cultivation for agricultural purposes. But whatever the test might be, the fact remains that at the time the Constitution was adopted, lands of the public domain were classified in our laws and jurisprudence into agricultural, mineral, and timber, and that the term "public agricultural lands" was construed as referring to those lands that were not timber or mineral, and as including residential lands. It may safely be presumed, therefore, that what the members of the Constitutional Convention had in mind when they drafted the Constitution was this well-known classification and its technical meaning then prevailing. "Certain expressions which appear in Constitutions, * * * are obviously technical; and where such words have.been in use prior to the adoption of a Constitution, it is presumed that its framers and the people who ratified it have used such expressions in accordance with their technical meaning." (11 Am. Jur., sec. 66, p. 688.') Also Calder vs. Bull, 3 Dall. [U. S.], 386; 1 Law. ed., 648; Bronson vs. Syverson, 88 Wash., 264; 152 P., 1039.) "It is a fundamental rule that, in construing constitutions, terms employed therein shall be given the meaning which had been put upon them, and which they possessed, at the time of the framing and adoption of the instrument. If a word has acquired a fixed, technical meaning in legal and constitutional history, it will be presumed to have been employed in that sense in a written Constitution." (McKinney vs. Barker, 180 Ky., 526; 203 S. W., 303; L. R. A., 1918E, 581.) "Where words have been long used in a technical sense and have been judicially construed to have a certain meaning, and have been adopted by the legislature as having a certain meaning prior to a particular statute in which they are used, the rule of construction requires that the words used in such

statute should be construed according to the sense in which they have been so previously used, although the sense may vary from the strict literal meaning of the words." (II Sutherland, Statutory Construction, p. 758.) Therefore, the phrase "public agricultural lands" appearing in section 1 of Article XIII of the Constitution must be construed as including residential lands, and this is in conformity with a legislative interpretation given after the adoption of the Constitution. Well known is the rule that "where the Legislature has revised a statute after a Constitution has been adopted, such a revision is to be regarded as a legislative construction that the statute 80 revised conforms to the Constitution." (59 C. J., 1102.) Soon after the Constitution was adopted, the National Assembly revised the Public Land Law and passed Commonwealth Act No. 141, and sections 58, 59 and 60 thereof permit the sale of residential lots to Filipino citizens or to associations or corporations controlled by such citizens, which is equivalent to a solemn declaration that residential lots are considered as agricultural lands, for, under the Constitution, only agricultural lands may be alienated. It is true that in section 9 of said Commonwealth Act No. 141, "alienable or disposable public lands" which are the same "public agricultural lands" under the Constitution, are classified into agricultural, residential, commercial, industrial and for other purposes. This simply means that the term "public agricultural lands" has both a broad and a particular meaning. "Under its broad or general meaning, as used in the Constitution, it embraces all lands that are neither timber nor mineral. This broad meaning is particularized in section 9 of Commonwealth Act No. 141 which classifies "public agricultural lands" for purposes of alienation or disposition, into lands that are strictly agricultural or actually devoted to cultivation for agricultural purposes; lands that are residential; commercial; industrial; or lands for other purposes. The fact that these lands are made alienable or disposable under Commonwealth Act No. 141, in favor of Filipino citizens, is a conclusive indication of their character as public agricultural lands under said statute and under the Constitution. It must be observed, in this connection, that prior to the Constitution, under section 24 of Public Land Act No. 2874, aliens could acquire public agricultural lands used for industrial or residential purposes, but after the Constitution and under section 23 of Commonwealth Act No. 141, the right of aliens to acquire such kind of lands is completely stricken out, undoubtedly in pursuance of the constitutional limitation. And, again, prior to the Constitution, under section 57 of Public Land Act No. 2874, land of the public domain suitable for residence or industrial purposes could be sold or leased to aliens, but after the Constitution
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and under section 60 of Commonwealth Act No. 141, such land may only be leased, but not sold, to aliens, and the lease granted shall only be valid while the land is used for the purposes referred to. The exclusion of sale in the new Act is undoubtedly in pursuance of the constitutional limitation, and this again is another legislative construction that the term "public agricultural land" includes land for residence purposes. Such legislative interpretation is also in harmony with the interpretation given by the Executive Department of the Government. Way back in 1939, Secretary of Justice Jose Abad Santos, in answer to a query as to "whether or not the phrase 'public agricultural lands' in section 1 of Article XII (now XIII) of the Constitution may be interpreted to include residential, commercial, and industrial lands for purposes of their disposition," rendered the following short, sharp and crystal-clear opinion: "Section 1, Article XII (now XIII) of the Constitution classifies lands of the public domain in the Philippines into agricultural, timber and mineral. This is the basic classification adopted since the enactment of the Act of Congress of July 1, 1902, known as the Philippine Bill. At the time of the adoption of the Constitution of the Philippines, the term 'agricultural public lands' and, therefore, acquired a technical meaning in our public laws. The Supreme Court of the Philippines in the leading case of Mapa vs. Insular Government, 10 Phil., 175, held that the phrase 'agricultural public lands' means those public lands acquired from Spain which are neither timber nor mineral lands. This definition has been followed by our Supreme Court in many subsequent cases. * * "Residential, commercial, or industrial lots forming part of the public domain must have to be included in one or more of these classes. Clearly, they are neither timber nor mineral, of necessity, therefore, they must be classified as agricultural. "Viewed from another angle, it has been held that in determining whether lands are agricultural or not, the character of the land is the test (Odell vs. Durant, 62 N. W., 524; Lorch vs. Missoula Brick & Tile Co., 123 p. 25). In other words, it is the susceptibility of the land to cultivation for agricultural purposes by ordinary farming methods which determines whether it is agricultural or not (State vs. Stewart, 190 p. 129). "Furthermore, as said by the Director of Lands, no reason is seen why a piece of land, which may be sold to a person if he is to devote it to agricultural, cannot be sold to him if he intends to use it as a site for his home."

This opinion is important not alone because it comes from a Secretary of Justice who later became the Chief Justice of this Court, but also because it was rendered by a member of the cabinet of the late President Quezon who actively participated in the drafting of the constitutional provision under consideration. (2 Aruego, Framing of the Philippine Constitution, p. 598.) And the opinion of the Quezon administration was reiterated by the Secretary of Justice under the Osmea administration, and it was firmly maintained in this Court by the Solicitor General of both administrations. It is thus clear that the three great departments of the Governmentjudicial, legislative and executivehave always maintained that lands of the public domain are classified into agricultural, mineral and timber, and that agricultural lands include residential lots. Under section 1 of Article XIII of the Constitution, "natural resources, with the exception of public agricultural land, shall not be alienated," and with respect to public agricultural lands, their alienation is limited to Filipino citizens. But this constitutional purpose conserving agricultural resources in the hands of Filipino citizens may easily be defeated by the Filipino citizens themselves who may alienate their agricultural lands in favor of aliens. It is partly to prevent this result that section 5 is included in Article XIII, and it reads as follows: "Sec. 5. Save in cases of hereditary succession, no private agricultural land will be transferred or assigned except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain in the Philippines." This constitutional provision closes the only remaining avenue through which agricultural resources may leak into aliens' hands. It would certainly be futile to prohibit the alienation of public agricultural lands to aliens if, after all, they may be freely so alienated upon their becoming private agricultural lands in the hands of Filipino citizens. Undoubtedly, as above indicated, section 5 is intended to insure the policy of nationalization contained in section 1. Both sections must, therefore, be read together for they have the same purpose and the same subject matter. It must be noticed that the persons against whom the prohibition is directed in section 5 are the very same persons who under section 1 are disqualified "to acquire or hold lands of the public domain in the Philippines." And the subject matter of both sections is the same, namely, the non transferability of "agricultural land" to aliens. Since "agricultural land" under section 1 includes residential lots, the same technical meaning should be attached to "agricultural land" under section 5. It is a rule of statutory construction that "a word or phrase repeated in a statute will bear the same
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meaning throughout the statute, unless a different intention appears." (II Sutherland, Statutory Construction, p. 758.) The only difference between "agricultural land" under section 1, and "agricultural land" under section 5, is that the former is public and the latter private. But such difference refers to ownership and not to the class of land. The lands are the same in both sections, and, for the conservation of the national patrimony, what is important is the nature or class of the property regardless of whether it is owned by the State or by its citizens. Reference is made to an opinion rendered on September 19, 1941, by the Hon. Teofilo Sison, then Secretary of Justice, to the effect that residential lands of the public domain may be considered as agricultural lands, whereas residential lands of private ownership cannot be so considered. No reason whatsoever is given in the opinion for such a distinction, and no valid reason can be adduced for such a discriminatory view, particularly having in mind that the purpose of the constitutional provision is the conservation of the national patrimony, and private residential lands are as much an integral part of the national patrimony as the residential lands of the public domain. Specially is this so where, as indicated above, the prohibition as to the alienable of public residential lots would become superfluous if the same prohibition is not equally applied to private residential lots. Indeed, the prohibition as to private residential lands will eventually become more important, for time will come when, in view of the constant disposition of public lands in favor of private individuals, almost all, if not all, the residential lands of the public domain shall have become private residential lands. It is maintained that in the first draft of section 5, the words "no land of private ownership" were used and later changed into "no agricultural land of private ownership," and lastly into "no private agricultural land" and from these changes it is argued that the word "agricultural" introduced in the second and final drafts was intended to limit the meaning of the word "land" to land actually used for agricultural purposes. The implication is not accurate. The wording of the first draft was amended for no other purpose than to clarify concepts and avoid uncertainties. The words "no land" of the first draft, unqualified by the word "agricultural," may be mistaken to include timber and mineral lands, and since under section 1, this kind of lands can never be private, the prohibition to transfer the same would be superfluous. Upon the other hand, section 5 had to be drafted in harmony with section 1 to which it is supplementary, as above indicated. Inasmuch as under section 1, timber and mineral lands can never be private, and the only lands that may become private are agricultural lands, the words "no land of private ownership" of the first draft can have no other

meaning than "private agricultural land." And thus the change in the final draft is merely one of words in order to make its subject matter more specific with a view to avoiding the possible confusion of ideas that could have arisen from the first draft. If the term "private agricultural lands" is to be construed as not including residential lots or lands not strictly agricultural, the result would be that "aliens may freely acquire and possess not only residential lots and houses for themselves but entire subdivisions, and whole towns and cities," and that "they may validly buy and hold in their names lands of any area for building homes, factories, industrial plants, fisheries, hatcheries, schools, health and vacation resorts, markets, golf courses. playgrounds, airfields, and a host of other uses and purposes that are not, in appellant's words, strictly agricultural." (Solicitor General's Brief, p. 6.) That this is obnoxious to the conservative spirit of the Constitution is beyond question. One of the fundamental principles underlying the provision of Article XIII of the Constitution and which was embodied in the report of the Committee 011 Nationalization and Preservation of Lands and other Natural Resources of the Constitutional Convention, is "that lands, minerals, forests, and other natural resources constitute the exclusive heritage of the Filipino nation. They should, therefore, be preserved for those under the sovereign authority of that nation and for their posterity." (2 Aruego, Framing of the Filipino Constitution, p. 595.) Delegate Ledesma, Chairman of the Committee on Agricultural Development of the Constitutional Convention, in a speech delivered in connection with the national policy on agricultural lands, said: "The exclusion of aliens from the privilege of acquiring public agricultural lands and of owning real estate is a necessary part of the Public Land Laws of the Philippines to keep pace with the idea of preserving the Philippines for the Filipinos." (Italics ours.) And, of the same tenor was the speech of Delegate Montilla who said: "With the complete nationalization of our lands and natural resources it is to be understood that our God-given birthright should be one hundred per cent in Filipino hands * * *. Lands and natural resources are immovables and as such can be compared to the vital organs of a person's body, the lack of possession of which may cause instant death or the shortening of life. * * * If we do not completely nationalize these two of our most important belongings, I am afraid that the time will come when we shall be sorry for the time we were born. Our independence will be just a mockery, for what kind of independence are we going to have if a part of our country is not in our hands but in those of foreigners?" (Italics ours.) Professor Aruego says that since the opening days of the Constitutional Convention one of its fixed and dominating objectives was the conservation
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and nationalization of the natural resources of the country. (2 Aruego, Framing of the Philippine Constitution, p. 592.) This is ratified by the members of the Constitutional Convention who are now members of this Court, namely, Mr. Justice Perfecto, Mr. Justice Briones, and Mr. Justice Hontiveros. And, indeed, if under Article XIV, section 8, of the Constitution, an alien may not even operate a small jitney for hire, it is certainly not hard to understand that neither is he allowed to own a piece of land. This constitutional intent is made more patent and is strongly implemented by an act of the National Assembly passed soon after the Constitution was approved. We are referring again to Commonwealth Act No. 141. Prior to the Constitution, there were in the Public Land Act No. 2874 sections 120 and 121 which granted aliens the right to acquire private lands only by way of reciprocity. Said section reads as follows: "SEC. 120. No land originally acquired in any manner under the provisions of this Act, nor any permanent improvement on such land, shall be encumbered, alienated, or transferred, except to persons, corporations, associations, or partnerships who may acquire lands of the public domain under this Act; to corporations organized in the Philippine Islands authorized therefor by their charters, and, upon express authorization by the Philippine Legislature, to citizens of countries the laws of which grant to citizens of the Philippine Islands the same right to acquire, hold, lease, encumber, dispose of, or alienate land, or permanent improvements thereon, or any interest therein, as to their own citizens, only in the manner and to the extent specified in such laws, and while the same are in force, but not thereafter. "SEC. 121. No land originally acquired in any manner under the provisions of the former Public Land Act or of any other Act, ordinance, royal order, royal decree, or any other provision of law formerly in force in the Philippine Islands with regard to public lands, terrenos baldios y realengos, or lands of any other denomination that were actually or presumptively of the public domain, or by royal grant or in any other form, nor any permanent improvement on such land, shall be encumbered, alienated, or conveyed, except to persons, corporations, or associations who may acquire land of the public domain under this Act; to corporate bodies organized in the Philippine Islands whose charters may authorize them to do so, and, upon express authorization by the Philippine Legislature, to citizens of the countries the laws of which grant to citizens of the Philippine Islands the same right to acquire, hold, lease, encumber, dispose of, or alienate land or permanent improvements thereon or any interest therein, as to their own citizens, and only in the manner and to the extent specified in such

laws, and while the same are in force, but not thereafter: Provided, however, That this prohibition shall not be applicable to the conveyance or acquisition by reason of hereditary succession duly acknowledged and legalized by competent courts, nor to lands and improvements acquired or held for industrial or residence purposes, while used for such purposes: Provided, further, That in the event of the ownership of the lands and improvements mentioned in this section and in the last preceding section being transferred by judicial decree to persons, corporations or associations not legally capacitated to acquire the same under the provisions of this Act, such persons, corporations, or associations shall be obliged to alienate said lands or improvements to others so capacitated within the precise period 'of five years, under the penalty of such property reverting to the Government in the contrary case." (Public Land Act, No. 2874.) It is to be observed that the phrase "no land" used in these section refers to all private lands, whether strictly agricultural, residential or otherwise, there being practically no private land which had not been acquired by any of the means provided in said two sections. Therefore, the prohibition contained in these two provisions was, in effect, that no private land could be transferred to aliens except "upon express authorization by the Philippine Legislature, to citizens of countries the laws of which grant to citizens of the Philippine Islands the same right to acquire, hold, lease, encumber, dispose of, or alienate land." In other words, aliens were granted the right to acquire private land merely by way of reciprocity. Then came the Constitution and Commonwealth Act No. 141 was passed, sections 122 and 123 of which read as follows: "SEC. 122. No land originally acquired in any manner under the provisions of this Act, nor any permanent improvement on such land, shall be encumbered, alienated, or transferred, except to persons, corporations, associations, or partnerships who may acquire lands of the public domain under this Act or to corporations organized in the Philippines authorized therefor by their charters. "SEC. 123. No land originally acquired in any manner under the provisions of any previous Act, ordinance, royal order, royal decree, or any other provision of law formerly in force in the Philippines with regard to public lands, terrenos baldos y realengos, or lands of any other denomination that were actually or presumptively of the public domain, or by royal grant or in any other form, nor any permanent improvement on such land, shall be encumbered, alienated, or conveyed, except to persons, corporations or associations who may acquire land of the public domain under this Act or to corporate bodies organized in the Philippines whose charters authorize them to do so: Provided, however, That this prohibition shall not be applicable to the conveyance or acquisition by
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reason of hereditary succession duly acknowledged and legalized by competent courts: Provided, further, That in the event of the ownership of the lands and improvements mentioned in this section and in the last preceding section being transferred by judicial decree to persons, corporations or associations not legally capacitated to acquire the same under the provisions of this Act, such persons, corporations, or associations shall be obliged to alienate said lands or improvements to others so capacitated within the precise period of five years; otherwise, such property shall revert to the Government." These two sections are almost literally the same as sections 120 and 121 of Act No. 2874, the only difference being that in the new provisions, the right to reciprocity granted to aliens is completely stricken out. This, undoubtedly, is to conform to the absolute policy contained in section 5 of Article XIII of the Constitution which, in prohibiting the alienation of private agricultural lands to aliens, grants them no right of reciprocity. This legislative construction carries exceptional weight, for prominent members of the National Assembly who approved the new Act had been members of the Constitutional Convention. It is said that the lot in question does not come within the purview of sections 122 and 123 of Commonwealth Act No. 141, there being no proof that the same had been acquired by one of the means provided in said provisions. We are not, however, deciding the instant case under the provisions of the Public Land Act, which have to refer to lands that had been formerly of the public domain, otherwise their constitutionality may be doubtf ful. We are deciding the instant case under section 5 of Article XIII of the Constitution which is more comprehensive and more absolute in the sense that it prohibits the transfer to aliens of any private agricultural land including residential land whatever its origin might have been. And, finally, 011 June 14, 1947, the Congress approved Republic Act No. 133 which allows mortgage of "private real property" of any kind in favor of aliens but with a qualification consisting of expressly prohibiting aliens to bid or take part in any sale of such real property as a consequence of the mortgage. This prohibition makes no distinction between private lands that are strictly agricultural and private lands that are residential or commercial. The prohibition embraces the sale of private lands of any kind in favor of aliens, which is again a clear implementation and a legislative interpretation of the constitutional prohibition. Had the Congress been of opinion that private residential lands may be sold to aliens under the Constitution, no legislative measure would have been found necessary to authorize mortgage which would have been deemed also permissible under the Constitution. But clearly it was the opinion

of the Congress that such sale is forbidden by the Constitution and it was such opinion that prompted the legislative measure intended to clarify that mortgage is not within the constitutional prohibition. It is well to note at this juncture that in the present case we have no choice. We are construing the Constitution as it is and not as we may desire it to be. Perhaps the effect of our construction is to preclude aliens, admitted freely into the Philippines from owning sites where they may build their homes. But if this is the solemn mandate of the Constitution, we will not attempt to compromise it even in the name of amity or equity. We are satisfied, however, that aliens are not completely excluded by the Constitution from the use of lands for residential purposes. Since their residence in the Philippines is temporary, they may be granted temporary rights such as a lease contract which is not forbidden by the Constitution. Should they desire to remain here forever and share our fortunes and misfortunes, Filipino citizenship is not impossible to acquire. For all the foregoing, we hold that under the Constitution aliens may not acquire private or public agricultural lands, including residential lands, and, accordingly, judgment is affirmed, without costs. Feria, Pablo, Perfecto, Hilado, and Briones, JJ., concur. PERFECTO, J., concurring:

Today, which is the day set for the promulgation of this Court's decision, might be remembered by future generations always with joy, with gratitude, with pride. The failure of the highest tribunal of the land to do its duty in this case would have amounted to a national disaster. We would have refused to share the responsibility of causing it by, wittingly or unwittingly, allowing ourselves to act as tools in a conspiracy to sabotage the most important safeguard of the age-long patrimony of our people, the land which destiny or Providence has set aside to be the permanent abode of our race for unending generations. We who have children and grandchildren, and who expect to leave long and ramifying dendriform lines of descendants, could not bear the thought of the curse they may fling at us should the day arrive when our people will be foreigners in their fatherland, because in the crucial moment of our history, when the vision of judicial statemanship demanded on us the resolution and boldness to affirm and withhold the letter and spirit of the Constitution, we faltered. We would have preferred heroic defeat to inglorious desertion. Rather
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than abandon the sacred cause, we would have been ready to fall enveloped in the folds of the banner of our convictions for truth, for justice, for racial survival. We are happy to record that this Supreme Court turned an impending failure to a glorious success, saving our people from a looming catastrophe. On July 3, 1946, the case of Oh Cho vs. Director of Lands, (43 Off. Gaz., 866), was submitted for our decision. The case was initiated in the Court of First Instance of Tayabas on January 17, 1940, when an alien, Oh Cho, a citizen of China, applied for title and registration of a parcel of land located in the residential district of Guinayangan, Tayabas, with a house thereon. The Director of Lands opposed the application, one of the main grounds being that "the applicant, being a Chinese, is not qualified to acquire public or private agricultural lands under the provisions of the Constitution." On August 15, 1940, Judge P. Magsalin rendered decision granting the application. The Director of Lands appealed. In the brief filed by Solicitor General Roman Ozaeta, afterwards Associate Justice of the Supreme Court and now Secretary of Justice, and Assistant Solicitor General Rafael Amparo, appellant made only two assignments of error, although both raised but one question, the legal one stated in the first assignment of error as follows: "The lower court erred in decreeing the registration of the land in question in favor of the applicant who, according to his own voluntary admission is a citizen of the Chinese Republic." The brief was accompanied, as Appendix A, by the opinion of Secretary of Justice Jose A. Santoswho, while Chief Justice of the Supreme Court, suffered heroic martyrdom at the hands of the Japaneseaddressed to the Secretary of Agriculture and Commerce on July 15, 1939, supporting the same theory as the one advanced by the Director of Lands. The same legal question raised by appellant is discussed, not only in the brief f or the appellee, but also in the briefs of the several amid curi allowed by the Supreme Court to appear in the case. As a matter of fact, the case has been submitted for final decision of the Supreme Court since July of 1941, that is, six years ago. It remained undecided when the Pacific War broke out in December, 1941. After the Supreme Court was reorganized in the middle of 1945, it was found that the case was among those which were destroyed in February, 1945, during the battle for the liberation of Manila. The case had to be reconstituted upon motion of the office of the Solicitor General, filed with this Court on January 14,1946, in which it was also prayed that, after being reconstituted, the case be

submitted for final adjudication. The case was for the second time submitted for decision on July 3, 1946. After the last submission, it took the Supreme Court many days to deliberate on the case, especially on the legal question as to whether an alien may, under the Constitution, acquire private urban lands. An overwhelming majority answered no. But when the decision was promulgated on August 31, 1946, a majority resolved to ignore the question, notwithstanding our efforts to have the question, which is vital, pressing and far-reaching, decided once and f or all, to dispel definitely the uncertainty gnawing the conscience of the people. It has been our lot to be alone in expressing in unmistakable terms our opinion and decision on the main legal question raised by appellant. The constitutional question was by-passed by the majority because they were of opinion that it was not necessary to be decided, notwithstanding the fact that it was the main and only legal question upon which appellant Director of Lands relied in his appeal, and the question has been almost exhaustively argued in four printed briefs filed by the parties and the amici curi. Assurance was, nevertheless, given that in the next case in which the same constitutional question is raised, the majority shall make known their stand on the question, The next case came when the present one was submitted to us for decision on February 3, 1947. Again, we deliberated on the constitutional question for several days. On February 24, 1947, the case was submitted for final vote, and the result was that the constitutional question was decided against petitioner. The majority was also overwhelming. There were eight of us, more than twothirds of the Supreme Court. Only three Justices dissented. While the decision was being drafted, somehow, the way the majority had voted must have leaked out. On July 10, 1947, appellant Krivenko filed a motion for withdrawal of his appeal, for the evident purpose of preventing the rendering of the majority decision, which would settle once and for all the allimportant constitutional question as to whether aliens may acquire urban lots in the Philippines. Appellant chose to keep silent as to his reason for filing the motion. The Solicitor General's office gave its conformity to the withdrawal of the appeal. This surprising assent was given without expressing any ground at all, Would the Supreme Court permit itself to be cheated of its decision voted since February 24, 1947?
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Discussion immediately ensued as to whether the motion should be granted or denied, that is, whether this Court should abstain from promulgating the decision in accordance with the result of the vote taken on February 24, 1947, as if, after more than six years during which the question has been submitted for the decision of the highest tribunal of the land, the same has failed to form a definite opinion. After a two-day deliberation, the Chief Justice, Mr. Justice Pars, Mr. Justice Hontiveros, Mr. Justice Padilla and Mr. Justice Tuason voted to grant the motion for withdrawal. Those who voted to deny the motion were Mr. Justice Feria, Mr. Justice Pablo, ourselves, Mr. Justice Hilado and Mr. Justice Bengzon. The vote thus resulted in a tie, 5-5. The deadlock resulting from the tie should have the effect of denying the motion, as provided by section 2 of Rule 56 to the effect that "where the Court in banc is equally divided in opinion * * * on all incidental matters, the petition or motion shall be denied." And we proposed that the rule be complied with, and the denial be promulgated. Notwithstanding this, as Mr. Justice Briones was then absent, our brethren resolved to give him the opportunity of casting his vote on the question, although we insisted that it was unnecessary. Days later, when all the members of the Court were already present, a new vote was taken. Mr. Justice Briones voted for the denial of the motion, and his vote would have resulted, as must be expected, in 6 votes for the denial against 5 for granting. But the final result was different. Seven votes were cast for granting the motion and only four were cast for its denial. But then, by providential design or simply by a happy stroke of luck or fate, on the occasion of the registration by the register of deeds of Manila of land purchases of two aliens, a heated public polemic flared up in one section of the press, followed by controversial speeches, broadcast by radio, and culminating in the issuance on August 12, 1947, of Circular No. 128 of the Secretary of Justice which reads as follows: "To ALL REGISTER OF DEEDS : "Paragraph 5 of Circular No. 14, dated August 25, 1945, is hereby amended so as to read as follows: " '5 (a). Instruments by which private real property is mortgaged in favor of any individual, corporation, or association for a period not exceeding five years, renewable for another five years, may be accepted for registration. (Section 1, Republic Act No. 133.)

"'(b). Deeds or documents by which private residential, commercial, industrial or other classes of urban lands, or any right, title or interest therein is transferred, assigned or encumbered to an alien, who is not an enemy national, may be registered. Such classes of land are not deemed included within the purview of the prohibition contained in section 5, Article XIII of the Constitution against the acquisition or holding of "private agricultural land" by those who are not qualified to hold or acquire lands of the public domain. This is in conformity with Opinion No. 284, series of 1941, of the Secretary of Justice and with the practice consistently followed for nearly ten years since the Constitution took effect on November 15, 1935. "'(c). During the effectivity of the Executive Agreement entered into between the Republic of the Philippines and the Government of the United States on July 4, 1946, in pursuance of the so-called Parity Amendment to the Constitution, citizens of the United States and corporations or associations owned or controlled by such citizens are deemed to have the same rights as citizens of the Philippines and corporations or associations owned or controlled by citizens of the Philippines in the acquisition of all classes of lands in the Philippines, whether of private ownership or pertaining to the public domain.' " "ROMAN OZAETA "Secretary of Justice" Paragraph. 5 of Circular No. 14, dated August 25, 1945, amended by the above is as follows: "Deeds or other documents by which a real property, or a right, or title thereto, or an interest therein, is transferred, assigned or encumbered to an alien, who is not an enemy national, may be entered in the primary entry book; but, the registration of said deeds or other documents shall be deniedunless and/or until otherwise specifically directed by a final decision or order of a competent courtand the party in interest shall be advised of such denial, so that he could avail himself of the right to appeal therefrom, under the provisions of section 200 of the Revised Administrative Code. The denial of registration shall be predicated upon the prohibition contained in section 5, Article XIII (formerly Article XII) of the Constitution of the Philippines, and sections 122 and 123 of Commonwealth Act No. 141, the former as amended by Commonwealth Act No. 615."

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The polemic f found echo even in the Olympic serenity of a cloistered Supreme Court and the final result of long and tense deliberation which ensued is concisely recorded in the following resolution adopted on August 29, 1947: "In Krivenko vs. Register of Deeds, City of Manila, L-630, a case already submitted for decision, the appellant filed a motion to withdraw his appeal with the conformity of the adverse party. After full discussion of the matter specially in relation to the Court's discretion (Rule 52, section 4, and Rule 58), Mr. Justice Pars, Mr. Justice Hilado, Mr. Justice Bengzon, Mr. Justice Padilla and Mr. Justice Tuazon voted to grant, while the Chief Justice, Mr. Justice Feria, Mr. Justice Pablo, Mr. Justice Perfecto and Mr. Justice Briones voted to deny it. A redeliberation was consequently had, with the same result. Thereupon Mr. Justice Pars proposed that Mr. Justice Hontiveros be asked to sit and break the tie; but in view of the latter's absence due to illness and petition for retirement, the Court by a vote of seven to three did not approve the proposition. Therefore, under Rule 56, section 2, the motion to withdraw is considered denied. "Mr. Justice Padilla states that in his opinion the tie could not have the effect of overruling the previous vote of seven against four in favor of the motion to withdraw. "Mr. Justice Pars states: Justice Hontiveros is aware of and conversant with the controversy. He has voted once on the motion to withdraw the appeal. He is still a member of the Court and, on a moment's notice, can be present at any session of the Court. Last month, when all the members were present, the votes on the motion stood 7 to 4. Now, in the absence of one member, on reconsideration, another changed his vote resulting in a tie. Section 2 of Rule 56 requires that all efforts be exerted to break a deadlock in the votes. I deplore the inability of the majority to agree to my proposition that Mr. Justice Hontiveros be asked to participate in the resolution of the motion for withdrawal. I hold it to be fundamental and necessary that the votes of all the members be taken in cases like this. "Mr. Justice Perfecto stated, for purposes of completeness of the narration of facts, that when the petition to withdraw the appeal was submitted for resolution of this Court two days after the petition was filed, five justices voted to grant and five others voted to deny, and expressed the opinion that since then, according to the rules, the petition should have been considered denied. Said first vote took place many days before the one alluded to by Mr. Justice Padilla.

"Mr. Justice Tuason states: The motion to withdraw the appeal was first voted upon with the result that 5 were granting and 5 for denial Mr. Justice Briones was absent and it was decided to wait for him. Some time later, the same subject was deliberated upon and a new voting was had, on which occasion all the 11 justices were present. The voting stood 7 for allowing the dismissal of the appeal and 4 against. Mr. Justice Perfecto and Mr. Justice Briones expressed the intention to put in writing their dissents. Before these dissents were filed, about one month afterwards, without any previous notice the matter was brought up again and re-voted upon; the result was 5 to 5. Mr. Justice Hontiveros, who was ill but might have been able to attend if advised of the necessity of his presence, was absent. As the voting thus stood, Mr. Justice Hontiveros' vote would have changed its result unless he changed his mind, a fact of which no one is aware. My opinion is that since there was no formal motion for reconsideration nor a previous notice that this matter would be taken up once more, and since Mr. Justice Hontiveros had every reason to believe that the matter was over as f ar as he was concerned. this Justice's vote in the penultimate voting should, if he was not to be given an opportunity to recast his vote, be counted in favor of the vote for the allowance of the motion to withdraw. Above all, that opportunity should not have been denied on grounds of pure technicality never invoked before. I counted that the proceeding; was arbitrary and illegal." The resolution does not recite all the reasons why Mr. Justice Hontiveros did not participate in that last two votings and why it became unnecessary to wait f or him any f further to attend the sessions of the Court and to cast his vote on the question, Appellant Krivenko moved for the reconsideration of the denial of his withdrawal of appeal, alleging that it became moot in view of the ruling made by the Secretary of Justice in circular No. 128, thus giving us a hint that the latter, wittingly or unwittingly, had the effect of trying to take away f from the Supreme Court the decision of an important constitutional question, submitted to us in a pending litigation. We denied the motion for reconsideration. We did not want to entertain any obstruction to the promulgation of our decision. If the processes had in this case had been given the publicity suggested by us for all the official actuations of this Supreme Court, it should have been known by the whole world that since July, 1946, that is, more than a year ago, the opinion of the members of this Court had already been crystallized to the effect that under the Constitution, aliens are forbidden from acquiring urban lands in

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the Philippines, and it must have known that in this case a great majority had voted in that sense on February 24, 1947. The constitutional question involved in this case cannot be left undecided without jeopardizing public interest. The uncertainty in the public mind should be dispelled without further delay. While the doubt among the people as to what is the correct answer to the question remains to be dissipated, there will be uneasiness, undermining public morale and leading to evils of unpredictable extent. This Supreme Tribunal, by overwhelming majority, already knows what the correct answer is, and should not withhold and keep it f or itself with the same zealousness with which the ancient families of the Eumolpides and Keryces were keeping the Eleusinian mysteries. The oracle of Delphus must speak so that the people may know for their guidance what destiny has in store for them. The great question as to whether the land bequeathed to us by our f oref athers should remain as one of the most cherished treasures of our people and transmitted by inheritance to unending generations of our race, is not a new one. The long chain of land-grabbing invasions, conquests, depredations, and colonial imperialism recorded in the darkest and bloodiest pages of history from the bellicose enterprises of the Hittites in the plains of old Assyria, irrigated by the waters of the Tigris and Euphrates, and the invasion of Egypt by the Hyksos, up to the conquests of Hernan Cortes and Pizarro, the achievements of Cecil Rhodes, and the formation of the Spanish, Portuguese, Dutch, French and German colonial empires, had many of its iron links forged in our soil since Magellan, the greatest navigator of all history, had set foot at Limasawa and paid, for his daring enterprises, with his life at the hands of Lapulapu's men in the battle of Mactan. Since then, almost four centuries ago, our people have continuously been engaged in an unrelentless struggle to defend the national patrimony against the aggressive onslaughts of foreigners bent on grabbing our lands. First came the Spanish encomenderos and other gratuitous concessioners who were granted by the Spanish. crown immense areas of land. Immediately came the friars and other religious corporations who, notwithstanding their sacred vow of poverty, felt their greed whetted by the bountiful opportunities for easy and unscrupulous enrichment. Taking advantage of the uncontrollable religious leadership, on one side, and of the Christian virtues of obedience, resignation, humility, and credulity of a people who, after conversion to Catholicism, embraced with tacit faith all its tenets and practiced them with the loyalty and fidelity of persons still immune from the disappointments and bitterness caused

by the vices of modern civilization, the foreign religious orders set aside all compunction to acquire by foul means many large estates. Through the practice of confession and other means of moral intimidation, mostly based on the eternal tortures of hell, they were able to obtain by donation or by will the lands of many simple and credulous Catholics who, in order to conquer the eternal bliss of heaven, renounced all their property in f avor of religious orders and priests, many under the guise of chaplaincies or other apparently religious purposes, leaving in destitute their descendants and relatives. Thus big religious landed estates were formed, and under the system unbearable iniquities were committed. The case of the family of Rizal is just an index of a situation, which, under the moral leadership of the hero, finally drove our people into a national revolution not only against the Spanish sovereignty under which the social cancer had grown to unlimited proportions. Profiting from the lessons of history, the Delegates to our Constitutional Convention felt it their duty to insert in the fundamental law effective guarantees for conserving the national patrimony, the wisdom of which cannot be disputed in a world divided into nations and nationalities. In the same way that scientists and technicians resorted to radars, sonars, thermistors and other long range detection devices to stave off far-away enemy attacks in war, said Delegates set the guarantees to ward off open inroads or devious incursions into the national patrimony as a means of insuring racial safety and survival. When the ideal of one world should have been translated into reality, those guarantees might not be needed and our people may eliminate them. But in the meantime, it is our inescapable devoir, as the ultimate guardians of the Constitution, never to neglect the enforcement of its provisions whenever our action is called upon in a case, like the one now before us. One of the fundamental purposes of the government established by our Constitution is, in its very words, that it "shall conserve and develop the patrimony of the nation." That mandate is addressed to all departments and branches of our government, without excluding this Supreme Court. To make more specific the mandate, Article XIII has been inserted so as to avoid all doubt that all the natural resources of the country are reserved to Filipino citizens. Our land is the most important of our natural resources. That land should be kept in the hands of our people until, by constitutional amendment, they should decide to renounce that age-long patrimony. Save by hereditary successionthe only exception allowed by the Constitutionno foreigner may by any means acquire any land, any kind of land, in the
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Philippines. That was the overwhelming sentiment prevailing in the Constitutional Convention, that was the overpowering desire of the great majority of the Delegates, that was the dominating thought that was intended to be expressed in the great document, that was what the Committee on Style the drafter of the final texthas written in the Constitution, and that was what was solemnly ratified in the plebiscite by our people, who then were rankling by the sore spot of illegally Japanized Davao. The urgency of settling once and forever the constitutional question raised in this case cannot be overemphasized. If we should decide this question after many urban lots have been transferred to and registered in the name of alien purchasers, a situation may be created in which it will be hard to nullify the transfers and the nullification may create complications and problems highly distasteful to solve. The Georgia case is an objective lesson upon which we can mirror ourselves. From pages 22 and 23 of the book of Charless P. Curtiss, Jr. entitled "Lions Under the Throne," we quote the following: "It is of interest that it seems to have happened chiefly in important cases. Fletcher vs. Peck, in 1810, is the stock example. That was the first case in which the Court held a state statute void. It involved a national scandal. The 1795 legislature of Georgia sold its western lands, most of Alabama and Mississippi, to speculators. Perhaps it was the greatest real estate steal in our history. The purchase price was only half a million dollars. The next legislature repealed the statute for fraud, the bribery of legislator, but not before the land companies had completed the deal and unloaded. By that time, and increasingly soon afterwards, more and more people had bought, and their title was in issue. Eleven million of the acres had been bought for eleven cents an acre by leading citizens of Boston. How could they clear their title? Alexander Hamilton gave an opinion, that the repeal of the grant was void under the Constitution as an impairment of the obligation of a contract. "But could they not get a decision from the Supreme Court? Robert Fletcher of Anhirst, New Hampshire, had bought fifteen thousand acres from John Peck of Boston. He sued Peck, and he won. Fletcher appealed. Plainly it was a friendly suit. Marshall was nobody's fool. He told Cranch that the Court was reluctant to decide the case 'as it appeared manifestly made up for the purpose of getting the Court's judgment.' John Quincy Adams so reports in his diary. Yet Marshall decided it, and he held the repeal void. just as Hamilton said it was. 'The fact that Marshall rendered an opinion, under the circumstances,' says Beveridge, 'is one of the finest proofs of 'his greatness. A weaker man than John Marshall. and one less wise and courageous, would have dismissed the appeal.' That

may be, but it was the act of a stateman, not of a judge. The Court has always been able to overcome its judicial diffidence on state occasions." We see from the above how millions of acres of land were stolen from the people of Georgia and due to legal technicalities the people were unable to recover the stolen property. But in the case of Georgia, the lands had fallen into American hands and although the scandal was of gigantic proportions, no national disaster ensued. In our case if our lands should fall into foreign hands, although there may not be any scandal at all, the catastrophe sought to be avoided by the Delegates to our Constitutional Convention will surely be in no remote offing. We conclude that, under the provisions of the Constitution, aliens are not allowed to acquire the ownership of urban or residential lands in the Philippines and, as a consequence, all acquisitions made in contravention of the prohibitions since the fundamental law became effective are null and void per se and ab initio. As all public officials have sworn, and are duty bound, to obey and defend the Constitution, all those who, by their f functions, are in charge of enforcing the prohibition as laid down and interpreted in the decision in this case, should spare no efforts so that any and all violations which may have taken place should be corrected. We decide, therefore, that, upon the above premises, appellant Alexander A. Krivenko, not being a Filipino citizen, could not acquire by purchase the urban or residential lot here in question, the sale made in his favor by the Magdalena Estate, Inc. being null and void ab initio, and that the lower court acted correctly in rendering the appealed decision, which we affirm. HILADO, J., concurring:

Upon appellant's motion to withdraw his appeal herein with the conformity of the Solicitor General in behalf of appellee, indulging, at the time, all possible intendments in favor of another department, I ultimately voted to grant the motion after the matter was finally deliberated and voted upon. But the votes of the ten Justices participating were evenly divided, and under Rule 52, section 4, in relation with Rule 56, section 2, the motion was denied. The resolution to deny was adopted in the exercise of the court's discretion under Rule 52, section 4, by virtue of which it has discretion to deny the withdrawal of the appeal even though both appellant and appellee agree upon the withdrawal, when appellee's brief has been filed. Under the principle that where the
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necessary number have concurred in an opinion or resolution, the decision or determination rendered is the decision or determination of the court (2 C. J. S., 296), the resolution denying the motion to withdraw the appeal was the resolution of the court. Pursuant to Rule 56, section 2, where the court in banc is equally divided in opinion, such a motion "shall be denied." As a necessary consequence, the court as to decide the case upon the merits. After all, a consistent advocate and defender of the principle of separation of powers in a government like ours that I have always been, I think that under the circumstances it is well for all concerned that the Court should go ahead and decide the constitutional question presented. The very doctrine that the three coordinate, co-equal and independent departments should be maintained supreme in their respective legitimate spheres, makes it at once the right and the duty of each to defend and uphold its own peculiar powers and authority. Public respect f or and confidence in each department must be striven for and kept, for any lowering of the respect and diminution of that confidence will in the same measure take away from the very usefulness of the respective department to the people. For this reason, I believe that we should avert and avoid any tendency in this direction with respect to this Court. I am one of those who presume that Circular No. 128, dated August 12, 1947, of the Secretary of Justice, was issued in good faith. But at the same time, that declaration in sub-paragraph (b) of paragraph 5 of Circular No. 14, which was already amended, to the effect that private residential, commercial, industrial or other classes of urban lands "are not deemed included within the purview of the prohibition contained in section 5, Article XIII, of the Constitution", made at a time when the self-same question was pending decision of this Court, gives rise to the serious danger that should this Court refrain from deciding said question and giving its own interpretation of the constitutional mandate, the people may see in such an attitude an abandonment by this Court of a bounden duty, peculiarly its own, to decide a question of such a momentous transcendence, in view of an opinion, given in advance of its own decision, by an officer of another department. This will naturally detract in no small degree f from public respect and confidence towards the highest Court of the land. Of course, none of usthe other governmental departments includedwould desire such a situation to ensue. I have distincly noticed that the decision of the majority is confined to the constitutional question here presented, namely, "whether or not an alien under our Constitution may acquire residential land." (Opinion, p. 2.) Leases of

residential lands, or acquisition, ownership or lease of a house or building thereon, for example, are not covered by the decision. With these preliminary remarks and the statement of my concurrence in the opinion ably written by the Chief Justice, I have signed said decision. BRIONES, M., conforme:

Estoy conforme en un todo con la ponencia, a la cual no se puede aadir ni quitar nada, tal es su acabada y compacta elaboracin. Escribo, sin embargo, esta opinion separada nada mas que para unas observaciones, particularmente sobre ciertas fases extraordinarias de este asunto harto singular y extraordinario. I. Conforme se relata en la concurrencia del Magistrado Sr. Perfecto, despus de laboriosas deliberaciones este asunto se puso finalmente a votacin el 24 de Febrero de este ao, confirmndose la sentencia apelada por una buena mayora. En algunos comentarios adelantados por cierta parte de la prensa impaciencia que slo puede hallar explicacin en un nervioso y excesivo celo en la vigilancia de los intereses pblicos, mxime tratndose, como se trata, de la conservacin del patrimonio nacionalse ha hecho la pregunta de por que se ha demorado la promulgacin de la sentencia, habindose votado el asunto todava desde casi comienzos del ao. A simple vista, la pregunta tiene justrficacin; pero bien considerados los hechos se ver que no ha habido demora en el presente caso, mucho menos una demora desusada, alarmante, que autorice y justifique una crtica contra los mtodos de trabajo de esta corte. El curso seguido por el asunto ha sido normal, bajo las circunstancias. En realidad, no ya en esta Corte ahora, sino an en el pasado, antes de la guerra, hubo ms lentitud en casos no tan dficiles ni tan complicados como el que nos ocupa, en que las cuestiones planteadas y discutidas no tenan la densidad constitucional y jurdica de las que se discuten en el presente caso. Hay que tener en cuenta que desde el 24 de Febrero en que se vot finalmente el asunto hasta el 1. de Abril en que comenzaron las vacaciones judiciales, no haban transcurrido ms que 34 das; y cuando se reanudaron formalmente las sesiones de esta Corte en Julio se suscit un incidente de lo ms extraordinarioincidente que prcticamente vino a impedir, a paralizar la pronta promulgacin de la sentencia, Me refiero a la mocin que el 10 de Julio presentaron los abogados del apelante pidiendo permiso para retirar su apelacin. Lo sorprendente de esta mocin es que
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viene redactada escuetamente, sin explicar el por que de la retirada, ni expresar ningn fundamento. Pero lo ms sorprendente todava es la conformidad dada por el Procurador General, tambin escueta e inceremoniosamente. Digo que es sorprendente la retirada de la apelacin porque pocos casos he visto que hayan sido argidos con tanta energa, tanto inters y tanto celo por la parte apelante como este que nos ocupa. Los abogados del apelante no slo presentaron un alegato concienzudo de 34 pginas, sino que cuando se llam a vista el asunto informaron verbalmente ante esta Corte argumentando vigorosa y extensamente sobre el caso. El Procurador General, por su parte, ha presentado un alegato igualmente denso, de 31 pginas, en que se discuten acabadamente, hasta el punto mximo de saturacin y agotamiento, todos los ngulos de la formidable cuestin constitutional objeto de este asunto. Tambin inform el Procurador General verbalmente ante esta Corte, entablando fuerte lid con los abogados del apelante Con la mocin de retirada de la apelacin se hubo de retardar necesariamente la promulgacin de la sentencia pues trabajosas deliberaciones fueron necesarias para resolver la cuestin, dividindose casi por igual los miembros de la Corte sobre si deba o no permitirse la retirada Haba unanimidad en que bajo \a regla 52, seccin 4, de\ Reglamento de los Tribunales tenamos absoluta discrecin para conceder o denegar la mocin, toda vez que los alegatos estaban sometidos desde hacia tiempo, el asunto estaba votado y no faltaba ms que la firma y promulgacin de la decision juntamente con las disidencias. Sin embargo, algunos Magistrados opinaban que la discrecin deba ejercitarse en favor de la retirada en virtud de la prctica de evitar la aplicacin de la Constitucin a la solucin de un litigio siempre que se puede sentenciarlo de otra manera. (Entre los Magistrados que pensaban de esta manera se incluan algunos que en el fundo del asunto estaban a favor de la confirmacin de la sentencia apelada, es decir, crean que la Constitucin prohibe a los extranjeros la adquisicin a ttulo dominical de todo gnero de propiedad inmueble, sin excluir los solares residenciales, comerciales e industriales.) Pero otros Magistrados opinaban que en el estado tan avanzado en que se hallaba el asunto los dictados del inters pblico y de la sana discrecin requeran imperiosamente que la cuestin se atacase y decidiese frontalmente; que si una mayora de esta Corte estaba convencida, como al parecer lo estaba, de que exista esa interdiccin constitucional contra la facultad adquisitiva de los extranjeros, nuestro claro deber era apresurarnos a dar pleno y positivo cumplimiento a la Constitucin al presentarse la primera oportunidad; que el meollo del asunto, la lis mota era esola interdiccin

constitucional; por tanto, no haba otra manera de decidirlo ms que aplicando la Constitucin; obrar de otra manera sera desercin, abandono de un deber jurado. As estaban las deliberaciones cuando ocurre otro incidente mucho ms extraordinario y sorprendente todava que la retirada no explicada de la apelacin con la inslita conformidad del Procurador General; algo as como si de un cielo sereno, sin nubes, cayera de pronto un blido en medio de nosotros, en medio de la Corte: me refiero a la circular nm. 128 del Secretario de Justicia expedida el 12 de Agosto prximo pasado, esto es, 32 das despus de presentada la mocin de retirada de la apelacin. Esa circular se cita comprensivamente en la ponencia y su texto se copia ntegramente en la concurrencia del Magistrado Sr. Perfecto: as que me creo excusado de transcribirla in toto. En breves trminos, la circular reforma el prrafo 5 de la circular nm. 14 del mismo Departamento de Justicia de fecha 25 de Agosto, 1945, y levanta la prohibicin o interdiccin sobre el registro e inscripcin en el registro de la propiedad de las "escrituras o documentos en virtud de los cuales terrenos privados residenciales, comerciales, industriales u otras clases de terrenos urbanos, o cualquier derecho, ttulo o inters en ellos, se transfieren, ceden o gravan a un extranjero que no es nacional enemigo." En otras palabras, el Secretario de Justicia, por medio de esta circular, dejaba sin efecto la prohibicin contenida en la circular nm. 14 del mismo Departamentola prohibicin que precisamente ataca el apelante Krivenko en el asunto que tenemos ante Nosy authorizaba y ordenaba a todos los Registradores de Ttulos en Filipinas para que inscribiesen las escrituras o documentos de venta, hipoteca o cualquier otro gravamen a favor de extranjeros, siempre que no se tratase de terrenos pblicos o de "terrenos privados agrcolas," es decir, siempre que los terrenos objeto de la escritura fuesen "residenciales, comerciales e industriales." La comparacin de esa circular con un blido cado sbitamente en medio de la Corte no es un simple tropo, no es una mera imagen retrica: refleja una verdadera realidad. Esa circular, al derogar la prohibicin decretada en el prrafo 5 de la circular nm. 14prohibicin que, como queda dicho, es precisamente el objeto del presente asuntovena prcticamente a escamotear la cuestin discutida, la cuestin sub jdice sustrayndola de la jurisdiccin de los tribunales. Dicho crudamente, el Departamento de Justicia vena a arrebatar el asunto de nuestras manos, de las manos de esta Corte, anticipndose a resolverlo por si mismo y dando efectividad y vigor inmediatos a su resolucin mediante la correspondiente autorizacin a los Registradores de Ttulos.
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A la luz de esa circular queda perfectamente explicada la mocin de retirada de la apelacin consentida inslitamente por el Procurador General. Para que esperar la decision de la Corte Suprema que acaso podra ser adversa? No estaba ya esa circular bajo la cual podan registrarse ahora las ventas de terrenos residenciales, comerciales o industriales a extranjeros? Por eso no es extrao que los abogados del apelante Krivenko, en su mocin de 1. de Septiembre, 1947, pidiendo la reconsideracin de nuestro auto denegando la retirada de la apelacin, dijeran por primera vez como fundamento que la cuestin ya era simplemente acadmica ("question is now moot") en vista de esa circular y de la conformidad del Procurador General con la retirada de la apelacin. He aqu las propias palabras de la mocin del apelante Krivenko: "ln view of Circular No. 128 of the Department of Justice, dated August 12, 1947, which amends Circular No. 14 by expressly authorizing the registration of the sale of urban lands to aliens, and in view of the fact that the Solicitor General has joined in the motion for withdrawal of the appeal, there is no longer a controversy between the parties and the question is now moot. For this reason the court no longer has jurisdiction to act on the case."1 Lo menos que se puede decir de esa accin del Departamentro de Justicia atravesndose en el camino de los tribunales mientras un asunto est sub jdice, es que ello no tiene precedentes, que yo sepa, en los anales de la administracin de justicia en Filipinas en cerca de medio siglo que llevamos de existencia bajo un gobierno constitucional y sustancialmente republicano. Ni an en los llamados das del Imperio, cuando la soberana americana era ms propensa a manejar el bastn grueso y afirmar vigorosamente los fueros de su poder y autoridad, se vi jams a un departamento ejecutivo del gobierno, mucho menos al Departamento de Justicia o a alguna de sus dependencias entrometerse en el ejercicio ordenado por los tribunales de su jurisdiccin y competencia. Era una tradicin firmemente establecida en las esfersas del Poder Ejecutivotradicin inviolada e inviolablemxime en el Departamento de Justicia y en la Fiscala General, el inhibirse de expresar alguna opinion sobre un asunto ya sometido a los tribunales, excepto cuando venan llamados a hacerlo, en representacin del gobierno, en los trmites de un litigio, civil o criminal, propiamente planteado ante dichos tribunales. Fuera de estos casos, la inhibicin era tradicionalmente absoluta, observada con la devocin y la escrupulosidad de un rito. Y la razn era muy sencilla: jams se quera estorbar ni entorpecer la funcin de los tribunales de justicia, los cuales, bajo la carta orgnica y las leyes, tenan absoluto derecho a actuar con mximo desembarazo, libres de toda ingerencia extraa. Esto se hizo bajo la Ley Cooper; esto se hizo bajo la Ley Jones; y esto se hizo bajo la Ley Tydings-

McDuffie, la ley orgnica del Commonwealth. Creo que el pueblo filipino tiene derecho a que eso mismo se haga bajo el gobierno de la Repblica, que es suyo, que es de su propia hechura. No faltaba ms que los hombres de su propia raza le nieguen lo que no le negaron gobernantes de otra raza! No se niega la facultad de supervision que tiene el Departamento de Justicia sobre las oficinas y dependencias que caen bajo su jurisdiccin, entre ellas las varias oficinas de registro de la propiedad en Manila y en las provincias. Tampoco se niega la facultad que tiene dicho Departamento para expedir circulares, ya de carcter puramente administrativo, ya de carcter semijudicial, dando instrucciones, vgr., a los registradores acerca de cmo deben desempear sus funciones. De hecho la circular nm. 14 de 25 de Agosto, 1945, es de esta ltima naturaleza: en ella se instruye y ordena a los registradores de ttulos que no registren ni inscriban ventas de propiedad inmueble a extranjeros, as sean terrenos residenciales, comerciales o industriales. Pero la facultad llega slo hasta all; fuera de esas fronteras el campo ya es pura y exclusivamente judicial. Cuando una determinada circular del Departamento a los registradores es combatida o puesta en tela de juicio ante los tribunales, ora por fundamentos constitucionales, ora por razones meramente legales, ya no es el Departamento el que tiene que determinar o resolver la disputa, sino que eso compete en absoluto a los tribunales de justicia. As lo dispone terminantemente el artculo 200 del Cdigo Administrativo. Segn este artculo, el asunto o disputa debe elevarse en forma de consulta a la Sala Cuarta del Juzgado de Primera Instancia de Manila. La ley no confiere ninguna facultad al Departamento de Justicia para enjuiciar y decidir el caso. Y cuando una parte no estuviere conforme con la decision de la Sala Cuarta, ella puede alzarse de la sentencia para ante la Corte Suprema. He aqu el texto ntegro del artculo 200 del Cdigo Administrativo: "SEC. 200. Reference of doubtful matter to judge of fourth branch of Court of First Instance at Manila.When the register of deeds is in doubt with regard to the proper step to be taken or memorandum to be made in pursuance of any deed, mortgage, or other instrument presented for registration or where any party in interest does not agree with the register of deeds with reference to any such matter, the question shall be referred to the judge of the fourth branch of the Court of First Instance of the Ninth Judicial District either on the certificate of the register of deeds stating the question upon which he is in doubt or upon the suggestion in writing of the party in interest; and thereupon said judge, upon consideration of the matter as shown by the record certified to him, and in
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case of registered lands, after notice to the parties and hearing, shall enter an order prescribing the step to be taken or memorandum to be made." Tal es lo que ha ocurrido en el presente caso. Krivenko present su escritura de compraventa al Registrador de la Propiedad de Manila. lste deneg la inscripcin solicitada en virtud de la prohibicin contenida en la circular nm. 14. Qu hizo Krivenko entonces? Elev acaso el asunto al Departamento de Justicia? No. Lo que hicieron sus abogados entonces fu presentar una demanda el 23 de Noviembre, 1945, contra el Registrador de Ttulos ante la Sala Cuarta del Juzgado de Primera Instancia de Manila, numerndose dicha demanda como consulta nm. 1289; y cuando esta Sala decidi el asunto confirmando la accin del Registrador, Krivenko trajo a esta Corte la apelacin que estamos considerando. Tan elemental es esto que en la misma circular nm. 14 se dice que la prohibicin queda decretada hasta que los tribunales resuelvan lo contrario. He aqu la fraseologa pertinente de dicha circular nm. 14: " * * * the registration of said deeds or other documents shall be denied, unless and/or until otherwise specifically directed by a final decision or order of a competent courtand the party in interest shall be advised of such denial, so that he could avail himself of the right to appeal therefrom, under the provisions of section 200 of the Revised Administrative Code." La posicin de la Corte Suprema ante este caso claro y positivo de intromisin (interference) en sus funciones es de lo ms peculiar. Tenemos en el Reglamento de los Tribunales algunas disposiciones que proveen sancin por desacato para ciertos actos de intromisin en el ejercicio de las funciones judiciales.1 Pero se preguntar naturalmente: son aplicables estas disposiciones cuando la intromisin procede de un ramo del poder ejecutivo, el cual, como se sabe, en la mecnica de los poderes del Estado, esusando un anglicismo-coigual y coordinado con el poder judicial, mxime si esa intromisin se ha realizado so capa de un acto oficial? Cualquiera, pues, puede imaginarse la situacin tremendamente embarazosa, inclusive angustiosa en que esta Corte ha quedado colocada con motivo de esa intromisin departamental, exponindose a chocar con otro poder del Estado. En casos recientes en que estaban envueltos otros poderes, esta Corte, estimando dudosa su posicin constitucional, prefiri adoptar una actitud de elegante inhibicin, de "manos fuera" (hands-off), si bien hay que hacer constar que con la fuerte disidencia de algunos Magistrados, entre ellos el opinante.2 Tenemos, por tanto, un caso de verdadera intromisin en que siendo, por lo menos, dudosa la facultad de esta Corte para imponer una

sancin por desacato de acuerdo con el Reglamento de los Tribunales, le queda el nico recurso decente, ordenado: registrar su excepcin sin ambages ni eufemismos contra la intromisin, y reafirmar con todo vigor, con toda firmeza su independencia. Se arguye con tenaz persitencia que debamos de haber concedido la mocin de retirada de la apelacin, por dos razones: (a) porque el Procurador General estaba conforme con dicha retirada; (b) para evitar la resolucin del punto constitucional envuelto, en virtud de la prctica, segn se dice, de soslayar toda cuestin constitucional siempre que se pueda. Respecto de la primera razn ser suficiente decir que el Procurador General es libre de entrar en cualquiera transaccin sobre un asunto en que interviene, pero es evidente que su accin no ata ni obliga a esta Corte en el ejercicio de la discrecin que le confiere la regla 52, seccin 4, del Reglamento de los Tribunales, que reza como sigue: "Rule 52, SEC. 4An appeal may be withdrawn as of right at any time before the filing of appellee's brief. After that brief is filed the withdrawal may be allowed by the court in its discretion." * * * (Las cursivas son nuestras.) Como se ve, nuestra discrecin es absoluta: no est condicionada por la conformidad o disconformidad de una de las partes. Y la incondicionalidad de esa discrecin es ms absoluta e imperativa all donde el litigio versa sobre una materia que no afecta slo a un inters privado, sino que es de inters pblico, como el caso presente en que el Procurador General ha transigido no sobre un asunto suyo personal o de un cliente particular, sino de un cliente de mucha mayor monta y significacinel pueblo filipinoy siendo materia del litigio la propiedad del suelo, parte, vitalsima del patrimonio nacional que nuestro pueblo ha colocado bajo la salvaguardia de la Constitucin. Respecto del segundo fundamento, o sea que debamos permitir la retirada de la apelacin para no tener que resolver la cuestin constitucional disputada, bastar decir que la prctica, principio o doctrina que se invoca, lleva consigo una salvedad o cualificacin y es que el litigio se pueda resolver de otra manera. Podemos soslayar el punto constitucional discutido en el pleito que nos ocupa? Podemos decidirlo bajo otra ratio decidendi, esto es, que no sea la constitucionalidad o inconstitucionalidad de la venta del inmueble al apelante Krivenko, en virtud de su condicin de extranjero? Indudablemente que no: la lis mota, la nica, es la misma constitucionalidad de la compraventa de que se trata. Para decidir si al recurrido apelado, Registrador de Ttulos de la Ciudad de Manila, le asiste o no razn para denegar la inscripcin solicitada
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por el recurrente y apelante, Krivenko, la nica disposicin legal que se puede aplicar es el artculo XIII, seccin 5, de la Constitucin de Filipinas, invocado por el Registrador como defensa e inserto en el prrafo 5 de la circular nm. 14 como fundamento de la prohibicin o interdiccin contra el registro de las ventas de terreno a extranjeros. No hay otra ley para el caso. EI caso de Oh Cho contra el Director de Terrenos 43 Gac. Of., No. 3, pg. 866), que se cita en una de las disidencias, es completamente diferente. Es verdad que all se plante tambin la cuestin constitucional de que se trata, por cierto que el que lo planteaba -en nombre del Gobierno era el actual Secretario de Justicia que entonces era Procurador General, y lo planteaba en un sentido absolutamente concorde con la circular nm. 14. Pero esta Corte, con la disidencia de algunos Magistrados, opt por soslayar el punto constitucional denegando el registro solicitado por Oh Cho, por el fundamento de que bajo la Ley No. 2874 sobre terrenos de dominio pblico los extranjeros estn excludos de dichos terrenos; es decir, que el terreno solicitado se consider como terreno pblico. Podemos hacer la misma evasion en el presente caso, acogindonos a la ley No. 2874 o a cualquier otra ley? Indudablemente que no porque ningn Magistrado de esta Corte, mucho menos los disidentes, consideran el terreno reclamado por Krivenko como terreno pblico. Luego todos los caminosestn bloqueados para nosotros, menos el camino constitucional. Luego el segundo fundamento alegado para cubrir la evasiva tambin debe descartarse totalmente. Se insina que no debamos darnos prisa en resolver constitucionalmente el presente asunto, puesto que pueden presentarse otros de igual naturaleza en tiempo no remoto, y en efecto se cita el caso de Rellosa contra Gaw Chee Hun (49 Off. Gaz., 4345), en que los alegatos de ambas partes ya estn sometidos y se halla ahora pendiente de decision. Es evidente que esto tampoco arguye en f avor de la evasiva, en primer lugar, porque cuando se le somete un caso para deliberacin y decision esta Corte no tiene el deber de ir averiguando en su Escribana si hay casos de igual naturaleza, sino que los casos se someten por orden de prelacin y prioridad de tiempo a medida que estn preparados para deliberacin y decision; y en segundo lugar, porque cada caso debe decidirse por sus propios mritos y conforme a la ley pertinente. La salvedad o cualificacin de la doctrina o prctica que se invoca no dice: "hay que soslayar la cuestin constitucional siempre que se pueda resolver de otra manera, reservando dicha cuestin constitucional para otro caso; la salvedad es dentro del mismo caso. De otro modo no sera un simple soslayo legal, sino que sera un subterfugio impropio, indebido, ilegal. En el presente caso no ha habido ninguna prisa, excesivo celo, como se insina; desde luego no mayor prisa

que en otros asuntos. El curso, el ritmo de los trmites ha sido normal; en realidad, si ha habido algo, ha sido un poco de parsimonia, lentitud. Haba justificacin para demorar el pronto, rpido pronunciamiento de nuestro veredicto sobre la formidable cuestin constitucional debatida, por lo menos, tan pronto como fuese posible? Haba alguna razn de inters pblico para justificar una evasiva? Absolutamente ninguna. Por el contrario, nuestro deber ineludible, imperioso, era formular y promulgar inmediatamente ese veredicto. Lo debamos a nuestras conciencias; lo debamos, sobre todo, al pas para la tranquilidad y conveniencia de todosdel pueblo filipino y de los extranjeros residentes o que tuvieren voluntad de residir o negociar en estas Islas. As cada cual podra hacer su composicin de lugar, podra orientarse sin zozobras ni miedo a la incertidumbre. Tanto nacionales como extranjeros sabran donde invertir su dinero. Todo lo que necesitbamos era tener dentro de esta Corte una mayora firmemente convencida de que la Constitucin provee la interdiccin de que se trata. Tuvimos esa mayora cuando se vot por primera vez este asunto en Febrero de este ao (8 contra 3) ; la tuvimos cuando despus de laboriosas deliberaciones qued denegada la mocin de retirada de la apelacin, pues no tengo noticia de que ninguno de la mayora haya cambiado de opinion sobre el fondo de la cuestin; la tenemos ahora naturalmente. Por tanto, nada hace falta ya para que se de la seal de "luz verde" a la promulgacin de la sentencia. Toda evasiva sera negligencia, desidia. Es ms: sera abandono de un deber jurado, como digo en otra parte de esta concurrencia; y la Corte Suprema naturalmente no ha de permitir que se le pueda proferir el cargo de que ha abandonado su puesto privilegiado de viga, de centinela avanzado de la Constitucin. No es que la Corte Suprema, con sto, pretenda tener "un monopolio de la virtud de sostener y poner en vigor, o de suplir una deficiencia en la Constitucin," o que se crea ms hbil y patriota que los otros departamentos del gobierno, como se insina en una de las disidencias. No hay tal cosa. El principio de la supremaca judicial no es una pretension ni mucho menos un ademn de inmodestia o arrogancia, sino que es una parte vital de nuestras instituciones, una condicin peculiarsima de nuestro sistema de gobierno en que a la judicatura, como uno de los tres poderes del Estado, corresponde la facultad exclusiva de disponer de los asuntos judiciales. Con respecto a los asuntos de registro particularmente esa facultad exclusiva no slo se infiere del principio de la supremaca judicial, sino que, como ya se ha dicho en otra parte de esta concurrencia, se halla especficamente estatuda en el artculo 200 del Cdigo Administrativo transcrito arriba. Este artculo confiere jurisdiccin exclusiva a los tribunales de justicia para decidir las cuestiones
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sobre registro, y esto lo ha reconocido el mismo Departamento de Justicia en su circular nm. 14 al referir tales cuestiones a la determinacin o arbitrio judicial en casos de duda o litigio. Es injustificada la insinuacin de que, al parecer, la mayora deneg la retirada de la apelacin no tanto para resolver el asunto en su fondo o por sus mritos, como para enervar los efectos de la circular nm. 128 del Departamento de Justicia, pues Krivenko, el apelante, habra ganado entonces su pleito no en virtud de una sentencia judicial, sino pasando por la puerta trasera abierta por esa circular. Tampoco hay tal cosa. Ya repetidas veces se ha dicho que el presente asunto se haba votado mucho antes de que se expidiese esa circular. Lo que ms correctamente podra decirse es que si antes de la expedicin de esa desafortunada circular poderosas razones de inters pblico aconsejaban que se denegase la retirada de la apelacin y se diese fin al asunto mediante una sentencia en el fondo, despus de la expedicin esas razones quedaron centuplicadas. La explicacin es sencilla: nuestra aquiescencia a la retirada hubiera podido interpretarse entonces como que aprobbamos el escamoteo del asunto, sustrayndolo de nuestra jurisdiccin. Es ms: hubiera podido interpretarse como una abyecta rendicin en la pugna por sostener los fueros de cada ramo coigual y coordinado del gobierno. Es todava ms injustificada la insinuacin de que la denegacin de la retirada de la apelacin equivale "a asumir que el solicitante-apelante y el Procurador General se han confabulado con el Departamento de Justicia no slo para ingerirse en las funciones de esta Corte, sino para enajenar el patrimonio nacional a los extranjeros." Esto es inconcebible. La Corte presume que todos han obrado de buena fe, de acuerdo con los dictados de su conciencia. Se ha denegado la retirada de la apelacin por razones puramente jurdicas y objetivas, sin consideracin a los motivos de nadie. Por ltimo, estimo que debe rectificarse la asercin de que el Magistrado Hontiveros fu excludo de la votacin que culmin en un empate y que determin el rechazamiento de la retirada de la apelacin, a tenor de la regla 56, seccin 2, Reglamento de los Tribunales. El Magistrado Hontiveros no estaba presente en la sesin por estar enfermo; pero estaban presentes 10 Magistrados, es decir, ms que el nmero necesario para formar quorum y para despachar los asuntos. La rueda de la justicia en la Corte Suprema jams ha dejado de rodar por la ausencia de uno o dos miembros, siempre que hubiese quorum. A la votacin precedieron muy laboriosas y vivas deliberaciones. Ningn Magistrado llam la atencin de la Corte hacia la

ausencia del Sr. Hontiveros. Ningn Magistrado pidi que se le esperase o llamase al Sr. Hontiveros. Todos se conformaron con que se efectuase la votacin, no obstante la ausencia del Sr. Hontiveros. En efecto, se hace la votacin y resulta un empate, es decir, 5 contra 5. De acuerdo con la regla 56, quedaba naturalmente denegada la mocin de retirada. Dnde est, pues, la "ilegalidad", dnde la "arbitrariedad"? Algunos das despus se present una mocin de reconsideracin, la misma en que ya se alegaba como f fundamento el hecho de que la cuestin ya era simplemente acadmica (moot question) por la conformidad del Procurador General con la retirada y por la circular nm. 128 del Departamento de Justicia. Tampoco estaba presente el Sr. Hontiveros al someterse la mocin, la cual fu de nuevo denegada. Pregunto otra vez: dnde est la "arbitrariedad" ? Qu culpa tena la Corte de que el Sr. Hontiveros no pudiera estar presente por estar enfermo? lba a detenerse la rueda de la justicia por eso? Conviene, sin embargo, hacer constar que sobre el fondo de la cuestin el Sr. Hontiveros era uno de los 8 que haban votado en favor de la confirmacin de la sentencia apelada, es decir, en favor del veredicto de que la Constitucin excluye a los extranjeros de la propiedad de bienes races en Filipinas. II. No queda casi nada por decir sobre el fondo de la cuestin. Todos los ngulos y fases de la misma estn acabadamente tratados y discutidos en la ponencia. Me limitar, por tanto, a hacer unas cuantas observaciones, unas sobre hermenutica legal, y otras sobre historia nacional contempornea, aprovechando en este ltimo respecto mis reminiscencias y mi experiencia como humilde miembro que f fu de la Asamblea Constituyente que redact y aprob la Constitucin de Filipinas. Toda la cuestin, a mi juicio, se reduce a determinar e interpretar la palabra "agrcola" (agricultural) usada en el artculo XIII, seccin 5, de la Constitucin. He aqu el texto completo de la seccin: "SEC. 5.Save in cases of hereditary succession, no private agricultural land shall be transferred or assigned except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain in the Philippines." lncluye la palabra "agricultural" aqu empleada los terrenos residenciales, comerciales e industriales? Tal es la cuestin: la mayora de esta Corte dice que si; los disidentes dicen que no.

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Es indudable que por razones sanas de hermenutica legal el artculo XIII de que se trata debe interpretarse como un todo homogneo, simtrico. En otras palabras, los vocablos all empleados deben interpretarse en el sentido de que tienen un mismo significado. Es absurdo pensar o suponer que en el texto de una ley, sobre todo dentro del estrecho marco de un artculo, un vocablo tenga dos o ms significados distintos, a menos que la misma ley as lo diga expresamente. La presuncin es que el legislador sigue y se atiene a las reglas literarias elementales. Ahora bien: el artculo XIII consta de dos partesla primera, que trata de los terrenos agrcolas de dominio pblico, y la segunda, que se refiere a los terrenos agrcolas privados o particulares. La primera parte se compone de las secciones 1 y 2 que vinculan la propiedad de los terrenos pblicos en el Estado y disponen que slo se pueden enajenar a favor de ciudadanos filipinos, o de corporaciones o asociaciones en que el 60 por ciento del capital, por lo menos, pertenece a tales ciudadanos. En ambas secciones se emplea literalmente la frase "public agricultural land." La segunda parte la componen las secciones 3 y 5: Ia seccin 3 precepta que "the Congress may determine by law the size of private agricultural land which individuals, corporations, or associations may acquire and hold, subject to rights existing prior to the enactment of such law" 1 ; y la seccin 5 es la que queda transcrita ms arriba y es objeto del presente litigio. En ambas secciones se emplea literalmente la frase "private agricultural land." No hay ninguna cuestin de que la frase "public agricultural land" empleada en la primera parte comprende terrenos residenciales, comerciales e industriales; lo admiten los mismos abogados del apelante y los Sres, Magistrados disidentes. Y por que lo admiten? Ser porque en la Constitucin se define la palabra "agricultural", aplicada a terrenos pblicos, en el sentido de incluir solares residenciales, comerciales e industriales? Indudablemente que no, porque en ninguna parte de la Constitucin se da tal definicin. Lo admiten porque en esta jurisdiccin tenemos una serie consistente de sentencias de esta Corte Suprema en que es jurisprudencia firmemente establecida la doctrina de que la palabra "agricultural" usada en la Ley del Congreso de los Estados Unidos de 1902 (Ley Cooper) y en nuestras leyes de terrenos pblicos comprende y abarca solares residenciales, comerciales, industriales y cualquier otra clase de terrenos, excepto forestales y minerales.2Es decir, que se aplica a la actual Constitucin de Filipinas una interpretacin clsica, tradicional, embebida en nuestra jurisprudencia de cerca de medio siglo.

Ahora bien, pregunto: si la palabra "agricultural" empleada en la primera parte del artculo XIII tiene tal significadoy lo tiene porque la Constitucin no da otro diferentepor que esa misma palabra empleada en la segunda parte, unas cuantas lneas ms adelante, no ha de tener el mismo significado? Da acaso la Constitucin una definicin de la palabra "agricultural" cuando se refiere a terreno privado? Dnde est esa definicin? O es que se pretende que la diferenciacin opera no en virtud de la palabra "agricultural", sino en virtud del vocablo "public" o "private", segn que se trate de terreno pblico o privado? Si la intencin de la Asamblea Constituyente fuera el dar a la palabra "agricultural" aplicada a terreno privado un significado distinto de cuando se refiere a terreno pblico, lo hubiese hecho constar as expresamente en el mismo texto de la Constitucin Si, como se admite, la Asamblea opt por no definir la palabra "agricultural" aplicada a terreno pblico porque contaba para ello con la definicin clsica establecida en la jurisprudencia, cuando la misma Asamblea tampoco defini la palabra con relacin a terreno privado, es lgico inferir que tuvo la misma intencin, esto es, aplicar la definicin de la jurisprudencia a ambos tipos de terrenoel pblico y el privado. Pensar de otra manera podra ser ofensivo, insultante; podra equivaler a decir que aquella Asamblea estaba compuesta de miembros ignorantes, desconocedores de las reglas elementales en la tcnica de redaccin legislativa. Tuve el honor de pertenecer a aquella Asamblea como uno de los Delegados por Ceb. Tambin me cupo el honor de pertenecer al llamado Comit de Sieteel comit encargado finalmente de redactar la ponencia de la Constitucin. No digo que aquella Asamblea estaba compuesta de sabios, pero indudablemente no era inferior a ninguna otra de su tipo en cualquiera otra parte del mundo. All haba un plantel de buenos abogados, algunos versados y especialistas en derecho constitucional. All estaba el Presidente de la Universidad de Filipinas Dr. Rafael Palma; all estaba el propio Presidente de la Asamblea Constituyente Hon. Claro M. Recto, con los prestigios de su reconocida cultura jurdica y humanista; all estaba tambin el Dr. Jose P. Laurel, considerado como una de las primeras autoridades en derecho constitucional y poltico en nuestro pas. En el Comit de Siete o de Ponencia figuraban el actual Presidente de Filipinas Hon. Manuel Roxas; el exSenador de Ceb Hon. Filemon Sotto; el Hon. Vicente Singson Encarnacin, lder de la minora en la primera Asamblea Filipina, ex-miembro de la Comisin de Filipinas, ex-Senador y ex-Secretario de Gabinete; el ex-Magistrado de la Corte Suprema Hon. Norberto Romualdez; el actual Secretario de Hacienda
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Hon. Miguel Cuaderno; y el ex-Decano del Colegio de Artes Liberales de la Universidad de Filipinas, Hon. Conrado Benitez. No se puede concebir cmo bajo la inspiracin y gua de estas personas pudiera redactarse el texto de un artculo en que un vocabloel vocablo "agricultural"tuviera dos acepciones diferentes: una, aplicada a terrenos pblicos; y otra, aplicada a terrenos privados. Menos se concibe que, si f uese esta la intencin, se incurriese en una omisin imperdonable: la omisin de una definicin especifica, diferenciadora, que evitase caos y confusion en la mente de los abogados y del pblico. Teniendo en cuenta la innegable competencia de los Delegados a la Asamblea Constituyente y de sus liders, lo ms lgico pensar es que al no definir la palabra "agricultural" y al no diferenciar su aplicacin entre terrenos pblicos y privados, lo hicieron deliberadamente, esto es, con la manifiesta intencin de dejar enteramente la interpretacin de la palabra a la luz de una sola comn definicinla establecida en la jurisprudencia del asunto tpico de Mapa contra Gobierno Insular y otros similares (supra); es decir, que la palabra "agricultural", aplicada a terrenos privados, incluye tambin solares residenciales, comerciales, e industriales. "A word or phrase repeated in a statute will bear the same meaning' throughout the statute, unless a different intention appears. * * * Where words have been long used in a technical sense and have been judicially construed to have a certain meaning, and have been adopted by the legislature as having a certain meaning prior to a particular statute in which they are used, the rule of construction requires that the words used in such statute should be construed according to the sense in which they have been so previously used, although that sense may vary from the strict literal meaning of the words." (II Sutherland, Stat. Construction, p. 758.) Pero acaso se diga que la Asamblea Constituyente ha dejado sin definir la palabra "agricultural" referente a terreno particular, dando a entender con su silencio que endosaba la definicin al diccionario o a la usanza popular. La suposicin es igualmente insostenible. Por que en un caso se entrega la definicin a la jurisprudencia, y por que en otro al diccionario, o al habla popular? Aparte de que los miembros y dirigentes de la Asamblea Constituyente saban muy bien que esto causara una tremenda confusion. Ni los diccionarios, ni mucho menos el lenguaje popular, ofrecen apoyo seguro para una fiel y autorizada interpretacin. Si el texto mismo de la ley, con definiciones especficas y casusticas, todava ofrece dudas a veces cmo no el lxico vulgar, con su infinita variedad de matices e idiotismos?

Ahora mismo no estamos presenciando una confusion, una perplejidad? Hay acaso uniformidad en la definicin de lo que es un terreno privado agrcola? No; cada cual lo define a su manera. Uno de los disidentes el Magistrado Sr. Tuason toma su definicin de la palabra "agricultural" del Diccionario Internacional de Webster que dice * * * "of or pertaining to agricultural connected with, or engaged in, tillage; as, the agricultural class; agricultural implements, wages, etc." Tambin hace referencia el mismo Magistrado al concepto popular. Otro disidente el Magistrado Sr. Padilla dice que "the term private agricultural land means lands privately owned devoted to cultivation, to the raising of agricultural products." El Magistrado Sr. Pars no da ninguna definicin; da por definida la palabra "agricultural", al parecer, segn el concepto popular. Pero, sobre todo, los abogados del apelante definen el vocablo de una manera distinta. Segn ellos, "land spoken of as 'agricultural' naturally refers to land not only susceptible of agricultural or cultivation but more valuable for such than for another purpose, say residential, commercial or educational. * * * The criterion is not mere susceptibility of conversion into a f arm but its greater value when devoted to one or the other purpose". De modo que, segn esta definicin, lo que determina la calidad del terreno es su valor relativo, segn que se dedique al cultivo, o a residencia, o al comercio, o a la industria. Los autores de esta definicin indudablemente tienen en cuenta el hecho de que en las af ueras de las ciudades existen terrenos inmensos que desde tiempo inmemorial se han dedicado a la agricultura, pero que se han convertido en subdivisiones multiplicndose su valor en mil por ciento si no ms. De hecho esos terrenos son agrcolas; como que todava se ven all los pilpiles y ciertas partes estn cultivadas; pero en virtud de su mayor valor para residencia, comercio e industria se les quiere colocar fuera de la prohibicin constitucional. En verdad, el criterio no puede ser ms elstico y convencional, y denota cun incierta y cun confusa es la situacin a que da lugar la tesis del apelante y de los que le sostienen. Si hubiramos de hacer depender la definicin de lo que es un terreno agrcola del concepto popular y de los diccionarios, as sean los mejores y ms cientificamente elaborados qu normas claras, concretas y definitivas de diferenciacin podran establecerse? Podran trazarse fronteras inconfundibles entre lo que es agrcola y lo que es residencial, comercial e industrial? Podra hacerse una clasificacin que no fuese arbitraria? Indudablemente que no. El patron ms usual de diferenciacin es la naturaleza urbana o rural del terreno; se considera como residencial, comercial e industrial todo lo que est dentro de una urbe, ciudad o poblacin. Pero
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resolvera esto Ia dificultad? Proporcionara un patron exacto, cientfico, no arbitrario? Tampoco. Porque dentro de una ciudad o poblacin puede haber y hay terrenos agrcolas. Como dijo muy bien el Magistrado Sr. Willard en el asunto clsico de Mapa contra, Gobierno Insular, "uno de los inconvenientes de la adopcin de este criterio es que es tan vago e indeterminado, que sera muy difcil aplicarlo en la prctica. Qu terrenos son agrcolas por naturaleza? El mismo Fiscal General, en su alegato presentado en este asunto, dice: 'La montaa ms pedregosa y el suelo ms pobre son susceptibles de cultivo mediante la mano del hombre'" (Mapa contra Gobierno Insular, 10 Jur. Fil., 183). Y luego el Sr. Willard aade las siguientes observaciones sumamente pertinentes e ilustrativas para una correcta resolucin del asunto que nos ocupa, a saber: "* * * Tales terrenos (agrcolas, quiere decir) se pueden encontrar dentro de los lmites de cualquier ciudad. Hay dentro de la ciudad de Manila, y en la parte densamente poblada de la misma, una granja experimental. sta es por su naturaleza agrcola. Contigua a la Luneta, en la misma ciudad, hay una gran extension de terreno denominado Camp Wallace, destinada a sports. El terreno que circunda los muros de la ciudad de Manila, situado entre stos y el paseo del Malecn por el Oeste, La Luneta por el Sur, y el paseo de Bagumbayan por el Sur y Este contiene muchas hectreas de extension y es de naturaleza agrcola. La Luneta misma podra en cualquier tiempo destinarse al cultivo" La dificultad es mayor tratndose de diferenciar un terreno agrcola de un terreno industrial. En este respecto es preciso tener en cuenta que un terreno industrial no tiene que ser necesariamente urbano; en realidad, la tendencia moderna es a situar las industrias fuera de las ciudades en vastas zonas rurales. Verbigracia; en derredor de la famosa cascada de Maria Cristina en Lanao existen grandes extensiones de terreno agrcola, algunas de propiedad particular. Cuando se industrialice aquella formidable fuerza hidrulica bajo el llamado Plan Beyster qu normas seguras se podran establecer para poner en vigor la prohibicin constitucional de que se trata? No habra peligro de que la Constitucin fuese burlada enajenndose tierras agrcolas de propiedad privada a favor de extranjeros, ya sean individuos, ya sean corporaciones o asociaciones, so pretexto de ser industriales? Resulta evidente de lo expuesto que los redactores de nuestra Constitucin no pudieron haber tenido la idea de que el artculo XIII fuera interpretado a la luz de ese criterio vago e indeterminado que llama el Sr. Willard, Es ms lgico pensar que el criterio que ellos tenan en la mente era el criterio establecido en

la jurisprudencia sentada en el asunto clsico de Mapa contra Gobierno Insular y otros asuntos concomitantes citadoscriterio ms firme, ms seguro, menos expuesto a confusion y arbitrariedad, y sobre todo, "que ofrece menos inconvenientes", parafraseando otra vez al Magistrado Sr. Willard, (supra, p. 185). Otro serio inconveniente. La seccin 3, artculo XIII de la Constitucin, dispone que "el Congreso puede determinar por ley la extension superficial del terreno privado agrcola que los individuos, corporaciones o asociaciones pueden adquirir y poseer, sujeto a los derechos existentes antes de la aprobacin de dicha ley." Si se interpretase que la frase "private agricultural land" no incluye terrenos residenciales, comerciales e industriales, entonces estas ltimas clases de terreno quedaran excludas de la facultad reguladora concedida por la Constitucin al Congreso mediante dicha seccin 3. Entonces un individuo o una corporacin podran ser dueos de todos los terrenos de una ciudad; no habra lmite a las adquisiciones y posesiones en lo tocante a terrenos residenciales, comerciales e industriales. Esto parece absurdo, pero sera obligada consecuencia de la tesis sustentada por el apelante. Se hace hincapi en el argumento de que en el proceso de tamizacin del artculo XIII durante las deliberaciones de la Asamblea Constituyente y de los Comits de Ponencia y de Estilo al principio no figuraba el adjetivo "agrcola" en la seccin 5, dicindose slo "terreno privado", y que slo ms tarde se aadi la palabra calificativa "agrcola", redondendose entonces la frase "terreno privado agrcola"private agricultural land". De sto se quiere inferir que la adicin de la palabra "agricultural" debi de ser por algn motivo, y ste no poda ser ms que el de que se quiso excluir los terrenos residenciales, comerciales e industriales, limitndose el precepto a los propia o estrictamente agrcolas. La deduccin es incorrecta y sin fundamento. No cabe decir que la adicin de la palabra "agricultural" en este caso equivale a excluir los terrenos residenciales, comerciales e industriales, por la sencilla razn de que la Constitucin no slo no define lo que es residencial, comercial e industrial, sino que ni siquiera hace mencin de ello. En ninguna parte de la Constitucin se emplean las palabras residencial, comercial e industrial. En cambio, ya hemos visto que la palabra "agricultural" tiene una significacin tradicionalmente bien establecida en nuestra jurisprudencia y en nuestro vocabulario jurdico: incluye no slo terrenos cultivados o susceptibles de cultivo, sino tambin residenciales, comerciales e industriales. Se admite por todo el mundo que la palabra tiene tal significacin en el artculo XIII, seccin
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5, de la Constitucin, en cuanto se refiere a terreno pblico. Ahora bien; qu diferencia hay, despus de todo, entre un terreno pblico agrcola y un terreno privado agrcola? En cuanto a la naturaleza, o sea, a la calidad de agrcola, absolutamente ninguna. Uno no es ms o menos agrcola que el otro. La nica diferencia se refiere a la propiedad, al ttulo dominicalen que el uno es del Estado y el otro es de un particular. En realidad, creo que la diferencia es ms bien psicolgica, subjetivaen que vulgarmente hablando parece que los conceptos de "agrcola" y "residencial" se repelen. No se debe menospreciar la influencia del vulgo en algunas cosas; en la misma literatura el vulgo juega su papel; diga si no la formacin popular del romancero. Pero es indudable que ciertas cosas estn por encima del concepto vulgaruna de stas la interpretacin de las leyes, la hermenutica legal. Esto no es exagerar la importancia de la tcnica, sino que es simplemente colocar las cosas en su verdadero lugar. La interpretacin de la ley es una f uncin tcnica por excelencia; por eso que ha sido siempre funcin de minoralos abogados. Si no fuera as para que los abogados? Y para que las escuelas de derecho. y para que los exmenes, cada vez ms rgidos, para depurar el alma de la toga, que dijo un gran abogado espaol? 1 As que cuando decimos que el precepto constitucional en cuestin debe interpretarse tcnicamente, a la luz de la jurisprudencia, por ser ello el mtodo ms seguro para hallar la verdad judicial, no importa que ello repugne al concepto vulgar a simple vista, no ponemos, en realidad, ninguna pica en Flandes, sino que propugnamos una cosa harto elemental por lo sabida. Por tanto, no es necesario especular o devanarse los sesos tratando de inquirir por que en la tamizacin del precepto se aadi el adjetivo "agricultural" a las palabras "private land" en vez de dejarlas solas, sin cualificacin, Algunos dirn que fu por razn de simetra para hacer "pendant" con la frase "public agricultural land" puesta ms arriba. Pero esto no tiene ninguna importancia. Lo importante es saber que la aadidura, tal como est, sin otro dato en el texto constitucional, no ha tenido el efecto de cambiar el significado jurdico, tradicional en esta jurisdiccin, de la palabra "agricultural" empleada en dicho texto. Eso es todo: lo dems creo que es puro bizantinismo. III. Creo que una examen de los documentos y debates de la Asamblea Constituyente para ver de inquirir la motivacin y finalidad del precepto constitucional que nos ocupa puede ayudar grandemente y arrojar no poca luz en la interpretacin de la letra y espritu de dicho precepto. Este gnero de inquisicin es perfectamente propio y permisible en hermenutica

constitucional, y se ha hecho siempre, segn las mejores autoridades sobre la materia. Cooley, en su autorizado tratado sobre Limitaciones Constitucionales (Contitutional Limitations) dice a este efecto lo siguiente: "When the inquiry is directed to ascertaining the mischief designed to be remedied, or the purpose sought to be accomplished by a particular provision, it may be proper to examine the proceedings of the convention which framed the instrument. Where the proceedings clearly point out the purpose of the provision, the aid will be valuable and satisfactory; but where the question is one of abstract meaning, it will be difficult to derive from this source much reliable assistance in interpretation." (1 Cooley on Constitutional Limitations [8th ed.], p. 142.) Qu atmsfera prevaleca en la Asamblea sobre el problema de la tierra, en general sobre el problema capitalsimo de los terrenos naturales? Cul era la tendencia predominante entre los Delegados? Y cmo era tambin el giro de la opinion, del sentimiento pblico, es decir, cmo era el pulso del pueblo mismo, del cual la Asamblea, despus de todo, no era ms que rgano e intrprete? Varios discursos sobre el particular se pronunciaron en la Asamblea Constituyente. El tono predominante en todos ellos era un fuerte, profundo nacionalismo. Tanto dentro como fuera de la Asamblea Constituyente era evidente, acusado, el afn unnime y decidido de conservar el patrimonio nacional no slo para las presentes generaciones filipinas, sino tambin para la posteridad. Y patrimonio nacional tena, en la mente de todos, un significado categrico e indubitable: significaba no slo bosques, minas y otros recursos naturales, sino que significaba asimismo la tierra, el suelo, sin distincin de si es de dominio pblico o privado. Muestras tpicas y representativas de este tono peculiar y dominante de la ideologa constituyente son ciertas manifestaciones que constan en el diario de sesiones, hechas en el curso de los debates o en el proceso de la redaccin del proyecto constitucional por Delegados de palabra autorizada, bien por su significacin personal, bien por el papel particular que desempeaban en las tareas constituyentes. Por ejemplo, el Delegado Montilla, por Negros Occidental, conspicuo representante del agro, usando del privilegio de media hora parlamentaria dijo en parte lo siguiente: "* * * Con la completa nacionalizacin de nuestras tierras y recursos naturales debe entenderse que nuestro patrimonio nacional debe estar vinculado 100 por 100 en manos filipinas. Tierras y recursos naturales son inmuebles y como
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tales pueden compararse con los rganos vitales del cuerpo de una persona: la falta de posesin de los mismos puede causar la muerte instantnea o el abreviamiento de la vida" (Diario de Sesiones, Asamblea Constituyente, indita, "Framing of the Constitution," tt. 2, pg. 592, Libro del Profesor Aruego). Como se ve, el Delegado Montilla habla de tierras sin adjetivacin, es decir sin diferenciar entre propiedad pblica y privada. El Delegado Ledesma, por Iloilo, otro conspicuo representante del agro, presidente del comit de agricultura de la Asamblea Constituyente, fu ms explcito diciendo inequvocamente que los extranjeros no podan ser dueos de propiedad inmueble (real estate). He aqu sus mismas palabras: "La exclusion de los extranjeros del privilegio de adquirir terrenos pblicos agrcolas y de poder ser dueos de propiedades inmuebles (real estate) es una parte necesaria de las leyes de terrenos pblicos de Filipinas para mantener firme la idea de conservar Filipinas para los filipinos" (Diario de Sesiones, id.; Libro de Aruego, supra, pg. 593.) Es harto significativo que en el informe del Comit de Nacionalizacin y Conservacin de Recursos Naturales de la Asamblea Constituyente la palabra tierra (land) se usa genricamente, sin cualificacin de pblica o privada. Dice el Comit: "Que la tierra, los minerales, los bosques y otros recursos naturales constituyen la herencia exclusiva de la nacin filipina. Deben, por tanto, ser conservados para aquellos que se hallan bajo la autoridad soberana de esa nacin y para su posteridad." (Libro de Aruego, supra, pg. 595.) La conservacin y fomento del patrimonio nacional fu una verdadera obsesin en la Asamblea Constituyente. Sus miembros que todava viven recordarn la infinita paciencia, el esmero de orfebrera con que se trabaj el prembulo de la Constitucin. Cada frase, cada concepto se someti a un rgido proceso de seleccin y depuracin. Pues bien; de esa labor benedictina una de las gemas resultantes es la parte pertinente a la conservacin y fomento del patrimonio nacional. He aqu el prembulo: "The Filipino people, imploring the aid of Divine Providence, in order to establish a government that shall embody their ideals, conserve and develop the patrimony of the nation, promote the general welfare, and secure to

themselves and their posterity the blessings of independence under a regime of justice, liberty, and democracy, do ordain and promulgate this Constitution." El espritu fuertemente nacionalista que saturaba la Asamblea Constituyente con respecto a la tierra y recursos naturales es de fcil explicacin. Estbamos escribiendo una Constitucin no slo para el Commonwealth, sino tambin para la repblica que advendra despus de 10 aos. Queramos, pues, asegurar firmemente las bases de nuestra nacionalidad. Qu cosa mejor, para ello, que blindar por los cuatro costados el cuerpo de la nacin, del cual parodiando al Delegado Montillala tierra y los recursos naturales son como rganos vitales, cuya prdida puede causar la muerte instantnea o el abreviamiento de la vida? Para apreciar el pulso de la nacin en aquel momento histrico es preciso tener en cuenta las circunstancias. Nos dbamos perfecta cuenta de nuestra posicin geogrfica, as como tambin de nuestras limitaciones demogrficas. Se trataba, por cierto, de una conciencia agudamente atormentadora y alarmante. Estbamos rodeados de enormes masas humanascentenares de milloneseconmica y biolgicamente agresivas, vidas de desbordarse por todas partes, por las areas del Pacfico particularmente, Krivenko vs. Register of Deeds of Manila en busca de espacios vitales. China, JapnJapn, sobre todo, que estaba entonces en el apogeo de su delirio de engrandecimiento econmico y militarista. Tenamos apuntado al mismo corazn, como espada rutilante de Samurai, el pavoroso problema de Davao, donde, por errores iniciales del Gobierno, Japn tena el control de la tierra, instituyendo all una especie de Japn en miniatura, con todas las amenazas y peligros que ello implicaba para la integridad de nuestra existencia nacional. Como que Davao ya se llamaba popular y sarcsticamente Davaoko, en trgica rima con Manchuko. Tambin nos obsesionaban otras lecciones dolorosas de historia contempornea. Texas, Mjico, Cuba y otros pases del Mar Caribe y de la Amrica Latina que todavia expiaban, como una terrible maldicin, el error de sus gobernantes al permitir la enajenacin del suelo a extranjeros. Con el comercio y la industria principalmente en manos no-filipinas, los Delegados a la Constituyente se hacan cargo tambin de la vitalsima necesidad de, por lo menos, vincular el patrimonio nacional, entre otras cosas la tierra, en manos de los filipinos.

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Qu de extrao haba, pues, que en semejante atmsfera y tales circunstancias se aprobase un artculo rgida-mente nacionalista como es el Artculo XIII? La motivacin y finalidad, como ya se ha dicho, era triple: (a) conservar el patrimonio nacional para las presentes y futuras generaciones filipinas; (b) vincular, por lo menos, la propiedad de la tierra y de los recursos naturales en manos filipinas como la mejor manera de mantener el equilibrio de un sistema econmico dominado principalmente por extranjeros en virtud de su tcnica (know-how) superior y de su abundancia de capitales; (c) prevenir peligros que pudieran comprometer la defensa y la integridad de la nacin, y evitar a la repblica conflictos y complicaciones internacionales. No se concibe que los Delegados tuvieran la intencin de excluir del precepto los terrenos residenciales, comerciales e industriales, pues saban muy bien que los fines que se trataban de conseguir y los peligros que se trataban de evitar con la poltica de nacionalizacin y conservacin rezaban tanto para una clase de terrenos como para otra. Por que se iba a temer, verbigracia, el dominio extranjero sobre un terreno estrictamente agrcola, sujeto a cultivo, y no sobre el terreno en que estuviera instalada una formidable industria o fbrica? Otro detalle significativo. Era tan vigoroso el sentimiento nacionalista en la Asamblea Constituyente que, no obstante el natural sentimiento de gratitud que nos obligaba a favor de los americanos, a stos no se les concedi ningn privilegio en relacin con la tierra y dems recursos naturales, sino que se les coloc en el mismo plano que a los otros extranjeros. Como que ha habido necesidad de una reforma constitucionalla llamada reforma sobre la paridadpara equipararlos a los filipinos. "The mere literal construction of a section in a statute ought not to prevail if it is opposed to the intention of the legislature apparent by the statute; and if the words are sufficiently flexible to admit of some other construction it is to be adopted to effectuate that intention. The intent prevails over the letter, and the letter will, if possible, be so read as to conform to the spirit of the act. While the intention of the legislature must be ascertained from the words used to express it, the manifest reason and the obvious purpose of the law should not be sacrificed to a literal interpretation of such words." (II Sutherland, Stat. Construction, pp. 721, 722.) IV.Se insina que no debiramos declarar que la Constitucin excluye a los extranjeros de la propiedad sobre terrenos residenciales, comerciales e industriales, porque ello imposibilitara toda accin legislativa en sentido

contrario para el caso de que el Congreso llegase alguna vez a pensar que semejante interdiccin deba levantarse. Se dice que es mejor y ms conveniente dejar esta cuestin en manos del Congreso para que haya ms elasticidad en las soluciones de los diferentes problemas sobre la tierra. Cometeramos un grave error si esto hiciramos. Esta es una cuestin constitucional por excelencia. Solamente el pueblo puede disponer del patrimonio nacional. Ni el Congreso, ni mucho menos los tribunales, pueden disponer de ese patrimonio. Lo ms que puede hacer el Congreso es proponer una reforma constitucional mediante los votos de tres cuartas () de sus miembros; y el pueblo tiene la ltima palabra que se expresar en una eleccin o plebiscito convocado al efecto. El argumento de que esto costara dinero es insostenible. Sera una economa mal entendida. Si no se escatiman gastos para celebrar elecciones ordinarias peridicamente cmo ha de escatimarse para averiguar la verdadera voluntad del pueblo en un asunto tan vital como es la disposicin del patrimonio nacional, base de su misma existencia? Esto en el supuesto de que hubiera un serio movimiento para reformar la Constitucin, apoyado por tres cuartas () del Congreso, por lo menos. En el entretanto el artculo XIII de la Constitucin debe quedar tal como es, e interpretarse en la forma como lo interpretamos en nuestra decision. Se confirma la sentencia. PARS, J., dissenting:

Section 5 of Article XIII of the Constitution provides that "save in cases of hereditary succession, no private agricultural land shall be transferred or assigned except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain in the Philippines." The important question that arises is whether private residential land is included in the terms "private agricultural land." There is no doubt that under section 1 of Article XIII of the Constitution, quoted in the majority opinion, lands of the public domain are classified into agricultural, timber, or mineral. There can be no doubt, also, that public lands suitable or actually used for residential purposes, must of necessity come under any of the three classes.
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But may it be reasonably supposed that lands already of private ownership at the time of the approval of the Constitution, have the same classifications? An affirmative answer will lead to the conclusionwhich is at once absurd and anomalousthat private timber and mineral lands may be transferred or assigned to aliens by a mode other than hereditary succession. It is, however, contended that timber and mineral lands can never be private, and reliance is placed on section 1, Article XIII, of the Constitution providing that "all agricultural, timber and mineral lands of the public domain * * * belong to the State," and limiting the alienation of natural resources only to public agricultural land. The contention is obviously untenable. This constitutional provision, far from stating that all timber and mineral lands existing at the time of its approval belong to the State, merely proclaims ownership by the Government of all such lands as are then of the public domain; and although, after the approval of the Constitution, no public timber or mineral land may be alienated, it does not follow that timber or mineral lands theretofore already of private ownership also became part of the public domain. We have held, quite recently, that lands in the possession of occupants and their predecessors in interest since time immemorial do not belong to the Government, for such possession justifies the presumption that said lands had never been part of the public domain or that they had been private properties even before the Spanish conquest. (Oh Cho vs. Director of Lands, 43 Off. Gaz., 866.) This gives effect to the pronouncement in Cario vs. Insular Government (212 U. S., 446; 53 Law. ed., 594), that it could not be supposed that "every native who had not a paper title is a trespasser." It is easy to imagine that some of such lands may be timber or mineral. However, if there are absolutely no private timber or mineral lands, why did the framers of the Constitution bother about speaking of "private agricultural land" in sections 3 and 5 of Article XIII, and merely of "lands" in section 4? "SEC. 3. The Congress may determine by law the size of private agricultural land which individuals, corporations, or associations may acquire and hold, subject to rights existing prior to the enactment of such law. "SEC. 4. The Congress may authorize, upon payment of just compensation, the expropriation of lands to be subdivided into small lots and conveyed at cost to individuals. "SEC. 5. Save in cases of hereditary succession, no private agricultural land shall be transferred or assigned except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain in the Philippines."

Under section 3, the Congress may determine by law the size of private agricultural land which individuals, corporations, or associations may acquire and hold, subject to rights existing prior to the enactment of such law, and under section 4 it may authorize, upon payment of just compensation, the expropriation of lands to be subdivided into small lots and conveyed at cost to individuals. The latter section clearly negatives the idea that private lands can only be agricultural. If the exclusive classification of public lands contained in section 1 is held applicable to private lands, and, as we have shown, there may be private timber and mineral lands, there would be neither sense nor justification in authorizing the Congress to determine the size of private agricultural land only, and in not extending the prohibition of section 5 to timber and mineral lands. In my opinion, private lands are not contemplated or controlled by the classification of public lands, and the term "agricultural" appearing in section 5 was used as it is commonly understood, namely, as denoting lands devoted to agriculture. In other words, residential or urban lots are not embraced within the inhibition established in said provision. It is noteworthy that the original draft referred merely to "private land." This certainty would have been comprehensive enough to include any kind of land. The insertion of the adjective "agricultural" is therefore significant. If the Constitution prohibits the alienation to foreigners of private lands of any kind, no legislation can ever be enacted with a view to permitting limited areas of land for residential, commercial, or industrial use, and said prohibition may readily affect any effort towards the attainment of rapid progress in Philippine economy. On the other hand, should any danger arise from the absence of such constitutional prohibition, a law may be passed to remedy the situation, thereby enabling the Government to adopt such elastic policy as may from time to time be necessary, unhampered by any inconveniences or difficulties in amending the Constitution. The power of expropriation is, furthermore, a handy safeguard against undesirable effects of unrestricted alienation to, or ownership by, aliens of urban properties. The majority argue that the original draft in which the more general terms "private land" was used, was amended in the same that the adjective "agricultural" was inserted in order merely "to clarify concepts and avoid uncertainties" and because, as under section 1, timber and mineral lands can never be private, "the prohibition to transfer the same, would be superfluous." In answer, it may be stated that section 4 of Article XIII, referring to the right of expropriation, uses "lands" without any qualification, and it is logical to believe that the use was made knowingly in contradistinction with the limited term "private agricultural land" in sections 3 and 5. Following the line of reasoning of the majority, "lands" in section 4 necessarily implies that what
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may be expropriated is not only private agricultural land but also private timber and mineral lands, as well, of course, as private residential lands. This of course tears apart the majority's contention that there cannot be any private timber or mineral land, Any doubt in the matter will be removed when it is borne in mind that no less than Honorable Filemon Sotto, Chairman of the Sponsorship Committee of the Constitutional Convention, in supporting section 3 of Article XIII, explained that the same refers to agricultural land, and not to urban properties, and such explanation is somewhat confirmed by the statement of another member of the Convention (Delegate Sevilla) to the effect that said section "is discriminatory and unjust with regard to the agriculturists." "Sr. SOTTO (F.) Seor Presidente: "Qu hay caballeros de la Convencin en el fondo de esta cuestin al parecer inocente y ordinaria para que tanto revuelo haya metido tanto en la sesin de ayer como en la de hoy? Qu hay de misterioso en el fondo de este problema, para que polticos del volumen del caballero por Iloilo y del caballero por Batangas, tomen con gran inters una mocin para reconsiderar lo acordado ayer? Voy a ser fro, seores. Parece que es mejor tratar estas cuestiones con calma y no con apasionamiento. He prestado atencin, como siempre suelo hacer a todos los argumentos aducidos aqu en contra del precepto contenido en el draft y a f avor ahora de la' reconsideracin y siento decir lo siguiente; todos son argumentos muy buenos a posteriori. Cuando la Asamblea Nacional se haya reunido, ser la ocasin de ver si procede o no expropiar terrenos o latifundios existentes ahora o existentes despus. En el presente, yo me limito a invitar la atencin de la Convencin al hecho de que el precepto no hace otra cosa ms que autorizar a la Asamblea Nacional a que tome las medidas necesarias en tiempo oportuno, cuando el problema del latifundismo se haya presentado con carcteres tales que el bienestar, inters y orden pblico lo requieran. Permtame la Convencin que lo discuta en globo las dos partes del artculo 9. Hay tal engranaje en los dos mandatos que tiene dicho precepto, hay tal eslabn en una u otra parte que es imposible, que es difcil que quitramos deslindes si nos limitsemos a considerar una sola parte. La primera parte autoriza a la Legislatura para fijar el lmite mximo de propiedad agrcola que los ciudadanos particulares pueden tener. Parece que es un punto que ha pasado desapercibido. No se trata aqu ahora de propiedades urbanas, sino de propiedades agrcolas, y es por la razn de que con mucha especialidad en las regiones agrcolas, en las zones rsticas es donde el latifundismo se extiende con facilidad, y desde all los tentculos de las caciques van al cuello de los pobres y de los pequeos propietarios precisamente para ahogarles y

para inutilizarles. Est, pues, a salvo completamente la cuestin de las propiedades urbanas. Ciertos grandes solares de nuestras ciudades que con pretexto de tener ciertos edificios, que en realidad no necesitan de tales extensos solares para su existencia ni para su mantenimiento, puedan dormir tranquilos. No vamos contra esas propiedades. Por una causa o por otra el pasado nos ha legado ese lastre doloroso. Pero la region agrcola, la region menos explotada por nuestro pueblo, la regin que necesitamos si queremos vivir por cuenta propia, la regin que es el mayor incentivo no slo para los grandes capitalistas de fuera sino tambin para los grandes capitalistas interiores, esa regin merece todos los cuidados del gobierno. "Voy a pasar ahora a la relacin que tiene la segunda parte de la enmienda con la primera. Una vez demostrado ante la Legislatura, una vez convencida la Asamblea Nacional de que existe un latifundismo y que este latifundismo puede producir males o est produciendo daos a la comunidad, es cuando entonces la Legislatura puede acordar la expropiacin de los latifundios. Donde est el mal que los opositores a este precepto pretenden ver intilmente ? Prever es gobernar. Este es un postulado que todos conocen. Bien, voy a admitir para los propsitos del argumento que hoy no existen latifundios, y si los opositores al precepto quieren ms vamos a convenir en que no existirn en el futuro. Pues, entonces, dnde est el temor de que el hijo de tal no pueda recibir la herencia de cual? Por lo dems, el ejemplo repetidas veces presentado ayer y hoy en cuanto al heredero y al causahabiente no es completamente exacto. Vamos a suponer que efectivamente un padre de familia posee un nmero tal de hectreas de terreno, superior o exedente a lo que fija la ley. Creen los Caballeros, creen los opositores al precepto que la Legislatura, la Asamblea Nacional va a ser tan imprudente, tan loca que inmediatamente disponga por ley que aquella porcin excedente del terreno que ha de recibir un hijo de su padre no podr poseerlo, no podr tenerlo o recibirlo el heredero. "Esa es una materia para la Asamblea Nacional. La Asamblea Nacional sabe que no puede dictar leyes o medidas imposibles de cumplir. Fijar el plazo, fijar la proporcin de acuerdo con las circunstancias del tiempo entonces en que vivamos. Es posible que ahora un nmero determinado de hectreas sea excesivo; es posible que por desenvolvimientos econmicos del pas, ese nmero de hectreas pueda ser elevado o reducido. Es por esto porque el Comit precisamente no ha querido fijar desde ahora el nmero de hectreas, prefiriendo dejar a la sabidura, a la prudencia, al patriotismo y a la justicia de la Asamblea Nacional el fijar ese nmero.
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"Lo mismo digo de la expropiacin. Se habla de que el gobierno no tendr, dinero; se habla de que no podr revender las propiedades. Pero, Caballeros de la Convencin, caballeros opositores del precepto; si la Legislatura, si la Asamblea Nacional estuviera convencida de que el gobierno no puede hacer una expropiacin, va a hacerlo? La Asamblea Nacional dictar una ley autorizando la expropiacin de tal o cual latifundio cuando est convencida, primero, de que la existencia de ese latifundio es amenazante para el bienestar pblico; y, segundo, cuando la Asamblea Nacional est convencida de que el gobierno est en disposicin para disponer la expropiacin. "Visto, pues, desde este punto el asunto, no es malo autorizar, fijar los lmites, ni mucho menos es malo autorizar a la Legislatura para dictar leyes de expropiacin. "Pero voy a molestaros por un minuto ms. Se ha mentado aqu con algn xito esta maanay digo con xito porque he odo algunos aplausosse ha mentado la posibilidad de que los comunistas hagan un issue de esta disposicin que existe en el draft; podrn los comunistas pedir los votos del electorado para ser ellos los que dicten las leyes fijando el lmite del terreno y ordenen la expropiacin? Qu argumento ms bonito si tuviera base! Lo ms natural, creo yo, es que el pueblo, el electorado, al ver que no es una Asamblea Constituyente comunista la que ha puesto esta disposicin, otorgue sus votos a esta misma Asamblea Nacional, o a esos candidatos no comunistas. Quin est en disposicin de terminar mejor una obra, aquel que ha trazado y puesto los primeros pilares, o aquel que viene de gorra al final de la obra para decir: 'Aqu estoy para poner el tejado?' "Es sensible, sin embargo, que una cuestin de importancia tan nacional como sta, pretendamos ligarla a los votos de los comunistas. El comunismo no ha de venir porque nosotros fijemos los lmites de terreno; no ha de venir porque prohibamos los latifundios mediante expropiacin forzosa, no; ha de venir precisamente por causa de los grandes propietarios de terreno, y ha de venir, quermoslo o no, porque el mundo est evolucionando y se va a convencer de que la vida no es solamente para unos cuantos sino para todos, porque Dios nos la di, con la libertad, el aire, la luz, la tierra para vivir (Grandes Aplausos), y por algo se ha dicho que en los comienzos de la vida humana debi haber sido fusilado, matado, a aquel primero que puso un cerco a un pedazo de tierra reclamando ser suya a propiedad.

"Por estas razones, seor Presidente, y sintiendo que mi tiempo est para terminar, voy a dar fin a mi discurso agradeciendo a la Convencin." (Speech of Delegate Sotto.) "I would further add, Mr. President, that this precept by limiting private individuals to holding and acquiring lands, private agricultural lands * * * is discriminatory and unjust with regard to the agriculturists. Why not, Mr. President, extend this provision also to those who are engaged in commerce and industries? Both elements amass wealth. If the purpose of the Committee, Mr. President, is to distribute the wealth in such a manner that it will not breed discontent, I see no reason for the discrimination against the agriculturist. In view of these reasons, Mr. President, I do not want to speak further and I submit this amendment because many reasons have been given already yesterday and this morning." (Speech of Delegate Sevilla.) Delegate Sotto was not interpellated, much less contradicted, on the observation that section 3 of Article XIII does not embrace private urban lands. There is of course every reason to believe that the sense in which the terms "private agricultural lands" were employed in section 3 must be the same as that in section 5, if consistency is to be attributed to the framers of the Constitution. We should not be concluded by the remarks, cited in the majority opinion, made by Delegate Ledesma to the effect that "the exclusion of aliens from the privilege of acquiring public agricultural lands and of owning real estate is a necessary part of the Public Land Laws," and of the statement of Delegate Montilla regarding "the complete nationalization of our lands and natural resources," because (1) the remarks of Delegate Ledesma expressly mentions "public agricultural lands" and the term "real estate" must undoubtedly carry the same meaning as the preceding words "public agricultural lands" under the principle of "ejusdem generis"; (2) Delegate Ledesma must have in mind purely "agricultural" land, since he was the Chairman of the Committee on Agricultural Development and his speech was made in connection with the national policy on agricultural lands; (3) the general nature of the explanations of both Delegate Ledesma and Delegate Montilla, cannot control the more specific clarification of Delegate Sotto that agricultural lands in section S do not include urban properties. Neither are we bound to give greater force to the view (apparently based on mere mental recollections) of the Justices who were members of the Constitutional Convention than to the specific recorded manifestation of Delegate Sotto.

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The decision in the case of Mapa vs. Insular Government (10 Phil., 175), invoked by the majority, is surely not controlling, because, first, it dealt with "agricultural public lands" and, secondly, in that case it was expressly held that the phrase "agricultural land" as used in Act No. 926 "means those public lands acquired from Spain which are not timber or mineral lands,"the definition held to be found in section 13 of the Act of Congress of July 1, 1902. "We hold that there is to be found in the act of Congress a definition of the phrase 'agricultural public lands,' and after a careful consideration of the question we are satisfied that the only definition which exists in said act is the definition adopted by the court below. Section 13 says that the Government shall 'make rules and regulations for the lease, sale, or other disposition of the public lands other than timber or mineral lands." To our minds that is the only definition that can be said to be given to agricultural lands. In other words, that the phrase 'agricultural land' as used in Act No. 926 means those public lands acquired from Spain which are not timber or mineral lands." (Mapa vs. Insular Government, 10 Phil., 182.) The majority, in support of their construction, invoke Commonwealth Act No. 141, enacted after the approval of the Constitution, which prohibits the alienation to foreigners of "land originally acquired in any manner under the provisions of this Act," (section 122) or "land originally acquired in any manner under the provisions of any previous Act, ordinance, royal order, royal decree, or any other provision of law formerly in force in the Philippines with regard to public lands, terrenos baldos y realengos, or lands of any other denomination that were actually or presumptively of the public domain;" (Section 123.) They hold that the constitutional intent "is made more patent and is strongly implemented by Said Act." The majority have evidently overlooked the f act that the prohibition contained in said sections refer to lands originally acquired under said Act or other legal provisions formerly in force in the Philippines with regard to public lands, which of course do not include lands not originally of the public domain. The lands that may be acquired under Act No. 141 necessarily have to be public agricultural lands, since they are the only kinds that are subject to alienation or disposition under the Constitution. Hence, even if they become private, said lands retained their original agricultural character and may not therefore be alienated to foreigners. It is only in this sense, I think, that Act No. 141 seeks to carry out and implement the constitutional objective. In the case before us, however, there is no pretense that the land bought by the appellant was originally acquired under said Act or other legal provisions contemplated therein.

The majority is also mistaken in arguing that "prior to the Constitution, under section 24 of the Public Land Act No. 2874, aliens could acquire public agricultural lands used for industrial or residential purposes, but after the Constitution and under section 23 of Commonwealth Act No. 141, the right of aliens to acquire such kind of lands is completely stricken out, undoubtedly in pursuance of the Constitutional limitation," and that "prior to the Constitution, under section 57 of the Public Land Act No. 2874, land of the public domain suitable for residence or industrial purposes could be sold or leased to aliens, but after the Constitution and under section 60 of Commonwealth Act No. 141, such land may only be leased, but not sold, to aliens, and the lease granted shall only be valid while the land is used for the purpose referred to." Section 1 of Article XIII of the Constitution speaks of "public agricultural lands" and, quite logically, Commonwealth Act No. 141, enacted after the approval of the Constitution, has to limit the alienation of its subject matter (public agricultural land, which includes public residential or industrial land) to Filipino citizens. But it is not correct to consider said Act as a legislation on, or a limitation against, the right of aliens to acquire residential land that was already of private ownership prior to the approval of the Constitution. The sweeping assertion of the majority that "the three great departments of the GovernmentJudicial, Legislative and Executivehave always maintained that lands of the public domain are classified into agricultural, mineral and timber, and that agricultural lands include residential lots," is rather misleading and not inconsistent with our position. While the construction mistakenly invoked by the majority refers exclusively to lands of the public domain, our view is that private residential lands are not embraced within the terms "private agricultural land" in section 5 of Article XIII. Let us particularize in somewhat chronological order. We have already pointed out that the leading case of Mapa vs. Insular Government, supra, only held that agricultural public lands are those public lands acquired from Spain which are neither timber nor mineral lands. The opinion of the Secretary of Justice dated July 15, 1939, quoted in the majority opinion, limited itself in affirming that "residential, commercial or industrial lots forming part of the public domain * * * must be classified as agricultural." Indeed, the limited scope of said opinion is clearly pointed out in the following subsequent opinion of the Secretary of Justice dated September 25, 1941, expressly holding that "in cases involving the prohibition in section 5 of Article XIII (formerly Article XII) regarding transfer or assignment of private agricultural lands to foreigners, the opinion that residential lots are not agricultural lands is applicable/'

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"This is with reference to your first indorsement dated July 30, 1941, forwarding the request of the Register of Deeds of Oriental Misamis for an opinion as to whether Opinion No. 130, dated July 15, 1939, of this Department quoted in its Circular No. 28, dated May 13, 1941, holding among others, that the phrase 'public agricultural land' in section 1, Article XIII (formerly article XII) of the Constitution of the Philippines, includes residential, commercial or industrial lots for purposes of their disposition, amends or supersedes a decision or order of the fourth branch of the Court of First Instance of the City of Manila rendered pursuant to section 200 of the Administrative Code which holds that a residential lot is not an agricultural land. and, therefore, the prohibition in section 5, Article XIII (formerly Article XII) of the Constitution of the Philippines does not apply. "There is no conflict between the two opinions. "Section 1, Article XIII (formerly article XII of the Constitution of the Philippines, speaks of public agricultural lands while section 5 of the same article treats of private agricultural lands, A holding, therefore, that a residential lot is not private agricultural land within the meaning of that phrase as found in section 5 of Article XIII (formerly Article XII) does not conflict with an opinion that residential, commercial or industrial lots forming part of the public domain are included within the phrase 'public agricultural land' found in section 1, Article XIII (formerly Article XII) of the Constitution of the Philippines. In cases involving the prohibition in section 5 of Article XIII (formerly Article XII) regarding transfer or assignment of private agricultural lands to foreigners, the opinion that residential lots are not agricultural lands is applicable. In cases involving the prohibition in section 1 of Article XIII (formerly Article XII) regarding disposition in favor of, and exploitation, development or utilization by, foreigners of public agricultural lands, the opinion that residential, commercial or industrial lots forming part of the public domain are included within the phrase 'public agricultural land' found in said section 1 of Article XIII (formerly Article XII) governs." Commonwealth Act No. 141, passed after the approval of the Constitution, limited its restriction against transfers in favor of aliens to public agricultural lands or to lands originally acquired under said Act or other legal provisions formerly in force in the Philippines with regard to public lands, which necessarily have to be public agricultural lands. On November 29, 1943, the Court of Appeals rendered a decision affirming that of the Court of First Instance of Tarlac in a case in which it was held that private residential lots are not included in the prohibition in section 5 of Article XIII. (CA-G. R. No. 29,) During the Japanese occupation, the Constitution of the then Republic of the Philippines contained an almost verbatim reproduction of said section 5 of

Article XIII; and the then National Assembly passed an Act providing that "no natural or juridical person who is not a Filipino citizen shall acquire directly or indirectly any title to private lands (which are not agricultural lands) including buildings and other improvements thereon or leasehold rights on said lands, except by legal succession of proper cases, unless authorized by the President of the Republic of the Philippines." (Off. Gaz., Vol. I, p. 497, February, 1944,) It is true that the Secretary of Justice in 1945 appears to have rendered an opinion on the matter, but it cannot have any persuasive force because it merely suspended the effect of the previous opinion of his Department pending judicial determination of the question. Very recently, the Secretary of Justice issued a circular adopting in effect the opinion of his Department rendered in 1941. Last but not least, since the approval of the Constitution, numerous transactions involving transfers of private residential lots to aliens had been allowed to be registered without any opposition on the part of the Government. It will thus be seen that, contrary to what the majority believe, our Government has constantly adopted the view that private residential lands do not fall under the limitation contained in section 5 of Article XIII of the Constitution. I do not question or doubt the nationalistic spirit permeating the Constitution, but I will not permit myself to be blinded by any sentimental feelings or conjectural considerations to such a degree as to attribute to any of its provisions a construction not justified by or beyond what the plain written words purport to convey. We need not express any unnecessary concern over the possibility that entire towns and cities may come to the hands of aliens, as long as we have faith in our independence and in our power to supply any deficiency in the Constitution either by its amendment or by Congressional action. There should really have been. no occasion for writing this dissent, because the appellant, with the conformity of the appellee, had filed a motion for the withdrawal of the appeal and the same should have been granted outright. In Co Chiong vs. Dinglasan (p. 122, ante), decided only a few days ago, we reiterated the well-settled rule that "a court should not pass upon a constitutional question and decide a law to be unconstitutional or invalid unless such question is raised by the parties, and that when it is raised, if the record also presents some other ground upon which the court may rest its judgment, that course will be adopted and the constitutional question will be left for consideration until a case arises in which a decision upon such question will be unavoidable." In other words, a court will always avoid a constitutional question, if possible. In the present case, that course of action was not only possible but absolutely imperative, If appellant's motion for withdrawal had
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been opposed by the appellee, there might be some reasons for its denial, in view of section 4 of Rule 52 which provides that after the filing of appellee's brief, "the withdrawal may be allowed by the court in its discretion." At any rate, this discretion should always be exercised in favor of a withdrawal where a constitutional question will thereby be avoided. In this connection, let us describe the proceedings (called "arbitrary and illegal" by Mr. Justice Tuason) that led to the denial of the motion for withdrawal. During the deliberation in which all the eleven members were present, seven voted to allow and four to deny. Subsequently, without any previous notice and when Mr. Justice Hontiveros was absent, the matter was again submitted to a vote, and one Justice (who previously was in favor of the withdrawal) reversed his stand, with the result that the votes were five to five. This result was officially released and the motion. denied under the technicality provided in Rule of Court No. 56, section 2. It is very interesting to observe that Mr. Justice Hontiveros, who was still a member of the Court and could have attended the later deliberation, if notified and requested, previously voted for the granting of the motion. The real explanation for excluding Mr. Justice Hontiveros, against my objection, and for the reversal of the vote of one Justice who originally was in favor of the withdrawal is found in the confession made in the majority opinion to the effect that the circular of the Department of Justice instructing all registers of deeds to accept for registration transfers of residential lots to aliens, was an "interference with the regular and complete exercise by this Court of its constitutional functions," and that "if we grant the withdrawal, the result is that petitioner-appellant Alexander A. Krivenko wins his case, not by a decision of this Court, but by the decision or circular of the Department of Justice issued while this case was pending before this Court." The zealousness thus shown in denying the motion for withdrawal is open to question. The denial of course is another way of assuming that the petitionerappellant and the Solicitor General had connived with the Department of Justice in a scheme not only to interfere with the functions of this Court but to dispose of the national patrimony in favor of aliens. In the absence of any injunction from this Court, we should recognize the right of the Department of Justice to issue any circular it may deem legal and proper on any subject, and the corollary right of the appellant to take advantage thereof. What is most regrettable is the implication that the Department of Justice, as a part of the Executive Department, cannot be as patriotic and able as this Court in defending the Constitution. If the circular in question is objectionable, the same can be said of the opinion of the Secretary of Justice in 1945 in effect prohibiting the registration of transfers of private residential

lots in favor of aliens, notwithstanding the pendency in this Court of the case of Oh Cho vs. Director of Lands (43 Off. Gaz., 866), wherein, according to the appellant, the only question raised was whether or not "an alien can acquire a residential lot and register it in his name," and notwithstanding the f act that in said case the appealed decision was in favor of the alien applicant and that, as hereinbefore stated, the Court of Appeals in another case (CA-G. R. No. 29) had rendered in 1943 a decision holding that private residential lots are not included in the prohibition in section 5 of Article XIII of the Constitution. And yet this Court, failing to consider said opinion as an "interference," chose to evade the only issue raised by the appellant and squarely met by the appellee in the Oh Cho case which already required a decision on the constitutional question resolved in the case at bar against, so to say, the will of the parties litigant. In other words, the majority did not allow the withdrawal of the present appeal not so much as to dispose of it on the merits, but to annul the circular of the Department of Justice which is, needless to say, not involved in this case. I cannot accept the shallow excuse of the majority that the denial of the motion f or withdrawal was prompted by the fear that "our indifference of today might signify a permanent offense to the Constitution," because it carries the rather immodest implication that this Court has a monopoly of the virtue of upholding and enforcing, or supplying any deficiency in, the Constitution. Indeed, the fallacy of the implication is made glaring when Senator Francisco lost no time in introducing a bill that would clarify the constitutional provision in question in the sense desired by the majority. Upon the other hand, the majority should not worry about the remoteness of the opportunity that will enable this Court to pass upon this constitutional question, because we can take advance notice of the fact that in Rellosa vs. Gaw Chee Hun (49 Off. Gaz., 4345), in which the parties have already submitted their briefs, that question is again squarely presented. But even disregarding said case, I am sure that, in view of the recent newspaper discussion which naturally reached the length and breadth of the country, there will be those who will dispute their sales of residential lots in favor of aliens and invoke the constitutional prohibition. BENGZON, J., dissenting:

It is unnecessary to deliver at this time any opinion about the extent of the constitutional prohibition. Both parties having agreed to write finis to the litigation, there is no obligation to hold forth on the issue. It is not our mission to give advice to other persons who might be interested to know the validity or

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invalidity of their sales or purchases. That is the work of lawyers and jurisconsults. There is much to what Mr. Justice Padilla explains regarding any eagerness to solve the constitutional problem. It must be remembered that the other departments of the Government are not prevented from passing on constitutional questions arising in the exercise of their official powers. (Cooley, Constitutional Limitations, 8th ed., p. 101.) This Tribunal was not established, nor is it expected to play the role of an overseer to supervise the other Government departments, with the obligation to seize any opportunity to correct what we may believe to be erroneous application of the constitutional mandate. I cannot agree to the suggestion that the way the incumbent Secretary of Justice has interpreted the fundamental law, no case will ever arise before the courts, because the registers of deeds under his command, will transfer on their books all sales to aliens. It is easy to perceive several probabilities: (1) a new secretary may entertain opposite views; (2) parties legally affectedlike heirs or creditors of the sellermay wish to avoid the conveyance to aliens, invoking the constitutional inhibition. Then, in a truly contested case, with opposing litigants actively arguing their sides we shall be in a position to do full justice. It is not enough that briefsas in this casehave been filed; it is desirable, perhaps essential, to make sure that in a motion for reconsideration, or in a re-hearing in case of tie, our attention shall be invited to points inadequately touched or improperly considered. It is stated that sales to aliens of residential lots are currently being effected. No matter. Those sales will be subject to the final decision we shall reach in a properly submitted litigation. To spell necessity out of the existence of such conveyances, might amount to begging the issue, with the assumption that such transfers are obviously barred by the Organic Law. And yet sales to foreigners of residential lots have taken place since our Constitution was approved in 1935, and no one questioned their validity in Court until nine years later in 1945, after the Japanese authorities had shown distaste for such transfers. The Court should have, I submit, ample time to discuss this all-important point, and reflect upon the conflictting politico-economic philosophies of those who advocate national isolation against international cooperation, and vice-versa. We could also delve into several aspects necessarily involved, to wit: (a) Whether the prohibition in the Constitution operated to curtail the freedom to dispose of landowners at the time of its adoption; or whether it merely

affected the rights of those who should become landowners after the approval of the Constitution ;1 (b) What consequences would a ruling adverse to aliens have upon our position and commitments in the United Nations Organization, and upon our treaty-making negotiations with other nations of the world; and (c) When in 1941 Krivenko acquired this land he was a Russian citizen. Under the treaties between the United States and Russia, were Russian nationals allowed to acquire residential lots in places under the jurisdiction of the United States? If so, did our Constitution have the effect of modifying such treaty, during the existence of the Commonwealth Government? The foregoing views and doubts induced me to vote for dismissal of the appeal as requested by the parties, and for withholding of any ruling on the constitutional prohibition. However, I am now ready to cast my vote. I am convinced that the organic law bans the sales of agricultural lands as they are popularly understoodnot including residential, commercial, industrial or urban lots. This belief is founded on the reasons ably expounded by Mr. Justice Pars, Mr. Justice Padilla and Mr. Justice Tuason. I am particularly moved by the consideration that a restricted interpretation of the prohibition, if erroneous or contrary to the people's desire, may be remedied by legislation amplifying it; whereas a liberal and wide application, if erroneous, would need the cumbersome and highly expensive process of a constitutional amendment. PADILLA, J., dissenting:

The question submitted for decision is whether a parcel of land of private ownership suitable or intended for residence may be alienated or sold to an alien. Section 5, Article XIII, of the Constitution provides: Save in cases of hereditary succession, no private agricultural land shall be transferred or assigned except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain in the Philippines. The majority holds that a parcel of land of private ownership suitable or intended or used for residence is included in the term "private agricultural land"
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and comes within the prohibition of the Constitution. In support of the opinion that lands of private ownership suitable for residence are included in the term "private agricultural land" and cannot be alienated or sold to aliens, the majority invokes the decision of this Court in Mapa vs. Insular Government (10 Phil., 175), which holds that urban lands of the public domain are included in the term "public agricultural land." But the opinion of the majority overlooks the fact that the inclusion by this Court of public lands suitable for residence in the term "public agricultural land" was due to the classification made by the Congress of the United States in the Act of 1 July 1.902, commonly known as the Philippine Bill. In said Act, lands of the public domain were classified into agricultural, timber and mineral. The only alienable or disposable lands of the public domain were those belonging to the first class. Hence a parcel of land of the public domain suitable for residence, which was neither timber nor mineral, could not be disposed of or alienated unless classified as public agricultural land. The susceptibility of a residential lot of the public domain of being cultivated is not the real reason for the inclusion of such lot in the classification of public agricultural land, for there are lands, such as foreshore lands, which would hardly be susceptible of cultivation (Ibaez de Aldecoa vs. Insular Government, 13 Phil., 159, 167-168), and yet the same come under the classification of public agricultural land. The fact, therefore, that parcels of land of the public domain suitable for residence are included in the clasification of public agricultural land, is not a safe guide or index of what the framers of the Constitution intended to mean by the term "private agricultural land." It is contrary to the rules of statutory construction to attach technical meaning to terms or phrases that have a common or ordinary meaning as understood by the average citizen. At the time of the adoption of the Constitution (8 February 1935), the Public Land Act in force was Act No. 2874. Under this Act, only citizens of the Philippine Islands or of the United States and corporations or associations described in section 23 thereof, and citizens of countries the laws of which grant to citizens of the Philippine Islands the same right to acquire public land as to their own citizens, could acquire by purchase agricultural land of the public domain (section 23, Act No, 2874). This was the general rule. There was an exception. Section 24 of the Act provides: No person, corporation, association or partnership other than those mentioned in the last preceding section may acquire or own agricultural public land or land of any other denomination or classification, not used for industrial or residence purposes, that is at the time or was originally, really or presumptively, of the public domain, or any permanent improvement thereon, or any real right on

such land and improvement: Provided, however,, That persons, corporations, associations, or partnerships which,, at the date upon which this Act shall take effect, hold agricultural public lands or land of any other denomination not used for industrial or residence purposes, that belonged originally, really or presumptively, to the public domain, or permanent improvements on such lands, or a real right upon such lands and improvements, having acquired the same under the laws and regulations in force at the date of such acquisition, shall be authorized to continue holding the same as if such persons, corporations, associations, or partnerships were qualified under the last preceding section; but they shall not encumber, convey, or alienate the same to persons, corporations, associations or partnerships not included in section twenty-three of this Act, except by reason of hereditary succession, duly legalized and acknowledged by competent Courts. (Italics supplied.) Section 57 of the Act, dealing with lands of the public domain suitable for residential, commercial, industrial, or other productive purposes other than agricultural, provides: Any tract of land comprised under this title may be leased or sold, as the case may be, to any person, corporation, or association authorized to purchase or lease public lands for agricultural purposes. * * * Provided further, That any person, corporation, association, or partnership disqualified from purchasing public land for agricultural purposes under the provisions of this Act, may purchase or lease land included under this title suitable for industrial or residence purposes, but the title or lease granted shall only be valid while such land is used for the purposes referred to. (Italics supplied.) Section 121 of the Act provides: "No land originally acquired in any manner under the provisions of the former Public Land Act or of any other Act, ordinance, royal order, royal decree, or any other provision of law formerly in force in the Philippine Islands with regard to public lands, terrenos baldos y realengos, or lands of any other denomination that were actually or presumptively of the public domain, or by royal grant or in any other form, nor any permanent improvement on such land, shall be encumbered, alienated, or conveyed, except to persons, corporations, or associations who may acquire land of the public domain under this Act; * * * Provided, however, That this prohibition shall not be applicable to the conveyance or acquisition by reason of hereditary succession duly acknowledged and legalized by competent Courts, nor to lands and

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improvements acquired or held for industrial or residence purposes, while used for such purposes: * * * (Italics supplied.) Under and pursuant to the above quoted provisions of Act No. 2874, lands of the public domain, that were neither timber nor mineral, held for industrial or residence purposes, could be acquired by aliens disqualified from acquiring by purchase or lease public agricultural lands (sections 24, 57, 121, Act No. 2874). The delegates to the Constituent Assembly were familiar with the provisions of the Public Land Act referred to. The prohibition to alienate public agricultural lands to disqualified persons, corporations or associations did not apply to "lands and improvements acquired or held for industrial or residence purposes, while used for such purposes." Even under the provisions of Act No. 926, the first Public Land Act, lots for townsites could be acquired by any person irrespective of citizenship, pursuant to section 47 of the said Act. In spite of the nationalistic spirit that pervades all the provisions of Act No. 2874, the Philippine Legislature did not deem it necessary to exclude aliens from acquiring and owning lands of the public domain suitable for industrial or residence purposes. It adopted the policy of excluding aliens from acquiring agricultural lands of the public domain not "suitable for residential, commercial, industrial, or other productive purposes," which, together with timber, mineral and private agricultural lands, constitute the mainstay of the nation, Act No. 2874 was in force for nearly sixteen yearsfrom 1919 to 1935. There is nothing recorded in the journals of proceedings of the Constituent Assembly regarding the matter which would have justified a departure from the policy theretofore adopted. If under the law in force at the time of the adoption of the Constitution, aliens could acquire by purchase or lease lands of the public domain, that were neither timber nor mineral, held for industrial or residence purposes, how can it be presumed that the framers of the Constitution intended to exclude such aliens from acquiring by purchase private lands suitable for industrial or residence purposes? If pursuant to the law in force at the time of the adoption of the Constitution, lands of the public domain and improvements thereon acquired or held for industrial or residence purposes were not Included in the prohibition found in section 121 of Act No. 2874, there is every reason for believing that the framers of the Constitution, who were familiar with the law then in force, did not have the intention of applying the prohibition contained in section 5, Article XIII, of the Constitution to lands of private ownership suitable or intended or used for residence, there being 110thing recorded in the journals of proceedings of the Constituent Assembly regarding the matter which, as above stated, would have justified a departure from the policy then existing. If

the term "private agricultural land" comprehends lands of private ownership suitable or intended or used for residence, as held by the majority, there was no need of implementing a self-executory prohibition found in the Constitution. The prohibition to alienate such lands found in section 123 of Commonwealth Act No. 141 is a clear indication and proof that section 5, Article XIII, of the Constitution does not apply to lands of private ownership suitable or intended or used for residence. The term "private agricultural land" means privately owned lands devoted to cultivation. to the raising of agricultural products, and does not include urban lands of private ownership suitable for industrial or residence purposes. The use of the adjective "agricultural" has the effect of excluding all other private lands that are not agricultural. Timber and mineral lands are not, however, included among the excluded, because these lands could not and can never become private lands. From the land grants known as caballeras and peonias under the Laws of Indies down to those under the Royal Decrees of 25 June 1880 and 18 February 1894, the Philippine Bill, Act No. 926, the Jones Law, Act No. 2874, the Constitution, and Commonwealth Act No. 141, timber and mineral lands have always been excluded from alienation. The repeal by sections 23, 60, 123 of Commonwealth Act No. 141 of the exception provided for in sections 24, 57, 121 of Act No. 2874, did not change the meaning of the term "private agricultural land," as intended by the framers of the Constitution and understood by the people that adopted it. The next question is whether the court below was justified under the law in confirming the refusal of the Register of Deeds of Manila to record the sale of the private land for residence purposes to the appellant who is an alien. There is no evidence to show the kind of land, the deed of sale of which is sought to be recorded by the appellantwhether it is one of those described in section 123 of Commonwealth Act No. 141; or a private land that had never been a part of the public domain (Cario vs. Insular Government, 212 U. S., 449; Oh Cho vs. Director of Lands, 43 Off. Gaz., 866). If it is the latter, the prohibition of section 123 of Commonwealth Act No. 141 does not apply. If it is the former, section 123 of Commonwealth Act No. 141, which provides that No land originally acquired in any manner under the provisions of any previous Act, ordinance, royal order, royal decree, or any other provision of law formerly in force in the Philippines with regard to public lands, terrenos baldos y realengos, or lands of any other denomination that were actually or presumptively of the public domain, or by royal grant or in any other form, nor any permanent improvement on such land, shall be encumbered, alienated, or conveyed, except to persons, corporations or associations who may acquire
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land of the public domain under this Act or to corporate bodies organized in the Philippines whose charters authorize them to do so: * * * is similar in nature to section 121 of Act No. 2874. This Court held the last mentioned section unconstitutional, for it violates section 3 of the Act of Congress of 29 August 1916, commonly known as the Jones Law (Central Capiz vs. Ramirez, 40 Phil., 883). Section 123 of Commonwealth Act No. 141, following the rule laid down in the aforecited case, must also be declared unconstitutional, for it violates section 21 (1), Article VI, of the Constitution, which is exactly the same as the one infringed upon by section 121 of Act No. 2874. This does not mean that a law may not be passed by Congress to prohibit alienation to foreigners of urban lands of private ownership; but in so doing, it must avoid offending against the constitutional provision referred to above. Before closing, I cannot help but comment on the action taken by the Court in considering the merits of the case, despite the withdrawal of the appeal by the appellant, consented to by the appellee. If discretion was to be exercised, this Court did not exercise it wisely. Courts of last resort generally avoid passing upon constitutional questions if the case where such questions are raised may be decided on other grounds. Courts of last resort do not express their opinion on a constitutional question except when it is the very lis mota (Yangco vs. Board of Public Utility Commissioners, 36 Phil., 116, 120; Co Chiong vs. Dinglasan, p. 122, ante). Moreover, the interpretation of the provisions of the Constitution is no exclusive of the courts. The other coordinate branches of the government may interpret such provisions acting on matters coming within their jurisdiction. And although such interpretation is only persuasive and not binding upon the courts, nevertheless they cannot be deprived of such power. Of course, the final say on what is the correct interpretation of a constitutional provision must come from and be made by this Court in an appropriate action submitted to it for decision. The correct interpretation of a constitutional provision is that which gives effect to the intent of its framers and primarily to the understanding of such provision by the people that adopted it. This Court is only an interpreter of the instrument which embodies what its framers had in mind and especially what the people understood it to be when they adopted it The eagerness of this Court to express its opinion on the constitutional provision involved in this case, notwithstanding the withdrawal of the appeal, is unusual for a Court of last resort. It seems as if it were afraid to be deprived by the other coordinate branches of the government of its prerogative to pass upon the constitutional question herein involved. If all the members of the Court were unanimous in the interpretation of the constitutional provision under scrutiny, that eagerness might be justified, but when some members of the Court do not agree to the

interpretation placed upon such provision, that eagerness becomes recklessness. The interpretation thus placed by the majority of the Court upon the constitutional provision referred to will be binding upon the other coordinate branches of the government. If, in the course of time, such opinion should turn out to be erroneous and against the welfare of the country, an amendment to the Constitutiona costly processwould have to be proposed and adopted. But, if the Court had granted the motion for the withdrawal of the appeal, it would not have to express its opinion upon the constitutional provision in question. It would let the other coordinate branches of the Government act according to their wisdom, foresight and patriotism. They, too, possess those qualities and virtues. These are not of the exclusive possession of the members of this Court. The end sought to be accomplished by the decision of this Court may be carried out by the enactment of a law, And if the law should turn out to be against the wellbeing of the people, its amendment or repeal would not be as costly a process as a constitutional amendment In view of the denial by this Court of the motion to dismiss the appeal, as prayed for by the appellant and consented to by the appellee, I am constrained to record my opinion that, for the reasons hereinbefore set forth, the judgment under review should be reversed, TUASON, J., dissenting:

The decision concludes with the assertion that there is no choice. "We are construing" it says, "the Constitution as we see it and not as we may wish it to be. If this is the solemn mandate of the Constitution, we cannot compromise it even in the name of equity." We wish deep in our heart that we were given the light to see as the majority do and could share their opinion. As it is, we perceive things the other way around. As we see it, the decision by-passed what according to .our humble understanding is the plain intent of the Constitution and groped out of its way in search of' the idea! result. The denial by this Court of the motion to withdraw the appeal to which the Solicitor General -gave his conformity collides with the professed sorrow that the decision cannot be helped. Section 5, Article XIII, of the Constitution reads:

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"5. Save in cases of hereditary succession, no private agricultural land shall be transferred or assigned except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain in the Philippines." The sole and simple question at issue is, what is the meaning of the term "agricultural land" as used in this section? Before answering the question, it is convenient to refresh our memory of the pertinent rule in the interpretation of constitutions as expounded in decisions of courts of last resort and by law authors. "It is a cardinal rule in the interpretation of constitutions that the instrument must be as construed so to give effect to the intention of the people who adopted it This intention is to be sought in the constitution itself, and the apparent meaning of the words employed is to be taken as expressing it, except in cases where the assumption would lead to absurdity, ambiguity, or contradiction." Black on Interpretation of Laws, 2d ed., p. 20.) "Every word employed in the constitution is to be expounded in its plain, obvious, and common sense, unless the context furnishes some ground to control, qualify, or enlarge it. Constitutions are not designed for metaphysical or logical subtleties, for niceties of expression, for critical propriety, for elaborate shades of meaning, or for the exercise of philosophical acuteness or judicial research. They are instruments of a practical nature founded on the common business of human life adapted to common wants, designed for common use, and fitted for common understandings. The people make them, the people adopt them, the people must be supposed to read them with the help of common sense, and cannot be presumed to admit in them any recondite meaning or any extraordinary gloss." (1 Story, Const. sec. 451.) Marshall, Ch. J., says:

supposed to underline and pervade the instrument and to render it consonant to the genius of the institutions of the state. The courts are not at liberty to declare an act void because they deem it opposed to the spirit of the Constitution." (12 C. J., 702-703.) There is no obscurity or ambiguity in the section of the Constitution above quoted, nor does a literal interpretation of the words "agricultural land" lead to any un- the majority opinion, the phrase has no technical meaning, and the same could not have been used in any sense other than that in which it is understood by the men in the street. That there are lands of private ownership will not be denied, in spite of the fiction that all lands proceed from the sovereign. And, that lands of private ownership are known as agricultural, residential, commercial and industrial, is another truth which no one can successfully dispute. In prohibiting the alienation of private agricultural land to aliens, the Constitution, by necessary implication, authorizes the alienation of other kinds of private property. The express mention of one thing excludes all others of the same kind. Let us then ascertain the meaning of the word "agricultural" so that by process of elimination we can see what lands do not fall within the purview of the constitutional inhibition. Webster's New International Dictionary defines this word as "of or pertaining to agriculture connected with, or engaged in, tillage; as, the agricultural class; agricultural implements, wages, etc." According to this definition and according to the popular conception of the word, lands in cities and towns intended or used for buildings or other kinds of structure are never understood to mean agricultural lands. They are either residential, commercial, or industrial lands. In all city plannings, communities are divided into residential, commercial and industrial sections. It would be extremely out of the ordinary, not to say ridiculous, to imagine that the Constitutional Convention considered a lot on the Escolta with its improvement as agricultural land. If extrinsic evidence is needed, a reference to the history of the constitutional provision under consideration will dispel all doubts that urban lands were in the minds of the framers of the Constitution as properties that may be assigned to foreigners. Dean Aruego, himself a member of the Constitutional Convention, is authority for the statement that the committee on nationalization and preservation of lands and other natural resources in its report recommended the incorporation into the Constitution of the following provision:
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"The framers of the Constitution, and the people who adopted it, 'must be understood to have employed words in their natural sense, and to have intended what they have said." (Gibbons vs. Ogdon, 9 Wheat, 1, 188; 6 Law. ed., 23) "Questions as to the wisdom, expediency, or justice of constitutional provisions afford no basis for construction where the intent to adopt such provisions is expressed in clear and unmistakable terms, Nor can construction read into the provisions of a constitution some unexpressed general policy or spirit,

"SEC. 4. Save in cases of hereditary succession, no land of private ownership shall be transferred or assigned by the owner thereof except to individuals, corporations, or associations qualified to acquire or hold lands of the public domain in the Philippine Islands; and the Government shall regulate the transfer or assignment of land now owned by persons, or corporations, or associations not qualified under the provisions of this Constitution to acquire or hold lands in the Philippine Islands." In Article XIII, entitled "General Provisions," of the first draft of the Constitution, the sub-committee of seven embodied the following provision which had been recommended in the reports of the committee on agricultural development, national defense, industry, and nationalization of public utilities, and of the committee or the nationalization and preservation of lands and other natural resources: "SEC. 16. Save in cases of hereditary succession, no land of private ownership shall be transferred or assigned by the owner thereof except to individuals, corporations, or associations qualified to acquire 01- hold lands of the public domain in the Philippines." But on January 22, 1935, the sub-committee of seven submitted to the Convention a revised draft of the article on General Provisions of the first draft, which revised draft had been prepared by the committee in consultation with President Quezon. The revised draft as it touches private lands provides as follows: "Save in cases of hereditary succession, no agricultural land of private ownership shall be transferred or assigned by the owner thereof except to individuals, corporations, or associations qualified to acquire or hold lands, of the public domain in the Philippine Islands." (2 The Framing of the Philippine Constitution, Aruego. 595-599.) The last-quoted proposal became section 5 of Article XIII of the Constitution in its final form with slight alteration in the phraseology. It will thus be seen that two committees in their reports and the sub-committee of seven in its first draft of the Constitution all proposed to prescribe the transfer to non-Filipino citizens of any land of private ownership without regard to its nature or use, but that the last mentioned sub-committee later amended that proposal by putting the word "agricultural" before the word "land." What are we to conclude from this modification? Its self-evident purpose was to confine the prohibition to agricultural lands, allowing the ownership by

foreigners of private lands that do not partake of agricultural character. The insertion of the word "agricultural" was studied and deliberated, thereby eliminating any possibility that its implication was not comprehended. In the following paragraphs we shall, in our inadequate way, attempt to show that the conclusions in this Court's decision are erroneous either because the premises are wrong or because the conclusions do not follow the premises. According to the decision, the insertion of the word "agricultural" was not intended to change the scope of the provision. It says that "the wording of the first draft was amended for no other purpose than to clarify concepts and avoid uncertainties." If this was the intention of the Constitutional Assembly, that body could not have devised a better way of messing up and obscuring the meaning of the provision than what it did. If the purpose was "to clarify concepts and avoid uncertainties," the insertion of the word "agricultural" before the word "land" produced the exact opposite of the result which the change was expected to accomplishas witness the present sharp and bitter controversy which would not have arisen had they let well enough alone. But the assumption is untenable. To brush aside the introduction of the word "agricultural" into the final draft as "merely one of words" is utterly unsupported by evidence, by the text of the Constitution, or by sound principles of construction. There is absolutely no warrant for the statement that the Constitutional Convention, which was guided by wise men, men of ability and experience in different fields of endeavor, used the term after mature deliberation and reflection and after consultation with the President, without intending to give it its natural signification and connotation. "We are not at liberty to presume that the framers of the Constitution, or the people who adopted it, did not understand the force of language." (People vs. Rathbone, 32 N. Y. S., 108.), The Constitution will be scanned in vain for any reasonable indication that its authors made the change with intention that it should not operate according to the rules of grammar and the ordinary process of drawing logical inferences. The theory is against the presumption, based on human experience, that the framers of a constitution "have expressed themselves in careful and measured terms, corresponding with the immense importance of the powers delegated, leaving as little as possible to implication." (1 Cooley's Constitutional Limitations, 8th ed., 128, 129.) "As men, whose intention require no concealment, generally employ the words which most directly and aptly express the ideas they intend to convey, the enlightened patriots who framed
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our constitution, and the people who adopted it, must be understood to have employed words in their natural sense and to have intended what they have said." (Gibbons vs. Ogden, ante.) When instead of prohibiting the acquisition of private land of any kind by foreigners, as originally proposed, the prohibition was changed to private agricutural lands, the average man's faculty of reasoning tells him that other lands may be acquired. The elementary rules of speech with which men of average intelligence and, above all, the members of the Constitutional Assembly were familiar, inform us that the object of a descriptive adjective is to specify a thing as distinct from another. It is from this process of reasoning that the maxim expressio unius est exclusio alterius stems; a familiar rule of interpretation often quoted, and admitted as agreeable to natural reason. If then a foreigner may acquire private lands that are not agricultural, what lands are they? Timber land or mineral land, or both? As the decision itself says these lands are not susceptible of private ownership, the answer can only be residential, commercial, industrial or other lands that are not agricultural. Whether a property is more suitable and profitable to the owner as residential, commercial or industrial than if he devotes it to the cultivation of crops is a matter that has to be decided according to the value of the property, its size, and other attending circumstances. The main burden of this Court's argument is that, as lands of the public domain which are suitable for home building are considered agricultural land, the Constitution intended that private residential, commercial or industrial lands should be considered also agricultural lands. The Court says that "what the members of the Constitutional Convention had in mind when they drafted the Constitution was this well-known classification (timber, mineral and agricultural) and its technical meaning then prevailing." As far as private lands are concerned, there is no factual or legal basis for this assumption. The classification of public lands was used for one purpose not contemplated in the classification of private lands. At the outset, it should be distinctly made clear that it was his Court's previous decisions and not an act of Congress which declared that public lands which were not forest or mineral were agricultural lands. Little reflection on the background of this Court's decisions and the nature of the question presented in relation to the peculiar provisions of the enactments which came up for construction, will bring into relief the error of applying to private lands the classification of public lands.

In the first place, we cannot classify private lands in the same manner as public lands for the very simple and manifest reason that only lands pertaining to one of the three groups of public landsagriculturalcan find their way into the hands of private persons. Forest lands and mineral lands are preserved by the State for itself and for posterity. Granting what is possible, that there are here and there forest lands and mineral lands to which private persons have obtained patents or titles, it would be pointless to suppose that such properties are the ones which section 5 of Article XIII of the Constitution wants to distinguish from private agricultural lands as lienable. The majority themselves will not admit that the Constitution which forbids the alienation of private agricultural lands allows the conveyance of private forests and mines. In the second place, public lands are classified under special conditions and with a different object in view. Classification of public lands was and is made for purposes of administration; for the purpose principally of segregating lands that may be sold from lands that should be conserved. The Act of July 1, 1902, of the United States Congress designated what lands of the public domain might be alienated and what should be kept by the State. Public lands are divided into three classes to the end that natural resources may be used without waste. Subject to some exceptions and limitation, agricultural lands may be disposed of by the Government. Preservation of forest and mineral lands was and is a dominant preoccupation. These are important parts of the country's natural resources. Private non-agricultural land does not come within the category of natural resources. Natural resources are defined in Webster's Standard Dictionary as materials supplied or produced by nature. The United States Congress evinced very little if any concern with private lands. It should also be distinctly kept in mind that the Act of Congress of the United States above mentioned was an organic law and dealt with vast tracts of untouched public lands. It was enacted by a Congress whose members were not closely familiar with local conditions affecting lands. Under the circumstances, it was natural that the Congress employed "words in a comprehensive sense as expressive of general ideas rather than of finer shades of thought or of narrow distinctions." The United States Congress was content with laying down a broad outline governing the administration. exploitation and disposition of the public wealth, leaving the details to be worked out by the local authorities and courts entrusted with the enforcement and interpretation of the law. It was as a result of this broad classification that questions crept for a definition of the status of scattered small parcels of public lands that were neither forest,
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mineral, nor agricultural, and with which. the Congress had not bothered itself to mention separately or specifically. This Court, forced by the nature of its duty to decide legal controversies, ruled that public lands that were fit for residential purposes, public swamps and other public lands that were neither forest nor mineral, were to be regarded as agricultural lands. In other words, there was an apparent void, often inevitable in a law or constitution, and this Court merely filled that void. It should be noted that this Court did not say that agricultural lands and residential lands are the same or alike in their character and use. It merely said that for the purpose of judging their alienability, residential, commercial or industrial lands should be brought under the class of agricultural lands. On the other hand, section 5 of Article XIII of the Constitution treats of private lands with a different aim. This Court is not now confronted with any problem for which there is no specific provision, such as faced it when the question of determining the character of public residential land came up for decision. This Court is not called to rule whether a private residential land is forest, mineral or agricultural. This Court is not, in regard to private lands, In the position where it found itself with reference to public lands, compelled by the limited field of its choice for a name to call public residential lands, agricultural lands. When it comes to determining the character of private non-agricultural lands, the Court's task is not to compare it with forests, mines and agricultural lands, to see which of these bears the closest resembrance to the land in question. Since there are no private timber or mineral lands, and if there were, they could not be transferred to foreigners,, and since the object of section 5 of Article XIII of the Constitution is radically at variance with that of? the laws covering public lands, we have to have different standards of comparison and have to look of the intent of this constitutional provision from a different angle and perspective. When a private nonagricultural land demands to know where it stands, we do not inquire, is it mineral, forest or agricultural ? We only ask, is it agricultural ? to ascertain whether it is within the inhibition of section 5 of Article XIII. The last question in turn resolves itself into what is understood by agricultural land. Stripped of the special considerations which dictated the classification of public lands into three general groups, there is no alternative but to take the term "agricultural land" in its natural and popular signification; and thus regarded, it imports a distinct connotation which involves no absurdity and no contradiction between different parts of the organic law. Its meaning is that agricultural land is specified in section 5 of Article XIII to differentiate it from lands that are used or are more suitable for purposes other than agriculture.

It would profit us to take notice of the admonition of two of the most revered writers on constitutional law, Justice Story and Professor Cooley: "As a general thing, it is to be supposed that the same word is used in the same sense wherever it occurs in a constitution. Here again, however, great caution must be observed in applying an arbitrary rule; for, as Mr. Justice Story has well observed: 'lt does not follow, either logically or grammatically, that because a word is found in one connection in the Constitution with a definite sense, therefore the same sense is to be adopted in every other connection in which it occurs. This would be to suppose that the framers weighed only the force of single words, as philologists or critics, and not whole clauses and objects, as statesmen and practical reasoners. And yet nothing has been more common than to subject the Constitution to this narrow and mischievous criticism. Men of ingenious and subtle minds, who seek for symmetry and harmony in language, having found in the Constitution a word used in some sense which falls in with their favorite theory of interpreting it, have made that the standard by which to measure its use in every other part of the instrument. They have thus stretched it, as it were, on the bed of Procrustes, lopping off its meaning when it seemed too large for their purposes, and extending it when it seemed too short. They have thus distorted it to the most unnatural shapes, and crippled where they have sought only to adjust its proportions according to their own opinions.' And he gives many instances where, in the national Constitution, it is very manifest the same word is employed in different meanings. So that, while the rule may be sound as one of presumption merely, its force is but slight, and it must readily give way to a different intent appearing in the instrument." (1 Cooley's Constitutional Limitations, 8th ed., 135.) As to the proposition that the words "agricultural lands" have been given a technical meaning and that the Constitution has employed them in that sense, it can only be accepted in reference to public lands. If a technical import has been affixed to the term, it can not be extended to private lands if we are not to be led to an absurdity and if we are to avoid the charge that we are resorting to subtle and ingenious refinement to force from the Constitution a meaning which its framers never held,. While in the construction of a constitution words must be given the technical meaning which they have acquired, the rule is limited to the "well-understood meaning" "which the people must be supposed to have had in view in adopting them." To give an example. "When the constitution speaks of an ex post facto law, it means a law technically known by that designation; the meaning of the phrase having become definite in the history of constitutional law, and being so familiar to the people that it is: not necessary to employ language of a more popular character to designate it." In reality, this is
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not a departure from the general rule that the language used is to be taken in the sense it conveys to the popular mind, "for the technical sense in these cases is the sense popularly understood, because that is the sense fixed upon the words in legal and constitutional history where they have been employed for the protection of popular rights." (1 Cooley's Constitutional Limitations, 8th ed., 132-133.) Viewed from this angle, "agricultural land" does not possess the quality of a technical term. Even as applied to public lands, and even among lawyers and judges, how many are familiar with the decisions of this Court which hold that public swamps and public lands more appropriate for buildings and other structures than for agriculture are agricultural lands? The same can be truthfully said of members of the Constitutional Assembly, The speeches of delegates Montilla and Ledesma cannot serve as a means of interpretation. The sentiments expressed in those speeches, like the first drafts of section 5 of Article XIII, may have reflected the sentiments of the Convention in the first stages of the deliberation or down to its close. If they were, those sentiments were relaxed and not given full sway for reasons on which we need not speculate. Speeches in support of a project can be a valuable criterion for judging the intention of a law or constitution only if no changes were afterward effected. If anything, the change in section 5 of Article XIII wrought in the face of a strong advocacy for complete and absolute nationalization of all lands, without exception, offers itself as the best proof that to the framers of the Constitution the change was not "merely one of words" but represented something real and substantial. Firm and resolute convictions are expressed in a document in strong, unequivocal and unqualified language. This is specially true when the Instrument is a constitution, "the most solemn and deliberate of human writings, always carefully drawn, and calculated for permanent endurance." The decision quotes from the Framing of the Constitution by Dean Aruego a sentence which says that one of the principles underlying the provision of Article XIII of the Constitution is "that lands, minerals, forests and other natural resources constitute the exclusive heritage of the Filipino Nation." In underlying the word lands the Court wants to insinuate that all lands without exceptions are included. This is nothing to be enthusiastic over. It is hyperbole, "a figure of speech in which the statement expresses more than the truth" but "is accepted as a legal form of expression." It is an expression that "lies but does not deceive." When we say men must fight we do not mean all men, and every one knows we don't. The decision says.:

"It is true that in section 9 of said Commonwealth Act No. 141, alienable or disposable public lands' which are the same as 'public agricultural lands' under the Constitution, are classified into agricultural, residential, commercial, industrial and for other purposes. This simply means that the term 'public agricultural lands' has both a broad and a particular meaning. Under its broad or general meaning, as used in the Constitution, it embraces all lands that are neither timber nor mineral. This broad meaning is particularized in section 9 of Commonwealth Act No. 141 which classifies 'public agricultural lands' for purposes of alienation or disposition, into lands that are strictly agricultural or actually devoted to cultivation for agricultural purposes; lands that are residential; commercial; industrial; or lands for other purposes. The fact that these lands are made alienable or disposable under Commonwealth Act No. 141, in favor of Filipino citizens, is a conclusive indication of their character as public agricultural lands under said statute and under the Constitution." If I am not mistaken in my understanding of the line of reasoning in the foregoing passage, my humble opinion is that there is no logical connection between the premise and the conclusion. What to me seems clearly to emerge from it is that Commonwealth Act No. 141, so far from sustaining the Court's theory, actually pulls down its case which. it has built upon the foundation of parallel classification of public and private lands into forest, mineral and agricultural lands, and the inexistence of such things as residential, industrial or commercial lands. It is to be noted that Act No. 141, section 9, classifies disposable lands into agricultural, industrial, residential, commercial, etc. And these are lands of the public domain. The fact that the provisions regarding alienation of private lands happens to be included in Article XIII, which is entitled "Conservation and Utilization of Natural Resources," is no ground for treating public lands and private lands on the same footing. The inference should rather be the exact reverse. Agricultural lands, whether public or private, are natural resources. But residential, commercial, and industrial lands, as we have seen, are not natural resources either in the sense these words convey to the popular mind or as defined in the dictionary. This fact may have been one factor which prompted the elimination of private non-agricultural lands from the range of the prohibition, along with reasons of foreign policy, economics and politics. From the opinion of Secretary of Justice Jose A. Santos in 1939, the majority can not derive any comfort unless we cling to the specious argument that as public lands go so go private lands. In that opinion the question propounded was whether a piece of public land which was more profitable as a homesite
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might not be sold and considered as agricultural. The illustrious Secretary answered yes, which was correct. But the classification of private lands was not directly or indirectly involved. It is the opinion of the present Secretary of Justice that is to the point. If the construction placed by the law-officer of the government on a constitutional provision may properly be invoked, as the majority say but which 1 doubt, as representing the true intent of the instrument, this Court, if it is to be consistent, should adopt Secretary Ozaeta's view. If the Solicitor General's attitude as interested counsel for the government in a judicial action isas the decision also suggests but which, I think, is still more incorrect both in theory and' in practicethen this Court should have given heed to the motion for withdrawal of the present appeal, which had been concurred in by the Solicitor General in line presumably with the opinion of the head of his department. The Court fears that "this constitutional purpose of conserving agricultural resources in the hands of Filipino citizens may easily be defeated by the Filipino citizens themselves who may alienate their agricultural lands in favor of aliens." It reasons that "it would certainly be futile to prohibit the alienation of public agricultural lands to aliens if, after all, they may be freely so alienated upon their becoming private agricultural lands in the hands of Filipino citizens." Sections 122 and 123 of Act No. 141 should banish this fear. These sections, quoted and relied upon in the majority opinion, prevent private lands that have been acquired under any of the public land laws from falling into alien possession in fee simple. Without this law, the fear would be well-founded if we adopt the majority's theory, which we precisely reject, that agricultural and residential lands are synonymous, be they public or private. The fear would not materialize under our theory, that only lands which are not agricultural may be owned by persons other than Filipino citizens. Act No. 141, by the way, supplies the best argument against the majority's interpretation of section 5 of Article XIII. Prohibiting the acquisition by foreigners of any lands originally acquired in any manner under its provisions or under the provisions of any previous law, ordinance, royal order, royal decree, or any other law formerly enforced in the Philippines with regard to public lands, etc., it is a mute and eloquent testimony that in the minds of the legislature, whose interpretation the majority correctly say should be looked to as authoritative, the Constitution did not carry such prohibition. For if the Constitution already barred the alienation of lands of any kind in favor of aliens, the provisions of sections 122 and 123 of Commonwealth Act No. 141 would have been superfluous.

The decision says that "if under Article XIV section 8, of the Constitution, an alien may not even operate a small jeepney for hire, it is certainly not hard to understand that neither is he allowed to own a piece of land." There is no similitude between owning a lot for a home or a factory or a store and operating a jeepney for hire. It is not the ownership of a jeepney that is forbidden; it is the use of it for public service that is not allowed. A foreigner is not barred from owning the costliest motor cars, steamships or airplanes in any number, for his private use or that of his friends and relatives. He can not use a jeepney for hire because the operation of public utilities is reserved to Filipino nationals, and the operation of a jeepney happens to be within this policy. The use of a jeepney for hire may be insignificant in itself but it falls within a class of industry that performs a vital function in the country's economic life, closely associated with its advancing civilization, supplying needs so fundamental for communal living and for the development of the country's economy. that the government finds need of subjecting them to some measure of control and the Constitution deems it necessary to limit their operation by Filipino citizens. The importance of using a jeepney for hire cannot be sneered at or minimized just as a vote for public office by a single foreign citizen can not be looked at with a shrug of the shoulder on the theory that it would not cause a ripple in the political complexion or scene of the nation. This Court quotes with approval from the Solicitor General's brief this passage: "If the term 'private agricultural lands' is to be construed as not including residential lots or lands of similar nature, the result will be that aliens may freely acquire and possess not only residential lots and houses for themselves but entire subdivisions and whole towns and cities, and that they may validly buy and hold in their names lands of any area for building homes, factories, industrial plants, fisheries, hatcheries, schools, health and vacation resorts, markets, golf-courses, playgrounds, airfields and a host of other uses and purposes that are not, in appellant's words, strictly agricultural." Arguments like this have no place where there is no ambiguity in the constitution or law. The courts are not at liberty to disregard a provision that is clear and certain simply because its enforcement would work inconvenience or hardship or lead to what they believe pernicious results. Courts have nothing to do with inconvenience or consequences. This rle is founded on sound principles of constitutional government and is so well known as to make citations of authorities presumptuous. Granting the possibility or probability of the consequences which this Court and the Solicitor General dread, we should not overlook the fact that there is the Congress standing guard to curtail or stop such excesses or abuses if and
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when the menace should show its head. The fact that the Constitution has not prohibited, as we contend, the transfer of private non-agricultural lands to aliens does not prevent the Congress from passing legislation to regulate or prohibit such transfer, to define the size of private lands a foreigner may possess in fee simple, or to specify the uses for which lands may be dedicated, in order to prevent aliens from conducting fisheries, hatcheries, vacation resorts, markets, golf-courses, cemeteries. The Congress could, if it wants, go so far as to exclude foreigners from entering the country or settling here. If I may be permitted to guess, the alteration. in the original draft of section 5 of Article XIII may have been prompted precisely by the thought that it is the better policy to leave to the political departments of the Government the regulation or absolute prohibition of all land ownership by foreigners, as the changed, changing and ever-changing conditions demand. The Commonwealth Legislature did that with respect to lands that were originally public lands, through Commonwealth Act No. 141, and the Legislative Assembly during the Japanese occupation extended the prohibition to all private lands, as Mr. Justice Pars has pointed out. In the present Congress, at least two bills have been introduced proposing Congressional legislation in the same direction. All of which is an infallible sign that the Constitution does not carry such prohibition, in the opinion of three legislatures, an opinion which, we entirely agree with the majority, should be given serious consideration by the courts (if indeed there were any doubt), both as a matter of policy, and also because it may be presumed to represent the true intent of the instrument. (12 C. J., 714.) In truth, the decision lays special emphasis on the fact that "many members of the National Assembly who approved the new Act (No. 141) had been members of the Constitutional Convention." May I add that Senator Francisco, who is the author of one of the bills I have referred to, in the Senate, was a leading, active and influential member of the Constitutional Convention? Judgment affirmed. ____________

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Krivenko vs. Register of Deeds of Manila, 79 Phil. 461(1947)]

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G.R. No. 126699. August 7, 1998.* AYALA CORPORATION, petitioner, vs. RAY BURTON DEVELOPMENT
CORPORATION, respondent. Remedial Law; Judgments; Effect of Judgments; Decision in CA-G.R. SP No. 29157 is not binding on the parties as RBDC is not a party in that case.Decision in CA-G.R. SP No. 29157 is not binding on the parties herein, simply because, except for AYALA, RBDC is not a party in that case. Section 49, Rule 39 of the Revised Rules of Court (now Sec. 47, Rule 39 of the 1997 Rules of Civil Procedure) provides in part: Sec. 49. Effect of judgments. The effect of a judgment or final order rendered by a court or judge of the Philippines, having jurisdiction to pronounce the judgment or order, may be as follows: (a) x x x; (b) In other cases the judgment or order is, with respect to the matter directly adjudged or as to any other matter that could have been raised in relation thereto, conclusive between the parties and their successors in interest by title subsequent to the commencement of action or special proceeding, litigating for the same thing and under the same title and in the same capacity; (emphasis supplied) Same; Same; Same; A final judgment or order of a court is conclusive and binding only upon the parties to a case and their successors in interest.The clear mandate of the above-quoted rule is that a final judgment or order of a court is conclusive and binding only upon the parties to a case and their successors in interest. Both the present case and the Rosa-Diana case, however, involve different parties who are not litigating for the same thing nor under the same title and in the same capacity. Hence, the Rosa-Diana decision cannot have binding effect against either party to the instant case. Same; Estoppel; An admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon.Under the doctrine of estoppel, an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon. A party may not go back on his own acts and representations to the prejudice of the other party who relied upon them. Here, we find no admission, false representation or concealment that can be attributed to AYALA relied upon by RBDC. Civil Law; Contracts; Contract of Adhesion; Contracts of adhesion wherein one party imposes a ready-made form of contract on the other x x x are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely.A contract of adhesion in itself is not an invalid agreement. This type of contract is as binding as a mutually executed transaction. We have emphatically ruled in the case of Ong Yiu vs. Court of Appeals, et al. that contracts of adhesion wherein one party imposes a ready-made form of contract on the other x x x are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres he gives his consent. This ruling was reiterated in Philippine American General Insurance Co., Inc. vs. Sweet Lines, Inc., et al., wherein we further declared through Justice Florenz Regalado that not even an allegation of ignorance of a party excuses non-compliance with the contractual stipulations since the responsibility for ensuring full comprehension of the provisions of a contract of carriage (a contract of adhesion) devolves not on the carrier but on the owner, shipper, or consignee as the case may be.

Same; Same; Same; Contracts of adhesion are accorded inordinate vigilance and scrutiny by the courts in order to shield the unwary from deceptive schemes contained in ready-made covenants.Contracts of adhesion, however, stand out from other contracts (which are bilaterally drafted by the parties) in that the former is accorded inordinate vigilance and scrutiny by the courts in order to shield the unwary from deceptive schemes contained in readymade covenants. As stated by this Court, speaking through Justice J.B.L. Reyes, in Qua Chee Gan vs. Law Union and Rock Insurance Co., Ltd.: The courts cannot ignore that nowadays, monopolies, cartels and concentration of capital, endowed with overwhelming economic power, manage to impose upon parties dealing with them cunningly prepared agreements that the weaker party may not change one whit, his participation in the agreement being reduced to the alternative to take it or leave it labeled since Raymond Saleilles contracts by adherence (contracts d adhesion) in contrast to those entered into by parties bargaining on an equal footing. Such contracts (of which policies of insurance and international bill of lading are prime examples) obviously call for greater strictness and vigilance on the part of the courts of justice with a view to protecting the weaker party from abuses and imposition, and prevent their becoming traps for the unwary. (Emphasis supplied) Same; Same; Same; In all contractual, property or other relations, when one of the parties is at a disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age or other handicap, the courts must be vigilant for his protection.The stringent treatment towards contracts of adhesion which the courts are enjoined to observe is in pursuance of the mandate in Article 24 of the New Civil Code that (i)n all contractual, property or other relations, when one of the parties is at a disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age or other handicap, the courts must be vigilant for his protection. Same; Same; Same; Validity and enforceability of the contract of adhesion will have to be determined by the peculiar circumstances obtaining in each case and the situation of the parties concerned.The validity and/or enforceability of a contract of adhesion will have to be determined by the peculiar circumstances obtaining in each case and the situation of the parties concerned. In the instant case, the stipulations in the Deed Restrictions and Special Conditions are plain and unambiguous which leave no room for interpretation. Moreover, there was even no attempt on the part of RBDC to prove that, in the execution of the Deed of Sale on the subject lot, it was a weaker or a disadvantaged party on account of its moral dependence, ignorance, mental weakness or other handicap. On the contrary, as testified to by Edwin Ngo, President of RBDC, the latter is a realty firm and has been engaged in realty business, and that he, a businessman for 30 years, represented RBDC in the negotiations and in the eventual purchase of the subject lot from PALMCREST. Edwin Ngos testimony proves that RBDC was not an unwary party in the subject transaction. Instead, Edwin Ngo has portrayed RBDC as a knowledgeable realty firm experienced in real estate business.

PETITION for review on certiorari of a decision of the Court of Appeals.

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The facts are stated in the opinion of the Court. Poblador, Bautista & Reyes for petitioner. Anthony Jay B. Consunji for private respondent. MARTINEZ, J.:

a) The total height of the building to be constructed on the lot shall not be more than forty-two (42) meters, nor shall it have a total gross floor area of more than five (5) times the lot area; and b) The sewage disposal must be by means of connection into the sewerage system servicing the area. Special Conditions:3

Petitioner Ayala Corporation (AYALA) is the owner of the Ayala estate located in Makati City. The said estate was originally a raw land which was subdivided for sale into different lots devoted for residential, commercial and industrial purposes. The development of the estate consisted of road and building construction and installation of a central sewerage treatment plant and drainage system which services the whole Ayala Commercial Area. On March 20, 1984, Karamfil Import-Export Company Ltd. (KARAMFIL) bought from AYALA a piece of land identified as Lot 26, Block 2 consisting of 1,188 square meters, located at what is now known as H.V. de la Costa Street, Salcedo Village, Makati City. The said land, which is now the subject of this case, is more particularly described as follows: A parcel of land (Lot 26, Block 2, of the subdivision plan [LRC] Psd-6086, being a portion of Block D, described as plan [LRC] Psd-5812 LRC [GLRO] Rec. No. 2029) situated in the Municipality of Makati, Province of Rizal, Is. of Luzon. Bounded on the N.E., points 2 to 3 by Lot 31, Block 2 (Creek 6.00 m. wide) of the subdivision plan, on the SE., points 3 to 4 by Lot 27, Block 2 of the Subdivision plan; on the SW, points 4 to 5, by proposed Road, 17.00 m. wide (Block C[LRC] Psd-5812); points 5 to 1 by Street Lot 2 (17.00 m. wide) of the subdivision plan. On the NW, points 1 to 2 by Lot 25, Block 2 of the subdivision plan. x x x beginning, containing an area of ONE THOUSAND ONE HUNDRED EIGHTY EIGHT (1,188) SQUARE METERS. The transaction was documented in a Deed of Sale1 of even date, which provides, among others, that the vendee would comply with certain special conditions and restrictions on the use or occupancy of the land, among which are Deed Restrictions:2

a) The vendee must obtain final approval from AYALA of the building plans and specifications of the proposed structures that shall be constructed on the land; b) The lot shall not be sold without the building having been completed; and c) Any breach of the stipulations and restrictions entitles AYALA to rescission of the contract. As a result of the sale, a Transfer Certificate of Title No. 1320864 was issued in the name of KARAMFIL. The said special conditions and restrictions were attached as an annex to the deed of sale and incorporated in the Memorandum of Encumbrances at the reverse side of the title of the lot as Entry No. 2432/T-131086. On February 18, 1988, KARAMFIL sold the lot to Palmcrest Development and Realty Corporation (PALMCREST) under a Deed of Absolute Sale5 of even date. This deed was submitted to AYALA for approval in order to obtain the latters waiver of the special condition prohibiting the resale of the lot until after KARAMFIL shall have constructed a building thereon. AYALA gave its written conformity to the sale but reflecting in its approval the same special conditions/restrictions as in the previous sale. AYALAs conformity was annotated on the deed of sale.6 PALMCREST did not object to the stipulated conditions and restrictions.7 PALMCREST in turn sold the lot to Ray Burton Development Corporation (RBDC), now respondent, on April 11, 1988, with the agreement that AYALA retains possession of the Owners Duplicate copy of the title until a building is erected on said parcel of land in accordance with the requirements and/or restrictions of AYALA.8 The Deed of Absolute Sale9 executed on the said date was also presented to AYALA for approval since no building had yet been constructed on the lot at the time of the sale. As in the KARAMFILPALMCREST transaction, AYALA gave its conformity to the sale, subject to

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RBDCs compliance with the special conditions/restrictions which were annotated in the deed of sale, thus: With our conformity, subject to the compliance by the Vendees of the Special Conditions of Sale on the reverse side of the Deed of Sale dated March 20, 1984 per Doc. No. 140, Page No. 29, Book No. 1, Series of 1984 of the Notary Public Silverio Aquino.10 The conditions and restrictions of the sale were likewise entered as encumbrances at the reverse side of the Transfer Certificate of Title No. 155384 which was later issued in the name of RBDC.11 Like PALMCREST, RBDC was not also averse to the aforesaid conditions and restrictions.12 Sometime in June of 1989, RBDC submitted to AYALA for approval a set of architectural plans for the construction of a 5-storey office building on the subject lot, with a height of 25.85 meters and a total gross floor area of 4,989.402 square meters.13 The building was to be known as Trafalgar Tower but later renamed Trafalgar Plaza. Since the building was well within the 42-meter height restriction, AYALA approved the architectural plans. Upon written request14 made by RBDC, AYALA likewise agreed to release the owners copy of the title covering the subject lot to the China Banking Corporation as guarantee of the loan granted to RBDC for the construction of the 5-storey building. Meanwhile, on November 28, 1989, RBDC, together with the Makati Developers Association, Inc. (MADAI), of which RBDC is a member, and other lot owners, filed a complaint against AYALA before the Housing and Land Use Regulatory Board (HLRB), docketed as HLRB Case No. REM-A-0818 (OAALAREM-111489-4240). The complaint sought the nullification of the very same Deed Restrictions incorporated in the deeds of sale of the lots purchased by the complainants from AYALA and annotated on their certificates of title, on the grounds, inter alia, that said restrictions purportedly: (a) place unreasonable control over the lots sold by AYALA, thereby depriving the vendees of the full enjoyment of the lots they bought, in violation of Article 428 of the Civil Code; (b) have been superseded by Presidential Decree No. 1096 (the National Building Code) and Metro Manila Commission Zoning Ordinance No. 81-01; (c) violate the constitutional provision on equal protection of the laws, since the restrictions are imposed without regard to reasonable standards or classifications; and (d) are contracts of adhesion15 since AYALA would not sell the lots unless the buyers agree to the deed restrictions. The complaint also alleged that AYALA is in estoppel from enforcing the restrictions in question

when it allowed the construction of other high-rise buildings in Makati City beyond the height and floor area limits. AYALA was further charged with unsound business practice. Early in June of 1990, RBDC made another set of building plans for Trafalgar Plaza and submitted the same for approval, this time to the Building Official of the Makati City Engineers Office,16 not to AYALA. In these plans, the building was to be 26-storey high, or a height of 98.60 meters, with a total gross floor area of 28,600 square meters. After having obtained the necessary building permits from the City Engineers Office, RBDC began to construct Trafalgar Plaza in accordance with these new plans. On July 11, 1990, the majority of the lot owners in the Makati City area, including the Salcedo and Legaspi Village areas, in a general assembly of the Makati Commercial Estate Association, Inc. (MACEA), approved the revision of the Deed Restrictions, which revision was embodied in the Consolidated and Revised Deed Restrictions17 (Revised Deed Restrictions) wherein direct height restrictions were abolished in favor of floor area limits computed on the basis of floor area ratios (FARs). In the case of buildings devoted solely to office use in Salcedo Villagesuch as the Trafalgar Plazathe same could have a maximum gross floor area of only eight (8) times the lot area. Thus, under the Revised Deed Restrictions, Trafalgar Plaza could be built with a maximum gross floor area of only 9,504 square meters (1,188 sq. m.the size of the subject lotmultiplied by 8). Even under the Revised Deed Restrictions, Trafalgar would still exceed 19,065 square meters of floor area on the basis of a FARs of 8:1. RBDC did not vote for the approval of the Revised Deed Restrictions and, therefore, it continued to be bound by the original Deed Restrictions. In the meantime, on August 22, 1990, the HLRB En Banc rendered a decision18 (a) upholding the Deed Restrictions; (b) absolving AYALA from the charge of unsound business practice; and (c) dismissing HLRB Case No. REM-A-0818. MADAI and RBDC separately appealed the decision to the Office of the President, which appeal was docketed as O.P. Case No. 4476. While the appeal was pending before the Office of the President, the September 21, 1990 issue of the Business World magazine19 featured the Trafalgar Plaza as a modern 27storey structure which will soon rise in Salcedo Village, Makati City. Stunned by this information, AYALA, through counsel, then sent a letter20 to RBDC demanding the latter to cease the construction of the building which dimensions do not conform to the previous
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plans it earlier approved. RBDC, through counsel, replied with a series of letters21 requesting for time to assess the merits of AYALAs demand. For failing to heed AYALAs bidding, RBDC was sued on January 25, 1991 before the Regional Trial Court of Makati City (Branch 148). AYALAs complaint for Specific Performance of Rescission, docketed as Civil Case No. 91-220, prayed inter alia that judgment be rendered x x x xxx xxx

b. Ordering the defendant to comply with its contractual obligations and to remove or demolish the portions or areas of the Trafalgar Tower/Plaza Building constructed beyond or in excess of the approved height as shown by building plans approved by the plaintiff, including any other portion of the building constructed not in accordance with the building plans and specifications submitted to and approved by plaintiff. c. Alternatively, in the event specific performance becomes impossible: i) Ordering the cancellation and rescission of the Deed of Sale dated March 20, 1984 (Annex A hereof) and ordering defendant to return to plaintiff Lot 26, Block 2 of Salcedo Village; ii) Ordering the cancellation of Transfer Certificate of Title No. 155384 (in the name of defendant) and directing the Makati Register of Deeds to issue a new title over the Lot in the name of plaintiff; and d. Ordering defendant to pay plaintiff attorneys fees in the amount of P500,000.00, exemplary damages in the amount of P5,000.00 and the costs of the instant suit.22 In its answer (with counterclaim) to the complaint, RBDC denied having actual or constructive notice of the Deed Restrictions imposed by AYALA on the subject lot. RBDC alleged in essence that even if said deed restrictions exist, the same are not economically viable and should not be enforced because they constitute unreasonable restrictions on its property rights and are, therefore, contrary to law, morals, good customs, public order or public policy. Moreover, RBDC claimed that the enforcement of the deed restrictions has also been arbitrary or discriminatory since AYALA has not made any action against a number of violators of the deed restrictions. Meantime, the appeal of MADAI in O.P. Case No. 44761 was considered resolved when it entered into a compromise agreement with AYALA wherein

the latter adopted and acknowledged as binding the Revised Deed Restrictions of July 11, 1990.23 On the other hand, RBDCs appeal was dismissed in an Order dated February 13, 1992, for the reason that, insofar as the disposition of the appealed (HLRB) decision is concerned, there is virtually no more actual controversy on the subject of the Deed Restrictions because the same has been overridden by the Revised (Deed) Restrictions which the appellee Ayala Corporation has in fact acknowledged as binding and in full force and effect x x x.24 Accordingly, aside from dismissing RBDCs appeal, the Order of February 13, 1992 also set aside the appealed HLRB decision. From this order, AYALA sought a reconsideration or clarification, noting, inter alia, that while the said order has ruled that AYALA can no longer enforce the Deed Restrictions against RBDC, it does not expressly state that RBDC is bound by the Revised Deed Restrictions. Clarifying this matter, the Office of the President issued a Resolution dated April 21, 1992,25 modifying the February 13, 1992 order, ruling: (1) that RBDC is bound by the original Deed Restrictions, but it has the option to accept and be bound by the Revised Deed Restrictions in lieu of the former; and (2) that the HLRB decision dated 22 August 1990, to the extent that it absolved AYALA from the charge of unsound business practice, subject of the basic complaint, is affirmed. This time RBDC moved for a reconsideration of the April 21, 1992 Order, but the motion was denied in a Resolution dated October 15, 1993.26 Another Resolution of March 21, 199427 was issued denying with finality RBDCs second motion for reconsideration. AYALA then filed a Manifestation28 in Civil Case No. 91220, informing the trial court of the pertinent rulings/resolutions in the proceedings before the HLRB and the Office of the President, which rulings, AYALA suggested, amount to res judicata on the issue of the validity and enforceability of the Deed Restrictions involved in the said civil case. After trial on the merits, the trial court rendered a Decision on April 28, 1994 in favor of RBDC, the dispositive portion of which reads: WHEREFORE, premises considered, judgment is hereby rendered in favor of the defendant and against the plaintiff, and as a consequence: 1. The instant case is hereby dismissed; 2. The motion/application for the annotation of the lis pendens is hereby DENIED;

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3. The motion/application to hold defendant in continuing contempt is hereby also DENIED; 4. No damages is awarded to any of the parties; 5. Plaintiff is hereby ordered to pay the defendant P30,000.00 for and as attorneys fees and litigation expenses; With costs against plaintiff. SO ORDERED.29 The trial courts decision is based on its findings that: (1) RBDC had neither actual nor constructive notice of the 42meter height limitation of the building to be constructed on the subject lot; (2) even if the Deed Restrictions did exist, AYALA is estopped from enforcing the same against RBDC by reason of the formers failure to enforce said restrictions against other violators in the same area; (3) the Deed Restrictions partake of the nature of a contract of adhesion; (4) since the Trafalgar Plaza building is in accord with the minimum requirements of P.D. No. 1096 (The National Building Code), the Deed Restrictions may not be allowed by RBDC; and (5) the rulings of the HLRB and the Office of the President do not have binding effect in the instant case. Dissatisfied, AYALA appealed to the Court of Appeals which affirmed the judgment of the trial court in a Decision30 dated February 27, 1996 in CA-G.R. CV No. 46488. AYALAs motion for reconsideration was likewise denied in the Resolution31 of October 7, 1996. AYALA now interposes the present petition for review on certiorari, citing several errors in the decision of the Court of Appeals, some of which involve questions of fact. The resolution of factual issues raised in the petition would certainly call for a review of the Court of Appeals findings of fact. As a rule, the reexamination of the evidence proffered by the contending parties during the trial of the case is not a function that this Court normally undertakes inasmuch as the findings of fact of the Court of Appeals are generally binding and conclusive on the Supreme Court.32 The jurisdiction of this Court in a petition for review on certiorari under Rule 45 of the Revised Rules of Court is limited to reviewing only errors of law.33 A reevaluation of factual issues by this Court is justified when the findings of fact complained of are devoid of support by the evidence

on record, or when the assailed judgment is based on misapprehension of facts.34 The present petition has shown that certain relevant facts were overlooked by the Court of Appeals, which facts, if properly appreciated, would justify a different conclusion from the one reached in the assailed decision. The principal error raised here by petitioner AYALA pertains to the Court of Appeals finding that RBDC did not have actual or constructive notice of the 42meter height restriction, since what was annotated on its (RBDCs) title is the erroneous 23-meter height limit which, according to AYALAs own witness, Jose Cuaresma, was not applicable to RBDC.35 Thus, the Court of Appeals concluded, RBDC has the right to enjoy the subject property as if no restrictions and conditions were imposed thereon.36 The above finding and conclusion of the Court of Appeals, AYALA submits, are based on surmises and conjectures which are contrary to the evidence on record and (RBDCs) own admissions.37 There is merit in AYALAs submission. The erroneous annotation of the 23-meter height restriction in RBDCs title was explained by Jose Cuaresma, AYALAs Assistant Manager for Marketing and Sales. Cuaresma testified that when the deed of sale between PALMCREST and RBDC was submitted to the Register of Deeds of Makati and the corresponding title was issued in the name of RBDC, the Register of Deeds annotated the wrong height limit in Entry No. 2432 on the said title, but he emphasized that the incorrect annotation does not apply to RBDC.38 Jose Cuaresma further clarified that the correct height restriction imposed by AYALA on RBDC was 42 meters.39 This height ceiling, he said, is based on the deed of restrictions attached as annex to the deed of sale,40 and the same has been uniformly imposed on the transferees beginning from the original deed of sale between AYALA and KARAMFIL.41 This clarificatory statement of Jose Cuaresma should have cautioned the Court of Appeals from making the unfounded and sweeping conclusion that RBDC can do anything it wants on the subject property as if no restrictions and conditions were imposed thereon, on the mistaken premise that RBDC was unaware of the correct 42-meter height limit. It must be stressed that Cuaresmas testimony is bolstered by documentary evidence and

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circumstances of the case which would show that RBDC was put on notice about the 42-meter height restriction. The record reveals that the subject Lot 26 was first sold by AYALA to KARAMFIL under a deed of sale (Exhibit A) dated March 20, 1984 and duly notarized by Notary Public Silverio Aquino. Attached to the deed of sale is an appendix of special conditions/restrictions (deed restrictions), which provides, inter alia, that the building to be constructed on the lot must have a total height of not more than 42 meters, and that any building plans and specifications of the proposed structures must have the approval of AYALA. The deed restrictions were incorporated in the memorandum of encumbrances at the reverse side of the title of the lot as Entry No. 2432. When the lot was sold by KARAMFIL to PALMCREST, the deed of sale (Exhibit B) on this transaction bears an annotation of AYALAs conformity to the transfer, with the condition that the approval was subject to the compliance by the vendee of the special conditions of sale on the reverse side of the deed of sale dated March 20, 1984, per Doc. No. 140, Page No. 29, Book No. 1, Series of 1984 of Notary Public Silverio F. Aquino (Exhibit B-1). PALMCREST later resold the lot to RBDC by virtue of a deed of sale (Exhibit C), to which AYALAs approval was also annotated therein (Exhibit C-1), but with the same explicit inscription that RBDC, as vendee, must comply with the special deed restrictions appended to the AYALA-KARAMFIL deed of sale of March 20, 1984. All these three (3) deeds of sale and the accompanying special deed restrictions imposing a 42meter height limit, were duly registered with the Register of Deeds. Thus, RBDC cannot profess ignorance of the 42-meter height restriction and other special conditions of the sale. Verily, the deed restrictions are integral parts of the PALMCREST-RBDC deed of sale, considering that AYALAs required conformity to the transfer, as annotated therein, was conditioned upon RBDCs compliance of the deed restrictions. Consequently, as a matter of contractual obligation, RBDC is bound to observe the deed restrictions which impose a building height of not more than 42 meters. Moreover, RBDC was fully aware that it was bound by the 42-meter height limit. This is shown by the fact that, pursuant to the special conditions/restrictions of the sale, it submitted to AYALA, for approval, building plans for a 5-storey structure with a height of 25.85 meters. Certainly, RBDC would not have submitted such plans had it truly believed that it was restricted by a lower 23-meter height ceiling, in the same manner that RBDC did not seek AYALAs approval when it later made another set of building plans for the

26storey Trafalgar Plaza, knowing that the same would be disapproved for exceeding the 42-meter height restriction. The fact that RBDC was later issued a building permit from the Makati City Engineers Office for the construction of the Trafalgar Plaza is not a valid justification to disregard the stipulated contractual restriction of 42 meters. Another error which AYALA claims to have been committed by the Court of Appeals is the latters finding that AYALA, under the principle of estoppel, is now barred from enforcing the deed restrictions because it had supposedly failed to act against other violators of the said restrictions. AYALA argues that such finding is baseless and is contrary to the Civil Code provisions on estoppel and applicable jurisprudence. We agree with the petitioner. In support of its finding that estoppel operates against AYALA, the Court of Appeals merely cited its decision dated November 17, 1993, in CA-G.R. SP No. 29157, entitled RosaDiana Realty and Development Corporation, Petitioner vs. Land Registration Authority and Ayala Corporation, Respondents, and reiterated its findings therein, to wit: Also, Ayala is barred from enforcing the deed of restrictions in question, pursuant to the doctrines of waiver and estoppel. Under the terms of the deed of sale, the vendee Sy Ka Kieng assumed faithful compliance with the special conditions of sale and with the Salcedo Village deed of restrictions. One of the conditions was that a building would be constructed within one year. Ayala did nothing to enforce the terms of the contract. In fact, it even agreed to the sale of the lot by Sy Ka Kieng in favor of the petitioner realty in 1989, or thirteen (13) years later. We, therefore, see no justifiable reason for Ayala to attempt to enforce the terms of the conditions of the sale against the petitioner. It should now be estopped from enforcing the said conditions through any means. xxx xxx xxx

Even assuming that petitioner RDR violated the floor area and height restrictions, it is markedly significant that Ayala disregarded the fact that it had previously allowed and tolerated similar and repeated violations of the same restrictive covenants by property owners which it now seeks to enforce against the herein petitioner. Some examples of existing buildings in Salcedo Village that greatly exceeded the gross floor area (5 times lot area) and height (42 meters) limitations are (Rollo, p. 32):
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(1) Pacific Star (Nauru Center Building29 stories and 112.5 meters high) (2) Sagittarius Building16 stories (3) Shell House Building14 stories (4) Eurovilla Building15 stories (5) LPL Plaza Building18 stories (6) LPL Tower Building24 stories.42 An examination of the decision in the said Rosa Diana case reveals that the sole issue raised before the appellate court was the propriety of the lis pendens annotation. However, the appellate court went beyond the sole issue and made factual findings bereft of any basis in the record to inappropriately rule that AYALA is in estoppel and has waived its right to enforce the subject restrictions. Such ruling was immaterial to the resolution of the issue of the propriety of the annotation of the lis pendens. The finding of estoppel was thus improper and made in excess of jurisdiction. Moreover, the decision in CA-G.R. SP No. 29157 is not binding on the parties herein, simply because, except for AYALA, RBDC is not a party in that case. Section 49, Rule 39 of the Revised Rules of Court (now Sec. 47, Rule 39 of the 1997 Rules of Civil Procedure) provides in part: Sec. 49. Effect of judgments.The effect of a judgment or final order rendered by a court or judge of the Philippines, having jurisdiction to pronounce the judgment or order, may be as follows: (a) x x x; (b) In other cases the judgment or order is, with respect to the matter directly adjudged or as to any other matter that could have been raised in relation thereto, conclusive between the parties and their successors in interest by title subsequent to the commencement of action or special proceeding, litigating for the same thing and under the same title and in the same capacity; (emphasis supplied) (c) x x x. The clear mandate of the above-quoted rule is that a final judgment or order of a court is conclusive and binding only upon the parties to a case and their

successors in interest. Both the present case and the Rosa-Diana case, however, involve different parties who are not litigating for the same thing nor under the same title and in the same capacity. Hence, the Rosa-Diana decision cannot have binding effect against either party to the instant case. In any case, AYALA asserts that a few gross violators of the deed restrictions have been, or are being, proceeded against.43 AYALA admits, though, that there are other violations of the restrictions but these are of a minor nature which do not detract from substantial compliance by the lot owners of the deed restrictions. AYALA submits that minor violations are insufficient to warrant judicial action, thus: As a rule, non-objection to trivial breaches of a restrictive covenant does not result in loss of the right to enforce the covenant by injunction, and acquiescence in violations of a restrictive covenant which are immaterial and do not affect or injure one will not preclude him from restraining violations thereof which would so operate as to cause him to be damaged. (20 Am. Jur. 2d. Sec. 271, p. 835; italics provided). Occasional and temporary violations by lot owners of a covenant forbidding the use of property for mercantile purposes are not sufficient as a matter of law to warrant a finding of a waiver or abandonment of the right to enforce the restriction. A waiver in favor of one person and for a limited purpose is not a waiver as to all persons generally. (id., at 836; italics provided).44 It is the sole prerogative and discretion of AYALA to initiate any action against violators of the deed restrictions. This Court cannot interfere with the exercise of such prerogative/discretion. How AYALA could be considered in estoppel as found by both the trial court and the Court of Appeals, was not duly established. Under the doctrine of estoppel, an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon. A party may not go back on his own acts and representations to the prejudice of the other party who relied upon them.45 Here, we find no admission, false representation or concealment that can be attributed to AYALA relied upon by RBDC. What is clear from the record, however, is that RBDC was the party guilty of misrepresentation and/or concealment when it resorted to the fraudulent scheme of submitting two (2) sets of building plans, one (1) set conformed to the Deed Restrictions, which was submitted to and approved by AYALA,46
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while another set violated the said restrictions, and which it presented to the Makati City Building Official in order to secure from the latter the necessary building permit.47 It is noteworthy that after the submission of the second set of building plans to the Building Official, RBDC continued to make representations to AYALA that it would build the five-storey building in accordance with the first set of plans approved by AYALA, obviously for the purpose of securing the release of the title of the subject lot to obtain bank funding. AYALA relied on RBDCs false representations and released the said title. Hence, RBDC was in bad faith. AYALA further assigns as error the finding of the respondent court that, while the Deed of Sale to Ray Burton (RBDC) did not appear to be a contract of adhesion, however, the subject Deed Restrictions annotated therein appeared to be one.48 The only basis for such finding is that the Deed Restrictions and Special Conditions were pre-printed and prepared by AYALA, and that RBDCs participation thereof was only to sign the Deed of Sale with the said restrictions and conditions.49 The respondent court erred in ruling that the Deed Restrictions is a contract of adhesion. A contract of adhesion in itself is not an invalid agreement. This type of contract is as binding as a mutually executed transaction. We have emphatically ruled in the case of Ong Yiu vs. Court of Appeals, et al.50 that contracts of adhesion wherein one party imposes a ready-made form of contract on the other x x x are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres he gives his consent. This ruling was reiterated in Philippine American General Insurance Co., Inc. vs. Sweet Lines, Inc., et al.,51 wherein we further declared through Justice Florenz Regalado that not even an allegation of ignorance of a party excuses non-compliance with the contractual stipulations since the responsibility for ensuring full comprehension of the provisions of a contract of carriage (a contract of adhesion) devolves not on the carrier but on the owner, shipper, or consignee as the case may be. Contracts of adhesion, however, stand out from other contracts (which are bilaterally drafted by the parties) in that the former is accorded inordinate vigilance and scrutiny by the courts in order to shield the unwary from deceptive schemes contained in ready-made covenants. As stated by this Court, speaking through Justice J.B.L. Reyes, in Qua Chee Gan vs. Law Union and Rock Insurance Co., Ltd.:52

The courts cannot ignore that nowadays, monopolies, cartels and concentration of capital, endowed with overwhelming economic power, manage to impose upon parties dealing with them cunningly prepared agreements that the weaker party may not change one whit, his participation in the agreement being reduced to the alternative to take it or leave it labeled since Raymond Saleilles contracts by adherence (contracts d adhesion) in contrast to those entered into by parties bargaining on an equal footing. Such contracts (of which policies of insurance and international bill of lading are prime examples) obviously call for greater strictness and vigilance on the part of the courts of justice with a view to protecting the weaker party from abuses and imposition, and prevent their becoming traps for the unwary.53 (Emphasis supplied) The stringent treatment towards contracts of adhesion which the courts are enjoined to observe is in pursuance of the mandate in Article 24 of the New Civil Code that (i)n all contractual, property or other relations, when one of the parties is at a disadvantage on account of his moral dependence, ignorance, indigence, mental weakness, tender age or other handicap, the courts must be vigilant for his protection. Thus, the validity and/or enforceability of a contract of adhesion will have to be determined by the peculiar circumstances obtaining in each case and the situation of the parties concerned. In the instant case, the stipulations in the Deed Restrictions and Special Conditions are plain and unambiguous which leave no room for interpretation. Moreover, there was even no attempt on the part of RBDC to prove that, in the execution of the Deed of Sale on the subject lot, it was a weaker or a disadvantaged party on account of its moral dependence, ignorance, mental weakness or other handicap. On the contrary, as testified to by Edwin Ngo, President of RBDC, the latter is a realty firm and has been engaged in realty business,54 and that he, a businessman for 30 years,55 represented RBDC in the negotiations and in the eventual purchase of the subject lot from PALMCREST.56 Edwin Ngos testimony proves that RBDC was not an unwary party in the subject transaction. Instead, Edwin Ngo has portrayed RBDC as a knowledgeable realty firm experienced in real estate business. In sum, there is more than ample evidence on record pinpointing RBDCs violation of the applicable FAR restrictions in the Consolidated and Revised Deed Restrictions (CRDRs) when it constructed the 27-storey Trafalgar Plaza. The prayer of petitioner is that judgment be rendered as follows:
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a. Ordering Ray Burton to comply with its contractual obligations in the construction of Trafalgar Plaza by removing or demolishing the portions of areas thereof constructed beyond or in excess of the approved height, as shown by the building plans submitted to, and approved by, Ayala, including any other portion of the building constructed not in accordance with the said building plans; b. Alternatively, in the event specific performance becomes impossible: (1) ordering the cancellation and rescission of the March 20, 1984 Deed of Sale and all subsequent Deeds of Sale executed in favor of the original vendees successors-ininterest and ordering Ray Burton to return to Ayala Lot 26, Lot 2 of Salcedo Village; (2) ordering the cancellation of Transfer Certificate of Title No. 155384 (in the name of defendant) and directing the Office of the Register of Deeds of Makati to issue a new title over the lot in the name of Ayala; and xxx xxx x x x.57

or any expansion of an existing building, a DEVELOPMENT CHARGE as a contribution to a trust fund to be administered by MACEA. This trust fund shall be used to improve facilities and utilities in the Makati Central Business District. 3.1 The amount of the development charge that shall be due from the OWNER shall be computed as follows: DEVELOPMENT CHARGE = A x (B - C - D) where: Ais equal to the Area Assessment which shall be set at Five Hundred Pesos (P500.00) until December 31, 1990. Each January 1st thereafter, such amount shall increase by ten percent (10%) over the Area Assessment charged in the immediately preceding year; provided that, beginning 1995 and at the end of every successive five-year period thereafter, the increase in the Area Assessment shall be reviewed and adjusted by the VENDOR to correspond to the accumulated increase in the construction cost index during the immediately preceding five years as based on the weighted average of wholesale price and wage indices of the National Census and Statistics Office and the Bureau of Labor Statistics. Bis equal to the total Gross Floor Area of the completed or expanded building in square meters. Cis equal to the estimated Gross Floor Area permitted under the original deed restrictions, derived by multiplying the lot area by the effective original FAR shown below for each location:59 Accordingly, in accordance with the unique, peculiar circumstance of the case at hand, we hold that the said development charges are a fair measure of compensatory damages which RBDC has caused in terms of creating a disproportionate additional burden on the facilities of the Makati Central Business District. As discussed above, Ray Burton Development Corporation acted in bad faith in constructing Trafalgar Plaza in excess of the applicable restrictions upon a double submission of plans and exercising deceit upon both AYALA and the Makati Engineers Office, and thus by way of example and correction, should be held liable to pay AYALA exemplary damages in the sum of P2,500,000.00. Finally, we find the complaint to be well-grounded, thus it is AYALA which is entitled to an award of attorneys fees, and while it prays for the amount of

However, the record reveals that construction of Trafalgar Plaza began in 1990, and a certificate of completion thereof was issued by the Makati City Engineers Office per ocular inspection on November 7, 1996.58 Apparently Trafalgar Plaza has been fully built, and we assume, is now fully tenanted. The alternative prayers of petitioner under the CRDRs, i.e., the demolition of excessively built space or to permanently restrict the use thereof, are no longer feasible. Thus, we perforce instead rule that RBDC may only be held alternatively liable for substitute performance of its obligationsthe payment of damages. In this regard, we note that the CRDRs impose development charges on constructions which exceed the estimated Gross Limits permitted under the original Deed Restrictions but which are within the limits of the CRDRs. In this regard, we quote hereunder pertinent portions of The Revised Deed Restrictions, to wit: 3. DEVELOPMENT CHARGE For any building construction within the Gross Floor Area limits defined under Paragraphs C-2.1 to C-2.4 above, but which will result in a Gross Floor Area exceeding certain standards defined in Paragraphs C-3.1-C below, the OWNER shall pay MACEA, prior to the start of construction of any new building

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P500,000.00, we award the amount of P250,000.00 which we find to be reasonable under the circumstances. WHEREFORE, premises considered, the assailed Decision of the Court of Appeals dated February 27, 1996, in CA-G.R. CV No. 46488, and its Resolution dated October 7, 1996 are hereby REVERSED and SET ASIDE, and in lieu thereof, judgment is hereby rendered finding that: (1) The Deed Restrictions are valid and petitioner AYALA is not estopped from enforcing them against lot owners who have not yet adopted the Consolidated and Revised Deed Restrictions; (2) Having admitted that the Consolidated and Revised Deed Restrictions are the applicable Deed Restrictions to Ray Burton Development Corporations Trafalgar Plaza, RBDC should be, and is, bound by the same; (3) Considering that Ray Burton Development Corporations Trafalgar Plaza exceeds the floor area limits of the Deed Restrictions, RBDC is hereby ordered to pay development charges as computed under the provisions of the Consolidated and Revised Deed Restrictions currently in force. (4) Ray Burton Development Corporation is further ordered to pay AYALA exemplary damages in the amount of P2,500,000.00, attorneys fees in the amount of P250,000.00, and the costs of suit. SO ORDERED. Regalado (Chairman), Melo, Puno and Mendoza, JJ., concur. Judgment reversed and set aside. The Supreme Court has construed obscurities and ambiguities in the restrictive provisions of contracts of adhesion strictly albeit not unreasonably against the drafter thereof when justified in light of the operative facts and surrounding circumstances. (Philippine Airlines, Inc. vs. Court of Appeals, 255 SCRA 48 [1996]) A contract of adhesion is defined as one in which one of the parties imposes a ready-made form of contract, which the other party may accept or reject, but which the latter cannot modify. (Philippine Commercial International Bank vs. Court of Appeals, 255 SCRA 299 [1996]) o0o
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Copyright 2012 Central Book Supply, Inc. All rights reserved. [Ayala Corporation vs. Ray Burton Development Corp., 294 SCRA 48(1998)]

G.R. No. 134692. August 1, 2000.* ELISEO FAJARDO, JR., and MARISSA FAJARDO, petitioners, vs. FREEDOM TO BUILD, INC., respondent.
Civil Law; Contracts; Restrictive covenants are not, strictly speaking synonymous with easements.Restrictive covenants are not, strictly speaking, synonymous with easements. While it may be correct to state that restrictive covenants on the use of land or the location or character of buildings or other structures thereon may broadly be said to create easements or rights, it can also be contended that such covenants, being limitations on the manner in which one may use his own property, do not result in true easements, but a case of servitudes (burden), sometimes characterized to be negative easements or reciprocal negative easements. Negative easement is the most common easement created by covenant or agreement whose effect is to preclude the owner of the land from doing an act, which, if no easement existed, he would be entitled to do. Same; Same; In general frontline restrictions on constructions have been held to be valid stipulations.Courts which generally view restrictive covenants with disfavor for being a restriction on the use of ones property, have, nevertheless, sustained them where the covenants are reasonable, not contrary to public policy, or to law, and not in restraint of trade. Subject to these limitations, courts enforce restrictions to the same extent that will lend judicial sanction to any other valid contractual relationship. In general, frontline restrictions on constructions have been held to be valid stipulations. Same; Same; A developer of a subdivision can enforce restrictions, even as against remote grantees of lots, only if he retains part of the land.Petitioners raise the issue of the personality of respondent to enforce the provisions of the covenant. Broadly speaking, a suit for equitable enforcement of a restrictive covenant can only be made by one for whose benefit it is intended. It is not thus normally enforceable by one who has no right nor interest in the land for the benefit of which the restriction has been imposed. Thus, a developer of a subdivision can enforce restrictions, even as against remote grantees of lots, only if he retains part of the land. There would have been merit in the argument of petitionersthat respondent, having relinquished ownership of the subdivision to the homeowners, is precluded from claiming any right or interest on the same propertyhad not the homeowners association, confirmed by its board of directors, allowed respondent to enforce the provisions of the restrictive covenant.

VITUG, J.: Freedom To Build, Incorporated, an owner-developer and seller of low-cost housing, sold to petitioner-spouses, a house and lot designated Lot No. 33, Block 14, of the De la Costa Homes in Barangka, Marikina, Metro Manila. The Contract to Sell executed between the parties, contained a Restrictive Covenant providing certain prohibitions, to wit:1 Easements. For the good of the entire community, the homeowner must observe a two-meter easement in front. No structure of any kind (store, garage, bodega, etc.) may be built on the front easement. x x x xxx xxx

Upward expansion. A second storey is not prohibited. But the second storey expansion must be placed above the back portion of the house and should not extend forward beyond the apex of the original building. xxx xxx xxx

Front expansion: 2nd Storey: No unit may be extended in the front beyond the line as designed and implemented by the developer in the 60 sq. m. unit. In other words, the 2nd floor expansion, in front, is 6 meters back from the front property line and 4 meters back from the front wall of the house, just as provided in the 60 sq. m. units.2 The above restrictions were also contained in Transfer Certificate of Title No. N-115384 covering the lot issued in the name of petitioner-spouses. The controversy arose when petitioners, despite repeated warnings from respondent, extended the roof of their house to the property line and expanded the second floor of their house to a point directly above the original front wall.3 Respondent filed before the Regional Trial Court, National Capital Judicial Region, Branch 261, Pasig City, an action to demolish the unauthorized structures. After trial, judgment was rendered against petitioners; thus:

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court. Arturo L. Paglinawan for petitioner. Benjamin S. Benito & Associates for private respondent.

WHEREFORE, premises considered, defendant spouses Eliseo B. Fajardo, Jr., and Marissa F. Fajardo are hereby directed to immediately demolish and remove the extension of their expanded housing unit that exceeds the limitations imposed by the Restrictive Covenant, otherwise the Branch Sheriff of this Court shall execute this decision at the expense of the defendants.
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As to damages and attorneys fees, it appearing from the records of this case that no evidence to sustain the same was adduced by either of the parties, the Court deems it proper not to award any. SO ORDERED.4 On appeal to it, the Court of Appeals affirmed the decision of the trial court. In their petition for review to this Court, the spouses contest the judgment of the courts below. Adjacent owners reportedly have no objection to the construction, and have even expressed interest in undertaking a similar expansion in their respective residences. Moreover, the couples two children, a son and a daughter, might soon get married and then share, with their families, living quarters with petitioners. The latter also assail the personality of private respondent to question the construction which have effectively relinquished its ownership, right or interest over the subdivision upon the execution of the Deed of Absolute Sale in favor of the individual homeowners. Per the contract between Freedom to Build Incorporated and the De la Costa Low Income Project Homeowners Association (hereinafter homeowners association), petitioners aver, the enforcement of the prohibitions contained in the Restrictive Covenant originally residing on respondent is now lodged in the homeowners association. Petitioners maintain that it is incumbent upon the homeowners association, not on respondent, to enforce compliance with the provisions of the covenant. A perusal of the provisions of the covenant would show that the restrictions therein imposed were intended For the protection and benefit of the De La Costa Low Income Housing Project, and of all the persons who may now, or hereafter become owners of any part of the project, and as part of the consideration for the conveyance of the housing unit, these restrictions are promulgated in order that; the intents and purposes for which the project was designed shall be upheld; to wit: subsequent duly approved sale and assignments of housing units shall be made only to low income families; a certain level of privacy shall be observed; a community spirit shall be fostered; and an undisturbed possession and occupancy at the homeowners shall be maintained.5 Restrictive covenants are not, strictly speaking, synonymous with easements. While it may be correct to state that restrictive covenants on the use of land or the location or character of buildings or other structures thereon may broadly be said to create easements or rights, it can also be contended that such

covenants, being limitations on the manner in which one may use his own property,6 do not result in true easements,7 but a case of servitudes (burden), sometimes characterized to be negative easements or reciprocal negative easements. Negative easement is the most common easement created by covenant or agreement whose effect is to preclude the owner of the land from doing an act, which, if no easement existed, he would be entitled to do.8 Courts which generally view restrictive covenants with disfavor for being a restriction on the use of ones property, have, nevertheless, sustained them9 where the covenants are reasonable,10 not contrary to public policy,11 or to law,12 and not in restraint of trade.13 Subject to these limitations, courts enforce restrictions to the same extent that will lend judicial sanction to any other valid contractual relationship.14 In general, frontline restrictions on constructions have been held to be valid stipulations.15 The provisions in a restrictive covenant prescribing the type of the building to be erected are crafted not solely for the purpose of creating easements, generally of light and view, nor as a restriction as to the type of construction,16 but may also be aimed as a check on the subsequent uses of the building17 conformably with what the developer originally might have intended the stipulations to be. In its Memorandum, respondent states in arguing for the validity of the restrictive covenant that the x x x restrictions are not without specific purpose. In a low cost-socialized housing, it is of public knowledge that owners-developers are constrained to build as many number of houses on a limited land area precisely to accommodate marginalized lot buyers, providing as much as possible the safety, aesthetic and decent living condition by controlling overcrowding. Such project has been designed to accommodate at least 100 families per hectare.18 There appears to be no cogent reasons for not upholding restrictive covenants aimed to promote aesthetics, health, and privacy or to prevent overcrowding. Viewed accordingly, the statement of petitioners that their immediate neighbors have not opposed the construction is unavailing to their cause, the subject restrictive covenant not being intended for the benefit of adjacent owners but to prescribe the uses of the building, i.e., to ensure, among other things, that the structures built on De la Costa Homes Subdivision would prevent overcrowding and promote privacy among subdivision dwellers. The argument then of petitioners that expansion is necessary in order to accommodate the individual families of their two children must fail for like reason. Nor can petitioners claim
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good faith; the restrictive covenants are explicitly written in the Contract To Sell and annotated at the back of the Transfer Certificate of Title. Petitioners raise the issue of the personality of respondent to enforce the provisions of the covenant. Broadly speaking, a suit for equitable enforcement of a restrictive covenant can only be made by one for whose benefit it is intended.19 It is not thus normally enforceable by one who has no right nor interest in the land for the benefit of which the restriction has been imposed.20 Thus, a developer of a subdivision can enforce restrictions, even as against remote grantees of lots, only if he retains part of the land.21 There would have been merit in the argument of petitionersthat respondent, having relinquished ownership of the subdivision to the homeowners, is precluded from claiming any right or interest on the same propertyhad not the homeowners association, confirmed by its board of directors, allowed respondent to enforce the provisions of the restrictive covenant. Finally, petitioners argue that for lack of a specific provision, prescribing the penalty of demolition in the Restrictive Covenant in the event of a breach thereof, the prayer of respondent to demolish the structure should fail. This argument has no merit; Article 1168 of the New Civil Code states: When the obligation consists in not doing and the obligor does what has been forbidden him, it shall be undone at his expense. This Court is not unaware of its ruling in Ayala Corporation vs. Ray Burton Development Corporation,22 which has merely adjudged the payment of damages in lieu of demolition. In the aforementioned case, however, the elaborate mathematical formula for the determination of compensatory damages which takes into account the current construction cost index during the immediately preceding 5 years based on the weighted average of wholesale price and wage indices of the National Census and Statistics Office and the Bureau of Labor Statistics is explicitly provided for in the Deed of Restrictions entered into by the parties. This unique and peculiar circumstance, among other strong justifications therein mentioned, is not extant in the case at bar. In sum, the Court holds that (1) The provisions of the Restrictive Covenant are valid;

(2) Petitioners must be held to be bound thereby; and (3) Since the extension constructed exceeds the floor area limits of the Restrictive Covenant, petitioner-spouses can be required to demolish the structure to the extent that it exceeds the prescribed floor area limits. WHEREFORE, the assailed decision, dated 13 July 1998, of the Court of Appeals in CA-G.R. CV No. 50085, sustaining that of the court a quo, is AFFIRMED. No costs. SO ORDERED. Melo (Chairman), Panganiban, Purisima and Gonzaga-Reyes, JJ., concur. Judgment affirmed. Note.A voluntary easement is constituted simply by will or agreement of the parties. (La Vista Association Inc. vs. Court of Appeals, 278 SCRA 498 [1997]) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Fajardo, Jr. vs. Freedom to Build, Inc., 337 SCRA 115(2000)]

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G.R. No. 134971. March 25, 2004.* HERMINIO TAYAG, petitioner, vs. AMANCIA LACSON, ROSENDO LACSON, ANTONIO LACSON, JUAN LACSON, TEODOSIA LACSONESPINOSA and THE COURT OF APPEALS, respondents.
Remedial Law; Injunction; While generally the grant of a writ of preliminary injunction rests on the sound discretion of the trial court taking cognizance of the case, extreme caution must be observed in the exercise of such discretion.A preliminary injunction is an extraordinary event calculated to preserve or maintain the status quo of things ante litem and is generally availed of to prevent actual or threatened acts, until the merits of the case can be heard. Injunction is accepted as the strong arm of equity or a transcendent remedy. While generally the grant of a writ of preliminary injunction rests on the sound discretion of the trial court taking cognizance of the case, extreme caution must be observed in the exercise of such discretion. Same; Same; Requisites for the issuance of a writ of preliminary injunction; The possibility of irreparable damage without proof of adequate existing rights is not a ground for injunction. For the court to issue a writ of preliminary injunction, the petitioner was burdened to establish the following: (1) a right in esse or a clear and unmistakable right to be protected; (2) a violation of that right; (3) that there is an urgent and permanent act and urgent necessity for the writ to prevent serious damage. Thus, in the absence of a clear legal right, the issuance of the injunctive writ constitutes a grave abuse of discretion. Where the complainants right is doubtful or disputed, injunction is not proper. Injunction is a preservative remedy aimed at protecting substantial rights and interests. It is not designed to protect contingent or future rights. The possibility of irreparable damage without proof of adequate existing rights is not a ground for injunction. Civil Law; Contracts; Options; Words and Phrases; An option is a contract by which the owner of the property agrees with another person that he shall have the right to buy his property at a fixed price within a certain time; An option contract is a separate and distinct contract from which the parties may enter into upon the conjunction of the option.We do not agree with the contention of the petitioner that the deeds of assignment executed by the defendants-tenants are perfected option contracts. An option is a contract by which the owner of the property agrees with another person that he shall have the right to buy his property at a fixed price within a certain time. It is a condition offered or contract by which the owner stipulates with another that the latter shall have the right to buy the property at a fixed price within a certain time, or under, or in compliance with certain terms and conditions, or which gives to the owner of the property the right to sell or demand a sale. It imposes no binding obligation on the person holding the option, aside from the consideration for the offer. Until accepted, it is not, properly speaking, treated as a contract. The second party gets in praesenti, not lands, not an agreement that he shall have the lands, but the right to call for and receive lands if he elects. An option contract is a separate and distinct contract from which the parties may enter into upon the conjunction of the option.

Same; Same; Damages; Requisites before Art. 1314 of the Civil Code may apply.In So Ping Bun v. Court of Appeals, we held that for the said law to apply, the pleader is burdened to prove the following: (1) the existence of a valid contract; (2) knowledge by the third person of the existence of the contract; and (3) interference by the third person in the contractual relation without legal justification.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court. Ernesto L. Pineda for petitioner. Rafael De Claro for private respondents. CALLEJO, SR., J.: Before us is a petition for review on certiorari of the Decision1 and the Resolution2 of respondent Court of Appeals in CA-G.R. SP No. 44883. The Case for the Petitioner Respondents Angelica Tiotuyco Vda. de Lacson,3 and her children Amancia, Antonio, Juan, and Teodosia, all surnamed Lacson, were the registered owners of three parcels of land located in Mabalacat, Pampanga, covered by Transfer Certificates of Title (TCT) Nos. 35922-R, 35923-R, and 35925-R, registered in the Register of Deeds of San Fernando, Pampanga. The properties, which were tenanted agricultural lands,4 were administered by Renato Espinosa for the owner. On March 17, 1996, a group of original farmers/tillers, namely, Julio Tiamson, Renato Gozun, Rosita Hernandez, Bienvenido Tongol, Alfonso Flores, Norma Quiambao, Rosita Tolentino, Jose Sosa, Francisco Tolentino, Sr., Emiliano Laxamana, Ruben Torres, Meliton Allanigue, Dominga Laxamana, Felicencia de Leon, Emiliano Ramos, and another group, namely, Felino G. Tolentino, Rica Gozun, Perla Gozun, Benigno Tolentino, Rodolfo Quiambao, Roman Laxamana, Eddie San Luis, Ricardo Hernandez, Nicenciana Miranda, Jose Gozun, Alfredo Sosa, Jose Tiamson, Augusto Tolentino, Sixto Hernandez, Alex Quiambao, Isidro Tolentino, Ceferino de Leon, Alberto Hernandez, Orlando Flores, and Aurelio Flores,5 individually executed in favor of the petitioner separate Deeds of Assignment6 in which the assignees assigned to the petitioner their
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respective rights as tenants/tillers of the landholdings possessed and tilled by them for and in consideration of P50.00 per square meter. The said amount was made payable when the legal impediments to the sale of the property to the petitioner no longer existed. The petitioner was also granted the exclusive right to buy the property if and when the respondents, with the concurrence of the defendants-tenants, agreed to sell the property. In the interim, the petitioner gave varied sums of money to the tenants as partial payments, and the latter issued receipts for the said amounts. On July 24, 1996, the petitioner called a meeting of the defendants-tenants to work out the implementation of the terms of their separate agreements.7 However, on August 8, 1996, the defendants-tenants, through Joven Mariano, wrote the petitioner stating that they were not attending the meeting and instead gave notice of their collective decision to sell all their rights and interests, as tenants/lessees, over the landholding to the respondents.8 Explaining their reasons for their collective decision, they wrote as follows: Kami ay nagtiwala sa inyo, naging tapat at nanindigan sa lahat ng ating napagkasunduan, hindi tumanggap ng ibang buyer o ahente, pero sinira ninyo ang aming pagtitiwala sa pamamagitan ng demanda ninyo at pagbibigay ng problema sa amin na hindi naman nagbenta ng lupa. Kaya kami ay nagpulong at nagpasya na ibenta na lang ang aming karapatan o ang aming lupang sinasaka sa landowner o sa mga pamilyang Lacson, dahil ayaw naming magkaroon ng problema. Kaya kung ang sasabihin ninyong itoy katangahan, lalo sigurong magiging katangahan kung ibebenta pa namin sa inyo ang aming lupang sinasaka, kaya pasensya na lang Mister Tayag. Dahil sinira ninyo ang aming pagtitiwala at katapatan.9 On August 19, 1996, the petitioner filed a complaint with the Regional Trial Court of San Fernando, Pampanga, Branch 44, against the defendantstenants, as well as the respondents, for the court to fix a period within which to pay the agreed purchase price of P50.00 per square meter to the defendants, as provided for in the Deeds of Assignment. The petitioner also prayed for a writ of preliminary injunction against the defendants and the respondents therein.10 The case was docketed as Civil Case No. 10910. In his complaint, the petitioner alleged, inter alia, the following:

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

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1. Julio Tiamson 2. Renato Gozun [son of Felix Gozun (deceased)] 3. Rosita Hernandez 4. Bienvenido Tongol [son of Abundio Tongol (deceased)] 5. Alfonso Flores 6. Norma Quiambao 7. Rosita Tolentino 8. Jose Sosa 9. Francisco Tolentino, Sr. 10. Emiliano Laxamana 11. Ruben Torres [son of Mariano Torres (deceased)] 12. Meliton Allanigue 13. Dominga Laxamana 14. Felicencia de Leon 15. Emiliano Ramos 16. Felino G. Tolentino 17. Rica Gozun 18. Perla Gozun 19. Benigno Tolentino 20. Rodolfo Quiambao 21. Roman Laxamana 22. Eddie San Luis 23. Ricardo Hernandez 24. Nicenciana Miranda 25. Jose Gozun 26. Alfredo Sosa 27. Jose Tiamson 28. Augusto Tolentino 29. Sixto Hernandez 30. Alex Quiambao 31. Isidro Tolentino 32. Ceferino de Leon 33. Alberto Hernandez 34. Orlando Florez 35. Aurelio Flores 10,000

1st PAYMENT P20,000 P10,000 P5,000 P10,000 P30,000 P10,000 P10,000 P10,000 P10,000 P10,000 P10,000 P10,000 P5,000 10,000 5,000 10,000 5,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 5,000 5,000 10,000 10,000 10,000 ---------10,000 10,000 --------

2nd PAYMENT P10,621.54 96,000 14,374.24 14,465.90 26,648.40 41,501.10 22,126.08 14,861.31 24,237.62 -------P33,587.31 12,944.77 22.269.02 -------18,869.60 ---------------------------------------------------------------------------------------------------------11,378.70 ----------------------

CHECK NO. 231281

TOTAL P30,621.54 106,000.00

A copy of the letter is hereto attached as Annex A etc.; 8. That the defendants TIAMSON, et al., have no right to deal with the defendants LACSON or with any third persons while their contracts with the plaintiff are subsisting; defendants LACSONS are inducing or have induced the defendants TIAMSON, et al., to violate their contracts with the plaintiff; 9. That by reason of the malicious acts of all the defendants, plaintiff suffered moral damages in the forms of mental anguish, mental torture and serious anxiety which in the sum of P500,000.00 for which defendants should be held liable jointly and severally.11 In support of his plea for injunctive relief, the petitioner, as plaintiff, also alleged the following in his complaint: 11. That to maintain the status quo, the defendants TIAMSON, et al., should be restrained from rescinding their contracts with the plaintiff, and the defendants LACSONS should also be restrained from accepting any offer of sale or alienation with the defendants TIAMSON, et al., in whatever form, the latters rights and interests in the properties mentioned in paragraph 4 hereof; further, the LACSONS should be restrained from encumbering/alienating the subject properties covered by TCT No. 35922-R, 35923-R and TCT No. 35925-R, Registry of Deeds of San Fernando, Pampanga; 12. That the defendants TIAMSON, et al., threaten to rescind their contracts with the plaintiff and are also bent on selling/alienating their rights and interests over the subject properties to their co-defendants (LACSONS) or any other persons to the damage and prejudice of the plaintiff who already invested much money, efforts and time in the said transactions; 13. That the plaintiff is entitled to the reliefs being demanded in the complaint; 14. That to prevent irreparable damages and prejudice to the plaintiff, as the latter has no speedy and adequate remedy under the ordinary course of law, it is essential that a Writ of Preliminary Injunction be issued enjoining and restraining the defendants TIAMSON, et al., from rescinding their contracts with the plaintiff and from selling/alienating their properties to the LACSONS or other persons; 15. That the plaintiff is willing and able to put up a reasonable bond to answer for the damages which the defendants would suffer should the injunction prayed for and granted be found without basis.12

231274 231285 231271 231279 231284 231291 231283 --------------231269 231275 -------231280 ---------------------------------------------------------------------------------------------------------231270 ----------------------

P19,374.24 24,465.90 56,648.40 51,501.10 32,126.08 24,861.31 34,237.62 -------P43,587.31 P22,944.77 27,269.02 -------23,869.60 ------------------------------------------------------------------------------------------------------------------------------10,000

6. That on July 24, 1996, the plaintiff wrote the defendants TIAM-SON, et al., inviting them for a meeting regarding the negotiations/implementations of the terms of their Deeds of Assignment; 7. That on August 8, 1996, the defendants TIAMSON, et al., through Joven Mariano, replied that they are no longer willing to pursue with the negotiations, and instead they gave notice to the plaintiff that they will sell all their rights and interests to the registered owners (defendants LACSONS).

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The petitioner prayed, that after the proceedings, judgment be rendered as follows: 1. Pending the hearing, a Writ of Preliminary Injunction be issued prohibiting, enjoining and restraining defendants Julio Tiamson, Renato Gozun, Rosita Hernandez, Bienvenido Tongol, Alfonso Flores, Norma Quiambao, Rosita Tolentino, Jose Sosa, Francisco Tolentino, Sr., Emiliano Laxamana, Ruben Torres, Meliton Allanigue, Dominga Laxamana, Felicencia de Leon, Emiliano Ramos, Felino G. Tolentino, Rica Gozun, Perla Gozun, Benigno Tolentino, Rodolfo Quiambao, Roman Laxamana, Eddie San Luis, Ricardo Hernandez, Nicenciana Miranda, Jose Gozun, Alfredo Sosa, Jose Tiamson, Augusto Tolentino, Ceferino de Leon, Alberto Hernandez, Orlando Flores, and Aurelio Flores from rescinding their contracts with the plaintiff and from alienating their rights and interest over the aforementioned properties in favor of defendants LACSONS or any other third persons; and prohibiting the defendants LACSONS from encumbering/alienating TCT Nos. 35922-R, 35923-R and 35925-R of the Registry of Deeds of San Fernando. Pampanga. 2. And pending the hearing of the Prayer for a Writ of Preliminary Injunction, it is prayed that a restraining order be issued restraining the aforementioned defendants (TIAMSON, et al.) from rescinding their contracts with the plaintiff and from alienating the subject properties to the defendants LACSONS or any third persons; further, restraining and enjoining the defendants LACSONS from encumbering/selling the properties covered by TCT Nos. 35922-R, 35923-R, and 35925-R of the Registry of Deeds of San Fernando, Pampanga. 3. Fixing the period within which plaintiff shall pay the balance of the purchase price to the defendants TIAMSON, et al., after the lapse of legal impediment, if any. 4. Making the Writ of Preliminary Injunction permanent; 5. Ordering the defendants to pay the plaintiff the sum of P500,000.00 as moral damages; 6. Ordering the defendants to pay the plaintiff attorneys fees in the sum of P100,000.00 plus litigation expenses of P50,000.00; Plaintiff prays for such other relief as may be just and equitable under the premises.13 In their answer to the complaint, the respondents as defendants asserted that (a) the defendant Angelica Vda. de Lacson had died on April 24, 1993; (b) twelve of the defendants were tenants/lessees of respondents, but the tenancy

status of the rest of the defendants was uncertain; (c) they never induced the defendants Tiamson to violate their contracts with the petitioner; and, (d) being merely tenants-tillers, the defendants-tenants had no right to enter into any transactions involving their properties without their knowledge and consent. They also averred that the transfers or assignments of leasehold rights made by the defendants-tenants to the petitioner is contrary to Presidential Decree (P.D.) No. 27 and Republic Act No. 6657, the Comprehensive Agrarian Reform Program (CARP).14 The respondents interposed counterclaims for damages against the petitioner as plaintiff. The defendants-tenants Tiamson, et al., alleged in their answer with counterclaim for damages, that the money each of them received from the petitioner were in the form of loans, and that they were deceived into signing the deeds of assignment: a) That all the foregoing allegations in the Answer are hereby repleaded and incorporated in so far as they are material and relevant herein; b) That the defendants Tiamson, et al., in so far as the Deeds of Assignment are concern[ed] never knew that what they did sign is a Deed of Assignment. What they knew was that they were made to sign a document that will serve as a receipt for the loan granted [to] them by the plaintiff; c) That the Deeds of Assignment were signed through the employment of fraud, deceit and false pretenses of plaintiff and made the defendants believe that what they sign[ed] was a mere receipt for amounts received by way of loans; d) That the documents signed in blank were filled up and completed after the defendants Tiamson, et al., signed the documents and their completion and accomplishment was done in the absence of said defendants and, worst of all, defendants were not provided a copy thereof; e) That as completed, the Deeds of Assignment reflected that the defendants Tiamson, et al., did assign all their rights and interests in the properties or landholdings they were tilling in favor of the plaintiff. That if this is so, assuming arguendo that the documents were voluntarily executed, the defendants Tiamson, et al., do not have any right to transfer their interest in the landholdings they are tilling as they have no right whatsoever in the landholdings, the landholdings belong to their co-defendants, Lacson, et al., and therefore, the contract is null and void;
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f) That while it is admitted that the defendants Tiamson, et al., received sums of money from plaintiffs, the same were received as approved loans granted by plaintiff to the defendants Tiamson, et al., and not as part consideration of the alleged Deeds of Assignment; and by way of:. . . .15 At the hearing of the petitioners plea for a writ of preliminary injunction, the respondents counsel failed to appear. In support of his plea for a writ of preliminary injunction, the petitioner adduced in evidence the Deeds of Assignment,16 the receipts17 issued by the defendants-tenants for the amounts they received from him; and the letter18 the petitioner received from the defendants-tenants. The petitioner then rested his case. The respondents, thereafter, filed a Comment/Motion to dismiss/deny the petitioners plea for injunctive relief on the following grounds: (a) the Deeds of Assignment executed by the defendants-tenants were contrary to public policy and P.D. No. 27 and Rep. Act No. 6657; (b) the petitioner failed to prove that the respondents induced the defendants-tenants to renege on their obligations under the Deeds of Assignment; (c) not being privy to the said deeds, the respondents are not bound by the said deeds; and, (d) the respondents had the absolute right to sell and dispose of their property and to encumber the same and cannot be enjoined from doing so by the trial court. The petitioner opposed the motion, contending that it was premature for the trial court to resolve his plea for injunctive relief, before the respondents and the defendants-tenants adduced evidence in opposition thereto, to afford the petitioner a chance to adduce rebuttal evidence and prove his entitlement to a writ of preliminary injunction. The respondents replied that it was the burden of the petitioner to establish the requisites of a writ of preliminary injunction without any evidence on their part, and that they were not bound to adduce any evidence in opposition to the petitioners plea for a writ of preliminary injunction. On February 13, 1997, the court issued an Order19 denying the motion of the respondents for being premature. It directed the hearing to proceed for the respondents to adduce their evidence. The court ruled that the petitioner, on the basis of the material allegations of the complaint, was entitled to injunctive relief. It also held that before the court could resolve the petitioners plea for injunctive relief, there was need for a hearing to enable the respondents and the defendants-tenants to adduce evidence to controvert that of the petitioner. The respondents filed a motion for reconsideration, which the court denied in its Order dated April 16, 1997. The trial court ruled that on the face of the

averments of the complaint, the pleadings of the parties and the evidence adduced by the petitioner, the latter was entitled to injunctive relief unless the respondents and the defendants-tenants adduced controverting evidence. The respondents, the petitioners therein, filed a petition for certiorari in the Court of Appeals for the nullification of the February 13, 1997 and April 16, 1997 Orders of the trial court. The case was docketed as CA-G.R. SP No. 44883. The petitioners therein prayed in their petition that: 1. An order be issued declaring the orders of respondent court dated February 13, 1997 and April 16, 1997 as null and void; 2. An order be issued directing the respondent court to issue an order denying the application of respondent Herminio Tayag for the issuance of a Writ of Preliminary Injunction and/or restraining order. 3. In the meantime, a Writ of Preliminary Injunction be issued against the respondent court, prohibiting it from issuing its own writ of injunction against Petitioners, and thereafter making said injunction to be issued by this Court permanent. Such other orders as may be deemed just & equitable under the premises also prayed for.20 The respondents asserted that the Deeds of Assignment executed by the assignees in favor of the petitioner were contrary to paragraph 13 of P.D. No. 27 and the second paragraph of Section 70 of Rep. Act No. 6657, and, as such, could not be enforced by the petitioner for being null and void. The respondents also claimed that the enforcement of the deeds of assignment was subject to a supervening condition: 3. That this exclusive and absolute right given to the assignee shall be exercised only when no legal impediments exist to the lot to effect the smooth transfer of lawful ownership of the lot/property in the name of the ASSIGNEE.21 The respondents argued that until such condition took place, the petitioner would not acquire any right to enforce the deeds by injunctive relief. Furthermore, the petitioners plea in his complaint before the trial court, to fix a period within which to pay the balance of the amounts due to the tenants under said deeds after the lapse of any legal impediment, assumed that the deeds were valid, when, in fact and in law, they were not. According to the
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respondents, they were not parties to the deeds of assignment; hence, they were not bound by the said deeds. The issuance of a writ of preliminary injunction would restrict and impede the exercise of their right to dispose of their property, as provided for in Article 428 of the New Civil Code. They asserted that the petitioner had no cause of action against them and the defendants-tenants. On April 17, 1998, the Court of Appeals rendered its decision against the petitioner, annulling and setting aside the assailed orders of the trial court; and permanently enjoining the said trial court from proceeding with Civil Case No. 10901. The decretal portion of the decision reads as follows: However, even if private respondent is denied of the injunctive relief he demands in the lower court still he could avail of other course of action in order to protect his interest such as the institution of a simple civil case of collection of money against TIAMSON, et al. For all the foregoing considerations, the orders dated 13 February 1997 and 16 April 1997 are hereby NULLIFIED and ordered SET ASIDE for having been issued with grave abuse of discretion amounting to lack or excess of jurisdiction. Accordingly, public respondent is permanently enjoined from proceeding with the case designated as Civil Case No. 10901.22 The CA ruled that the respondents could not be enjoined from alienating or even encumbering their property, especially so since they were not privies to the deeds of assignment executed by the defendants-tenants. The defendantstenants were not yet owners of the portions of the landholdings respectively tilled by them; as such, they had nothing to assign to the petitioner. Finally, the CA ruled that the deeds of assignment executed by the defendants-tenants were contrary to P.D. No. 27 and Rep. Act No. 6657. On August 4, 1998, the CA issued a Resolution denying the petitioners motion for reconsideration.23 Hence, the petitioner filed his petition for review on certiorari before this Court, contending as follows: I A MERE ALLEGATION IN THE ANSWER OF THE TENANTS COULD NOT BE USED AS EVIDENCE OR BASIS FOR ANY CONCLUSION, AS THIS

ALLEGATION, IS STILL THE SUBJECT OF TRIAL IN THE LOWER COURT (RTC).24 II THE COURT OF APPEALS CANNOT ENJOIN THE HEARING OF A PETITION FOR PRELIMINARY INJUNCTION AT A TIME WHEN THE LOWER COURT (RTC) IS STILL RECEIVING EVIDENCE PRECISELY TO DETERMINE WHETHER OR NOT THE WRIT OF PRELIMINARY INJUNCTION BEING PRAYED FOR BY TAYAG SHOULD BE GRANTED OR NOT.25 III THE COURT OF APPEALS CANNOT USE FACTS NOT IN EVIDENCE, TO SUPPORT ITS CONCLUSION THAT THE TENANTS ARE NOT YET AWARDEES OF THE LAND REFORM.26 IV THE COURT OF APPEALS CANNOT CAUSE THE PERMANENT STOPPAGE OF THE ENTIRE PROCEEDINGS BELOW INCLUDING THE TRIAL ON THE MERITS OF THE CASE CONSIDERING THAT THE ISSUE INVOLVED ONLY THE PROPRIETY OF MAINTAINING THE STATUS QUO.27 V THE COURT OF APPEALS CANNOT INCLUDE IN ITS DECISION THE CASE OF THE OTHER 35 TENANTS WHO DO NOT QUESTION THE JURISDICTION OF THE LOWER COURT (RTC) OVER THE CASE AND WHO ARE IN FACT STILL PRESENTING THEIR EVIDENCE TO OPPOSE THE INJUNCTION PRAYED FOR, AND TO PROVE AT THE SAME TIME THE COUNTER-CLAIMS THEY FILED AGAINST THE PETITIONER.28 VI THE LOWER COURT (RTC) HAS JURISDICTION OVER THE CASE FILED BY TAYAG FOR FIXING OF PERIOD UNDER ART. 1197 OF THE NEW CIVIL CODE AND FOR DAMAGES AGAINST THE LACSONS UNDER ART. 1314 OF THE SAME CODE. THIS CASE CANNOT BE SUPPRESSED OR RENDERED NUGATORY UNCEREMONIOUSLY.29
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The petitioner faults the Court of Appeals for permanently enjoining the trial court from proceeding with Civil Case No. 10910. He opines that the same was too drastic, tantamount to a dismissal of the case. He argues that at that stage, it was premature for the appellate court to determine the merits of the case since no evidentiary hearing thereon was conducted by the trial court. This, the Court of Appeals cannot do, since neither party moved for the dismissal of Civil Case No. 10910. The petitioner points out that the Court of Appeals, in making its findings, went beyond the issue raised by the private respondents, namely, whether or not the trial court committed a grave abuse of discretion amounting to excess or lack of jurisdiction when it denied the respondents motion for the denial/dismissal of the petitioners plea for a writ of preliminary injunction. He, likewise, points out that the appellate court erroneously presumed that the leaseholders were not DAR awardees and that the deeds of assignment were contrary to law. He contends that leasehold tenants are not prohibited from conveying or waiving their leasehold rights in his favor. He insists that there is nothing illegal with his contracts with the leaseholders, since the same shall be effected only when there are no more legal impediments. At bottom, the petitioner contends that, at that stage, it was premature for the appellate court to determine the merits of his case since no evidentiary hearing on the merits of his complaint had yet been conducted by the trial court. The Comment/Motion of the Respondents to Dismiss/Deny Petitioners Plea for a Writ of Preliminary Injunction Was Not Premature. Contrary to the ruling of the trial court, the motion of the respondents to dismiss/deny the petitioners plea for a writ of preliminary injunction after the petitioner had adduced his evidence, testimonial and documentary, and had rested his case on the incident, was proper and timely. It bears stressing that the petitioner had the burden to prove his right to a writ of preliminary injunction. He may rely solely on the material allegations of his complaint or adduce evidence in support thereof. The petitioner adduced his evidence to support his plea for a writ of preliminary injunction against the respondents and the defendants-tenants and rested his case on the said incident. The respondents then had three options: (a) file a motion to deny/dismiss the motion on the ground that the petitioner failed to discharge his burden to prove the factual and legal basis for his plea for a writ of preliminary injunction and, if the trial court denies his motion, for them to adduce evidence in opposition to the petitioners plea; (b) forgo their motion and adduce testimonial and/or documentary evidence in opposition to the petitioners plea for a writ of preliminary injunction; or, (c) waive their right to adduce evidence and submit

the incident for consideration on the basis of the pleadings of the parties and the evidence of the petitioner. The respondents opted not to adduce any evidence, and instead filed a motion to deny or dismiss the petitioners plea for a writ of preliminary injunction against them, on their claim that the petitioner failed to prove his entitlement thereto. The trial court cannot compel the respondents to adduce evidence in opposition to the petitioners plea if the respondents opt to waive their right to adduce such evidence. Thus, the trial court should have resolved the respondents motion even without the latters opposition and the presentation of evidence thereon. The RTC Committed a Grave Abuse of Discretion Amounting to Excess or Lack of Jurisdiction in Issuing its February 13, 1997 and April 16, 1997 Orders In its February 13, 1997 Order, the trial court ruled that the petitioner was entitled to a writ of preliminary injunction against the respondents on the basis of the material averments of the complaint. In its April 16, 1997 Order, the trial court denied the respondents motion for reconsideration of the previous order, on its finding that the petitioner was entitled to a writ of preliminary injunction based on the material allegations of his complaint, the evidence on record, the pleadings of the parties, as well as the applicable laws: . . . For the record, the Court denied the LACSONS COMMENT/MOTION on the basis of the facts culled from the evidence presented, the pleadings and the law applicable unswayed by the partisan or personal interests, public opinion or fear of criticism (Canon 3, Rule 3.02, Code of Judicial Ethics).30 Section 3, Rule 58 of the Rules of Court, as amended, enumerates the grounds for the issuance of a writ of preliminary injunction, thus: (a) That the applicant is entitled to the relief demanded, and the whole or part of such relief consists in restraining the commission or continuance of the act or acts complained of, or in requiring the performance of an act or acts, either for a limited period or perpetually; (b) That the commission, continuance or non-performance of the act or acts complained of during the litigation would probably work injustice to the applicant; or (c) That a party, court, agency or a person is doing, threatening, or is attempting to do, or is procuring or suffering to be done, some act or acts probably in violation of the rights of the applicant respecting the subject of the action or proceeding, and tending to render the judgment ineffectual.
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A preliminary injunction is an extraordinary event calculated to preserve or maintain the status quo of things ante litem and is generally availed of to prevent actual or threatened acts, until the merits of the case can be heard. Injunction is accepted as the strong arm of equity or a transcendent remedy.31 While generally the grant of a writ of preliminary injunction rests on the sound discretion of the trial court taking cognizance of the case, extreme caution must be observed in the exercise of such discretion.32 Indeed, in Olalia v. Hizon,33 we held: It has been consistently held that there is no power the exercise of which is more delicate, which requires greater caution, deliberation and sound discretion, or more dangerous in a doubtful case, than the issuance of an injunction. It is the strong arm of equity that should never be extended unless to cases of great injury, where courts of law cannot afford an adequate or commensurate remedy in damages. Every court should remember that an injunction is a limitation upon the freedom of action of the defendant and should not be granted lightly or precipitately. It should be granted only when the court is fully satisfied that the law permits it and the emergency demands it.34 The very foundation of the jurisdiction to issue writ of injunction rests in the existence of a cause of action and in the probability of irreparable injury, inadequacy of pecuniary compensation and the prevention of the multiplicity of suits. Where facts are not shown to bring the case within these conditions, the relief of injunction should be refused.35 For the court to issue a writ of preliminary injunction, the petitioner was burdened to establish the following: (1) a right in esse or a clear and unmistakable right to be protected; (2) a violation of that right; (3) that there is an urgent and permanent act and urgent necessity for the writ to prevent serious damage.36 Thus, in the absence of a clear legal right, the issuance of the injunctive writ constitutes a grave abuse of discretion. Where the complainants right is doubtful or disputed, injunction is not proper. Injunction is a preservative remedy aimed at protecting substantial rights and interests. It is not designed to protect contingent or future rights. The possibility of irreparable damage without proof of adequate existing rights is not a ground for injunction.37 We have reviewed the pleadings of the parties and found that, as contended by the respondents, the petitioner failed to establish the essential requisites for the issuance of a writ of preliminary injunction. Hence, the trial court committed a

grave abuse of its discretion amounting to excess or lack of jurisdiction in denying the respondents comment/motion as well as their motion for reconsideration. First. The trial court cannot enjoin the respondents, at the instance of the petitioner, from selling, disposing of and encumbering their property. As the registered owners of the property, the respondents have the right to enjoy and dispose of their property without any other limitations than those established by law, in accordance with Article 428 of the Civil Code. The right to dispose of the property is the power of the owner to sell, encumber, transfer, and even destroy the property. Ownership also includes the right to recover the possession of the property from any other person to whom the owner has not transmitted such property, by the appropriate action for restitution, with the fruits, and for indemnification for damages.38 The right of ownership of the respondents is not, of course, absolute. It is limited by those set forth by law, such as the agrarian reform laws. Under Article 1306 of the New Civil Code, the respondents may enter into contracts covering their property with another under such terms and conditions as they may deem beneficial provided they are not contrary to law, morals, good conduct, public order or public policy. The respondents cannot be enjoined from selling or encumbering their property simply and merely because they had executed Deeds of Assignment in favor of the petitioner, obliging themselves to assign and transfer their rights or interests as agricultural farmers/laborers/sub-tenants over the landholding, and granting the petitioner the exclusive right to buy the property subject to the occurrence of certain conditions. The respondents were not parties to the said deeds. There is no evidence that the respondents agreed, expressly or impliedly, to the said deeds or to the terms and conditions set forth therein. Indeed, they assailed the validity of the said deeds on their claim that the same were contrary to the letter and spirit of P.D. No. 27 and Rep. Act No. 6657. The petitioner even admitted when he testified that he did not know any of the respondents, and that he had not met any of them before he filed his complaint in the RTC. He did not even know that one of those whom he had impleaded as defendant, Angelica Vda. de Lacson, was already dead. Q: But you have not met any of these Lacsons? A: Not yet, sir.
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Q: Do you know that two (2) of the defendants are residents of the United States? A: I do not know, sir. Q: You do not know also that Angela Tiotuvie (sic) Vda. de Lacson had already been dead? A: I am aware of that, sir.39 We are one of the Court of Appeals in its ruling that: We cannot see our way clear on how or why injunction should lie against petitioners. As owners of the lands being tilled by TIAMSON, et al, petitioners, undeer the law, have the right to enjoy and dispose of the same Thus, they have the right to possess the lands, as well as the right to encumber or alienate them. This principle of law notwithstanding, private respondent in the lower court sought to restrain the petitioners from encumbering and/or alienating the properties covered by TCT No. 35922-R, 35923-R and TCT No. 35925-R of the Registry of Deeds of San Fernando, Pampanga. This cannot be allowed to prosper since it would constitute a limitation or restriction, not otherwise established by law on their right of ownership, more so considering that petitioners were not even privy to the alleged transaction between private respondent and TIAMSON, et al.40 Second. A reading the averments of the complaint will show that the petitioner clearly has no cause of action against the respondents for the principal relief prayed for therein, for the trial court to fix a period within which to pay to each of the defendants-tenants the balance of the P50.00 per square meter, the consideration under the Deeds of Assignment executed by the defendantstenants. The respondents are not parties or privies to the deeds of assignment. The matter of the period for the petitioner to pay the balance of the said amount to each of the defendants-tenants is an issue between them, the parties to the deed.

Third. On the face of the complaint, the action of the petitioner against the respondents and the defendants-tenants has no legal basis. Under the Deeds of Assignment, the obligation of the petitioner to pay to each of the defendantstenants the balance of the purchase price was conditioned on the occurrence of the following events: (a) the respondents agree to sell their property to the petitioner; (b) the legal impediments to the sale of the landholding to the petitioner no longer exist; and, (c) the petitioner decides to buy the property. When he testified, the petitioner admitted that the legal impediments referred to in the deeds were (a) the respondents refusal to sell their property; and, (b) the lack of approval of the Department of Agrarian Reform: Q: There is no specific agreement prior to the execution of those documents as when they will pay? A: We agreed to that, that I will pay them when there are no legal impediment, sir. Q: Many of the documents are unlattered (sic) and you want to convey to this Honorable Court that prior to the execution of these documents you have those tentative agreement for instance that the amount or the cost of the price is to be paid when there are no legal impediment, you are using the word legal impediment, do you know the meaning of that? A: When there are (sic) no more legal impediment exist, sir. Q: Did you make how (sic) to the effect that the meaning of that phrase that you used the unlettered defendants? A: We have agreed to that, sir. ATTY. OCAMPO:

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May I ask, Your Honor, that the witness please answer my question not to answer in the way he wanted it. COURT:

and it was clearly stated in the title that there is [a] prohibited period of time before you can sell the property. I explained every detail to them.41 It is only upon the occurrence of the foregoing conditions that the petitioner would be obliged to pay to the defendants-tenants the balance of the P50.00 per square meter under the deeds of assignment. Thus: 2. That in case the ASSIGNOR and LANDOWNER will mutually agree to sell the said lot to the ASSIGNEE, who is given an exclusive and absolute right to buy the lot, the ASSIGNOR shall receive the sum of FIFTY PESOS (P50.00) per square meter as consideration of the total area actually tilled and possessed by the ASSIGNOR, less whatever amount received by the ASSIGNOR including commissions, taxes and all allowable deductions relative to the sale of the subject properties. 3. That this exclusive and absolute right given to the ASSIGNEE shall be exercised only when no legal impediments exist to the lot to effect the smooth transfer of lawful ownership of the lot/property in the name of the ASSIGNEE; 4. That the ASSIGNOR will remain in peaceful possession over the said property and shall enjoy the fruits/earnings and/or harvest of the said lot until such time that full payment of the agreed purchase price had been made by the ASSIGNEE.42 There is no showing in the petitioners complaint that the respondents had agreed to sell their property, and that the legal impediments to the agreement no longer existed. The petitioner and the defendants-tenants had yet to submit the Deeds of Assignment to the Department of Agrarian Reform which, in turn, had to act on and approve or disapprove the same. In fact, as alleged by the petitioner in his complaint, he was yet to meet with the defendants-tenants to discuss the implementation of the deeds of assignment. Unless and until the Department of Agrarian Reform approved the said deeds, if at all the petitioner had no right to enforce the same in a court of law by asking the trial court to fix a period within which to pay the balance of the purchase price and praying for injunctive relief. We do not agree with the contention of the petitioner that the deeds of assignment executed by the defendants-tenants are perfected option contracts.43 An option is a contract by which the owner of the property agrees with another person that he shall have the right to buy his property at a fixed price within a certain time. It is a condition offered or contract by which the owner stipulates with another that the latter shall have the right to buy the
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Just answer the question, Mr. Tayag. WITNESS:

Yes, Your Honor. ATTY. OCAMPO: Q: Did you explain to them? A: Yes, sir. 303

VOL. 426, MARCH 25, 2004 303 Tayag vs. Lacson Q: What did you tell them? A: I explain[ed] to them, sir, that the legal impediment then especially if the Lacsons will not agree to sell their shares to me or to us it would be hard to (sic) me to pay them in full. And those covered by DAR. I explain[ed] to them

property at a fixed price within a certain time, or under, or in compliance with certain terms and conditions, or which gives to the owner of the property the right to sell or demand a sale. It imposes no binding obligation on the person holding the option, aside from the consideration for the offer. Until accepted, it is not, properly speaking, treated as a contract.44 The second party gets in praesenti, not lands, not an agreement that he shall have the lands, but the right to call for and receive lands if he elects.45 An option contract is a separate and distinct contract from which the parties may enter into upon the conjunction of the option.46 In this case, the defendants-tenants-subtenants, under the deeds of assignment, granted to the petitioner not only an option but the exclusive right to buy the landholding. But the grantors were merely the defendants-tenants, and not the respondents, the registered owners of the property. Not being the registered owners of the property, the defendants-tenants could not legally grant to the petitioner the option, much less the exclusive right to buy the property. As the Latin saying goes, NEMO DAT QUOD NON HABET. Fourth. The petitioner impleaded the respondents as parties-defendants solely on his allegation that the latter induced or are inducing the defendants-tenants to violate the deeds of assignment, contrary to the provisions of Article 1314 of the New Civil Code which reads: Art. 1314. Any third person who induces another to violate his contract shall be liable for damages to the other contracting party. In So Ping Bun v. Court of Appeals,47 we held that for the said law to apply, the pleader is burdened to prove the following: (1) the existence of a valid contract; (2) knowledge by the third person of the existence of the contract; and (3) interference by the third person in the contractual relation without legal justification. Where there was no malice in the interference of a contract, and the impulse behind ones conduct lies in a proper business interest rather than in wrongful motives, a party cannot be a malicious interferer. Where the alleged interferer is financially interested, and such interest motivates his conduct, it cannot be said that he is an officious or malicious intermeddler.48 In fine, one who is not a party to a contract and who interferes thereon is not necessarily an officious or malicious intermeddler. The only evidence adduced by the petitioner to prove his claim is the letter from the defendants-tenants informing him that they had decided to sell their rights and interests over the landholding to the respondents, instead of honoring their obligation under the deeds of assignment because, according to them, the petitioner harassed

those tenants who did not want to execute deeds of assignment in his favor, and because the said defendants-tenants did not want to have any problem with the respondents who could cause their eviction for executing with the petitioner the deeds of assignment as the said deeds are in violation of P.D. No. 27 and Rep. Act No. 6657.49 The defendants-tenants did not allege therein that the respondents induced them to breach their contracts with the petitioner. The petitioner himself admitted when he testified that his claim that the respondents induced the defendants-assignees to violate contracts with him was based merely on what he heard, thus: Q: Going to your last statement that the Lacsons induces (sic) the defendants, did you see that the Lacsons were inducing the defendants? A: I heard and sometime in [the] first week of August, sir, they went in the barrio (sic). As a matter of fact, that is the reason why they sent me letter that they will sell it to the Lacsons. Q: Incidentally, do you knew (sic) these Lacsons individually? A: No, sir, it was only Mr. Espinosa who I knew (sic) personally, the alleged negotiator and has the authority to sell the property.50 Even if the respondents received an offer from the defendants-tenants to assign and transfer their rights and interests on the landholding, the respondents cannot be enjoined from entertaining the said offer, or even negotiating with the defendants-tenants. The respondents could not even be expected to warn the defendants-tenants for executing the said deeds in violation of P.D. No. 27 and Rep. Act No. 6657. Under Section 22 of the latter law, beneficiaries under P.D. No. 27 who have culpably sold, disposed of, or abandoned their land, are disqualified from becoming beneficiaries. From the pleadings of the petitioner, it is quite evident that his purpose in having the defendants-tenants execute the Deeds of Assignment in his favor was to acquire the landholding without any tenants thereon, in the event that the respondents agreed to sell the property to him. The petitioner knew that
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under Section 11 of Rep. Act No. 3844, if the respondents agreed to sell the property, the defendants-tenants shall have preferential right to buy the same under reasonable terms and conditions: SECTION 11. Lessees Right of Pre-emption.In case the agricultural lessor desires to sell the landholding, the agricultural lessee shall have the preferential right to buy the same under reasonable terms and conditions: Provided, That the entire landholding offered for sale must be pre-empted by the Land Authority if the landowner so desires, unless the majority of the lessees object to such acquisition: Provided, further, That where there are two or more agricultural lessees, each shall be entitled to said preferential right only to the extent of the area actually cultivated by him. . . .51 Under Section 12 of the law, if the property was sold to a third person without the knowledge of the tenants thereon, the latter shall have the right to redeem the same at a reasonable price and consideration. By assigning their rights and interests on the landholding under the deeds of assignment in favor of the petitioner, the defendants-tenants thereby waived, in favor of the petitioner, who is not a beneficiary under Section 22 of Rep. Act No. 6657, their rights of preemption or redemption under Rep. Act No. 3844. The defendants-tenants would then have to vacate the property in favor of the petitioner upon full payment of the purchase price. Instead of acquiring ownership of the portions of the landholding respectively tilled by them, the defendants-tenants would again become landless for a measly sum of P50.00 per square meter. The petitioners scheme is subversive, not only of public policy, but also of the letter and spirit of the agrarian laws. That the scheme of the petitioner had yet to take effect in the future or ten years hence is not a justification. The respondents may well argue that the agrarian laws had been violated by the defendantstenants and the petitioner by the mere execution of the deeds of assignment. In fact, the petitioner has implemented the deeds by paying the defendantstenants amounts of money and even sought their immediate implementation by setting a meeting with the defendants-tenants. In fine, the petitioner would not wait for ten years to evict the defendants-tenants. For him, time is of the essence. The Appellate Court Erred In Permanently Enjoining The Regional Trial Court From Continuing with the Proceedings in Civil Case No. 10910. We agree with the petitioners contention that the appellate court erred when it permanently enjoined the RTC from continuing with the proceedings in Civil Case No. 10910. The only issue before the appellate court was whether or not

the trial court committed a grave abuse of discretion amounting to excess or lack of jurisdiction in denying the respondents motion to deny or dismiss the petitioners plea for a writ of preliminary injunction. Not one of the parties prayed to permanently enjoin the trial court from further proceeding with Civil Case No. 10910 or to dismiss the complaint. It bears stressing that the petitioner may still amend his complaint, and the respondents and the defendants-tenants may file motions to dismiss the complaint. By permanently enjoining the trial court from proceeding with Civil Case No. 10910, the appellate court acted arbitrarily and effectively dismissed the complaint motu proprio, including the counterclaims of the respondents and that of the defendants-tenants. The defendants-tenants were even deprived of their right to prove their special and affirmative defenses. IN LIGHT OF ALL THE FOREGOING, the petition is PARTIALLY GRANTED. The Decision of the Court of Appeals nullifying the February 13, 1996 and April 16, 1997 Orders of the RTC is AFFIRMED. The writ of injunction issued by the Court of Appeals permanently enjoining the RTC from further proceeding with Civil Case No. 10910 is hereby LIFTED and SET ASIDE. The Regional Trial Court of Mabalacat, Pampanga, Branch 44, is ORDERED to continue with the proceedings in Civil Case No. 10910 as provided for by the Rules of Court, as amended. SO ORDERED. Puno (Chairman), Quisumbing, Austria-Martinez and Tinga, JJ., concur. Petition partially granted, judgment granted. Writs of injunction lifted and set aside. Note.The sole purpose of injunction is not to correct a wrong of the past, in the sense of redress for injury already sustained, but to prevent further injury. (Paramount Insurance Corporation vs. Court of Appeals, 310 SCRA 377 [1999]) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Tayag vs. Lacson, 426 SCRA 282(2004)]

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G.R. No. 132197. August 16, 2005.* ROSS RICA SALES CENTER, INC. and JUANITO KING & SONS, INC., petitioners, vs. SPOUSES GERRY ONG and ELIZABETH ONG, respondents.
Actions; Courts; Jurisdictions; Well settled is the rule that what determines the nature of an action as well as which court has jurisdiction over it are the allegations of the complaint and the character of the relief sought.Well-settled is the rule that what determines the nature of an action as well as which court has jurisdiction over it are the allegations of the complaint and the character of the relief sought. Respondents contend that the complaint did not allege that petitioners possession was originally lawful but had ceased to be so due to the expiration of the right to possess by virtue of any express or implied contract. Ejectment; Unlawful Detainer; It is equally settled that in an action for unlawful detainer, an allegation that the defendant is unlawfully withholding possession from the plaintiff is deemed sufficient, without necessarily employing the terminology of the law.In Javelosa v. Court of Appeals, it was held that the allegation in the complaint that there was unlawful withholding of possession is sufficient to make out a case for unlawful detainer. It is equally settled that in an action for unlawful detainer, an allegation that the defendant is unlawfully withholding possession from the plaintiff is deemed sufficient, without necessarily employing the terminology of the law. Same; Same; The phrase unlawfully withholding has been held to imply possession on the part of the defendant, which was legal in the beginning, having no other source than a contract, express or implied, and which later expired as a right and is being withheld by defendant.The phrase unlawful withholding has been held to imply possession on the part of defendant, which was legal in the beginning, having no other source than a contract, express or implied, and which later expired as a right and is being withheld by defendant. In Rosanna B. Barba v. Court of Appeals, we held that a simple allegation that the defendant is unlawfully withholding possession from plaintiff is sufficient. Same; Same; In an action for unlawful detainer, the question of possession is primordial while the issue of ownership is generally unessential.The issue involved in accion reivindicatoria is the recovery of ownership of real property. This differs from accion publiciana where the issue is the better right of possession or possession de jure, and accion interdictal where the issue is material possession or possession de facto. In an action for unlawful detainer, the question of possession is primordial while the issue of ownership is generally unessential. Same; Same; Jurisdictions; Petitioners, in all their pleadings, only sought to recover physical possession of the subject property. The mere fact that they claim ownership over the parcel of land as well did not deprive the Municipal Trial Court (MTC) of jurisdiction to try ejectment case.Neither the allegation in petitioners complaint for ejectment nor the defenses thereto raised by respondents sufficiently convert this case into an accion reivindicatoria which is beyond the province of the MTC to decide. Petitioners did not institute the complaint for ejectment as a means of claiming or obtaining ownership of the properties. The acknowledgment

in their pleadings of the fact of prior ownership by respondents does not constitute a recognition of respondents present ownership. This is meant only to establish one of the necessary elements for a case of unlawful detainer, specifically the unlawful withholding of possession. Petitioners, in all their pleadings, only sought to recover physical possession of the subject property. The mere fact that they claim ownership over the parcels of land as well did not deprive the MTC of jurisdiction to try the ejectment case. Same; Same; Same; If what is prayed for is ejectment or recovery of possession, it does not matter if ownership is claimed by either party. Therefore, the pending actions for declaration of nullity of deed of sale and Transfer Certificate of Title and quieting of title will not abate the ejectment case.Even if respondents claim ownership as a defense to the complaint for ejectment, the conclusion would be the same for mere assertion of ownership by the defendant in an ejectment case will not therefore oust the municipal court of its summary jurisdiction. This Court in Ganadin v. Ramos stated that if what is prayed for is ejectment or recovery of possession, it does not matter if ownership is claimed by either party. Therefore, the pending actions for declaration of nullity of deed of sale and Transfer Certificates of Title and quieting of title in Civil Case No. MAN-2356 will not abate the ejectment case. Same; Same; Same; The filing of an action for reconveyance of title over the same property or for annulment of the deed of sale over the land does not divest the Municipal Trial Court (MTC) of its jurisdiction to try the forcible entry or unlawful detainer case before it.In Drilon v. Gaurana, this Court ruled that the filing of an action for reconveyance of title over the same property or for annulment of the deed of sale over the land does not divest the MTC of its jurisdiction to try the forcible entry or unlawful detainer case before it, the rationale being that, while there may be identity of parties and subject matter in the forcible entry case and the suit for annulment of title and/or reconveyance, the rights asserted and the relief prayed for are not the same. Same; Same; Same; An adjudication made in an ejectment proceeding regarding the issue of ownership should be regarded as merely provisional and, therefore, would not bar or prejudice an action between the same parties involving title to the land. The foregoing doctrine is a necessary consequence of the nature of forcible entry and unlawful detainer cases where the only issue to be settled is the physical or material possession over the real property, that is, possession de facto and not possession de jure.In Oronce v. Court of Appeals, this Court held that the fact that respondents had previously filed a separate action for the reformation of a deed of absolute sale into one of pacto de retro sale or equitable mortgage in the same Court of First Instance is not a valid reason to frustrate the summary remedy of ejectment afforded by law to the plaintiff. Consequently, an adjudication made in an ejectment proceeding regarding the issue of ownership should be regarded as merely provisional and, therefore, would not bar or prejudice an action between the same parties involving title to the land. The foregoing doctrine is a necessary consequence of the nature of forcible entry and unlawful detainer cases where the only issue to be settled is the physical or material possession over the real property, that is, possession de facto and not possession de jure. Same; Same; Same; The long settled rule is that the issue of ownership cannot be subject of a collateral attack.The long settled rule is that the issue of ownership cannot be subject of a
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collateral attack. In Apostol v. Court of Appeals, this Court had the occasion to clarify this: . . . Under Section 48 of Presidential Decree No. 1529, a certificate of title shall not be subject to collateral attack. It cannot be altered, modified or cancelled, except in a direct proceeding for that purpose in accordance with law. The issue of the validity of the title of the respondents can only be assailed in an action expressly instituted for that purpose. Whether or not the petitioners have the right to claim ownership over the property is beyond the power of the court a quo to determine in an action for unlawful detainer.

23 March 1995. In turn, it appears that Mandaue Prime Estate Realty had acquired the properties from the respondents through a Deed of Absolute Sale dated 14 July 1994. However, this latter deed of sale and the transfers of title consequential thereto were subsequently sought to be annulled by respondents in a complaint filed on 13 February 1995 before the Mandaue RTC against Mandaue Prime Estate Realty.2 Per record, this case is still pending resolution. Meanwhile, the MTC resolved the ejectment case on 24 April 1996, with the decision ordering respondents to vacate the premises in question and to peacefully turn over possession thereof to petitioners. On appeal, the RTC rendered on 1 March 1997 a judgment affirming the MTCs decision in its entirety.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

Ernesto L. Abijay and Zosa & Quijano Law Offices for petitioners. Edgar F. Gica for respondents. TINGA, J.:

On 8 May 1997, respondents filed a notice of appeal. However, on the following day, they filed a motion for reconsideration. On 23 June 1997, the RTC issued an Order which concurrently gave due course to respondents notice of appeal filed on 8 May 1997; denied their motion for reconsideration dated 9 May 1997,3 and granted petitioners motion for immediate execution pending appeal. In a Petition for Certiorari with Injunction filed with the Court of Appeals and treated as a Petition for Review, the appellate court ruled that the MTC had no jurisdiction over said case as there was no contract between the parties, express or implied, as would qualify the same as one for unlawful detainer. Thus, the assailed Orders of the MTC and RTC were set aside. Petitioners then took this recourse via Petition for Review under Rule 45 of the Rules of Court. The principal issues raised before this Court are: (i) whether the RTC decision has already become final and executory at the time the petition for review was filed; (ii) whether the allegations in the complaint constitute a case for unlawful detainer properly cognizable by the MTC; and, (iii) whether petitioners, as registered owners, are entitled to the possession of the subject premises. We resolve the first argument to be without merit. The following sequence of events is undisputed: (1) On 1 March 1997, the RTC rendered the questioned decision affirming the judgment of the MTC.
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In a Decision1 dated 6 January 1998, the Former First Division of the Court of Appeals overturned the decisions of the Municipal Trial Court (MTC) and the Regional Trial Court (RTC) of Mandaue City, ruling instead that the MTC had no jurisdiction over the subject complaint for unlawful detainer. This petition for review prays for the reversal of the aforesaid Court of Appeals Decision. The case originated from a complaint for ejectment filed by petitioners against respondents, docketed as Civil Case No. 2376, before the MTC of Mandaue City, Branch I. In the complaint, petitioners alleged the fact of their ownership of three (3) parcels of land covered by Transfer Certificates of Title (TCT) Nos. 36466, 36467 and 36468. Petitioners likewise acknowledged respondent Elizabeth Ongs ownership of the lots previous to theirs. On 26 January 1995, Atty. Joseph M. Baduel, representing Mandaue Prime Estate Realty, wrote respondents informing them of its intent to use the lots and asking them to vacate within thirty (30) days from receipt of the letter. But respondents refused to vacate, thereby unlawfully withholding possession of said lots, so petitioners alleged. Ross Rica Sales Center, Inc. and Juanito King and Sons, Inc. (petitioners) had acquired the lands from Mandaue Prime Estate Realty through a sale made on

(2) On 28 April 1997, respondents received a copy of the aforementioned decision. (3) On 8 May 1997, respondents filed a Notice of Appeal with the RTC. (4) On 9 May 1997, respondents filed likewise with the RTC a Motion for Reconsideration of the aforementioned 1 March 1997 decision. (5) On 23 June 1997, the RTC of Mandaue issued an Order denying respondents Motion for Reconsideration. (6) On 9 July 1997, respondents received a copy of the aforementioned 23 June 1997 Order. (7) On 24 July 1997, respondents filed with the Court of Appeals their motion for an additional period of ten (10) days within which to file their Petition for Review. (8) On 30 July 1997, respondents filed with the Court of Appeals their Petition for Review. Petitioners assert that the Petition for Review was filed beyond the fifteen (15)day period for appeal. They theorize that the period started running on 28 April 1995, the date of receipt of the RTC decision, and ended on 13 May 1997. According to them, this reglementary period could not have been interrupted by the filing on 9 May 1997 of the Motion for Reconsideration because of the filing one day earlier of the Notice of Appeal. This Notice of Appeal dated 8 May 1997, albeit the wrong mode of appeal, expressly manifested their intention to file a petition for review to either the Court of Appeals or the Supreme Court.4 Petitioners further argue that respondents, after having filed the Notice of Appeal which was given due course by the RTC, cannot take an inconsistent stand such as filing a Motion for Reconsideration. Such filing, therefore, did not toll the fifteen (15)-day period which started running from the date of receipt of the RTC decision on 28 April 1997 and ended on 13 May 1997. Respondents, in their Comment,5 submit that the filing of the Notice of Appeal dated 8 May 1997 was improper, and as such did not produce any legal effect. Therefore, the filing of the Motion for Reconsideration immediately on the following day cured this defect. The RTC refused to subscribe respondents position. It justified the denial of the Motion for Reconsideration on the ground that the respondents had already filed a Notice of Appeal. The Order dated 23 June 1997 stated:

On record is a Notice of Appeal by Certiorari filed by Defendants on May 8, 1997. Likewise filed by Defendants on May 9, 1997 is a Motion for Reconsideration. Considering the Notice of Appeal filed earlier which the court hereby approves, the Motion for Reconsideration is DENIED. The Motion for Immediate Execution Pending Appeal being meritorious, is GRANTED.6 (Emphasis in the original.) Strangely enough, the Court of Appeals passed no comment on this point when it took cognizance of respondents position and reversed the RTC. But does this necessarily mean that the RTC was correct when it declared that the Motion for Reconsideration was barred by the filing of the Notice of Appeal, no matter how erroneous the latter mode was? Rule 42 governs the mode of appeal applicable in this case. Sec. 1 provides: Section 1. How appeal taken; time for filing.A party desiring to appeal from a decision of the RTC rendered in the exercise of its appellate jurisdiction may file a verified petition for review with the Court of Appeals, paying at the same time to the clerk of said court the corresponding docket and other lawful fees, depositing the amount of P500.00 for costs, and furnishing the Regional Trial Court and the adverse party with a copy of the petition. The petition shall be filed and served within fifteen (15) days from notice of the decision sought to be reviewed or of the denial of petitioners motion for new trial or reconsideration filed in due time after judgment. Upon proper motion and the payment of the full amount of the docket and other lawful fees and the deposit for costs before the expiration of the reglementary period, the Court of Appeals may grant an additional period of fifteen (15) days only within which to file the petition for review. No further extension shall be granted except for the most compelling reason and in no case to exceed fifteen (15) days. Since the unlawful detainer case was filed with the MTC and affirmed by the RTC, petitioners should have filed a Petition for Review with the Court of Appeals and not a Notice of Appeal with the RTC. However, we consider this to have been remedied by the timely filing of the Motion for Reconsideration on the following day. Section 3, Rule 50 of the Rules of Court allows the withdrawal of appeal at any time, as a matter of right, before the filing of the appellees brief. Applying this rule contextually, the filing of the Motion for

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Reconsideration may be deemed as an effective withdrawal of the defective Notice of Appeal. Perforce, the period of appeal was tolled by the Motion for Reconsideration and started to run again from the receipt of the order denying the Motion for Reconsideration. A Motion for Additional Time to File the Petition was likewise filed with the Court of Appeals. Counting fifteen (15) days from receipt of the denial of the Motion for Reconsideration and the ten (10)-day request for additional period, it is clear that respondents filed their Petition for Review on time. Petitioners invoke to the ruling in People v. De la Cruz 7 that once a notice of appeal is filed, it cannot be validly withdrawn to give way to a motion for reconsideration. The factual circumstances in the two cases are different. De la Cruz is a criminal case, governed by criminal procedure. Section 3, Rule 122 of the Rules of Court provides that the proper mode of appeal from a decision of the RTC is a notice of appeal and an appeal is deemed perfected upon filing of the notice of appeal. In the case at bar, a petition for review before the Court of Appeals is the proper mode of appeal from a decision of the RTC. Since the filing of the notice of appeal is erroneous, it is considered as if no appeal was interposed. Now on the second and more important issue raised by petitioners: whether the Complaint satisfies the jurisdictional requirements for a case of unlawful detainer properly cognizable by the MTC. The MTC considered itself as having jurisdiction over the ejectment complaint and disposed of the same in favor of petitioners. Said ruling was affirmed by the RTC. The Court of Appeals reversed the lower courts and found the complaint to be one not for unlawful detainer based on two (2) grounds, namely: that the allegations fail to show that petitioners were deprived of possession by force, intimidation, threat, strategy or stealth; and that there is no contract, express or implied, between the parties as would qualify the case as one of unlawful detainer. We disagree with the Court of Appeals. The complaint for unlawful detainer contained the following material allegations: ....

3. That plaintiffs are the owners of Lot No. 2, which is covered by T.C.T. No. 36466 of the Register of Deeds of Mandaue City, Lot No. 1-A which is covered by T.C.T. No. 36467 of the Register of Deeds of Mandaue City and Lot No. 86A which is covered by T.C.T. No. 36468 of the Register of Deeds of Mandaue City, all situated in the City of Mandaue. Copies of said Transfer Certificate of Titles are hereto attached as Annexes A, B, and C respectively and made an integral part hereof; 4. That defendant Elizabeth Ong is the previous registered owner of said lots; 5. That as the previous registered owner of said lots, defendant Elizabeth Ong and her husband and co-defendant Jerry Ong have been living in the house constructed on said lots; 6. That on May 6, 1995, plaintiffs, through the undersigned counsel, wrote defendants a letter informing them or their intent to use said lots and demanded of them to vacate said lots within 30 days from receipt of said letter. Copy of said letter is hereto attached as Annex D and made an integral part thereof; 7. That despite demand to vacate, the defendants have refused and still refuse to vacate said lots, thus, unlawfully withholding possession of said lots from plaintiffs and depriving plaintiffs of the use of their lots; 8. That in unlawfully withholding the possession of said lots from the plaintiffs, plaintiffs have suffered damages in the form of unearned rentals in the amount of P10,000.00 a month . . . .8 Well-settled is the rule that what determines the nature of an action as well as which court has jurisdiction over it are the allegations of the complaint and the character of the relief sought.9 Respondents contend that the complaint did not allege that petitioners possession was originally lawful but had ceased to be so due to the expiration of the right to possess by virtue of any express or implied contract. The emphasis placed by the Court of Appeals on the presence of a contract as a requisite to qualify the case as one of unlawful detainer contradicts the various jurisprudence dealing on the matter.

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In Javelosa v. Court of Appeals,10 it was held that the allegation in the complaint that there was unlawful withholding of possession is sufficient to make out a case for unlawful detainer. It is equally settled that in an action for unlawful detainer, an allegation that the defendant is unlawfully withholding possession from the plaintiff is deemed sufficient, without necessarily employing the terminology of the law.11 Hence, the phrase unlawful withholding has been held to imply possession on the part of defendant, which was legal in the beginning, having no other source than a contract, express or implied, and which later expired as a right and is being withheld by defendant.12 In Rosanna B. Barba v. Court of Appeals,13 we held that a simple allegation that the defendant is unlawfully withholding possession from plaintiff is sufficient. Based on this premise, the allegation in the Complaint that: . . . . despite demand to vacate, the defendants have refused and still refuse to vacate said lots, thus, unlawfully withholding possession of said lots from plaintiffs and depriving plaintiffs of the use of their lots;14 is already sufficient to constitute an unlawful detainer case. In the subject complaint, petitioners alleged that they are the registered owners of the lots covered by TCT Nos. 36466, 36467 and 36468. By their implied tolerance, they have allowed respondents, the former owners of the properties, to remain therein. Nonetheless, they eventually sent a letter to respondents asking that the latter vacate the said lots. Respondents refused, thereby depriving petitioners of possession of the lots. Clearly, the complaint establishes the basic elements of an unlawful detainer case, certainly sufficient for the purpose of vesting jurisdiction over it in the MTC. Respondents would like to capitalize on the requisites as cited in the case of Raymundo dela Paz v. Panis.15 But the citation is a mere reiteration of Sec. 1, Rule 7016 of the Rules of Court. The case does not provide for rigid standards in the drafting of the ejectment complaint. The case of Co Tiamco v. Diaz 17 justifies a more liberal approach, thus: . . . The principle underlying the brevity and simplicity of pleadings in forcible entry and unlawful detainer cases rests upon considerations of public policy. Cases of forcible entry and detainer are summary in nature, for they involve perturbation of social order which must be restored as promptly as possible and, accordingly, technicalities or details of procedure should be carefully avoided.18 Moreover, petitioners fail to mention any of the incidents of the

pending case involving the annulment of deed of sale and title over said property. Petitioners know better than to question this in an ejectment proceeding, which brings us to the nature of the action in this case. Respondents insist that the RTC, and not the MTC, had jurisdiction over the action, it being an accion reivindicatoria according to them, on the ground that petitioners were constantly claiming ownership over the lands in the guise of filing an action for ejectment. In their Comment,19 respondents maintain that they occupy the subject lots as the legal owners. Petitioners, on the other hand, are seeking recovery of possession under a claim of ownership which is tantamount to recovery of possession based on alleged title to the lands, and therefore is within the original jurisdiction of the RTC, so respondents conclude. This contention is not tenable. The issue involved in accion reivindicatoria is the recovery of ownership of real property. This differs from accion publiciana where the issue is the better right of possession or possession de jure, and accion interdictal where the issue is material possession or possession de facto. In an action for unlawful detainer, the question of possession is primordial while the issue of ownership is generally unessential.20 Neither the allegation in petitioners complaint for ejectment nor the defenses thereto raised by respondents sufficiently convert this case into an accion reivindicatoria which is beyond the province of the MTC to decide. Petitioners did not institute the complaint for ejectment as a means of claiming or obtaining ownership of the properties. The acknowledgment in their pleadings of the fact of prior ownership by respondents does not constitute a recognition of respondents present ownership. This is meant only to establish one of the necessary elements for a case of unlawful detainer, specifically the unlawful withholding of possession. Petitioners, in all their pleadings, only sought to recover physical possession of the subject property. The mere fact that they claim ownership over the parcels of land as well did not deprive the MTC of jurisdiction to try the ejectment case. Even if respondents claim ownership as a defense to the complaint for ejectment, the conclusion would be the same for mere assertion of ownership by the defendant in an ejectment case will not therefore oust the municipal court of its summary jurisdiction.21 This Court in Ganadin v. Ramos 22 stated that if what is prayed for is ejectment or recovery of possession, it does not matter if ownership is claimed by either party. Therefore, the pending actions
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for declaration of nullity of deed of sale and Transfer Certificates of Title and quieting of title in Civil Case No. MAN-2356 will not abate the ejectment case. In Drilon v. Gaurana,23 this Court ruled that the filing of an action for reconveyance of title over the same property or for annulment of the deed of sale over the land does not divest the MTC of its jurisdiction to try the forcible entry or unlawful detainer case before it, the rationale being that, while there may be identity of parties and subject matter in the forcible entry case and the suit for annulment of title and/or reconveyance, the rights asserted and the relief prayed for are not the same.24 In Oronce v. Court of Appeals,25 this Court held that the fact that respondents had previously filed a separate action for the reformation of a deed of absolute sale into one of pacto de retro sale or equitable mortgage in the same Court of First Instance is not a valid reason to frustrate the summary remedy of ejectment afforded by law to the plaintiff. Consequently, an adjudication made in an ejectment proceeding regarding the issue of ownership should be regarded as merely provisional and, therefore, would not bar or prejudice an action between the same parties involving title to the land. The foregoing doctrine is a necessary consequence of the nature of forcible entry and unlawful detainer cases where the only issue to be settled is the physical or material possession over the real property, that is, possession de facto and not possession de jure. The Court reiterated this in the case of Tecson v. Gutierrez 26 when it ruled: We must stress, however, that before us is only the initial determination of ownership over the lot in dispute, for the purpose of settling the issue of possession, although the issue of ownership is inseparably linked thereto. As such, the lower court's adjudication of ownership in the ejectment case is merely provisional, and our affirmance of the trial courts decisions as well, would not bar or prejudice an action between the same parties involving title to the property, if and when such action is brought seasonably before the proper forum. The long settled rule is that the issue of ownership cannot be subject of a collateral attack. In Apostol v. Court of Appeals,27 this Court had the occasion to clarify this: . . . Under Section 48 of Presidential Decree No. 1529, a certificate of title shall not be subject to collateral attack. It cannot be altered, modified or cancelled,

except in a direct proceeding for that purpose in accordance with law. The issue of the validity of the title of the respondents can only be assailed in an action expressly instituted for that purpose. Whether or not the petitioners have the right to claim ownership over the property is beyond the power of the court a quo to determine in an action for unlawful detainer.28 With the conclusion of the second issue in favor of petitioners, there is no need to discuss the third assignment of error which is related to the second issue. WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals dated 6 January 1998 is REVERSED and SET ASIDE and the Decision dated 24 April 1996 of the Municipal Trial Court of Mandaue City REINSTATED and AFFIRMED. Costs against respondents. SO ORDERED. Puno (Chairman), Austria-Martinez, Callejo, Sr. and Chico-Nazario, JJ., concur. Petition granted, judgment reversed and set aside. That of the Municipal Trial Court of Mandaue City reinstated and affirmed. Notes.In ejectment cases, the question is limited to which party among the litigants is entitled to the physical or material possession of the premises, that is to say, who should have possession de facto. (Rural Bank of Sta. Ignacia, Inc. vs. Dimatulac, 401 SCRA 742 [2003]) A certificate of title cannot be subject to collateral attack and can be altered, modified or cancelled only in a direct proceeding in accordance with law. (Balanon-Anicete vs. Balanon, 402 SCRA 514 [2003]) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Ross Rica Sales Center, Inc. vs. Ong, 467 SCRA 35(2005)]

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G.R. No. 76216.September 14, 1989.* GERMAN MANAGEMENT & SERVICES, INC., petitioner, vs. HON. COURT OF APPEALS and ORLANDO GERNALE, respondents. G.R. No. 76217.September 14, 1989.* GERMAN MANAGEMENT & SERVICES, INC., petitioner, vs. HON. COURT OF APPEALS and ERNESTO VILLEZA, respondents.
Appeals; Due Process; The Court of Appeals need not require petitioner to file an answer for due process to exist.We affirm. The Court of Appeals need not require petitioner to file an answer for due process to exist. The comment filed by petitioner on February 26, 1986 has sufficiently addressed the issues presented in the petition for review filed by private respondents before the Court of Appeals. Having heard both parties, the Appellate Court need not await or require any other additional pleading. Moreover, the fact that petitioner was heard by the Court of Appeals on its motion for reconsideration negates any violation of due process. Forcible Entry; Merely a quieting process, and title is not involved; Case at bar. Notwithstanding petitioners claim that it was duly authorized by the owners to develop the subject property, private respondents, as actual possessors, can commence a forcible entry case against petitioner because ownership is not in issue. Forcible entry is merely a quieting process and never determines the actual title to an estate. Title is not involved. Same; Same; Possession; Quieting of title; Rule that regardless of the actual condition of the title to the property, the party in peaceable quiet possession shall not be turned out by a strong hand, violence or terror; Remedy of a person having a better right.Although admittedly petitioner may validly claim ownership based on the muniments of title it presented, such evidence does not responsively address the issue of prior actual possession raised in a forcible entry case. It must be stated that regardless of the actual condition of the title to the property, the party in peaceable quiet possession shall not be turned out by a strong hand, violence or terror. Thus, a party who can prove prior possession can recover such possession even against the owner himself. Whatever may be the character of his prior possession, if he has in his favor priority in time, he has the security that entitles him to remain on the property until he is lawfully ejected by a person having a better right by accion publiciana oraccion reivindicatoria. Same; Same; Same; Doctrine of self-help can only be exercised at the time of actual or threatened dispossession; Absent in the case at bar.Both the Municipal Trial Court and the Regional Trial Court have rationalized petitioners drastic action of bulldozing and destroying the crops of private respondents on the basis of the doctrine of selfhelp enunciated in Article 429 of the New Civil Code. Such justification is unavailing because the doctrine of self-help can only be exercised at the time of actual or threatened dispossession which is absent in the case at bar. When possession has already been lost, the owner must resort to judicial process for the recovery of property. This is clear from Article 536 of the Civil Code which states, (I)n no case may possession be acquired through force or intimidation as long as there is a possessor who

objects thereto. He who believes that he has an action or right to deprive another of the holding of a thing, must invoke the aid of the competent court, if the holder should refuse to deliver the thing.

PETITION to review the decision of the Court of Appeals.

The facts are stated in the opinion of the Court. Alam, Verano & Associates for petitioner. Francisco D. Lozano for private respondents. FERNAN,C. J.:

Spouses Cynthia Cuyegkeng Jose and Manuel Rene Jose, residents of Pennsylvania, Philadelphia, USA are the owners of a parcel of land situated in Sitio Inarawan, San Isidro, Antipolo, Rizal, with an area of 232,942 square meters and covered by TCT No. 50023 of the Register of Deeds of the province of Rizal issued on September 11, 1980 which canceled TCT No. 56762/ T-560. The land was originally registered on August 5, 1948 in the Office of the Register of Deeds of Rizal as OCT No. 19, pursuant to a Homestead Patent granted by the President of the Philippines on July 27, 1948, under Act No. 141. On February 26, 1982, the spouses Jose executed a special power of attorney authorizing petitioner German Management Services to develop their property covered by TCT No. 50023 into a residential subdivision. Consequently, petitioner on February 9, 1983 obtained Development Permit No. 00424 from the Human Settlements Regulatory Commission for said development. Finding that part of the property was occupied by private respondents and twenty other persons, petitioner advised the occupants to vacate the premises but the latter refused. Nevertheless, petitioner proceeded with the development of the subject property which included the portions occupied and cultivated by private respondents. Private respondents filed an action for forcible entry against petitioner before the Municipal Trial Court of Antipolo, Rizal, alleging that they are mountainside farmers of Sitio Inarawan, San Isidro, Antipolo, Rizal and members of the Concerned Citizens of Farmers Association; that they have occupied and tilled
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their farmholdings some twelve to fifteen years prior to the promulgation of P. D. No. 27; that during the first week of August 1983, petitioner, under a permit from the Office of the Provincial Governor of Rizal, was allowed to improve the Barangay Road at Sitio Inarawan, San Isidro, Antipolo, Rizal at its expense, subject to the condition that it shall secure the needed right of way from the owners of the lot to be affected; that on August 15, 1983 and thereafter, petitioner deprived private respondents of their property without due process of law by: (1) forcibly removing and destroying the barbed wire fence enclosing their farmholdings without notice; (2) bulldozing the rice, corn, fruit bearing trees and other crops of private respondents by means of force, violence and intimidation, in violation of P. D. 1038 and (3) trespassing, coercing and threatening to harass, remove and eject private respondents from their respective farmholdings in violation of P.D. Nos. 316, 583, 815, and 1028.1 On January 7, 1985, the Municipal Trial Court dismissed private respondents complaint for forcible entry.2 On appeal, the Regional Trial Court of Antipolo, Rizal, Branch LXXI sustained the dismissal by the Municipal Trial Court.3 Private respondents then filed a petition for review with the Court of Appeals. On July 24, 1986, said court gave due course to their petition and reversed the decisions of the Municipal Trial Court and the Regional Trial Court.4 The Appellate Court held that since private respondents were in actual possession of the property at the time they were forcibly ejected by petitioner, private respondents have a right to commence an action for forcible entry regardless of the legality or illegality of possession.5 Petitioner moved to reconsider but the same was denied by the Appellate Court in its resolution dated September 26, 1986.6 Hence, this recourse. The issue in this case is whether or not the Court of Appeals denied due process to petitioner when it reversed the decision of the court a quo without giving petitioner the opportunity to file its answer and whether or not private respondents are entitled to file a forcible entry case against petitioner.7 We affirm. The Court of Appeals need not require petitioner to file an answer for due process to exist. The comment filed by petitioner on February 26, 1986 has sufficiently addressed the issues presented in the petition for review filed by private respondents before the Court of Appeals. Having heard both parties, the Appellate Court need not await or require any other additional pleading.

Moreover, the fact that petitioner was heard by the Court of Appeals on its motion for reconsideration negates any violation of due process. Notwithstanding petitioners claim that it was duly authorized by the owners to develop the subject property, private respondents, as actual possessors, can commence a forcible entry case against petitioner because ownership is not in issue. For-cible entry is merely a quieting process and never determines the actual title to an estate. Title is not involved.8 In the case at bar, it is undisputed that at the time petitioner entered the property, private respondents were already in possession thereof. There is no evidence that the spouses Jose were ever in possession of the subject property. On the contrary, private respondents peaceable possession was manifested by the fact that they even planted rice, corn and fruit bearing trees twelve to fifteen years prior to petitioners act of destroying their crops. Although admittedly petitioner may validly claim ownership based on the muniments of title it presented, such evidence does not responsively address the issue of prior actual possession raised in a forcible entry case. It must be stated that regardless of the actual condition of the title to the property, the party in peaceable quiet possession shall not be turned out by a strong hand, violence or terror.9 Thus, a party who can prove prior possession can recover such possession even against the owner himself. Whatever may be the character of his prior possession, if he has in his favor priority in time, he has the security that entitles him to remain on the property until he is lawfully ejected by a person having a better right by accion publiciana or accion reivindicatoria.10 Both the Municipal Trial Court and the Regional Trial Court have rationalized petitioners drastic action of bulldozing and destroying the crops of private respondents on the basis of the doctrine of self-help enunciated in Article 429 of the New Civil Code.11 Such justification is unavailing because the doctrine of self-help can only be exercised at the time of actual or threatened dispossession which is absent in the case at bar. When possession has already been lost, the owner must resort to judicial process for the recovery of property. This is clear from Article 536 of the Civil Code which states, (I)n no case may possession be acquired through force or intimidation as long as there is a possessor who objects thereto. He who believes that he has an action or right to deprive another of the holding of a thing, must invoke the aid of the competent court, if the holder should refuse to deliver the thing.

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WHEREFORE, the Court resolved to DENY the instant petition. The decision of the Court of Appeals dated July 24, 1986 is hereby AFFIRMED. Costs against petitioner. SO ORDERED. Bidin and Corts, JJ., concur. Gutierrez, Jr., J., in the result. Feliciano, J., on leave. Decision affirmed. Petition denied. Notes.Admission of petitioners appeal is more in keeping with the ends of substantial justice. (Republic vs. Court of Appeals,118 SCRA 409.) No denial of right to appeal which was lost due to appellants fault. (Lobete vs. Sundiam, 123 SCRA 95.) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [German Management & Services, Inc. vs. Court of Appeals, 177 SCRA 495(1989)]

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No. L-48250. December 28, 1979.* GRAND UNION SUPERMARKET, INC. and NELIA SANTOS FANDINO, petitioners, vs. JOSE J. ESPINO, JR., and THE HONORABLE COURT OF APPEALS, respondents.
Criminal Law; Theft (Shoplifting); Evidence; Where plaintiff had absolutely no intention to steal the rat tail file from the supermarket and his act of picking it up from the open shelf thereof was not criminal nor done with malice or criminal intent, the crime of shoplifting was not committed.We agree with the holding of the respondent appellate court that the evidence sustains the courts finding that the plaintiff had absolutely no intention to steal the file. The totality of the facts and circumstances as found by the Court of Appeals unerringly points to the conclusion that private respondent did not intend to steal the file and that his act of picking up the file from the open shelf was not criminal nor done with malice or criminal intent for on the contrary, he took the item with the intention of buying and paying for it. Same; Same; Same; The undisputed facts and circumstances surrounding the alleged taking of the file, the education, position and character of the respondent and the absence of any police record against him strongly and convincingly uphold the conclusion that private respondent was not shoplifting; case at bar.This Court needs only to stress the following undisputed facts which strongly and convincingly uphold the conclusion that private respondent was not shoplifting. Thus, the facts that private respondent after picking the cylindrical rat-tail file costing P3.85 had placed it inside his left front breast pocket with a good portion of the item exposed to view and that he did not conceal it in his person or hid it from sight as well as the fact that he paid the purchases of his wife amounting to P77.00 at the checkout counter of the Supermarket, showed that he was not acting suspiciously or furtively. And the circumstance that he was with his family consisting of his wife, Mrs. Caridad Jayme Espino, and their two daughters at the time negated any criminal intent on his part to steal. Moreover, when private respondent was approached by the guard of the Supermarket as he was leaving by the exit to his car who told him, Excuse, Mr., I think you have something in your pocket which you have not paid for, Espino immediately apologized and answered. I am sorry, Espino immediately apologized and answered, I am sorry, which indicated his sincere apology or regrets. He turned back towards the cashier to pay for the file which proved his honesty, sincerity and good faith in buying the item, and not to shoplift the same. x x x and considering further the personal circumstances of the private respondent, his education, position and character, showing that he is a graduate Mechanical Engineer from U.P. Class 1950, employed as an executive of Procter & Gamble Phils., Inc., a corporate manager incharge of motoring and warehousing therein; x x x We are fully convinced, as the trail and appellate courts were, that private respondent did not intend to steal the article costing P3.85. Nothing in the records intimates or hints whatsoever that private respondent has had any police record of any sort much less suspicion of stealing or shoplifting. Same; Same; Same; Shoplifting to be considered a crime, it must be adjudged on a case-to-case basis, with all the attendant facts and circumstances considered in their entirety.We do not lay down here any hard-and-fast rule as to what act or combination of acts constitute the crime of

shoplifting for it must be stressed that each case must be considered and adjudged on a case-tocase basis and that in the determination of whether a person suspected of shoplifting has in truth and in fact committed the same, all the attendant facts and circumstances should be considered in their entirety and not from any single fact or circumstance from which to impute the stigma of shoplifting on any person suspected and apprehended therefor. Civil Law; Damages; Where petitioners wilfully caused loss or injury to private respondent in a manner contrary to morals, good customs and public policy, they are liable for damages under Arts. 19 and 21 in relation to Art. 2219 of the Civil Code.Nonetheless, the false accusation charged against the private respondent after detaining and interrogating him by the uniformed guards and the mode and manner in which he was subjected, shouting at him, imposing him a fine, threatening to call the police and in the presence and hearing of many people at the Supermarket which brought and caused him humiliation and embarrassment, sufficiently rendered the petitioners liable for damages under Articles 19 and 21 relation to Article 2219 of the Civil Code. We rule that under the facts of the case at bar, petitioners wilfully caused loss or injury to private respondent in a manner that was contrary to morals, good customs or public policy. It is against morals, good customs and public policy to humiliate, embarrass and degrade the dignity of a person. Everyone must respect the dignity, personality, privacy and peace of mind of his neighbors and other persons (Article 26, Civil Code). And one must act with justice, give everyone his due and observe honesty and good faith (Article 19, Civil Code). Same; Same; Moral damages; Proof of pecuniary loss necessary for moral, nominal, temperate, liquidated or exemplary damages to be adjudicated; Assessment of such damages left to the discretion of the court.While no proof of pecuniary loss is necessary in order that moral, nominal, temperate, liquidated or exemplary damages may be adjudicated, the assessment of such damages, except liquidated ones, is left to the discretion of the court, according to the circumstances of each case (Art. 2216, New Civil Code). Same; Same; Same; Reduction of moral damages to be recovered against petitioners justified due to contributory negligence of respondent; case at bar.In the case at bar, there is no question that the whole incident that befell respondent had arisen in such a manner that was created unwittingly by his own act of forgetting to pay for the file. It was his forgetfullness in checking out the item and paying for it that started the chain of events which led to his embarrassment and humiliation, thereby causing him mental anguish, wounded feelings and serious anxiety. Yet, private respondents act of omission contributed to the occurrence of his injury or loss and such contributory negligence is a factor which may reduce the damages that private respondent may recover (Art. 2214, New Civil Code). Same; Same; Same; Purpose of moral damages; Award of moral damages must be proportionate to the suffering inflicted.As succinctly expressed by Mr. Justice J.B. L. Reyes in his concurring and dissenting opinion in Pangasinan Transportation Company, Inc. vs. Legaspi, 12 SCRA 598, the purpose of moral damages is essentially indemnity or reparation, both punishment or correction. Moral damages are emphatically not intended to enrich a complainant at the expense of a defendant; they are awarded only to enable the injured party to obtain means, diversions or amusements that will serve to alleviate the moral suffering he has undergone, by reason of the defendants culpable action. In other words, the award of moral damages is aimed at a
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restoration, within the limits of the possible, of the spiritual status quo ante and, it must be proportionate to the suffering inflicted. Same; Same; Exemplary or corrective damages; Purpose of imposition; Cannot be recovered as a matter of right but left to the discretion of the court; Facts and circumstances of the case do not warrant the grant of exemplary damages in favor of respondent.The grant of Twenty-Five Thousand Pesos (P25,000.00) as exemplary damages is unjustified. Exemplary or corrective damages are imposed by way of example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages (Art. 2229, New Civil Code). Exemplary damages cannot be recovered as a matter of right; the court will decide whether or not they could be adjucidated (Art. 2223, New Civil Code). Considering that exemplary damages are awarded for wanton acts, that they are penal in character granted not by way of compensation but as a punishment to the offender and a warning to others as a sort of deterrent, We hold that the facts and circumstances of the case at bar do not warrant the grant of exemplary damages. Same; Same; Same; Exemplary damages not awarded; Defense of property; Where petitioners acted in good faith in trying to protect and recover their property, and they acted upon probable cause in stopping and investigating respondent for taking the file without paying for it, they are considered in lawful exercise of their right of defense of property under Art. 429 of the Civil Code and are exempt from the imposition of exemplary damages against them.Petitioners acted in good faith in trying to protect and recover their property, a right which the law accords to them. Under Article 429, New Civil Code, the owner or lawful possessor of a thing has right to exclude any person from the enjoyment and disposal thereof and for this purpose, he may use such force as may be reasonably necessary to repeal or prevent an actual or threatened unlawful physical invasion or usurpation of his property. And since a person who acts in the fulfillment of a duty or in the lawful exercise of a right or office exempts him from civil or criminal liability, petitioner may not be punished by imposing exemplary damages against him. We agree that petitioners acted upon probable cause in stopping and investigating private respondent for taking the file without paying for it, hence, the imposition of exemplary damages as a warning to others by way of a deterrent is without legal basis. We, therefore, eliminate the grant of exemplary damages to the private respondent.

Twenty-Five Thousand Pesos (P25,000.00) as exemplary damages, and Five Thousand Pesos (P5,000.00) as attorneys fee. Costs of both instances shall be taxed against the defendants. The facts of the case are as stated in the decision of the respondent court, to wit: Upon the evidence, and from the findings of the lower court, it appears that in the morning of August 22, 1970, plaintiff Jose J. Espino, Jr., a civil engineer and an executive of Procter and Gamble Philippines, Inc., and his wife and their two daughters went to shop at the defendants South Supermarket in Makati. While his wife was shopping at the groceries section, plaintiff browsed around the other parts of the market. Finding a cylindrical rat tail file which he needed in his hobby and had been wanting to buy, plaintiff picked up that item from one of the shelves. He held it in his hand thinking that it might be lost, because of its tiny size, if he put it in his wifes grocery cart. In the course of their shopping, plaintiff and his wife saw the maid of plaintiffs aunt. While talking to this maid, plaintiff stuck the file into the front breast pocket of his shirt with a good part of the merchandise exposed. At the check-out counter, the plaintiff paid for his wifes purchases which amounted to P77.00, but he forgot to pay for the file. As he was leaving by the exit of the supermarket on his way to his car, carrying two bags of groceries and accompanied by his wife and two daughter, plaintiff was approached by a uniformed guard of the supermarket who said: Excuse me, Mr., I think you have something in your pocket which you have not paid for. (p. 5, tsn, Aug. 13, 1971), pointing to his left front breast pocket. Suddenly reminded of the file, plaintiff apologized thus: I am sorry, and he turned back toward the cashier to pay for the file. But the guard stopped him and led him instead toward the rear of the supermarket. The plaintiff protested but the guard was firm saying: No, Mr., please come with me. It is the procedure of the supermarket to bring people that we apprehend to the back of the supermarket (p. 8, ibid). The time was between 9 and 10 oclock. A crowd of customers on their way into the supermarket saw the plaintiff being stopped and led by a uniformed guard toward the rear of the supermarket. Plaintiff acquiesced and signaled to his wife and daughters to wait. Into a cubicle which was immediately adjacent to the area where deliveries to the supermarket were being made, the plaintiff was ushered. The guard directed him to a table and gave the file to the man seated at the desk. Another man stood beside the plaintiff. The man at the desk looked at the plaintiff and
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GUERRERO, J.

This is a petition for certiorari by way of appeal from the decision of the Court of Appeals1 dated September 26, 1977 rendered in CA-G.R. No. 55186-R entitled Jose J. Espino, Jr., plaintiff-appellant, versus Grand Union Supermarket, Inc. and Nelia Santos-Fandino, defendants-appellees, the dispositive portion of which states: WHEREFORE, the appealed judgment is hereby reversed and set aside. Defendants are ordered to pay plaintiff-jointly and severally, the sum of Seventy-Five Thousand Pesos (P75,000.00) by way of moral damages,

the latter immediately explained the circumstances that led to the finding of the file in his possession. The man at the desk pulled out a sheet of paper and began to ask plaintiffs name, age, residence and other personal data. Plaintiff was asked to make a brief statement, and on the sheet of paper or Incident Report he wrote down the following: While talking to my aunts maid with my wife, I put this item in my shirt pocket. I forgot to check it out with my wifes items (Exhibit A). Meanwhile, the plaintiffs wife joined him and asked what had taken him so long. The guard who had accosted plaintiff took him back inside the supermarket in the company of his wife. Plaintiff and his wife were directed across the main entrance to the shopping area, down the line of check-out counters, to a desk beside the first checkout counter. To the woman seated at the desk, who turned out to be defendant Nelia Santos-Fandino, the guard presented the incident report and the file, Exhibit B. Defendant Fandino read the report and addressing the guard remarked: Ano, nakaw na naman ito (p. 22, Id.). Plaintiff explained and narrated the incident that led to the finding of the file in his pocket, telling Fandino that he was going to pay for the file because he needed it. But this defendant replied: That is all they say, the people whom we cause not paying for the goods say. . . They all intended to pay for the things that are found to them. (p. 23, Id). Plaintiff objected and said that he was a regular customer of the supermarket. Extracting a P5.00 bill from his pocket, plaintiff told Fandino that he was paying for the file whose cost was P3.85. Fandino reached over and took the P5.00 bill from plaintiff with these words: We are fining you P5.00. That is your fine. Plaintiff was shocked. He and his wife objected vigorously that he was not a common criminal, and they wanted to get back the P5.00. But Fandino told them that the money would be given as an incentive to the guards who apprehend pilferers. People were milling around them and staring at the plaintiff. Plaintiff gave up the discussion. He drew a P50.00 bill and took back the file. Fandino directed him to the nearest check-out counter where he had to fall in line. The people who heard the exchange of words between Fandino and plaintiff continued to stare at him. At the trial, plaintiff expressed his embarrassment and humiliation thus: I felt as though I wanted to disappear into a hole on the ground (p. 34, id.). After paying for the file, plaintiff and his wife walked as fast as they could out of the supermarket. His first impulse was to go back to the supermarket that night to throw rocks at its glass windows. But reason prevailed over passion and he thought that justice should take its due course.

Plaintiff was certain during the trial that when he signed the incident report, Exhibit A, inside the cubicle at the back of the supermarket only his brief statement of the facts (Exhibit A-2), aside from his name and personal circumstances, was written thereon. He swore that the following were not in the incident report at the time he signed it: Exhibit A-1 which says opposite the stenciled word SUBJECT: Shoplifting Exhibit A-3 which says opposite the stenciled words Action Taken: Released by Mrs. Fandino after paying the item. Exhibit A-4 which says opposite the stenciled words Remarks Noted: Grd. Ebreo requested Grd. Paunil to apprehend subject shoplifter. Private respondents complaint filed on October 8, 1970 is founded on Article 21 in relation to Article 2219 of the New Civil Code and prays for moral damages, exemplary damages, attorneys fees and expenses of litigation, costs of the suit and the return of the P5.00 fine. After trial, the Court of First Instance of Pasig, Rizal, Branch XIX dismissed the complaint. Interposing the appeal to the Court of Appeals, the latter reversed and set aside the appealed judgment, granting and damages as earlier stated. Not satisfied with the decision of the respondent court, petitioners instituted the present petition and submits the following grounds and/or assignment of errors, to wit: I Respondent Court of Appeals erred in awarding moral and exemplary damages to the respondent Espino under Articles 19 and 21 in relation to Article 2219 of the Civil Code, considering that A. Respondent Espino was guilty of theft; B. Petitioners legitimately exercised their right of defense of property within the context of Article 429 of the Civil Code negating the application of Articles 19 and 21 of the same Code; C. Petitioners acted upon probable cause in stopping and investigating respondent Espino for shoplifting and as held in various decisions in the United States on shoplifting, a merchant who acts upon probable cause should not be held liable in damages by the suspected shoplifter;
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D. Petitioners did not exercise their right maliciously, wilfully or in bad faith; and/or E. The proximate cause of respondent Espinos alleged injury or suffering was his own negligence or forgetfulness; petitioners acted in good faith. II Assuming arguendo that petitioners are liable for moral and exemplary damages, the award of P75,000.00 for moral damages and P25,000.00 for exemplary damages by the respondent Court of Appeals is not legally justified and/or is grossly excessive in the premises. III The award of P5,000.00 for attorneys fees by the respondent Court of Appeals is unjustified and unwarranted under Article 2199 of the Civil Code. We agree with the holding of the respondent appellate court that the evidence sustains the courts finding that the plaintiff had absolutely no intention to steal the file. The totality of the facts and circumstances as found by the Court of Appeals unerringly points to the conclusion that private respondent did not intend to steal the file and that his act of picking up the file from the open shelf was not criminal nor done with malice or criminal intent for on the contrary, he took the item with the intention of buying and paying for it. This Court needs only to stress the following undisputed facts which strongly and convincingly uphold the conclusion that private respondent was not shoplifting. Thus, the facts that private respondent after picking the cylindrical rat-tail file costing P3.85 had placed it inside his left front breast pocket with a good portion of the item exposed to view and that he did not conceal it in his person or hid it from sight as well as the fact that he paid the purchases of his wife amounting to P77.00 at the checkout counter of the Supermarket, showed that he was not acting suspiciously or furtively. And the circumstance that he was with his family consisting of his wife, Mrs. Caridad Jayme Espino, and their two daughters at the time negated any criminal intent on his part; to steal. Moreover, when private respondent was approached by the guard of the Supermarket as he was leaving by the exit to his car who told him, Excuse me, Mr., I think you have something in your pocket which you have not paid for, Espino immediately apologized and answered, I am sorry, which indicated his sincere apology or regrets. He turned back towards the cashier to pay for the file which proved his honesty, sincerity and good faith in buying the

item, and not to shoplift the same. His brief statement on the sheet of paper called the Incident Report where private respondent wrote the following: While talking to my aunts maid with my wife, I put this item in my shirt pocket. I forgot to check it out with my wifes items, was an instant and contemporaneous explanation of the incident. Considering further the personal circumstances of the private respondent, his education, position and character showing that he is a graduate Mechanical Engineer from U.P. Class 1950, employed as an executive of Proctor & Gamble Phils., Inc., a corporate manager incharge of motoring and warehousing therein; honorably discharged from the Philippine Army in 1946; a Philippine government pensionado of the United States for six months; member, of the Philippine Veterans Legion; author of articles published in the Manila Sunday Times and Philippines Free Press; member of the Knights of Columbus, Council No. 3713; son of the late Jose Maria Espino, retired Minister, Department of Foreign Affairs at the Philippine Embassy, Washington, We are fully convinced, as the trial and appellate courts were, that private respondent did not intend to steal the article costing P3.85. Nothing in the records intimates or hints whatsoever that private respondent has had any police record of any sort much less suspicion of stealing or shoplifting. We do not lay down here any hard-and-fast rule as to what act or combination of acts constitute the crime of shoplifting for it must be stressed that each case must be considered and adjudged on a case-to-case basis and that in the determination of whether a person suspected of shoplifting has in truth and in fact committed the same, all the attendant facts and circumstances should be considered in their entirety and not from any single fact or circumstance from which to impute the stigma of shoplifting on any person suspected and apprehended therefor. We likewise concur with the Court of Appeals that (u)pon the facts and under the law, plaintiff has clearly made the cause of action for damages against the defendants. Defendants wilfully caused loss or injury to plaintiff in a manner that was contrary to morals, good customs or public policy, making them amenable to damages under Articles 19 and 21 in relation to Article 2219 of the Civil Code.2 That private respondent was falsely accused of shoplifting is evident. The Incident Report (Exhibit A) with the entries thereon under Exhibit A-1 which says opposite the stenciled word SUBJECT: Shoplifting, Exhibit A-3 which says opposite the stenciled words Action Taken: Released by Mrs. Fandino
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after paying the item, Exhibit A-4 which says opposite the stenciled words Remarks Noted: Grd. Ebreo requested Grd. Paunil to apprehend subject shoplifter, established the opinion, judgment or thinking of the management of petitioners supermarket upon private respondents act of picking up the file. In plain words, private respondent was regarded and pronounced a shoplifter and had committed shoplifting. We also affirm the Court of Appeals finding that petitioner Nelia Santos Fandino, after reading the incident report, remarked the following: Ano, nakaw na naman ito? Such a remark made in the presence of private respondent and with reference to the incident report with its entries, was offensive to private respondents dignity and defamatory to his character and honesty. When Espino explained that he was going to pay the file but simply forgot to do so, Fandino doubted the explanation, saying: That is all what they say, the people whom we caught not paying for the goods say. . . they all intended to pay for the things that are found to them. Private respondent objected and said that he was a regular customer of the Supermarket. The admission of Fandino that she required private respondent to pay a fine of P5.00 and did in fact take the P5.00 bill of private respondent tendered by the latter to pay for the file, as a fine which would be given as an incentive to the guards who apprehend pilferers clearly proved that Fandino branded private respondent as a thief which was not right nor justified. The testimony of the guard that management instructed them to bring the suspected customers to the public area for the people to see those kind of customers in order that they may be embarassed (p. 26, tsn, Sept. 30, 1971); that management wanted the customers to be embarrassed in public so that they will not repeat the stealing again (p. 2, tsn, Dec. 10, 1971); that the management asked the guards to bring these customers to different cashiers in order that they will know that they are pilferers (p. 2, ibid.) may indicate the manner or pattern whereby a confirmed or self-confessed shoplifter is treated by the Supermarket management but in the case at bar, there is no showing that such procedure was taken in the case of the private respondent who denied strongly and vehemently the charge of shoplifting. Nonetheless, the false accusation charged against the private respondent after detaining and interrogating him by the uniformed guards and the mode and manner in which he was subjected, shouting at him, imposing upon him a fine, threatening to call the police and in the presence and hearing of many people at the Supermarket which brought and caused him humiliation and

embarrassment, sufficiently rendered the petitioners liable for damages under Articles 19 and 21 in relation to Article 2219 of the Civil Code. We rule that under the facts of the case at bar, petitioners wilfully caused loss or in jury to private respondent in a manner that was contrary to morals, good customs or public policy. It is against morals, good customs and public policy to humiliate, embarrass and degrade the dignity of a person. Everyone must respect the dignity, personality, privacy and peace of mind of his neighbors and other persons (Article 26, Civil Code). And one must act with justice, give everyone his due and observe honesty and good faith (Article 19, Civil Code). Private respondent is entitled to damages but We hold that the award of Seventy-Five Thousand Pesos (P75,000.00) for moral damages and TwentyFive Thousand Pesos (P25,000.00) for exemplary damages is unconscionable and excessive. While no proof of pecuniary loss is necessary in order that moral, nominal, temperate, liquidated or exemplary damages may be adjudicated, the assessment of such damages, except liquidated ones, is left to the discretion of the court, according to the circumstances of each case (Art. 2216, New Civil Code). In the case at bar, there is no question that the whole incident that befell respondent had arisen in such a manner that was created unwittingly by his own act of forgetting to pay for the file. It was his forgetfullness in checking out the item and paying for it that started the chain of events which led to his embarassment and humiliation, thereby causing him mental anguish, wounded feelings and serious anxiety. Yet, private respondents act of omission contributed to the occurrence of his injury or loss and such contributory negligence is a factor which may reduce the damages that private respondent may recover (Art. 2214, New Civil Code). Moreover, that many people were present and they saw and heard the ensuing interrogation and altercation appears to be simply a matter of coincidence in a supermarket which is a public place and the crowd of onlookers, hearers or bystanders was not deliberately sought or called by management to witness private respondents predicament. We do not believe that private respondent was intentionally paraded in order to humiliate or embarrass him because petitioners business depended for its success and patronage the good will of the buying public which can only be preserved and promoted by good public relations. As succinctly expressed by Mr Justice J. B. L. Reyes in his concurring and dissenting opinion in Pangasinan Transportation Company, Inc. vs. Legaspi, 12 SCRA 598, the purpose of moral damages is essentially indemnity or reparation, both punishment or correction. Moral damages are emphatically not
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intended to enrich a complainant at the expense of a defendant; they are awarded only to enable the injured party to obtain means, diversion or amusements that will serve to alleviate the moral suffering he has undergone, by reason of the defendants culpable action. In other words, the award of moral damages is aimed at a restoration, within the limits of the possible, of the spiritual status quo ante and, it must be proportionate to the suffering inflicted. In Our considered estimation and assessment, moral damages in the amount of Five Thousand Pesos (P5,000.00) is reasonable and just to award to private respondent. The grant of Twenty-Five Thousand Pesos (P25,000.00) as exemplary damages is unjustified. Exemplary or corrective damages are imposed by way of example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages (Art. 2229, New Civil Code). Exemplary damages cannot be recovered as a matter of right; the court will decide whether or not they could be adjudicated (Art. 2223, New Civil Code). Considering that exemplary damages are awarded for wanton acts, that they are penal in character granted not by way of compensation but as a punishment to the offender and as a warning to others as a sort of deterrent, We hold that the facts and circumstances of the case at bar do not warrant the grant of exemplary damages. Petitioners acted in good faith in trying to protect and recover their property, a right which the law accords to them. Under Article 429, New Civil Code, the owner or lawful possessor of a thing has a right to exclude any person from the enjoyment and disposal thereof and for this purpose, he may use such force as may be reasonably necessary to repel or prevent an actual or threatened unlawful physical invasion or usurpation of his property. And since a person who acts in the fulfillment of a duty or in the lawful exercise of a right or office exempts him from civil or criminal liability, petitioner may not be punished by imposing exemplary damages against him. We agree that petitioners acted upon probable cause in stopping and investigating private respondent for taking the file without paying for it, hence, the imposition of exemplary damages as a warning to others by way of a deterrent is without legal basis. We, therefore, eliminate the grant of exemplary damages to the private respondent. In the light of the reduction of the damages, We hereby likewise reduce the original award of Five Thousand Pesos (P5,000.00) as attorneys fees to Two Thousand Pesos (P2,000.00).

WHEREFORE, IN VIEW OF THE FOREGOING, the judgment of the Court of Appeals is hereby modified, Petitioners are hereby ordered to pay, jointly and severally, to private respondent moral damages in the sum of Five Thousand Pesos (P5,000.00) and the amount of Two Thousand Pesos (P2,000.00) as and for attorneys fees; and further, to return the P5.00 fine to private respondent. No costs. SO ORDERED. Makasiar, Fernandez, De Castro and Melencio-Herrera, JJ., concur. Teehankee (Chairman), took no part. Judgment modified. Petition denied. Notes.The hearing of an application for damages against the surety due to wrongful attachment or seizure of property may be made in the Court of Appeals on appeal, not the trial court to avoid multiplicity of suits (Malayan Insurance Co. vs. Salas, 90 SCRA 252). In awarding compensatory damages based on the life expectancy of the victim of an accident, net earnings, not gross income, should be considered (MD Transit, Inc. vs. Court of Appeals, 90 SCRA 542). The defendants, who conspired to defraud the mortgages, are solidarity liable for the expenses of the receivership and for attorneys fees (Peoples Bank and Trust Co. vs. Dahican Lumber Co., 20 SCRA 84). The assessment of damages for dispossession of realty should begin after the filing of the suit for only then could the possessor be positively adjudged in bad faith in view of its knowledge that there was an adverse claimant to the land (De Villa vs. Trinidad, 22 SCRA 1167). o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Grand Union Supermarket, Inc. vs. Espino, Jr., 94 SCRA 953(1979)]

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G.R. No. 142668. August 31, 2004.* UNITED COCONUT PLANTERS BANK and LUIS MA. ONGSIAPCO, petitioners, vs. RUBEN E. BASCO, respondent. Actions; Damages; Where respondent did not suffer embarrassment, inconvenience or discomfort which partakes of the nature of damnum absque injuria, i.e., damage without injury or damage inflicted without injustice, or loss or damage without violation of legal rights, or a wrong due to pain for which the law provides no remedy, the award of nominal damages should be deleted.The respondent failed to adduce evidence other than his testimony that people in the ground floor of the petitioner bank saw him being stopped from proceeding to the working area of the bank. Evidently, the respondent did not suffer embarrassment, inconvenience or discomfort which, however, partakes of the nature of damnum absque injuria, i.e. damage without injury or damage inflicted without injustice, or loss or damage without violation of legal rights, or a wrong due to a pain for which the law provides no remedy. Hence, the award of nominal damages by the Court of Appeals should be deleted. Same; Same; The commencement of an action does not per se make the action wrongful and subject the action to damages, for the law could not have meant to impose a penalty on the right to litigate.The petitioner bank is not entitled to damages and attorneys fees as its counterclaim. There is no evidence on record that the respondent acted in bad faith or with malice in filing his complaint against the petitioners. Well-settled is the rule that the commencement of an action does not per se make the action wrongful and subject the action to damages, for the law could not have meant to impose a penalty on the right to litigate. PETITION for review on certiorari of a decision of the Court of Appeals.

the Regional Trial Court (RTC), Makati City, Branch 146, which found the petitioner bank liable for payment of damages and attorneys fees. The Case for the Respondent Respondent Ruben E. Basco had been employed with the petitioner United Coconut Planters Bank (UCPB) for seventeen (17) years.3 He was also a stockholder thereof and owned 804 common shares of stock at the par value of P1.00.4 He likewise maintained a checking account with the bank at its Las Pias Branch under Account No. 117-001520-6.5 Aside from his employment with the bank, the respondent also worked as an underwriter at the United Coconut Planters Life Association (Coco Life), a subsidiary of UCPB since December, 1992.6 The respondent also solicited insurance policies from UCPB employees. On June 19, 1995, the respondent received a letter from the UCPB informing him of the termination of his employment with the bank for grave abuse of discretion and authority, and breach of trust in the conduct of his job as Bank Operations Manager of its Olongapo Branch. The respondent thereafter filed a complaint for illegal dismissal, non-payment of salaries, and damages against the bank in the National Labor Relations Commission (NLRC), docketed as NLRC Cases Nos. 00-09-05354-92 and 00-09-05354-93. However, the respondent still frequented the UCPB main office in Makati City to solicit insurance policies from the employees thereat. He also discussed the complaint he filed against the bank with the said employees.7 The respondent was also employed by All-Asia Life Insurance Company as an underwriter. At one time, the lawyers of the UCPB had an informal conference with him at the head office of the bank, during which the respondent was offered money so that the case could be amicably settled. The respondent revealed the incident to some of the bank employees.8 On November 15, 1995, Luis Ma. Ongsiapco, UCPB First Vice-President, Human Resource Division, issued a Memorandum to Jesus Belanio, the VicePresident of the Security Department, informing him that the respondents employment had been terminated as of June 19, 1995, that the latter filed charges against the bank and that the case was still on-going. Ongsiapco instructed Belanio not to allow the respondent access to all bank premises.9 Attached to the Memorandum was a passport-size picture of the respondent. The next day, the security guards on duty were directed to strictly impose the security procedure in conformity with Ongsiapcos Memorandum.10
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The facts are stated in the opinion of the Court. Sycip, Salazar, Hernandez and Gatmaitan for petitioners. Saguisag & Associates for respondent. CALLEJO, SR., J.:

This is a petition for review on certiorari assailing the Decision1 of the Court of Appeals dated March 30, 2000, affirming, with modifications, the Decision2 of

On December 7, 1995, the respondent, through counsel, wrote Ongsiapco, requesting that such Memorandum be reconsidered, and that he be allowed entry into the bank premises.11 His counsel emphasized that In the meantime, we are more concerned with your denying Mr. Basco access to all bank premises. As you may know, he is currently connected with Cocolife as insurance agent. Given his 17-year tenure with your bank, he has established good relationships with many UCPB employees, who comprise the main source of his solicitations. In the course of his work as insurance agent, he needs free access to your bank premises, within reason, to add the unnecessary. Your memorandum has effectively curtailed his livelihood and he is once again becoming a victim of another illegal termination, so to speak. And Shakespeare said: You take his life when you do take the means whereby he lives. Mr. Bascos work as an insurance agent directly benefits UCPB, Cocolifes mother company. He performs his work in your premises peacefully without causing any disruption of bank operations. To deny him access to your premises for no reason except the pendency of the labor case, the outcome of which is still in doubthis liability, if any, certainly has not been provenis a clear abuse of right in violation of our clients rights. Denying him access to the bank, which is of a quasi-public nature, is an undue restriction on his freedom of movement and right to make a livelihood, comprising gross violations of his basic human rights. (This is Human Rights Week, ironically). We understand that Mr. Basco has been a stockholder of record of 804 common shares of the capital stock of UCPB since July 1983. As such, he certainly deserves better treatment than the one he has been receiving from your office regarding property he partly owns. He is a particle of corporate sovereignty. We doubt that you can impose the functional equivalent of the penalty of destierro on our client who really wishes only to keep his small place in the sun, to survive and breathe. No activity can be more legitimate than to toil for a living. Let us live and let live.12 In his reply dated December 12, 1995, Ongsiapco informed the respondent that his request could not be granted: As you understand, we are a banking institution; and as such, we deal with matters involving confidences of clients. This is among the many reasons why we, as a matter of policy, do not allow non-employees to have free access to areas where our employees work. Of course, there are places where visitors may meet our officers and employees to discuss business matters;

unfortunately, we have limited areas where our officers and employees can entertain non-official matters. Furthermore, in keeping with good business practices, the Bank prohibits solicitation, peddling and selling of goods, service and other commodities within its premises as it disrupts the efficient performance and function of the employees. Please be assured that it is farthest from our intention to discriminate against your client. In the same vein, it is highly improper for us to carve exceptions to our policies simply to accommodate your clients business ventures.13 The respondent was undaunted. At 5:30 p.m. of December 21, 1995, he went to the office of Junne Cacay, the Assistant Manager of the Makati Branch. Cacay was then having a conference with Bong Braganza, an officer of the UCPB Sucat Branch. Cacay entertained the respondent although the latter did have an appointment. Cacay even informed him that he had a friend who wanted to procure an insurance policy.14 Momentarily, a security guard of the bank approached the respondent and told him that it was already past office hours. He was also reminded not to stay longer than he should in the bank premises.15 Cacay told the guard that the respondent would be leaving shortly.16 The respondent was embarrassed and told Cacay that he was already leaving.17 At 1:30 p.m. of January 31, 1996, the respondent went to the UCPB Makati Branch to receive a check from Rene Jolo, a bank employee, and to deposit money with the bank for a friend.18 He seated himself on a sofa fronting the tellers booth19 where other people were also seated.20 Meanwhile, two security guards approached the respondent. The guards showed him the Ongsiapcos Memorandum and told him to leave the bank premises. The respondent pleaded that he be allowed to finish his transaction before leaving. One of the security guards contacted the management and was told to allow the respondent to finish his transaction with the bank. Momentarily, Jose Regino Casil, an employee of the bank who was in the 7th floor of the building, was asked by Rene Jolo to bring a check to the respondent, who was waiting in the lobby in front of the tellers booth.21 Casil agreed and went down to the ground floor of the building, through the elevator. He was standing in the working area near the Automated Teller Machine (ATM) Section22 in the ground floor when he saw the respondent standing near the sofa23 near the two security guards.24 He motioned the respondent to come and get the check, but the security guard tapped the respondent on the
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shoulder and prevented the latter from approaching Casil. The latter then walked towards the respondent and handed him the check from Jolo. Before leaving, the respondent requested the security guard to log his presence in the logbook. The guard did as requested and the respondents presence was recorded in the logbook.25 On March 11, 1996, the respondent filed a complaint for damages against the petitioners UCPB and Ongsiapco in the RTC of Manila, alleging inter alia, that 12. It is readily apparent from this exchange of correspondence that defendant bank' acknowledged reason for barring plaintiff from its premisesthe pending labor caseis a mere pretense for its real vindictive and invidious intent: to prevent plaintiff, and plaintiff alone, from carrying out his trade as an insurance agent among defendant banks employees, a practice openly and commonly allowed and tolerated (encouraged even, for some favored proverbial sacred cows) in the bank premises, now being unjustly denied to plaintiff on spurious grounds. 13. Defendants, to this day, have refused to act on plaintiffs claim to be allowed even in only the limited areas where [the banks] officers and employees can entertain non-official matters and have maintained the policy banning plaintiff from all bank premises. As he had dared exercised his legal right to question his dismissal, he is being penalized with a variation of destierro, available in criminal cases where the standard however, after proper hearing, is much more stringent and based on more noble grounds than mere pique or vindictiveness. 14. This appallingly discriminatory policy resulted in an incident on January 31, 1996 at 1:30 p.m. at defendant banks branch located at its head office, which caused plaintiff tremendous undeserved humiliation, embarrassment, and loss of face.26 ... 15. Defendants memorandum and the consequent acts of defendants security guards, together with defendant Ongsiapcos disingenuous letter of December 12, 1995, are suggestive of malice and bad faith in derogation of plaintiffs right and dignity as a human being and citizen of this country, which acts have caused him considerable undeserved embarrassment. Even if defendants, for the sake of argument, may be acting within their rights, they cannot exercise

same abusively, as they must, always, act with justice and in good faith, and give plaintiff his due.27 The respondent prayed that, after trial, judgment be rendered in his favor, as follows: WHEREFORE, it is respectfully prayed that judgment issue ordering defendants: 1. To rescind the directive to its agents barring plaintiff from all bank premises as embodied in the memorandum of November 15, 1995, and allow plaintiff access to the premises of defendant bank, including all its branches, which are open to members of the general public, during reasonable hours, to be able to conduct lawful business without being subject to invidious discrimination; and 2. To pay plaintiff P100,000.00 as moral damages, P100,000.00 as exemplary damages, and P50,000.00 by way of attorneys fees. Plaintiff likewise prays for costs, interest, the disbursements of this action, and such other further relief as may be deemed just and equitable in the premises.28 In their Answer to the complaint, the petitioners interposed the following affirmative defenses: 9. Plaintiff had been employed as Branch Operations Officer, Olongapo Branch, of defendant United Coconut Planters Bank. In or about the period May to June 1992, he was, together with other fellow officers and employees, investigated by the bank in connection with various anomalies. As a result of the investigation, plaintiff was recommended terminated on findings of fraud and abuse of discretion in the performance of his work. He was found by the banks Committee on Employee Discipline to have been guilty of committing or taking part in the commission of the following: a. Abuse of discretion in connection with actions taken beyond or outside the limits of his authority. b. Borrowing money from a bank client. c. Gross negligence or dereliction of duty in the implementation of bank policies or valid orders from management.

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d. Direct refusal or willful failure to perform, or delay in performing, an assigned task. e. Fraud or willful breach of trust in the conduct of his work. f. Falsification or forgery of bank records/documents. 10. Plaintiff thereafter decided to contest his termination by filing an action for illegal dismissal against the bank. Despite the pendency of this litigation, plaintiff was reported visiting employees of the bank in their place of work during work hours, and circulating false information concerning the status of his case against the bank, including alleged offers by management of a monetary settlement for his illegal dismissal. 11. Defendants acted to protect the banks interest by preventing plaintiffs access to the banks offices, and at the same time informing him of that decision. Plaintiff purported to insist on seeing and talking to the banks employees despite this decision, claiming he needed to do this in connection with his insurance solicitation activities, but the bank has not reconsidered. 12. The complaint states, and plaintiff has, no cause of action against defendants.29 The petitioners likewise interposed compulsory counterclaims for damages. The Case for the Petitioners The petitioners adduced evidence that a day or so before November 15, 1995, petitioner Ongsiapco was at the 10th floor of the main office of the bank where the training room of the Management Development Training Office was located. Some of the banks management employees were then undergoing training. The bank also kept important records in the said floor. When Ongsiapco passed by, he saw the respondent talking to some of the trainees. Ongsiapco was surprised because non-participants in the training were not supposed to be in the premises.30 Besides, the respondent had been dismissed and had filed complaints against the bank with the NLRC. Ongsiapco was worried that bank records could be purloined and employees could be hurt. The next day, Ongsiapco contacted the training supervisor and inquired why the respondent was in the training room the day before. The supervisor replied

that he did not know why.31 Thus, on November 15, 1995, Ongsiapco issued a Memorandum to Belanio, the Vice-President for Security Services, directing the latter not to allow the respondent access to the bank premises near the working area.32 The said Memorandum was circulated by the Chief of Security to the security guards and bank employees. At about 12:30 p.m. on January 31, 1996, Security Guard Raul Caspe, a substitute for the regular guard who was on leave, noticed the respondent seated on the sofa in front of the tellers booth.33 Caspe notified his superior of the respondents presence, and was instructed not to confront the respondent if the latter was going to make a deposit or withdrawal.34 Caspe was also instructed not to allow the respondent to go to the upper floors of the building.35 The respondent went to the tellers booth and, after a while, seated himself anew on the sofa. Momentarily, Caspe noticed Casil, another employee of the bank who was at the working section of the Deposit Service Department (DSD), motioning to the respondent to get the check. The latter stood up and proceeded in the direction of Casils workstation. After the respondent had taken about six to seven paces from the sofa, Caspe and the company guard approached him. The guards politely showed Ongsiapcos Memorandum to the respondent and told the latter that he was not allowed to enter the DSD working area; it was lunch break and no outsider was allowed in that area.36 The respondent looked at the Memorandum and complied. On May 29, 1998, the trial court rendered judgment in favor of the respondent. The fallo of the decision reads: WHEREFORE, premises considered, defendants are hereby adjudged liable to plaintiff and orders them to rescind and set-aside the Memorandum of November 15, 1995 and orders them to pay plaintiff the following: 1) the amount of P100,000.00 as moral damages; 2) the amount of P50,000.00 as exemplary damages; 3) P50,000.00 for and as attorneys fees; 4) Cost of suit. Defendants counterclaim is dismissed for lack of merit. SO ORDERED.37

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The trial court held that the petitioners abused their right; hence, were liable to the respondent for damages under Article 19 of the New Civil Code. The petitioners appealed the decision to the Court of Appeals and raised the following issues: 4.1 Did the appellants abuse their right when they issued the Memorandum? 4.2 Did the appellants abuse their right when Basco was asked to leave the bank premises, in implementation of the Memorandum, on 21 December 1995? 4.3. Did the appellants abuse their right when Basco was asked to leave the bank premises, in implementation of the Memorandum, on 31 January 1995? 4.4. Is Basco entitled to moral and exemplary damages and attorneys fees? 4.5. Are the appellants entitled to their counterclaim?38 The CA rendered a Decision on March 30, 2000, affirming the decision of the RTC with modifications. The CA deleted the awards for moral and exemplary damages, but ordered the petitioner bank to pay nominal damages on its finding that latter abused its right when its security guards stopped the respondent from proceeding to the working area near the ATM section to get the check from Casil. The decretal portion of the decision reads: WHEREFORE, the Decision of the Regional Trial Court dated May 29, 1998 is hereby MODIFIED as follows: 1. The awards for moral and exemplary damages are deleted; 2. The award for attorneys fees is deleted; 3. The order rescinding Memorandum dated November 15, 1995 is set aside; and 4. UCPB is ordered to pay nominal damages in the amount of P25,000.00 to plaintiff-appellee. Costs de oficio.39 The Present Petition The petitioners now raise the following issues before this Court:

I. Whether or not the appellate court erred when it found that UCPB excessively exercised its right to self-help to the detriment of Basco as a depositor, when on January 31, 1996, its security personnel stopped respondent from proceeding to the area restricted to UCPBs employees. II. Whether or not the appellate court erred when it ruled that respondent is entitled to nominal damages. III. Whether or not the appellate court erred when it did not award the petitioners valid and lawful counterclaim.40 The core issues are the following: (a) whether or not the petitioner bank abused its right when it issued, through petitioner Ongsiapco, the Memorandum barring the respondent access to all bank premises; (b) whether or not petitioner bank is liable for nominal damages in view of the incident involving its security guard Caspe, who stopped the respondent from proceeding to the working area of the ATM section to get the check from Casil; and (c) whether or not the petitioner bank is entitled to damages on its counterclaim. The Ruling of the Court On the first issue, the petitioners aver that the petitioner bank has the right to prohibit the respondent from access to all bank premises under Article 429 of the New Civil Code, which provides that: Art. 429. The owner or lawful possessor of a thing has the right to exclude any person from the enjoyment and disposal thereof. For this purpose, he may use such force as may be reasonably necessary to repel or prevent an actual or threatened unlawful physical invasion or usurpation of his property. The petitioners contend that the provision which enunciates the principle of self-help applies when there is a legitimate necessity to personally or through another, prevent not only an unlawful, actual, but also a threatened unlawful aggression or usurpation of its properties and records, and its personnel and customers/clients who are in its premises. The petitioners assert that petitioner Ongsiapco issued his Memorandum dated November 15, 1995 because the respondent had been dismissed from his employment for varied grave offenses; hence, his presence in the premises of the bank posed a threat to the integrity of its records and to the persons of its personnel. Besides, the petitioners contend, the respondent, while in the bank premises, conversed with bank employees about his complaint for illegal dismissal against the
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petitioner bank then pending before the Labor Arbiter, including negotiations with the petitioner banks counsels for an amicable settlement of the said case. The respondent, for his part, avers that Article 429 of the New Civil Code does not give to the petitioner bank the absolute right to exclude him, a stockholder and a depositor, from having access to the bank premises, absent any clear and convincing evidence that his presence therein posed an imminent threat or peril to its property and records, and the persons of its customers/clients. We agree with the respondent bank that it has the right to exclude certain individuals from its premises or to limit their access thereto as to time, to protect, not only its premises and records, but also the persons of its personnel and its customers/clients while in the premises. After all, by its very nature, the business of the petitioner bank is so impressed with public trust; banks are mandated to exercise a higher degree of diligence in the handling of its affairs than that expected of an ordinary business enterprise.41 Banks handle transactions involving millions of pesos and properties worth considerable sums of money. The banking business will thrive only as long as it maintains the trust and confidence of its customers/clients. Indeed, the very nature of their work, the degree of responsibility, care and trustworthiness expected of officials and employees of the bank is far greater than those of ordinary officers and employees in the other business firms.42 Hence, no effort must be spared by banks and their officers and employees to ensure and preserve the trust and confidence of the general public and its customers/clients, as well as the integrity of its records and the safety and well being of its customers/clients while in its premises. For the said purpose, banks may impose reasonable conditions or limitations to access by non-employees to its premises and records, such as the exclusion of non-employees from the working areas for employees, even absent any imminent or actual unlawful aggression on or an invasion of its properties or usurpation thereof, provided that such limitations are not contrary to the law.43 It bears stressing that property rights must be considered, for many purposes, not as absolute, unrestricted dominions but as an aggregation of qualified privileges, the limits of which are prescribed by the equality of rights, and the correlation of rights and obligations necessary for the highest enjoyment of property by the entire community of proprietors.44 Indeed, in Rellosa vs. Pellosis,45 we held that: Petitioner might verily be the owner of the land, with the right to enjoy and to exclude any person from the enjoyment and disposal thereof, but the exercise

of these rights is not without limitations. The abuse of rights rule established in Article 19 of the Civil Code requires every person to act with justice, to give everyone his due; and to observe honesty and good faith. When right is exercised in a manner which discards these norms resulting in damage to another, a legal wrong is committed for which the actor can be held accountable. Rights of property, like all other social and conventional rights, are subject to such reasonable limitations in their enjoyment and to such reasonable restraints established by law.46 In this case, the Memorandum of the petitioner Ongsiapco dated November 15, 1995, reads as follows: MEMO TO : MR. JESUS M. BELANIO Vice President

Security Department DATE 15 November 1995 RE MR. RUBEN E. BASCO Please be advised that Mr. Ruben E. Basco was terminated for a cause by the Bank on 19 June 1992. He filed charges against the bank and the case is still on-going. In view of this, he should not be allowed access to all bank premises. (Sgd.) LUIS MA. ONGSIAPCO First Vice President Human Resource Division

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16 November 1995 TO: ALL GUARDS ON DUTY Strictly adhere/impose Security Procedure RE: Admission to Bank premises. For your compliance. (Signature) 11/16/95 JOSE G. TORIAGA47 On its face, the Memorandum barred the respondent, a stockholder of the petitioner bank and one of its depositors, from gaining access to all bank premises under all circumstances. The said Memorandum is all-embracing and admits of no exceptions whatsoever. Moreover, the security guards were enjoined to strictly implement the same. We agree that the petitioner may prohibit non-employees from entering the working area of the ATM section. However, under the said Memorandum, even if the respondent wished to go to the bank to encash a check drawn and issued to him by a depositor of the petitioner bank in payment of an obligation, or to withdraw from his account therein, or to transact business with the said bank and exercise his right as a depositor, he could not do so as he was barred from entry into the bank. Even if the respondent wanted to go to the petitioner bank to confer with the corporate secretary in connection with his shares of stock therein, he could not do so, since as stated in the Memorandum of petitioner Ongsiapco, he would not be allowed access to all the bank premises. The said Memorandum, as worded, violates the right of the respondent as a stockholder or a depositor of the petitioner bank, for being capricious and arbitrary. The Memorandum even contravenes Article XII, paragraph 4 (4.1 and 4.2) of the Code of Ethics issued by the petitioner bank itself, which provides that one whose employment had been terminated by the petitioner bank may, nevertheless, be allowed access to bank premises, thus: 4.1 As a client of the Bank in the transaction of a regular bank-client activity. 4.2When the offending party is on official business concerning his employment with the Bank with the prior approval and supervision of the Head of HRD or of the Division Head, or of the Branch Head in case of branches.48

For another, the Memorandum, as worded, is contrary to the intention of the petitioners. Evidently, the petitioners did not intend to bar the respondent from access to all bank premises under all circumstances. When he testified, petitioner Ongsiapco admitted that a bank employee whose services had been terminated may be allowed to see an employee of the bank and may be allowed access to the bank premises under certain conditions, viz.: ATTY. R. ALIKPALA Q So the permission you are referring to is merely a permission to be granted by the security guard? A No, sir, not the security guard. The security will call the office where they are going. Because this is the same procedure they do for visitors. Anybody who wants to see anybody in the bank before they are allowed access or entry, they call up the department or the division. Q So I want to clarify, Mr. Witness. Former bank employees are not allowed within the bank premises until after the security guard call, which ever department they are headed for, and that they give the permission and they tell the security guard to allow the person? A Yes, Sir, that is the usual procedure. Q If an employee resigned from the bank, same treatment? A Yes, Sir. Q If an employee was terminated by the bank for cause, same treatment?

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

A There must be a guideline of the security. Q But you are not very familiar about the security procedures? A Yes, Sir.

Yes, Sir. Because there is a security control at the lobby. ATTY. R. ALIKPALA Q Q You mentioned that this is a general rule? Mr. Ongsiapco, the agency that you hired follows certain procedures? A A Yes, Sir. Yes, Sir. Q Q Is this rule written down in black and white anywhere? Which of course are under the direct control and supervision of the bank? A A I think this is more of a security procedure. Yes, Sir. Q Q But being a huge financial institution, we expect Cocobank has its procedure written down in black and white? ATTY. A. BATUHAN And did the security agency have any of this procedure written down? A It will be given to them by the Security Department, because they are under the Security Department. Your Honor, objection. Argumentative, Your Honor. There is no question posed at all, Your Honor. COURT Q But if an employee is only entering the ground floor bank area, where customers of the bank are normally allowed, whether depositors or not, they dont need to ask for express permission, is that correct? A
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Answer. Is there any guideline?

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

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

He is a client then. Q Q But he is not yet a client when he enters the bank premises. He only becomes . . . you know because you do not all these people, you do not know every client of the bank so you just all ow them inside the bank? A Yes, Sir. Yes, the premises.49 Q Petitioner Ongsiapco also testified that a former employee who is a customer/client of the petitioner bank also has access to the bank premises, except those areas reserved for its officers and employees, such as the working areas: ATTY. R. ALIKPALA Q So Mr. Witness, just for the sake of clarity. The ground floor area is where the regular consumer banking services are held? What do you call this portion? A That is the Deposit Servicing Department. Q Where the . . . . A Where the people transact business. So, in this portion, no, I mean beyond this portion, meaning the working areas and second floor up, outsiders will have to ask express permission from the security guard? A Yes, Sir. Q And you say that the security guards are instructed to verify the purpose of every person who goes into this area? A As far as I know, sir.50 It behooved the petitioners to revise such Memorandum to conform to its Code of Ethics and their intentions when it was issued, absent facts and circumstances that occurred pendente lite which warrant the retention of the Memorandum as presently worded. On the second issue, the Court of Appeals ruled that the petitioner bank is liable for nominal damages to the respondent despite its finding that the petitioners had the right to issue the Memorandum.
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This is the area where there are counters, Teller, where a person would normally go to let us say open a bank account or to request for managers check, is that correct? A

The CA ratiocinated that the petitioner bank should have allowed the respondent to walk towards the restricted area of the ATM section until they were sure that he had entered such area, and only then could the guards enforce the Memorandum of petitioner Ongsiapco. The Court of Appeals ruled that for such failure of the security guards, the petitioner bank thereby abused its right of self-help and violated the respondents right as one of its depositors: With respect, however, to the second incident on January 31, 1996, it appears that although according to UCPB security personnel they tried to stop plaintiffappellee from proceeding to the stairs leading to the upper floors, which were limited to bank personnel only (TSN, pp. 6-9, June 4, 1997), the said act exposed plaintiff-appellee to humiliation considering that it was done in full view of other bank customers. UCPB security personnel should have waited until they were sure that plaintiff-appellee had entered the restricted areas and then implemented the memorandum order by asking him to leave the premises. Technically, plaintiff-appellee was still in the depositing area when UCPB security personnel approached him. In this case, UCPBs exercise of its right to self-help was in excess and abusive to the detriment of the right of plaintiffappellee as depositor of said Bank, hence, warranting the award of nominal damages in favor of plaintiff-appellee. Nominal damages are adjudicated in order that a right of a plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized and not for the purpose of indemnifying any loss suffered by him (Japan Airlines vs. Court of Appeals, 294 SCRA 19).51 The petitioners contend that the respondent is not entitled to nominal damages and that the appellate court erred in so ruling for the following reasons: (a) the respondent failed to prove that the petitioner bank violated any of his rights; (b) the respondent did not suffer any humiliation because of the overt acts of the security guards; (c) even if the respondent did suffer humiliation, there was no breach of duty committed by the petitioner bank since its security guards politely asked the respondent not to proceed to the working area of the ATM section because they merely acted pursuant to the Memorandum of petitioner Ongsiapco, and accordingly, under Article 429 of the New Civil Code, this is a case of damnum absque injuria;52 and (d) the respondent staged the whole incident so that he could create evidence to file suit against the petitioners. We rule in favor of the petitioners. The evidence on record shows that Casil was in the working area of the ATM section on the ground floor when he motioned the respondent to approach him

and receive the check. The respondent then stood up and walked towards the direction of Casil. Indubitably, the respondent was set to enter the working area, where non-employees were prohibited entry; from there, the respondent could go up to the upper floors of the banks premises through the elevator or the stairway. Caspe and the company guard had no other recourse but prevent the respondent from going to and entering such working area. The security guards need not have waited for the respondent to actually commence entering the working area before stopping the latter. Indeed, it would have been more embarrassing for the respondent to have started walking to the working area only to be halted by two uniformed security guards and disallowed entry, in full view of bank customers. It bears stressing that the security guards were polite to the respondent and even apologized for any inconvenience caused him. The respondent could have just motioned to Casil to give him the check at the lobby near the tellers booth, instead of proceeding to and entering the working area himself, which the respondent knew to be an area off-limits to non-employees. He did not. The respondent failed to adduce evidence other than his testimony that people in the ground floor of the petitioner bank saw him being stopped from proceeding to the working area of the bank. Evidently, the respondent did not suffer embarrassment, inconvenience or discomfort which, however, partakes of the nature of damnum absque injuria, i.e. damage without injury or damage inflicted without injustice, or loss or damage without violation of legal rights, or a wrong due to a pain for which the law provides no remedy.53 Hence, the award of nominal damages by the Court of Appeals should be deleted. On the third issue, we now hold that the petitioner bank is not entitled to damages and attorneys fees as its counterclaim. There is no evidence on record that the respondent acted in bad faith or with malice in filing his complaint against the petitioners. Well-settled is the rule that the commencement of an action does not per se make the action wrongful and subject the action to damages, for the law could not have meant to impose a penalty on the right to litigate. We reiterate case law that if damages result from a partys exercise of a right, it is damnum absque injuria.54 IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The assailed Decision of the Court of Appeals is REVERSED and SET ASIDE. The complaint of the respondent in the trial court and the counterclaims of the petitioners are DISMISSED.
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No costs. SO ORDERED. Austria-Martinez (Acting Chairman), Tinga and Chico-Nazario, JJ., concur. Puno (Chairman), J., On Official Leave. Petition granted, assailed decision reversed and set aside. Note.Nominal damages are adjudicated in order that a right of plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized and not for the purpose of indemnifying the plaintiff for any loss suffered by him. (Philippine Telegraph & Telephone Corporation vs. Court of Appeals, 388 SCRA 270 [2002]) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [United Coconut Planters Bank vs. Basco, 437 SCRA 325(2004)]

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[No. L-4160. July 29, 1952] ANITA TAN, plaintiff and appellant, vs. STANDARD VACUUM OIL Co., JULITO STO. DOMINGO, IGMIDIO Rico, and RURAL TRANSIT Co.,
defendants and appellees. 1.CRIMINAL PROCEDURE; CIVIL ACTIONS ARISING FROM OFFENSES.Rule 107, section 1(d) means that the acquittal of the accused from the criminal charge will not necessarily extinguish the civil liability unless the court declares in the judgment that the fact from which. the civil liability might arise did not exist. Where the court states "that the evidence throws no light on the cause of fire and that it was an unfortunate accident for which the accused cannot be held responsible," this declaration fits well into the exception of the rule which exempts the accused, from civil liability. 2.ID. ; ID. ; RES JUDICATA.The principle of res judicata cannot apply to the employer of the accused driver for the simple reason that it was not included as co-accused in the criminal case. It cannot therefore enjoy the benefit resulting from the acquittal of the driver. This benefit can be claimed by the latter, if a subsequent action is later taken against him under the Revised Penal Code. And this action can only be maintained if proper reservation is made and there is no express declaration that the basis of the civil action has not existed. The case against the employer should not be dismissed, more so when its civil liability is predicated on facts other than those attributed to the driver in the criminal case. 3.ID.; ID.; NEED FOR RESERVATION OF A CIVIL ACTION; CULPA AQUILIANA.There is no need for the owner of the burned house to make a reservation of her right to file a separate civil action inasmuch as the civil action contemplated is not derived from the criminal liability but one based on culpa aquiliama under the old Civil Code. (Arts. 1902 to 1910). Parker vs. Panlilio, supra, p. 1. 4.ID.; ID.; ID.; CIVIL ACTION BASED ON PREVENTION OF A GREATER HARM.Where the damage caused to the plaintiff's house was brought about mainly because of the driver's desire to avoid a greater evil or harm, and where the defendant company is one of those for whose benefit a greater harm has been prevented, the case comes within the purview of article 101, Rule 2, of the revised Penal Code. The acquittal of the driver cannot, therefore, be deemed a bar to a civil action against this company because its civil liability is completely divorced from the criminal liability of the accused. And the rule regarding reservation of the right to file a separate civil action does not apply to it.

Arnaldo J. Guzman for appellee Rural Transit Co. BAUTISTA ANGELO, J.:

Anita Tan is the owner of a house of strong materials located in the City of Manila, Philippines. On May 3, 1949, the Standard Vacuum Oil Company ordered the delivery to the Rural Transit Company at its garage at Rizal Avenue Extension, City of Manila, of 1,925 gallons of gasoline using a gasoline tank-truck trailer. The truck was driven by Julito Sto. Domingo, who was helped by Igmidio Rico. While the gasoline was being discharged to the underground tank, it caught fire, whereupon Julito Sto. Domingo drove the truck across the Rizal Avenue Extension and upon reaching the middle of the street he abandoned the truck which continued moving to the opposite side of the street causing the buildings on that side to be burned and destroyed. The house of Anita Tan was among those destroyed and for its repair she spent P12,000. As an aftermath of the fire, Julito Sto. Domingo and Igmidio Rico were charged with arson through reckless imprudence in the Court of First Instance of Manila where, after trial, both were acquitted, the court holding that their negligence was not proven and the fire was due to an unfortunate accident. Anita Tan then brought this action against the Standard Vacuum Oil Company and the Rural Transit Company, including the two employees, seeking to recover the damages she has suffered for the destruction of her house. Defendants filed separate motions to dismiss alleging in substance that (a) plaintiff's action is barred by a prior judgment and (b) plaintiff's complaint states no cause of action; and this motion having been sustained, plaintiff elevated the case to this Court imputing eight errors to the court a quo. The record discloses that the lower court dismissed this case in view of the acquittal of the two employees of defendant Standard Vacuum Oil Company who were charged with arson through reckless imprudence in the Court of First Instance of Manila. In concluding that the accused were not guilty of the acts charged because the fire was accidental, the court made the f ollowing findings: "the accused Igmidio Rico cannot in any manner be held responsible for the fire to the three houses and goods therein above mentioned. He was not the cause of it, and he took all the necessary precautions against such contingency as he was confronted with. The evidence throws no light on the cause of the fire. The witnesses for the prosecution and for the defense
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APPEAL from an order of the Court of First Instance of Manila. Pea, J. The facts are stated in the opinion of the Court. Alberto R. de Joya for appellant. Ross, Selph, Carrascoso & Janda for appellees Standard Vacuum Oil Company, Sto. Domingo and Rico.

testified that they did not know what caused the fire. It was an unfortunate accident for which the accused Igmidio Rico cannot be held responsible." And a similar finding was made with respect to the other accused Julito Sto. Domingo. The record also discloses that the information filed against the accused by the Fiscal contains an itemized statement of the damages suffered by the victims, including the one suffered by Anita Tan, thereby indicating the intention of the prosecution to demand indemnity from the accused in the same action, but that notwithstanding this statement with respect to damages, Anita Tan did not make any reservation of her right to file a separate civil action against the accused as required by the Rules of Court Rule 107, section 1-(a). As Anita Tan failed to make reservation, and the accused were acquitted, the lower court ruled that she is now barred from filing this action against the defendants. This ruling in so far as defendants Julito Sto. Domingo and Igmidio Rico are concerned is correct. The rule is that "extinction of the penal action does not carry with it extinction of the civil, unless the extinction proceeds from a declaration in a final judgment that the fact from which the civil might arise did not exist" (Rule 107, section 1-d, Rules of Court). This provision means that the acquittal of the accused from the criminal charge will not necessarily extinguish the civil liability unless the court declares in the judgment that the fact from which the civil liability might arise did not exist. Here it is true that Julito Sto. Domingo and Igmidio Rico were acquitted, the court holding that they were not responsible for the fire that destroyed the house of the plaintiff,which as a rule will not necessarily extinguish their civil liability,but the court went further by stating that the evidence throws no light on the cause of fire and that it was an unfortunate accident for which the accused cannot be held responsible. In our opinion, this declaration fits well into the exception of the rule which exempts the two accused from civil liability. When the court acquitted the accused because the fire was due to an unfortunate accident it actually said that the fire was due to a fortuitous event for which the accused are not to blame. It actually exonerated them from civil liability. But the case takes on a different aspect with respect to the other defendants. For one thing, the principle of res judicata cannot apply to them for the simple reason that they were not included as co-accused in the criminal case. Not having been included in the criminal case they cannot enjoy the benefit resulting from the acquittal of the accused. This benefit can only be claimed by the accused if a subsequent action is later taken against them under the Revised Penal Code. And this action can only be maintained if proper reservation is made and there is no express declaration that the basis of the

civil action has not existed. It is, therefore, an error for the lower court to dismiss the case against these two defendants more so when their civil liability is predicated on facts other than those attributed to the two employees in the criminal case. Take, for instance, the case of the Standard Vacuum Oil Company. This company is sued not precisely because of supposed negligent acts of its two employees Julito Sto. Domingo and Igmidio Rico but because of acts of its own which might have contributed to the fire that destroyed the house of the plaintiff. The complaint contains definite allegations of negligent acts properly attributable to the company which if proven and not refuted may serve as basis of its civil liability. Thus, in paragraph 5 of the first cause of action, it is expressly alleged that this company, through its employees, failed to take the necessary precautions or measures to insure safety and avoid harm to person and damage to property as well as to observe that degree of care, precaution and vigilance which the circumstances justly demanded, thereby causing the gasoline they were unloading to catch fire. The precautions or measures which this company has allegedly failed to take to prevent fire are not clearly stated, but they are matters of evidence which need not now be determined. Suffice it to say that such allegation furnishes enough basis for a cause of action against this company. There Is no need for the plaintiff to make a reservation of her right to file a separate civil action, for as this court already held in a number of cases, such reservation is not necessary when the civil action contemplated is not derived from the criminal liability but one based on culpa aquiliana under the old Civil Code (articles 1902 to 1910). These two acts are separate and distinct and should not be confused one with the other. Plaintiff can choose either (Asuncion Parker vs. Hon. A. J. Panlilio supra, p. 1.) The case of the Rural Transit Co. is even more different as it is predicated on a special provision of the Revised Penal Code. Thus, article 101, Rule 2, of said Code provides: "Art. 101. Rules regarding civil liability in certain cases.The exemption from criminal liability established in subdivisions 1, 2, 3, 5 and 6 of article 12 and in subdivision 4 of article 11 of this Code does not include exemption from civil liability, which shall be enforced subject to the following rules: * * * * * * *

"Second. In cases falling within subdivision 4 of article 11, the persons for whose benefit the harm has been prevented shall be civilly liable in proportion to the benefit which they may have received."
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And on this point, the complaint contains the following averments: "3. That after the corresponding trial the said defendants were acquitted and defendant Julito Sto. Domingo was acquitted, on the ground that he so acted causing damage to another in order to avoid a greater evil or injury, under article 11, paragraph 4 of the Revised Penal Code, as shown by the pertinent portion of the decision of this Honorable Court in said case, dated October 28, 1949, which reads as follows: 'Under the foregoing facts, there can be no doubt that had the accused Julito Sto. Domingo not taken the gasoline tank-truck trailer out in the street, a bigger conflagration would have occurred in Rizal Avenue Extension, and, perhaps, there might have been several deaths and bearing in mind the provisions of Article 11, paragraph 4 of the Revised Penal Code the accused Julito Sto. Domingo incurred no criminal liability.' "4. That it was consequently the defendant Rural Transit Co., from whose premises the burning gasoline tank-truck trailer was driven out by defendant Julito ,Sto. Domingo in order to avoid a greater evil or injury, for whose benefit the harm has been prevented under article 101, second subsection of the Revised Penal Code." Considering the above quoted law and facts, the cause of action against the Rural Transit Company can hardly be disputed, it appearing that the damage caused to the plaintiff was brought about mainly because of the desire of driver Julito Sto. Domingo to avoid greater evil or harm, which would have been the case had he not brought the tank-truck trailer to the middle of the street, for then the fire would have caused the explosion of the gasoline deposit of the company which would have resulted in a conflagration of much greater proportion and consequences to the houses nearby or surrounding it. It cannot be denied that this company is one of those for whose benefit a greater harm has been prevented, and as such it comes within the purview of said penal provision. The acquittal of the accused cannot, therefore, be deemed a bar to a civil action against this company because its civil liability is completely divorced from the criminal liability of the accused. The rule regarding reservation of the right to file a separate civil action does not apply to it. Wherefore, the order appealed from is hereby modified as follows: it is affirmed with regard to defendants Julito Sto. Domingo and Igmidio Rico; but it is reversed with regard to defendants Standard Vacuum Oil Company and Rural Transit Company, with costs.

Pablo, Bengzon, Padilla, Tuason, and Labrador, JJ., concur. Pars, C. J., concurs in the result. Order affirmed as to defendants Sto. Domingo and Rico; reversed with regard to defendants standard Vacuum Oil, Co. and Rural Transit Co.

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Tan vs. Standard Vacuum Oil Co., et al., 91 Phil. 672(1952)]

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G.R. No. 158563. June 30, 2005.* AIR TRANSPORTATION OFFICE (ATO) and MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY (MCIAA), petitioners, vs. APOLONIO GOPUCO, JR., respondent.
Constitutional Law; Eminent Domain; Expropriation; When land has been acquired for public use in fee simple, unconditionally, either by the exercise of eminent domain or by purchase, the former owner retains no rights in the land.When land has been acquired for public use in fee simple, unconditionally, either by the exercise of eminent domain or by purchase, the former owner retains no rights in the land, and the public use may be abandoned or the land may be devoted to a different use, without any impairment of the estate or title acquired, or any reversion to the former owner. (Fort Wayne vs. Lake Shore, etc. Ry. Co., 132 Ind., 558; 18 L.R.A., 367.) Same; Same; Same; Eminent domain is the highest and most exact idea of property remaining in the government that may be acquired for some public purpose through a method in the nature of a forced purchase by the State; It is a right to take or reassert dominion over property within the state for public use or to meet a public exigency and is said to be an essential part of governance even in its most primitive form and thus inseparable from sovereignty.Eminent domain is generally described as the highest and most exact idea of property remaining in the government that may be acquired for some public purpose through a method in the nature of a forced purchase by the State. Also often referred to as expropriation and, with less frequency, as condemnation, it is, like police power and taxation, an inherent power of sovereignty and need not be clothed with any constitutional gear to exist; instead, provisions in our Constitution on the subject are meant more to regulate, rather than to grant, the exercise of the power. It is a right to take or reassert dominion over property within the state for public use or to meet a public exigency and is said to be an essential part of governance even in its most primitive form and thus inseparable from sovereignty. In fact, all separate interests of individuals in property are held of the government under this tacit agreement or implied reservation. Notwithstanding the grant to individuals, the eminent domain, the highest and most exact idea of property, remains in the government, or in the aggregate body of people in their sovereign capacity; and they have the right to resume the possession of the property whenever the public interest so requires it. Same; Same; Same; Expropriation proceedings are not adversarial in the conventional sense, for the condemning authority is not required to assert any conflicting interest in the property. The ubiquitous character of eminent domain is manifest in the nature of the expropriation proceedings. Expropriation proceedings are not adversarial in the conventional sense, for the condemning authority is not required to assert any conflicting interest in the property. Thus, by filing the action, the condemnor in effect merely serves notice that it is taking title and possession of the property, and the defendant asserts title or interest in the property, not to prove a right to possession, but to prove a right to compensation for the taking. Civil Law; Compromise Agreements; A compromise agreement when not contrary to law, public order, public policy, morals or good customs is a valid contract which is the law between the

parties; Anyone who is not a party to a contract or agreement cannot be bound by its terms and cannot be affected by it.As to respondents first and second arguments, we have time and again ruled that a compromise agreement, when not contrary to law, public order, public policy, morals, or good customs, is a valid contract which is the law between the parties. It is a contract perfected by mere consent, whereby the parties, making reciprocal concessions, avoid litigation or put an end to one already commenced. It has the force of law and is conclusive between the parties, and courts will not relieve parties from obligations voluntarily assumed, simply because their contracts turned out to be unwise. Note that respondent has not shown that any of the compromise agreements were in any way tainted with illegality, irregularity or imprudence. Indeed, anyone who is not a party to a contract or agreement cannot be bound by its terms, and cannot be affected by it. Since Gopuco was not a party to the compromise agreements, he cannot legally invoke the same.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court. The Solicitor General for petitioners. Francisco M. Malilong, Jr. for respondent. CHICO-NAZARIO, J.:

When private land is expropriated for a particular public use, and that particular public use is abandoned, does its former owner acquire a cause of action for recovery of the property? The trial courts ruling in the negative was reversed by the Court of Appeals in its Decision1 of 28 February 2001. Hence this petition for review under Rule 45 of the 1997 Rules of Civil Procedure of the said Decision of the court a quo, and its Resolution2 of 22 May 2003 dismissing petitioners motion for reconsideration. The facts, as adduced from the records, are as follows: Respondent Apolonio Gopuco, Jr. was the owner of Cadastral Lot No. 72 consisting of 995 square meters located in the vicinity of the Lahug Airport in Cebu City covered by Transfer Certificate of Title (TCT) No. 13061-T.

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The Lahug Airport had been turned over by the United States Army to the Republic of the Philippines sometime in 1947 through the Surplus Property Commission, which accepted it in behalf of the Philippine Government. In 1947, the Surplus Property Commission was succeeded by the Bureau of Aeronautics, which office was supplanted by the National Airport Corporation (NAC). The NAC was in turn dissolved and replaced with the Civil Aeronautics Administration (CAA).3 Sometime in 1949, the NAC informed the owners of the various lots surrounding the Lahug Airport, including the herein respondent, that the government was acquiring their lands for purposes of expansion. Some landowners were convinced to sell their properties on the assurance that they would be able to repurchase the same when these would no longer be used by the airport. Others, including Gopuco, refused to do so. Thus, on 16 April 1952, the CAA filed a complaint with the Court of First Instance (CFI) of Cebu for the expropriation of Lot No. 72 and its neighboring realties, docketed as Civil Case No. R-1881. On 29 December 1961, the CFI promulgated a Decision, 1. Declaring the expropriation of [the subject lots, including Lot No. 72] justified and in lawful exercise of the right of eminent domain; 2. Declaring . . . . a balance of P1,990 in favor of Apolonio Go Puco, Jr. with legal interest from November 16, 1947 until fully paid. . . . ; 3. After the payment of the foregoing financial obligation to the landowners, directing the latter to deliver to the plaintiff the corresponding Transfer Certificates of Title to their respective lots; and upon the presentation of the said titles to the Register of Deeds, ordering the latter to cancel the same and to issue, in lieu thereof, new Transfer Certificates of Title in the name of the plaintiff.4 No appeal was taken from the above Decision on Lot No. 72, and the judgment of condemnation became final and executory. Thereafter, on 23 May 1962, absolute title to Lot No. 72 was transferred to the Republic of the Philippines under TCT No. 25030.5 Subsequently, when the Mactan International Airport commenced operations, the Lahug Airport was ordered closed by then President Corazon C. Aquino in

a Memorandum of 29 November 1989.6 Lot No. 72 was thus virtually abandoned.7 On 16 March 1990, Gopuco wrote8 the Bureau of Air Transportation, through the manager of the Lahug Airport, seeking the return of his lot and offering to return the money previously received by him as payment for the expropriation. This letter was ignored.9 In the same year, Congress passed Republic Act No. 6958 creating the Mactan-Cebu International Airport Authority (MCIAA) and in part providing for the transfer of the assets of the Lahug Airport thereto. Consequently, on 08 May 1992, ownership of Lot No. 72 was transferred to MCIAA under TCT No. 120356.10 On 06 August 1992, Apolonio Gopuco, Jr. filed an amended complaint11 for recovery of ownership of Lot No. 72 against the Air Transportation Office12 and the Province of Cebu with the Regional Trial Court (RTC) of Cebu, Branch X, docketed as Civil Case No. CEB-11914. He maintained that by virtue of the closure of the Lahug Airport, the original purpose for which the property was expropriated had ceased or otherwise been abandoned, and title to the property had therefore reverted to him. Gopuco further alleged that when the original judgment of expropriation had been handed down, and before they could file an appeal thereto, the CAA offered them a compromise settlement whereby they were assured that the expropriated lots would be resold to them for the same price as when it was expropriated in the event that the Lahug Airport would be abandoned. Gopuco claims to have accepted this offer.13 However, he failed to present any proof on this matter, and later admitted that insofar as the said lot was concerned, no compromise agreement was entered into by the government and the previous owners.14 Lastly, Gopuco asserted that he had come across several announcements in the papers that the Lahug Airport was soon to be developed into a commercial complex, which he took to be a scheme of the Province of Cebu to make permanent the deprivation of his property. On 20 May 1994, the trial court rendered a Decision15 dismissing the complaint and directing the herein respondent to pay the MCIAA exemplary damages, litigation expenses and costs.

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Aggrieved by the holding of the trial court, Gopuco appealed to the Court of Appeals, which overturned the RTC decision, ordered the herein petitioners to reconvey Lot No. 72 to Gopuco upon payment of the reasonable price as determined by it, and deleted the award to the petitioners of exemplary damages, litigation expenses and costs. The Motion for Reconsideration was denied16 on 22 May 2003, hence this petition, which raises the following issues: WHETHER THE COURT OF APPEALS ERRED IN HOLDING THAT RESPONDENT HAS THE RIGHT TO RECLAIM OWNERSHIP OVER THE SUBJECT EXPROPRIATED LOT BASED ON THE IMPORT OF THE DECEMBER 29, 1961 DECISION IN CIVIL CASE NO. 1881. WHETHER THE COURT OF APPEALS ERRED IN DELETING THE AWARD OF LITIGATION EXPENSES AND COSTS IN FAVOR OF PETITIONERS. In deciding the original expropriation case that gave rise to the present controversy, Civil Case No. R-1881, the CFI reasoned that the planned expansion of the airport justified the exercise of eminent domain, thus: As for the public purpose of the expropriation proceeding, it cannot be doubted. Although the Mactan Airport is being constructed, it does not take away the actual usefulness and importance of the Lahug Airport; it is handling the air traffic both civilian and military. From it aircrafts fly to Mindanao and Visayas and pass thru it on their return flights to the North and Manila. Then, no evidence was adduced to show how soon is the Mactan Airport to be placed in operation and whether the Lahug Airport will be closed immediately thereafter. It is for the other departments of the Government to determine said matters. The Court cannot substitute its judgment for those of the said departments or agencies. In the absence of such a showing, the Court will presume that the Lahug Airport will continue to be in operation.17 (emphasis supplied) By the time Gopuco had filed his action for recovery of ownership of Lot No. 72, Lahug Airport had indeed ceased to operate. Nevertheless, the trial court held: The fact of abandonment or closure of the Lahug Airport admitted by the defendant did not by itself, result in the reversion of the subject property back to the plaintiff. Nor did it vest in the plaintiff the right to demand reconveyance of said property.

When real property has been acquired for public use unconditionally, either by eminent domain or by purchase, the abandonment or non-use of the real property, does not ipso facto give to the previous owner of said property any right to recover the same (Fery vs. Municipality of Cabanatuan, 42 Phil. 28).18 In reversing the trial court, the Court of Appeals called attention to the fact that both parties cited Fery v. Municipality of Cabanatuan,19 which the trial court also relied on in its Decision. The court a quo agreed in Gopucos interpretation of Fery that when the CFI in Civil Case No. R-1881 held that, . . . [T]hen, no evidence was adduced to show how soon is the Mactan Airport to be placed in operation and whether the Lahug Airport will be closed immediately thereafter. . . . In the absence of such a showing, the Court will presume that the Lahug Airport will continue to be in operation, . . . .20 the expropriation of the property was conditioned on its continued devotion to its public purpose. Thus, although the MCIAA stressed that nothing in the judgment of expropriation expressly stated that the lands would revert to their previous owners should the public use be terminated or abandoned, the Court of Appeals nevertheless ruled that, . . . [W]hile, there is no explicit statement that the land is expropriated with the condition that when the purpose is ended the property shall return to its owner, the full import of the decision (in Civil Case No. R-1881) suggests that the expropriation was granted because there is no clear showing that Lahug Airport will be closed, the moment Mactan International Airport is put to operation. It stands to reason that should that public use be abandoned, then the expropriated property should revert back to its former owner. Moreover, the foundation of the right to exercise the power of eminent domain is genuine necessity. Condemnation is justified only if it is for the public good and there is genuine necessity of a public character. Thus, when such genuine necessity no longer exists as when the State abandons the property expropriated, government interest must yield to the private right of the former land owner, whose property right was disturbed as a consequence of the exercise of eminent domain. Justice, equity and fair play demand that the property should revert back to plaintiff-appellant upon paying the reasonable value of the land to be based on the prevailing market value at the time of judicial demand to recover the property. If the State expects landowners to cooperate in its bid to take private property for its public use, so must it apply also the same standard, to allow the
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landowner to reclaim the property, now that the public use has been abandoned.21 In this petition, the MCIAA reiterates that the Republic of the Philippines validly expropriated Lot No. 72 through the proceedings in Civil Case No. R-1881, the judgment of which had long become final and executory. It further asserts that said judgment vested absolute and unconditional title in the government, specifically on the petitioners, there having been no condition whatsoever that the property should revert to its owners in case the Lahug Airport should be abandoned. On the other hand, the respondent would have us sustain the appellate courts interpretation of Fery as applied to the original judgment of expropriation, to the effect that this was subject to the condition that the Lahug Airport will continue to be in operation. We resolve to grant the petition. In Fery, the Court asked and answered the same question confronting us now: When private land is expropriated for a particular public use, and that particular public use is abandoned, does the land so expropriated return to its former owner?22 The answer to that question depends upon the character of the title acquired by the expropriator, whether it be the State, a province, a municipality, or a corporation which has the right to acquire property under the power of eminent domain. If, for example, land is expropriated for a particular purpose, with the condition that when that purpose is ended or abandoned the property shall return to its former owner, then, of course, when the purpose is terminated or abandoned the former owner reacquires the property so expropriated. If, for example, land is expropriated for a public street and the expropriation is granted upon condition that the city can only use it for a public street, then, of course, when the city abandons its use as a public street, it returns to the former owner, unless there is some statutory provision to the contrary. . . If upon the contrary, however, the decree of expropriation gives to the entity a fee simple title, then of course, the land becomes the absolute property of the expropriator, whether it be the State, a province, or municipality, and in that case the non-user does not have the effect of defeating the title acquired by the expropriation proceedings. (10 R.C.L., 240, sec. 202; 20 C.J. 1234, secs. 593599 and numerous cases cited; Reichling vs. Covington Lumber Co., 57 Wash., 225; 135 Am. St. Rep., 976; McConihay vs. Wright, 121 U.S., 201.)

When land has been acquired for public use in fee simple, unconditionally, either by the exercise of eminent domain or by purchase, the former owner retains no rights in the land, and the public use may be abandoned or the land may be devoted to a different use, without any impairment of the estate or title acquired, or any reversion to the former owner. (Fort Wayne vs. Lake Shore, etc. Ry. Co., 132 Ind., 558; 18 L.R.A., 367.) (Emphases Supplied)23 Did the judgment of expropriation in Civil Case No. R-1881 vest absolute and unconditional title in the government? We have already had occasion to rule on this matter in MactanCebu International Airport Authority v. Court of Appeals,24 which is a related action for reconveyance of a parcel of land also subject of the expropriation proceedings in Civil Case No. R-1881. One of the landowners affected by the said proceeding was Virginia Chiongbian, to whom the CFI ordered the Republic of the Philippines to pay P34,415.00, with legal interest computed from the time the government began using her land. Like the herein respondent, she did not appeal from the CFIs judgment. Also like Gopuco, she eventually filed for the reconveyance of her property when the airport closed. Although she was upheld by both the RTC of Cebu and the Court of Appeals, on appeal we held that the terms of the judgment (in Civil Case No. R-1881) are clear and unequivocal and granted title to Lot No. 941 in fee simple to the Republic of the Philippines. There was no condition imposed to the effect that the lot would return to CHIONGBIAN or that CHIONGBIAN had a right to repurchase the same if the purpose for which it was expropriated is ended or abandoned or if the property was to be used other than as the Lahug Airport.25 Moreover, we held that although other lot owners were able to successfully reacquire their lands by virtue of a compromise agreement, since CHIONGBIAN was not a party to any such agreement, she could not validly invoke the same. The respondent would have us revisit this ruling for three reasons. First, because he claims there is no showing that the government benefited from entering into compromise agreements with the other lot owners; second, because such a doctrine supposedly discriminates against those who have neither the werewithal nor the savvy to contest the expropriation, or agree to modify the judgment; and third, because there exists between the government and the owners of expropriated realty an implied contract that the properties involved will be used only for the public purpose for which they were acquired in the first place. As to respondents first and second arguments, we have time and again ruled that a compromise agreement, when not contrary to law, public order, public
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policy, morals, or good customs, is a valid contract which is the law between the parties.26 It is a contract perfected by mere consent,27 whereby the parties, making reciprocal concessions, avoid litigation or put an end to one already commenced. It has the force of law and is conclusive between the parties,28 and courts will not relieve parties from obligations voluntarily assumed, simply because their contracts turned out to be unwise.29 Note that respondent has not shown that any of the compromise agreements were in any way tainted with illegality, irregularity or imprudence. Indeed, anyone who is not a party to a contract or agreement cannot be bound by its terms, and cannot be affected by it.30 Since Gopuco was not a party to the compromise agreements, he cannot legally invoke the same.31 Lastly, Gopuco argues that there is present, in cases of expropriation, an implied contract that the properties will be used only for the public purpose for which they were acquired. No such contract exists. Eminent domain is generally described as the highest and most exact idea of property remaining in the government that may be acquired for some public purpose through a method in the nature of a forced purchase by the State.32 Also often referred to as expropriation and, with less frequency, as condemnation, it is, like police power and taxation, an inherent power of sovereignty and need not be clothed with any constitutional gear to exist; instead, provisions in our Constitution on the subject are meant more to regulate, rather than to grant, the exercise of the power. It is a right to take or reassert dominion over property within the state for public use or to meet a public exigency and is said to be an essential part of governance even in its most primitive form and thus inseparable from sovereignty.33 In fact, all separate interests of individuals in property are held of the government under this tacit agreement or implied reservation. Notwithstanding the grant to individuals, the eminent domain, the highest and most exact idea of property, remains in the government, or in the aggregate body of people in their sovereign capacity; and they have the right to resume the possession of the property whenever the public interest so requires it.34 The ubiquitous character of eminent domain is manifest in the nature of the expropriation proceedings. Expropriation proceedings are not adversarial in the conventional sense, for the condemning authority is not required to assert any conflicting interest in the property. Thus, by filing the action, the condemnor in effect merely serves notice that it is taking title and possession of the property, and the defendant asserts title or interest in the property, not to prove a right to possession, but to prove a right to compensation for the taking.35

The only direct constitutional qualification is thus that private property shall not be taken for public use without just compensation.36 This prescription is intended to provide a safeguard against possible abuse and so to protect as well the individual against whose property the power is sought to be enforced.37 In this case, the judgment on the propriety of the taking and the adequacy of the compensation received have long become final. We have also already held that the terms of that judgment granted title in fee simple to the Republic of the Philippines. Therefore, pursuant to our ruling in Fery, as recently cited in Reyes v. National Housing Authority,38 no rights to Lot No. 72, either express or implied, have been retained by the herein respondent. We are not unaware of the ruling in Heirs of Timoteo Moreno v. Mactan-Cebu International Airport Authority,39 concerning still another set of owners of lots declared expropriated in the judgment in Civil Case No. R-1881. As with Chiongbian and the herein respondent, the owners of the lots therein did not appeal the judgment of expropriation, but subsequently filed a complaint for reconveyance. In ordering MCIAA to reconvey the said lots in their favor, we held that the predicament of petitioners therein involved a constructive trust akin to the implied trust referred to in Art. 145440 of the Civil Code.41 However, we qualified our Decision in that case, to the effect that, We adhere to the principles enunciated in Fery and in Mactan-Cebu International Airport Authority, and do not overrule them. Nonetheless the weight of their import, particularly our ruling as regards the properties of respondent Chiongbian in Mactan-Cebu International Airport Authority, must be commensurate to the facts that were established therein as distinguished from those extant in the case at bar. Chiongbian put forth inadmissible and inconclusive evidence, while in the instant case we have preponderant proof as found by the trial court of the existence of the right of repurchase in favor of petitioners. Neither has Gopuco, in the present case, adduced any evidence at all concerning a right of repurchase in his favor. Heirs of Moreno is thus not in point. The trial court was thus correct in denying Gopucos claim for the reconveyance of Lot No. 72 in his favor. However, for failure of the petitioners to present any proof that this case was clearly unfounded or filed for purposes of harassment, or that the herein respondent acted in gross and evident bad faith, the reimposition of litigation expenses and costs has no basis. It is not
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sound public policy to set a premium upon the right to litigate where such right is exercised in good faith, as in the present case.42 WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. SP No. 49898 dated 28 February 2001, and its Resolution of 22 May 2003 are hereby REVERSED and SET ASIDE. The Decision of RTCBranch X of Cebu dated 20 May 1994 in Civil Case No. CEB-11914 is REINSTATED with the modification that the award of exemplary damages, litigation expenses and costs are DELETED. SO ORDERED. Puno (Chairman), Austria-Martinez, Callejo, Sr. and Tinga, JJ., concur. Petition granted, judgment and resolution reversed and set aside. That of that trial court reinstated with modification. Note.When land has been acquired for public use in fee simple, unconditionally, either by the exercise of eminent domain or by purchase, the former owner retains no rights in the land. (Mactan-Cebu International Airport Authority vs. Court of Appeals, 346 SCRA 126 [2000]) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Air Transportation Office (ATO) vs. Gopuco, Jr., 462 SCRA 544(2005)]

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G.R. No. 161656. June 29, 2005.* REPUBLIC OF THE PHILIPPINES, GENERAL ROMEO ZULUETA, COMMODORE EDGARDO GALEOS, ANTONIO CABALUNA, DOROTEO MANTOS & FLORENCIO BELOTINDOS, petitioners, vs. VICENTE G. LIM, respondent.
Actions; Pleadings and Practice; Motions for Reconsideration; A second motion for reconsideration is prohibited.While we commend the Republic for the zeal with which it pursues the present case, we reiterate that its urgent motion for clarification filed on July 7, 2004 is actually a second motion for reconsideration. This motion is prohibited under Section 2, Rule 52, of the 1997 Rules of Civil Procedure, as amended, which provides: Sec. 2. Second motion for reconsideration.No second motion for reconsideration of a judgment or final resolution by the same party shall be entertained. Consequently, as mentioned earlier, we simply noted without action the motion since petitioners petition was already denied with finality. Eminent Domain; Due Process; One of the basic principles in our Constitution is that no person shall be deprived of his private property without due process of law, and in expropriation cases, an essential element of due process is that there must be just compensation whenever private property is taken for public use; Undoubtedly, over 50 years of delayed payment cannot, in any way, be viewed as fair.One of the basic principles enshrined in our Constitution is that no person shall be deprived of his private property without due process of law; and in expropriation cases, an essential element of due process is that there must be just compensation whenever private property is taken for public use. Accordingly, Section 9, Article III, of our Constitution mandates: Private property shall not be taken for public use without just compensation. The Republic disregarded the foregoing provision when it failed and refused to pay respondents predecessors-in-interest the just compensation for Lots 932 and 939. The length of time and the manner with which it evaded payment demonstrate its arbitrary high-handedness and confiscatory attitude. The final judgment in the expropriation proceedings (Civil Case No. 781) was entered on April 5, 1948. More than half of a century has passed, yet, to this day, the landowner, now respondent, has remained empty-handed. Undoubtedly, over 50 years of delayed payment cannot, in any way, be viewed as fair. This is more so when such delay is accompanied by bureaucratic hassles. Apparent from Valdehueza is the fact that respondents predecessorsin-interest were given a run around by the Republics officials and agents. In 1950, despite the benefits it derived from the use of the two lots, the National Airports Corporation denied knowledge of the claim of respondents predecessors-in-interest. Even President Garcia, who sent a letter to the Civil Aeronautics Administration and the Secretary of National Defense to expedite the payment, failed in granting relief to them. And, on September 6, 1961, while the Chief of Staff of the Armed Forces expressed willingness to pay the appraised value of the lots, nothing happened. Same; Same; Just compensation embraces not only the correct determination of the amount to be paid to the owners of the land but also the payment for the land within a reasonable time from its taking.The Court of Appeals is correct in saying that Republics delay is contrary to the rules

of fair play, as just compensation embraces not only the correct determination of the amount to be paid to the owners of the land, but also the payment for the land within a reasonable time from its taking. Without prompt payment, compensation cannot be considered just. In jurisdictions similar to ours, where an entry to the expropriated property precedes the payment of compensation, it has been held that if the compensation is not paid in a reasonable time, the party may be treated as a trespasser ab initio. Same; Same; Section 9, Article III of the Constitution is not a grant but a limitation of power and should therefore be strictly interpreted against the expropriator, the government, and liberally in favor of the property owner.Significantly, the above-mentioned provision of Section 9, Article III of the Constitution is not a grant but a limitation of power. This limiting function is in keeping with the philosophy of the Bill of Rights against the arbitrary exercise of governmental powers to the detriment of the individuals rights. Given this function, the provision should therefore be strictly interpreted against the expropriator, the government, and liberally in favor of the property owner. Same; Same; Failure of the Republic to pay the landowner and his predecessors-in-interest for a period of 57 years rendered the expropriation process incomplete.In Municipality of Bian v. Garcia this Court ruled that the expropriation of lands consists of two stages, to wit: x x x The first is concerned with the determination of the authority of the plaintiff to exercise the power of eminent domain and the propriety of its exercise in the context of the facts involved in the suit. It ends with an order, if not of dismissal of the action, of condemnation declaring that the plaintiff has a lawful right to take the property sought to be condemned, for the public use or purpose described in the complaint, upon the payment of just compensation to be determined as of the date of the filing of the complaint x x x. The second phase of the eminent domain action is concerned with the determination by the court of the just compensation for the property sought to be taken. This is done by the court with the assistance of not more than three (3) commissioners. x x x. It is only upon the completion of these two stages that expropriation is said to have been completed. In Republic v. Salem Investment Corporation, we ruled that, the process is not completed until payment of just compensation. Thus, here, the failure of the Republic to pay respondent and his predecessors-in-interest for a period of 57 years rendered the expropriation process incomplete. Same; Same; The Republics failure to pay just compensation for 57 years cannot but be construed as a deliberate refusal to pay which makes the recovery of possession in order.The Republic now argues that under Valdehueza, respondent is not entitled to recover possession of Lot 932 but only to demand payment of its fair market value. Of course, we are aware of the doctrine that non-payment of just compensation (in an expropriation proceedings) does not entitle the private landowners to recover possession of the expropriated lots. This is our ruling in the recent cases of Republic of the Philippines vs. Court of Appeals, et al., and Reyes vs. National Housing Authority. However, the facts of the present case do not justify its application. It bears stressing that the Republic was ordered to pay just compensation twice,the first was in the expropriation proceedings and the second, in Valdehueza. Fifty-seven (57) years have passed since then. We cannot but construe the Republics failure to pay just compensation as a deliberate refusal on its part. Under such circumstance, recovery of possession is in order. In
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several jurisdictions, the courts held that recovery of possession may be had when property has been wrongfully taken or is wrongfully retained by one claiming to act under the power of eminent domain or where a rightful entry is made and the party condemning refuses to pay the compensation which has been assessed or agreed upon; or fails or refuses to have the compensation assessed and paid. Same; Same; It must be emphasized that an individual cannot be deprived of his property for the public convenience.The Republic also contends that where there have been constructions being used by the military, as in this case, public interest demands that the present suit should not be sustained. It must be emphasized that an individual cannot be deprived of his property for the public convenience. In Association of Small Landowners in the Philippines, Inc. vs. Secretary of Agrarian Reform, we ruled: One of the basic principles of the democratic system is that where the rights of the individual are concerned, the end does not justify the means. It is not enough that there be a valid objective; it is also necessary that the means employed to pursue it be in keeping with the Constitution. Mere expediency will not excuse constitutional shortcuts. There is no question that not even the strongest moral conviction or the most urgent public need, subject only to a few notable exceptions, will excuse the bypassing of an individuals rights. It is no exaggeration to say that a person invoking a right guaranteed under Article III of the Constitution is a majority of one even as against the rest of the nation who would deny him that right. The right covers the persons life, his liberty and his property under Section 1 of Article III of the Constitution. With regard to his property, the owner enjoys the added protection of Section 9, which reaffirms the familiar rule that private property shall not be taken for public use without just compensation. Same; Same; The special circumstances prevailing in this case entitle the landowner to recover possession of the expropriated lot from the Republic.We thus rule that the special circumstances prevailing in this case entitle respondent to recover possession of the expropriated lot from the Republic. Unless this form of swift and effective relief is granted to him, the grave injustice committed against his predecessors-in-interest, though no fault or negligence on their part, will be perpetuated. Let this case, therefore, serve as a wake-up call to the Republic that in the exercise of its power of eminent domain, necessarily in derogation of private rights, it must comply with the Constitutional limitations. This Court, as the guardian of the peoples right, will not stand still in the face of the Republics oppressive and confiscatory taking of private property, as in this case. Same; Real Estate Mortgages; Any person who deals with a property subject of an expropriation does so at his own risk, taking into account the ultimate possibility of losing the property in favor of the government; Until the action for expropriation has been completed and terminated, ownership over the property being expropriated remains with the registered owner who can exercise all rights pertaining to an owner, including the right to dispose of his property subject to the power of the State ultimately to acquire it through expropriation.Assuming that respondent had indeed knowledge of the annotation, still nothing would have prevented him from entering into a mortgage contract involving Lot 932 while the expropriation proceeding was pending. Any person who deals with a property subject of an expropriation does so at his own risk, taking into account the ultimate possibility of losing the property in favor of the

government. Here, the annotation merely served as a caveat that the Republic had a preferential right to acquire Lot 932 upon its payment of a reasonable market value. It did not proscribe Valdehueza and Panerio from exercising their rights of ownership including their right to mortgage or even to dispose of their property. In Republic vs. Salem Investment Corporation, we recognized the owners absolute right over his property pending completion of the expropriation proceeding, thus: It is only upon the completion of these two stages that expropriation is said to have been completed. Moreover, it is only upon payment of just compensation that title over the property passes to the government. Therefore, until the action for expropriation has been completed and terminated, ownership over the property being expropriated remains with the registered owner. Consequently, the latter can exercise all rights pertaining to an owner, including the right to dispose of his property subject to the power of the State ultimately to acquire it through expropriation. Same; Same; A mortgage is merely an accessory contract intended to secure the performance of the principal obligation, and one of its characteristics is that it is inseparable from the property.For respondents part, it is reasonable to conclude that he entered into the contract of mortgage with Valdehueza and Panerio fully aware of the extent of his right as a mortgagee. A mortgage is merely an accessory contract intended to secure the performance of the principal obligation. One of its characteristics is that it is inseparable from the property. It adheres to the property regardless of who its owner may subsequently be. Respondent must have known that even if Lot 932 is ultimately expropriated by the Republic, still, his right as a mortgagee is protected. In this regard, Article 2127 of the Civil Code provides: Art. 2127. The mortgage extends to the natural accessions, to the improvements, growing fruits, and the rents or income not yet received when the obligation becomes due, and to the amount of the indemnity granted or owing to the proprietor from the insurers of the property mortgaged, or in virtue of expropriation for public use, with the declarations, amplifications, and limitations established by law, whether the estate remains in the possession of the mortgagor or it passes in the hands of a third person. Same; While the prevailing doctrine is that the non-payment of just compensation does not entitle the private landowner to recover possession of the expropriated lots, in cases where the government failed to pay just compensation within five (5) years from the finality of the judgment in the expropriation proceedings, the owner concerned shall have the right to recover possession of his property.In summation, while the prevailing doctrine is that the non-payment of just compensation does not entitle the private landowner to recover possession of the expropriated lots, however, in cases where the government failed to pay just compensation within five (5) years from the finality of the judgment in the expropriation proceedings, the owners concerned shall have the right to recover possession of their property. This is in consonance with the principle that the government cannot keep the property and dishonor the judgment. To be sure, the five-year period limitation will encourage the government to pay just compensation punctually. This is in keeping with justice and equity. After all, it is the duty of the government, whenever it takes property from private persons against their will, to facilitate the payment of just compensation. In Cosculluela v. Court of Appeals, we defined just compensation as not only the correct determination of the amount to be paid to the property owner but also the payment of

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the property within a reasonable time. Without prompt payment, compensation cannot be considered just.

PETITION for review on certiorari of a decision of the Court of Appeals.

The Denzons interposed an appeal to the Court of Appeals but it was dismissed on March 11, 1948. An entry of judgment was made on April 5, 1948. In 1950, Jose Galeos, one of the heirs of the Denzons, filed with the National Airports Corporation a claim for rentals for the two lots, but it denied knowledge of the matter. Another heir, Nestor Belocura, brought the claim to the Office of then President Carlos Garcia who wrote the Civil Aeronautics Administration and the Secretary of National Defense to expedite action on said claim. On September 6, 1961, Lt. Manuel Cabal rejected the claim but expressed willingness to pay the appraised value of the lots within a reasonable time. For failure of the Republic to pay for the lots, on September 20, 1961, the Denzons successors-in-interest, Francisca Galeos-Valdehueza and Josefina Galeos-Panerio,2 filed with the same CFI an action for recovery of possession with damages against the Republic and officers of the Armed Forces of the Philippines in possession of the property. The case was docketed as Civil Case No. R-7208. In the interim or on November 9, 1961, TCT Nos. 23934 and 23935 covering Lots 932 and 939 were issued in the names of Francisca Valdehueza and Josefina Panerio, respectively. Annotated thereon was the phrase subject to the priority of the National Airports Corporation to acquire said parcels of land, Lots 932 and 939 upon previous payment of a reasonable market value. On July 31, 1962, the CFI promulgated its Decision in favor of Valdehueza and Panerio, holding that they are the owners and have retained their right as such over Lots 932 and 939 because of the Republics failure to pay the amount of P4,062.10, adjudged in the expropriation proceedings. However, in view of the annotation on their land titles, they were ordered to execute a deed of sale in favor of the Republic. In view of the differences in money value from 1940 up to the present, the court adjusted the market value at P16,248.40, to be paid with 6% interest per annum from April 5, 1948, date of entry in the expropriation proceedings, until full payment. After their motion for reconsideration was denied, Valdehueza and Panerio appealed from the CFI Decision, in view of the amount in controversy, directly to this Court. The case was docketed as No. L-21032.3 On May 19, 1966, this Court rendered its Decision affirming the CFI Decision. It held that Valdehueza and Panerio are still the registered owners of Lots 932 and 939, there having been no payment of just compensation by the Republic. Apparently, this Court
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The facts are stated in the resolution of the Court. The Solicitor General for petitioners. RESOLUTION SANDOVAL-GUTIERREZ, J.:

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

found nothing in the records to show that the Republic paid the owners or their successors-in-interest according to the CFI decision. While it deposited the amount of P9,500,00, and said deposit was allegedly disbursed, however, the payees could not be ascertained. Notwithstanding the above finding, this Court still ruled that Valdehueza and Panerio are not entitled to recover possession of the lots but may only demand the payment of their fair market value, ratiocinating as follows: Appellants would contend that: (1) possession of Lots 932 and 939 should be restored to them as owners of the same; (2) the Republic should be ordered to pay rentals for the use of said lots, plus attorneys fees; and (3) the court a quo in the present suit had no power to fix the value of the lots and order the execution of the deed of sale after payment. It is true that plaintiffs are still the registered owners of the land, there not having been a transfer of said lots in favor of the Government. The records do not show that the Government paid the owners or their successors-in-interest according to the 1940 CFI decision although, as stated, P9,500.00 was deposited by it, and said deposit had been disbursed. With the records lost, however, it cannot be known who received the money (Exh. 14 says: It is further certified that the corresponding Vouchers and pertinent Journal and Cash Book were destroyed during the last World War, and therefore the names of the payees concerned cannot be ascertained.) And the Government now admits that there is no available record showing that payment for the value of the lots in question has been made (Stipulation of Facts, par. 9, Rec. on Appeal, p. 28). The points in dispute are whether such payment can still be made and, if so, in what amount. Said lots have been the subject of expropriation proceedings. By final and executory judgment in said proceedings, they were condemned for public use, as part of an airport, and ordered sold to the Government. In fact, the abovementioned title certificates secured by plaintiffs over said lots contained annotations of the right of the National Airports Corporation (now CAA) to pay for and acquire them. It follows that both by virtue of the judgment, long final, in the expropriation suit, as well as the annotations upon their title certificates, plaintiffs are not entitled to recover possession of their expropriated lotswhich are still devoted to the public use for which they were expropriatedbut only to demand the fair market value of the same. Meanwhile, in 1964, Valdehueza and Panerio mortgaged Lot 932 to Vicente Lim, herein respondent,4 as security for their loans. For their failure to pay Lim

despite demand, he had the mortgage foreclosed in 1976. Thus, TCT No. 23934 was cancelled, and in lieu thereof, TCT No. 63894 was issued in his name. On August 20, 1992, respondent Lim filed a complaint for quieting of title with the Regional Trial Court (RTC), Branch 10, Cebu City, against General Romeo Zulueta, as Commander of the Armed Forces of the Philippines, Commodore Edgardo Galeos, as Commander of Naval District V of the Philippine Navy, Antonio Cabaluna, Doroteo Mantos and Florencio Belotindos, herein petitioners. Subsequently, he amended the complaint to implead the Republic. On May 4, 2001, the RTC rendered a decision in favor of respondent, thus: WHEREFORE, judgment is hereby rendered in favor of plaintiff Vicente Lim and against all defendants, public and private, declaring plaintiff Vicente Lim the absolute and exclusive owner of Lot No. 932 with all the rights of an absolute owner including the right to possession. The monetary claims in the complaint and in the counter claims contained in the answer of defendants are ordered Dismissed. Petitioners elevated the case to the Court of Appeals, docketed therein as CAG.R. CV No. 72915. In its Decision5 dated September 18, 2003, the Appellate Court sustained the RTC Decision, thus: Obviously, defendant-appellant Republic evaded its duty of paying what was due to the landowners. The expropriation proceedings had already become final in the late 1940s and yet, up to now, or more than fifty (50) years after, the Republic had not yet paid the compensation fixed by the court while continuously reaping benefits from the expropriated property to the prejudice of the landowner. x x x. This is contrary to the rules of fair play because the concept of just compensation embraces not only the correct determination of the amount to be paid to the owners of the land, but also the payment for the land within a reasonable time from its taking. Without prompt payment, compensation cannot be considered just for the property owner is made to suffer the consequence of being immediately deprived of his land while being made to wait for a decade or more, in this case more than 50 years, before actually receiving the amount necessary to cope with the loss. To allow the taking of the landowners properties, and in the meantime leave them emptyhanded by withholding payment of compensation while the government speculates on whether or not it will pursue expropriation, or worse, for government to subsequently decide to abandon the property and return it to the landowners, is undoubtedly an oppressive exercise of eminent domain that
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must never be sanctioned. (Land Bank of the Philippines vs. Court of Appeals, 258 SCRA 404). xxx xxx

prayer to refer the case to the En Banc). They maintain that the Republics right of ownership has been settled in Valdehueza. The basic issue for our resolution is whether the Republic has retained ownership of Lot 932 despite its failure to pay respondents predecessors-ininterest the just compensation therefor pursuant to the judgment of the CFI rendered as early as May 14, 1940. Initially, we must rule on the procedural obstacle. While we commend the Republic for the zeal with which it pursues the present case, we reiterate that its urgent motion for clarification filed on July 7, 2004 is actually a second motion for reconsideration. This motion is prohibited under Section 2, Rule 52, of the 1997 Rules of Civil Procedure, as amended, which provides: Sec. 2. Second motion for reconsideration.No second motion for reconsideration of a judgment or final resolution by the same party shall be entertained. Consequently, as mentioned earlier, we simply noted without action the motion since petitioners petition was already denied with finality. Considering the Republics urgent and serious insistence that it is still the owner of Lot 932 and in the interest of justice, we take another hard look at the controversial issue in order to determine the veracity of petitioners stance. One of the basic principles enshrined in our Constitution is that no person shall be deprived of his private property without due process of law; and in expropriation cases, an essential element of due process is that there must be just compensation whenever private property is taken for public use.7 Accordingly, Section 9, Article III, of our Constitution mandates: Private property shall not be taken for public use without just compensation. The Republic disregarded the foregoing provision when it failed and refused to pay respondents predecessors-in-interest the just compensation for Lots 932 and 939. The length of time and the manner with which it evaded payment demonstrate its arbitrary high-handedness and confiscatory attitude. The final judgment in the expropriation proceedings (Civil Case No. 781) was entered on April 5, 1948. More than half of a century has passed, yet, to this day, the landowner, now respondent, has remained empty-handed. Undoubtedly, over 50 years of delayed payment cannot, in any way, be viewed as fair. This is
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An action to quiet title is a common law remedy for the removal of any cloud or doubt or uncertainty on the title to real property. It is essential for the plaintiff or complainant to have a legal or equitable title or interest in the real property, which is the subject matter of the action. Also the deed, claim, encumbrance or proceeding that is being alleged as cloud on plaintiffs title must be shown to be in fact invalid or inoperative despite its prima facie appearance of validity or legal efficacy (Robles vs. Court of Appeals, 328 SCRA 97). In view of the foregoing discussion, clearly, the claim of defendant-appellant Republic constitutes a cloud, doubt or uncertainty on the title of plaintiff-appellee Vicente Lim that can be removed by an action to quiet title. WHEREFORE, in view of the foregoing, and finding no reversible error in the appealed May 4, 2001 Decision of Branch 9, Regional Trial Court of Cebu City, in Civil Case No. CEB-12701, the said decision is UPHELD AND AFFIRMED. Accordingly, the appeal is DISMISSED for lack of merit. Undaunted, petitioners, through the Office of the Solicitor General, filed with this Court a petition for review on certiorari alleging that the Republic has remained the owner of Lot 932 as held by this Court in Valdehueza vs. Republic.6 In our Resolution dated March 1, 2004, we denied the petition outright on the ground that the Court of Appeals did not commit a reversible error. Petitioners filed an urgent motion for reconsideration but we denied the same with finality in our Resolution of May 17, 2004. On May 18, 2004, respondent filed an ex-parte motion for the issuance of an entry of judgment. We only noted the motion in our Resolution of July 12, 2004. On July 7, 2004, petitioners filed an urgent plea/motion for clarification, which is actually a second motion for reconsideration. Thus, in our Resolution of September 6, 2004, we simply noted without action the motion considering that the instant petition was already denied with finality in our Resolution of May 17, 2004. On October 29, 2004, petitioners filed a very urgent motion for leave to file a motion for reconsideration of our Resolution dated September 6, 2004 (with

more so when such delay is accompanied by bureaucratic hassles. Apparent from Valdehueza is the fact that respondents predecessors-in-interest were given a run around by the Republics officials and agents. In 1950, despite the benefits it derived from the use of the two lots, the National Airports Corporation denied knowledge of the claim of respondents predecessors-ininterest. Even President Garcia, who sent a letter to the Civil Aeronautics Administration and the Secretary of National Defense to expedite the payment, failed in granting relief to them. And, on September 6, 1961, while the Chief of Staff of the Armed Forces expressed willingness to pay the appraised value of the lots, nothing happened. The Court of Appeals is correct in saying that Republics delay is contrary to the rules of fair play, as just compensation embraces not only the correct determination of the amount to be paid to the owners of the land, but also the payment for the land within a reasonable time from its taking. Without prompt payment, compensation cannot be considered just. In jurisdictions similar to ours, where an entry to the expropriated property precedes the payment of compensation, it has been held that if the compensation is not paid in a reasonable time, the party may be treated as a trespasser ab initio.8 Corollarily, in Provincial Government of Sorsogon vs. Vda. De Villaroya,9 similar to the present case, this Court expressed its disgust over the governments vexatious delay in the payment of just compensation, thus: The petitioners have been waiting for more than thirty years to be paid for their land which was taken for use as a public high school. As a matter of fair procedure, it is the duty of the Government, whenever it takes property from private persons against their will, to supply all required documentation and facilitate payment of just compensation. The imposition of unreasonable requirements and vexatious delays before effecting payment is not only galling and arbitrary but a rich source of discontent with government. There should be some kind of swift and effective recourse against unfeeling and uncaring acts of middle or lower level bureaucrats. We feel the same way in the instant case. More than anything else, however, it is the obstinacy of the Republic that prompted us to dismiss its petition outright. As early as May 19, 1966, in Valdehueza, this Court mandated the Republic to pay respondents predecessors-in-interest the sum of P16,248.40 as reasonable market value of the two lots in question. Unfortunately, it did not comply and allowed several decades to pass without obeying this Courts mandate. Such prolonged

obstinacy bespeaks of lack of respect to private rights and to the rule of law, which we cannot countenance. It is tantamount to confiscation of private property. While it is true that all private properties are subject to the need of government, and the government may take them whenever the necessity or the exigency of the occasion demands, however, the Constitution guarantees that when this governmental right of expropriation is exercised, it shall be attended by compensation.10 From the taking of private property by the government under the power of eminent domain, there arises an implied promise to compensate the owner for his loss.11 Significantly, the above-mentioned provision of Section 9, Article III of the Constitution is not a grant but a limitation of power. This limiting function is in keeping with the philosophy of the Bill of Rights against the arbitrary exercise of governmental powers to the detriment of the individuals rights. Given this function, the provision should therefore be strictly interpreted against the expropriator, the government, and liberally in favor of the property owner.12 Ironically, in opposing respondents claim, the Republic is invoking this Courts Decision in Valdehueza, a Decision it utterly defied. How could the Republic acquire ownership over Lot 932 when it has not paid its owner the just compensation, required by law, for more than 50 years? The recognized rule is that title to the property expropriated shall pass from the owner to the expropriator only upon full payment of the just compensation. Jurisprudence on this settled principle is consistent both here and in other democratic jurisdictions. In Association of Small Landowners in the Philippines, Inc., et al. vs. Secretary of Agrarian Reform,13 thus: Title to property which is the subject of condemnation proceedings does not vest the condemnor until the judgment fixing just compensation is entered and paid, but the condemnors title relates back to the date on which the petition under the Eminent Domain Act, or the commissioners report under the Local Improvement Act, is filed. x x x Although the right to appropriate and use land taken for a canal is complete at the time of entry, title to the property taken remains in the owner until payment is actually made. (Emphasis supplied.) In Kennedy v. Indianapolis, the US Supreme Court cited several cases holding that title to property does not pass to the condemnor until just compensation had actually been made. In fact, the decisions appear to be uniform to this effect. As early as 1838, in Rubottom v. McLure, it was held that actual payment to the owner of the condemned property was a condition precedent to
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the investment of the title to the property in the State albeit not to the appropriation of it to public use. In Rexford v. Knight, the Court of Appeals of New York said that the construction upon the statutes was that the fee did not vest in the State until the payment of the compensation although the authority to enter upon and appropriate the land was complete prior to the payment. Kennedy further said that both on principle and authority the rule is . . . that the right to enter on and use the property is complete, as soon as the property is actually appropriated under the authority of law for a public use, but that the title does not pass from the owner without his consent, until just compensation has been made to him. Our own Supreme Court has held in Visayan Refining Co. v. Camus and Paredes, that: If the laws which we have exhibited or cited in the preceding discussion are attentively examined it will be apparent that the method of expropriation adopted in this jurisdiction is such as to afford absolute reassurance that no piece of land can be finally and irrevocably taken from an unwilling owner until compensation is paid. . . (Emphasis supplied.) Clearly, without full payment of just compensation, there can be no transfer of title from the landowner to the expropriator. Otherwise stated, the Republics acquisition of ownership is conditioned upon the full payment of just compensation within a reasonable time.14 Significantly, in Municipality of Bian v. Garcia15 this Court ruled that the expropriation of lands consists of two stages, to wit: x x x The first is concerned with the determination of the authority of the plaintiff to exercise the power of eminent domain and the propriety of its exercise in the context of the facts involved in the suit. It ends with an order, if not of dismissal of the action, of condemnation declaring that the plaintiff has a lawful right to take the property sought to be condemned, for the public use or purpose described in the complaint, upon the payment of just compensation to be determined as of the date of the filing of the complaint x x x. The second phase of the eminent domain action is concerned with the determination by the court of the just compensation for the property sought to be taken. This is done by the court with the assistance of not more than three (3) commissioners. x x x.

It is only upon the completion of these two stages that expropriation is said to have been completed. In Republic v. Salem Investment Corporation,16 we ruled that, the process is not completed until payment of just compensation. Thus, here, the failure of the Republic to pay respondent and his predecessorsin-interest for a period of 57 years rendered the expropriation process incomplete. The Republic now argues that under Valdehueza, respondent is not entitled to recover possession of Lot 932 but only to demand payment of its fair market value. Of course, we are aware of the doctrine that non-payment of just compensation (in an expropriation proceedings) does not entitle the private landowners to recover possession of the expropriated lots. This is our ruling in the recent cases of Republic of the Philippines vs. Court of Appeals, et al.,17 and Reyes vs. National Housing Authority.18 However, the facts of the present case do not justify its application. It bears stressing that the Republic was ordered to pay just compensation twice,the first was in the expropriation proceedings and the second, in Valdehueza. Fifty-seven (57) years have passed since then. We cannot but construe the Republics failure to pay just compensation as a deliberate refusal on its part. Under such circumstance, recovery of possession is in order. In several jurisdictions, the courts held that recovery of possession may be had when property has been wrongfully taken or is wrongfully retained by one claiming to act under the power of eminent domain19 or where a rightful entry is made and the party condemning refuses to pay the compensation which has been assessed or agreed upon;20 or fails or refuses to have the compensation assessed and paid.21 The Republic also contends that where there have been constructions being used by the military, as in this case, public interest demands that the present suit should not be sustained. It must be emphasized that an individual cannot be deprived of his property for the public convenience.22 In Association of Small Landowners in the Philippines, Inc. vs. Secretary of Agrarian Reform,23 we ruled: One of the basic principles of the democratic system is that where the rights of the individual are concerned, the end does not justify the means. It is not enough that there be a valid objective; it is also necessary that the means employed to pursue it be in keeping with the Constitution. Mere expediency will not excuse constitutional shortcuts. There is no question that not even the strongest moral conviction or the most urgent public need, subject only to a few notable exceptions, will excuse the bypassing of an individuals rights. It is no
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exaggeration to say that a person invoking a right guaranteed under Article III of the Constitution is a majority of one even as against the rest of the nation who would deny him that right. The right covers the persons life, his liberty and his property under Section 1 of Article III of the Constitution. With regard to his property, the owner enjoys the added protection of Section 9, which reaffirms the familiar rule that private property shall not be taken for public use without just compensation. The Republics assertion that the defense of the State will be in grave danger if we shall order the reversion of Lot 932 to respondent is an overstatement. First, Lot 932 had ceased to operate as an airport. What remains in the site is just the National Historical Institutes marking stating that Lot 932 is the former location of Lahug Airport. And second, there are only thirteen (13) structures located on Lot 932, eight (8) of which are residence apartments of military personnel. Only two (2) buildings are actually used as training centers. Thus, practically speaking, the reversion of Lot 932 to respondent will only affect a handful of military personnel. It will not result to irreparable damage or damage beyond pecuniary estimation, as what the Republic vehemently claims. We thus rule that the special circumstances prevailing in this case entitle respondent to recover possession of the expropriated lot from the Republic. Unless this form of swift and effective relief is granted to him, the grave injustice committed against his predecessors-in-interest, though no fault or negligence on their part, will be perpetuated. Let this case, therefore, serve as a wake-up call to the Republic that in the exercise of its power of eminent domain, necessarily in derogation of private rights, it must comply with the Constitutional limitations. This Court, as the guardian of the peoples right, will not stand still in the face of the Republics oppressive and confiscatory taking of private property, as in this case. At this point, it may be argued that respondent Vicente Lim acted in bad faith in entering into a contract of mortgage with Valdehueza and Panerio despite the clear annotation in TCT No. 23934 that Lot 932 is subject to the priority of the National Airports Corporation [to acquire said parcels of land] x x x upon previous payment of a reasonable market value. The issue of whether or not respondent acted in bad faith is immaterial considering that the Republic did not complete the expropriation process. In short, it failed to perfect its title over Lot 932 by its failure to pay just compensation. The issue of bad faith would have assumed relevance if the

Republic actually acquired title over Lot 932. In such a case, even if respondents title was registered first, it would be the Republics title or right of ownership that shall be upheld. But now, assuming that respondent was in bad faith, can such fact vest upon the Republic a better title over Lot 932? We believe not. This is because in the first place, the Republic has no title to speak of. At any rate, assuming that respondent had indeed knowledge of the annotation, still nothing would have prevented him from entering into a mortgage contract involving Lot 932 while the expropriation proceeding was pending. Any person who deals with a property subject of an expropriation does so at his own risk, taking into account the ultimate possibility of losing the property in favor of the government. Here, the annotation merely served as a caveat that the Republic had a preferential right to acquire Lot 932 upon its payment of a reasonable market value. It did not proscribe Valdehueza and Panerio from exercising their rights of ownership including their right to mortgage or even to dispose of their property. In Republic vs. Salem Investment Corporation,24 we recognized the owners absolute right over his property pending completion of the expropriation proceeding, thus: It is only upon the completion of these two stages that expropriation is said to have been completed. Moreover, it is only upon payment of just compensation that title over the property passes to the government. Therefore, until the action for expropriation has been completed and terminated, ownership over the property being expropriated remains with the registered owner. Consequently, the latter can exercise all rights pertaining to an owner, including the right to dispose of his property subject to the power of the State ultimately to acquire it through expropriation. It bears emphasis that when Valdehueza and Panerio mortgaged Lot 932 to respondent in 1964, they were still the owners thereof and their title had not yet passed to the petitioner Republic. In fact, it never did. Such title or ownership was rendered conclusive when we categorically ruled in Valdehueza that: It is true that plaintiffs are still the registered owners of the land, there not having been a transfer of said lots in favor of the Government. For respondents part, it is reasonable to conclude that he entered into the contract of mortgage with Valdehueza and Panerio fully aware of the extent of his right as a mortgagee. A mortgage is merely an accessory contract intended to secure the performance of the principal obligation. One of its characteristics is that it is inseparable from the property. It adheres to the property regardless
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of who its owner may subsequently be.25 Respondent must have known that even if Lot 932 is ultimately expropriated by the Republic, still, his right as a mortgagee is protected. In this regard, Article 2127 of the Civil Code provides: Art. 2127. The mortgage extends to the natural accessions, to the improvements, growing fruits, and the rents or income not yet received when the obligation becomes due, and to the amount of the indemnity granted or owing to the proprietor from the insurers of the property mortgaged, or in virtue of expropriation for public use, with the declarations, amplifications, and limitations established by law, whether the estate remains in the possession of the mortgagor or it passes in the hands of a third person. In summation, while the prevailing doctrine is that the non-payment of just compensation does not entitle the private landowner to recover possession of the expropriated lots,26 however, in cases where the government failed to pay just compensation within five (5)27 years from the finality of the judgment in the expropriation proceedings, the owners concerned shall have the right to recover possession of their property. This is in consonance with the principle that the government cannot keep the property and dishonor the judgment.28 To be sure, the five-year period limitation will encourage the government to pay just compensation punctually. This is in keeping with justice and equity. After all, it is the duty of the government, whenever it takes property from private persons against their will, to facilitate the payment of just compensation. In Cosculluela v. Court of Appeals,29 we defined just compensation as not only the correct determination of the amount to be paid to the property owner but also the payment of the property within a reasonable time. Without prompt payment, compensation cannot be considered just. WHEREFORE, the assailed Decision of the Court of Appeals in CA-G.R. CV No. 72915 is AFFIRMED in toto. The Republics motion for reconsideration of our Resolution dated March 1, 2004 is DENIED with FINALITY. No further pleadings will be allowed. Let an entry of judgment be made in this case. SO ORDERED. Davide, Jr. (C.J.), Puno, Panganiban, Quisumbing, Ynares-Santiago, Carpio, Austria-Martinez, Corona, Carpio-Morales, Callejo, Sr., Azcuna, Tinga, Chico-Nazario and Garcia, JJ., concur.

Judgment affirmed in toto, Republics motion for reconsideration denied with finality. Notes.The general rule in determining just compensation in eminent domain is the value of the property as of the date of the filing of the complaint, which normally coincides with the taking. (National Power Corporation vs. Court of Appeals, 254 SCRA 577 [1996]) It is now settled doctrine that the concept of public use is no longer limited to traditional purposesthe idea that public use is strictly limited to clear cases of use by the public has been abandoned and the term has not been held to be synonymous with public interest, public benefit, public welfare, and public convenience. (Reyes vs. National Housing Authority, 395 SCRA 494 [2003]) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Republic vs. Lim, 462 SCRA 265(2005)]

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[No. 23352. December 31, 1926] THE PHILIPPINE SUGAR ESTATES DEVELOPMENT Co., LTD., INC., plaintiff and appellee, vs. JUAN M. POIZAT ET AL., defendants. GABRIELA ANDREA DE COSTER, appellant.
1.WHEN MORTGAGE UNDER POWER OF ATTORNEY is NULL AND VOID. When a wife gave her husband a power of attorney to loan or borrow money, and "in her name, place and stead" to mortgage her property, and where the husband negotiated a loan to himself and personally executed and acknowledged a mortgage upon real property which the wife owned in her own right and name at the time of her marriage, and which was her paraphernal property at the time the mortgage was executed, and where the mortgage was not signed by the wife or by her husband as agent or attorney in fact for his wife, the mortgage was never executed by or for the wife, and as to her it is null and void. 2.WHEN ONE SIGNATURE is NOT JOINT OR DUAL.Where the husband had a power of attorney from his wife authorizing him to mortgage her property, and where he is personally a party to the mortgage, and where he signed his name only to a mortgage on her property, and personally acknowledged the mortgage in his own name, his personal, unqualified signature only, standing alone, cannot be construed as the joint or dual signature of both the husband and the wife, and is not binding on the wife. 3.WHEN MORTGAGE is VOID AS TO PARAPHERNAL PROPERTY OF WIFE AND VALID AS TO CONJUGAL PROPERTY.Where a wife gave her husband a general power of attorney to mortgage or convey her property, and where on November 2, 1912, the husband personally executed and personally acknowledged a real mortgage on the property of the wife in which he is personally named and made a party, and where the mortgage is void as to the wife for want of execution, and where the mortgage recites "That the marriage of Don Juan M. Poizat and Doa Gabriela Andrea de Coster being subsisting and undissolved, and with the object of constructing a new building over the land herein-above described, the aforesaid house with the six warehouses thereon constructed were demolished and in their stead a building was erected, by permission of the department of engineering and public works of this city issued November 10, 1902, said building being of strong material which, together with the land, now forms only one piece of real estate, etc.; which property must be the subject of a new registration in which it must appear that the land belongs in fee simple and in full ownership as paraphernal property to the said Doa Gabriela Andrea de Coster and the new building thereon constructed to the conjugal partnership of Don Juan M. Poizat and the said Doa Gabriela Andrea de Coster, etc.," the mortgage is void as to the land belonging to the wife as to her paraphernal property, and is binding upon the husband, and as such it is valid as to both the husband and the wife upon the new building constructed on the land as the conjugal property of the husband and the wife. 4.WHEN DECREE AND SALE SHOULD BE SET ASIDE.Where in a suit against husband and wife to foreclose a real mortgage on the property of the wife, which mortgage as to the wife was void for want of execution, but in which a decree was rendered against both husband and wife, and execution was issued, and her property was advertised for sale and sold to satisfy the

judgment, and where the wife later personally appeared and made timely objections to the rendition of the judgment and the sale of her property, and to the confirmation of the sale, and moved to set them aside upon the ground that as to her the mortgage and all of such proceedings were null and void, and where all of such matters appear in the record, both the decree and the sale of her property, as to the wife, will be vacated, set aside, and declared null and void. 5.LAW OF AGENCY AS TO REAL PROPERTY.It is a general rule in the law of agency that, in order to bind the principal by a mortgage on real property executed by an agent, it must upon its face purport to be made, signed and sealed in the name of the principal, otherwise, it will bind the agent only. It is not enough merely that the agent was in fact authorized to make the mortgage, if he has not acted in the name of the principal. Neither is it ordinarily sufficient that in the mortgage the agent describes himself as acting by virtue of a power of attorney, if in fact the agent has acted in his own name and has set his own. hand and seal to the mortgage. This is especially true where the agent himself is a party to the instrument. However clearly the body of the mortgage may show and intend that it shall be the act of the principal, yet, unless in fact it is executed by the agent for and on behalf of his principal and as the act and deed of the principal, it is not valid as to the principal. (Mechem on Agency, section 1093 et sequor.) 6.DISTINCTION BETWEEN CONTRACTS.Although by the language used in the body of a simple contract to which the agent himself is not a party, the signature of the agent only may bind the principal, that is not true as to a real mortgage to which the agent himself is personally a party. In such a case, the signature of the agent only, standing alone, will not bind the principal, and that is especially true where the agent does not acknowledge the mortgage for and on behalf of his principal. 7.WHEN BUILDING is ACCESSORY TO THE LAND.Where a building on land is of much less value than the land, the building is an accessory to the land. 8.WHEN PARTY is ESTOPPED.Where a person takes and accepts a real mortgage, he is bound by the recitals made in the instrument, and is estopped to deny the legal force and effect of such recitals. 9.SPANISH NOTARIAL LAW REPEALED.Under the provisions of section 81 of Act No. 136, the Spanish Notarial Law and System of Conveyances was repealed by the enactment of a new system of registration of land titles. 10.SECTION 127 OF ACT No. 496 CONSTRUED.Section 127 of Act No. 496 provides in legal effect that where two or more persons are parties to a conveyance, that it must not only be signed by or on behalf of all the parties, but that it should be acknowledged by or on behalf of all the parties.

APPEAL from an order of the Court of First Instance of Manila. Harvey, J. The facts are stated in the opinion of the court. Antonio M. Opisso for appellant.
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Eusebio Orense and Fisher, DeWitt, Perkins & Brady for appellee. STATEMENT August 25, 1905, the appellant, with his consent, executed to and in favor of her husband, Juan M. Poizat, a general power of attorney, which, among other things, authorized .him to do "in her name, place and stead, and making use of her rights and actions," the following things: "To loan or borrow any amount in cash or fungible things at the rate of interest, for the time, and under the conditions he may deem convenient, collecting or paying the principal or the interest, when they respectively should become due; executing and signing the corresponding public or private documents, and making these transactions with or without mortgage, pledge or personal securities." November 2, 1912, Juan M. Poizat applied for and obtained from the plaintiff a credit for the sum of 10,000 Pounds Sterling to be drawn on the "Banco Espaol del Ro de la Plata" in London not later than January, 1913. Later, to secure the payment of the loan, he executed a mortgage upon the real property of his wife, the material portions of which are as follows: "This indenture entered into in the City of Manila, P. I., by and between Juan M. Poizat, merchant, of legal age, married and residing in the City of Manila, in his own behalf and in his capacity also as attorney in fact of his wife Doa Gabriela Andrea de Coster by virtue of the authority vested in him by the power of attorney duly executed and acknowledged in this City of Manila, etc. "First. That in the name of Doa Gabriela Andrea de Coster, wife of Don Juan M. Poizat, there is registered on page 89 (back) of Book 3, temporary Binondo Section, property No. 685, inscription No. 3, Urban Property consisting of a house and six adjacent warehouses, all of strong material and constructed upon her own land, said property being Nos. 5, 3, and 1 of Calle Urbiztondo, and No. 13 of Calle Barraca in the District of Binondo in the City of Manila, etc. "Second. That the marriage of Don Juan M. Poizat and Doa Gabriela Andrea de Coster being subsisting and undissolved, and with the object of constructing a new building over the land hereinabove described, the aforesaid house with the: six warehouses thereon constructed were demolished and in their stead a building was erected, by permission of the Department of Engineering and Public Works of this City issued November 10, 1902, said building being of strong material which, together with the land, now forms only one piece of real

estate, etc.; which property must be the subject of a new description [registration] in which it must appear that the land belongs in fee simple and in full ownership as paraphernal property to the said Doa Gabriela Andrea de Coster and the new building thereon constructed to the conjugal partnership of Don Juan M. Poizat and the said Doa Gabriela Andrea deCoster, etc. "Third. That the Philippine Sugar Estates Development Company, Ltd., having granted to Don Juan M. Poizat a credit of Ten Thousand Pounds Sterling with a mortgage upon the real property above described, etc. "(a). That the Philippine Sugar Estates Development Company, Ltd., hereby grants Don Juan M. Poizat a credit in the amount of Ten Thousand Pounds Sterling which the said Mr. Poizat may use within the entire month of January of the coming year, 1913, upon the bank established in the City of London, England, known as 'Banco Espaol del Ro de la Plata,' which shall be duly advised, so as to place upon the credit of Mr. Poizat the said amount of Ten Thousand Pounds Sterling, after executing the necessary receipt therefor. " (c) That Don Juan M. Poizat personally binds himself and also binds his principal Doa Gabriela Andrea de Coster to pay the Philippine Sugar Estates Development Company, Ltd., for the said amount of Ten Thousand Pounds Sterling at the yearly interest of 9 per cent which shall be paid at the end of each quarter, etc. " (d) Don Juan M. Poizat also binds himself personally and his principal Doa Gabriela Andrea de Coster to return to the Philippine Sugar Estates Development Company, Ltd., the amount of Ten Thousand Pounds Sterling within four years from the date that the said Mr. Poizat shall receive the aforesaid sum as evidenced by the receipt that he shall issue to the 'Banco Espaol del Ro de la Plata.' "(e) As security for the payment of the said credit, in the case Mr. Poizat should receive the money, together with its interest the said Mr. Poizat in the dual capacity that he represents hereby constitutes a voluntary especial mortgage upon the Philippine Sugar Estates Development Company, Ltd., of the urban property above described, etc. " (f) Don Juan M. Poizat in the capacity above mentioned binds himself, should he receive the amount of the credit, and while he may not return the said amount of Ten Thousand Pounds Sterling to the Philippine Sugar Estates Development Company, Ltd., to insure against fire the mortgaged property in an amount not less than One Hundred Thousand Pesos, etc.
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"Fourth. Don Buenaventura Campa in the accepts this indenture in the form, manner, Juan M. Poizat by himself personally and in Gabriela Andrea de Coster, in favor of Development Company, Ltd.

capacity that he holds hereby and condition executed by Don representation of his wife Doa the Philippine Sugar Estates

"Up to the 31st of December, 1912"

"In witness whereof, we have signed these presents in Manila, this November 2,' 1912. (Sgd.) "JUAN M. POIZAT "THE PHILIPPINE SUGAR ESTATES DEVELOPMENT COMPANY, LTD. "The President "BUENAVENTURA CAMPA "Signed in the presence of: (Sgd.) "MANUEL SAPSANO

For failure to pay the loan, on November 12, 1923, the plaintiff brought an action against the defendants, to foreclose the mortgage. In this action, the summons was served upon the defendant Juan M. Poizat only, who employed the services of Antonio A. Sanz to represent the defendants. The attorneys filed a general appearance for all of them, and later an answer in the nature of a general denial. February 18, 1924, when the case was called for trial, Jose Galan y Blanco in open court admitted all of the allegations made in the complaint, and consented that judgment should be rendered as prayed for. Later, Juan M. Poizat personally, for himself and his codefendants, filed an exception to the judgment, and moved for a new trial, which was denied March 31, 1924. August 22, 1924, execution was issued directing the sale of the mortgaged property to satisfy the judgment. September 18, 1924, the property, which had an assessed value of P342,685, was sold to the plaintiff for the sum of P100,000. September 23, 1924, and for the first time, the appellant personally appeared by her present attorney, and objected to the confirmation of the sale, among other things, upon the following grounds: That the mortgage in question was illegally executed, and is null and void, because the agent of this defendant was not authorized to execute it. That there was no consideration. That the plaintiff, with full knowledge that J. M. Poizat was acting beyond the scope of his authority, filed this action to subject the property of this defendant to the payment of the debt which, as to appellant, was not a valid contract. That the judgment was rendered by confession when the plaintiff and J. M. Poizat knew that Poizat was not authorized to confess judgment, and that the proceeding was a constructive fraud. That at the time the action was filed and the judgment rendered, this defendant was absent from the Philippine Islands, and had no knowledge of the execution of the mortgage. That after the judgment of foreclosure became final and the order of the sale of the property was made, that this defendant for the first time learned that the mortgage contract was tainted with fraud, and that she first knew and learned of such things on the 11th of September, 1924. That J. M. Poizat was not authorized to bind her property to secure the payment of his personal debts. That the plaintiff knew that the agent of the defendant was not authorized to bind her or her property. That the mortgage
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"JOSE SANTOS "UNITED STATES OF AMERICA "PHILIPPINE ISLANDS "CITY OF MANILA "In the City of Manila P. I., this November 2, 1912, before me Enrique Barrera y Caldes, a Notary Public for said city, personally appeared before me Don Juan M. Poizat and Don Buenaventura Campa, whom I know to be the persons who executed the foregoing document and acknowledged same before me as an act of their free will and deed; the first exhibited to me his certificate of registry No. 14237, issued in Manila, February 6, 1912, the second did not exhibit any cedula, being over sixty years old; this document bears No. 495, entered on page 80 of my Notarial registry. "Before me: (Sgd.) "Dr. ENRIQUE BARRERA Y CALDES

" [NOTARIAL SEAL] "Notary Public

was executed to secure a loan of 10,000 Pounds, which was not made to this def endant or for her benefit, but was made to him personally and for the personal use and benefit of J. M. Poizat. Among other things, the mortgage in question, marked Exhibit B, was introduced in evidence, and made a part of the record. All of such objections to the confirmation of the sale were overruled, from which Gabriela Andrea de Coster appealed and assigns the following errors: "I. The lower court erred in finding that Juan M. Poizat was, under the power of attorney which he had from Gabriela Andrea de Coster, authorized to mortgage her paraphernal property as security for a loan made to him personally by the Philippine Sugar Estates Development Co., Ltd.; "II. The lower court erred in not finding that under the power of attorney, Juan M. Poizat had no authority to make Gabriela Andrea de Coster jointly liable with him for a loan of 10,000 Pounds made by the Philippine Sugar Estates Development Co., Ltd., to him; "III. The lower court erred in not finding that the Philippine Sugar Estates Development Co., Ltd., had knowledge and notice of the lack of authority of Juan M. Poizat to execute the mortgage deed Exhibit A of the plaintiff; "IV. The lower court erred in holding that Gabriela Andrea de Coster was duly summoned in this case; and in holding that Attorney Jose Galan y Blanco could lawfully represent her or could, without proof of express authority, confess judgment against Gabriela Andrea de Coster; "V. The court erred in holding that the judgment in this case has become final and res judicata; "VI. The court erred in approving the judicial sale made by the sheriff at an inadequate price; "VII. The lower court erred in not declaring these proceedings, the judgment and the sale null and void. JOHNS, J.:

For the reasons stated in the decision of this court in the Bank of the Philippine Islands vs. De Coster (47 Phil., 594), the alleged service of the summons in the foreclosure suit upon the appellant was null and void. In fact, it was made on J. M. Poizat only, and there is no claim or pretense that any service of summons was ever made upon her. After service was made upon him, the attorneys in question entered their appearance for all of the defendants in the action, including the appellant upon whom no service was ever made, and filed an answer for them. Later, in open court, it was agreed that judgment should be entered for the plaintiff as prayed for in its complaint. The appellant contends that the appearance made by the attorneys for her was collusive and fraudulent, and that it was made without her authority, and there may be some truth in that contention. It is very apparent that the attorneys made no effort to protect or defend her legal rights, but under our view of the case, that question is not material to this decision. The storm center of this case is the legal force and effect of the real mortgage in question, by whom and f or whom it was executed, and upon whom is it binding, and whether or not it is null and void as to the appellant. It is admitted that the appellant gave her husband, J. M. Poizat, the power of attorney in question, and that it is in writing and speaks for itself. If the mortgage was legally executed by her attorney in fact for her and in her name as her act and deed, it would be legal and binding upon her and her property. If not so executed, it is null and void. It appears upon the face of the instrument that J. M. Poizat, as the husband of the wife, was personally a party to the mortgage, and that he was the only person who signed the mortgage. It does not appear from his signature that he signed it f or his wif e or as her agent or attorney in f act, and there is nothing in his signature that would indicate that in the signing of it by him, he intended that his signature should bind his wife. It also appears from the acknowledgment of the instrument that he executed it as his personal act and deed only, and there is nothing to show that he acknowledged it as the agent or attorney in f act of his wif e, or as her act and deed. The mortgage recites that it was entered into by and between Juan M. Poizat in his own behalf and as attorney in fact of his wife. That the record title of the mortgaged property is registered in the name of his wife, Doa Gabriela Andrea de Coster. That they were legally married, and that the marriage between them has never been dissolved. That with the object of constructing a new building on the land, the six warehouses thereon were demolished, and
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that a new building was erected. That the property is the subject of a new registration in which it must be made to appear that the land belongs in fee simple and in full ownership as the paraphernal property of the wife, and that the new building thereon is the property of the conjugal partnership. "That the Philippine Sugar Estates Development Company, Ltd., having granted to Don Juan M. Poizat a credit of 10,000 Pounds Sterling with the mortgage upon the real property above described," that the Development Company "hereby grants Don Juan M. Poizat a credit in the amount of 10,000 Pounds Sterling which the said Mr. Poizat may use, etc." That should he personally or on behalf of his wife use the credit he acknowledges, that he and his principal are indebted to the Development Company in the sum of 10,000 Pounds Sterling which "they deem to have received as a loan from the said commercial entity." That he binds himself and his wif e to pay that amount with a yearly interest of 9 per cent, payable quarterly. That as security f or the payment of said credit in the case Mr. Poizat should receive the money at any time, with its interest, "the said Mr. Poizat in the dual capacity that he represents hereby constitutes a voluntary especial mortgage." That Don Juan M. Poizat "in the capacity above mentioned binds himself, should he receive the amount of the credit." It thus appears that at the time the power of attorney and the mortgage were executed, Don Juan M. Poizat and Gabriela Andrea de Coster were husband and wife, and that the real property upon which the mortgage was executed was her sole property before her marriage, and that it was her paraphernal property at the time the mortgage was executed, and that the new building constructed on the land was the property of the conjugal partnership. The instrument further recites that the Development Company "hereby grants Don Juan M. Poizat a credit in the amount of 10,000 Pounds Sterling which the said Mr. Poizat may use within the entire month of January of the coming year, 1913." In other words, it appears upon the f ace of the mortgage that the loan was made to the husband with authority to use the money f or his sole use and benefit. With or without a power of attorney, the signature of the husband would be necessary to make the instrument a valid mortgage upon the property of the wife, even though she personally signed the mortgage. It is contended that the instrument upon its face shows that its purpose and intent was to bind the wife. But it also shows upon its face that the credit was granted to Don Juan M. Poizat which he might use within the "entire month of January."

Any authority which he had to bind his wife should be confined and limited to his power of attorney. Giving to it the very broadest construction, he would not have any authority to mortgage her property, unless the mortgage was executed for her "and in her name, place or stead," and as her act and deed. The mortgage in question was not so executed. It was signed by Don Juan M. Poizat in his own name, his own proper person, and by him only, and it was acknowledged by him in his personal capacity, and there is nothing in either the signature or acknowledgment which shows or tends to show that it was executed f or or on behalf of his wif e or "in her name, place or stead." It is contended that the instrument shows upon its face that it was intended to make the wife liable for his debt, and to mortgage her property to secure its payment, and that his personal signature should legally be construed as the joint or dual signature of both the husband and that of the wife as her agent. That is to say, construing the recitals in the mortgage and the instrument as a whole, his lone personal signature should be construed in a double capacity and binding equally and alike both upon the husband and the wife. No authority has been cited, and none will ever be found to sustain such a construction. As the husband of the wife, his signature was necessary to make the mortgage valid. In other words, to make it valid, it should have been signed by the husband in his own proper person and by him as attorney in fact for his wife, and it should have been executed by both husband and wife, and should have been so acknowledged. There is no principle of law by which a person can become liable on a real mortgage which she never executed either in person or by attorney in fact. It should be noted that this is a mortgage upon real property, the title to which cannot be divested except by sale on execution or the formalities of a will or deed. For such reasons, the law requires that a power of attorney to mortgage or sell real property should be executed with all of the formalities required in a deed. For the same reason that the personal signature of Poizat, standing alone, would not convey the title of his wife in her own real property, such a signature would not bind her as a mortgagor in real property, the title to which was in her name. We make this broad assertion that upon the facts shown in the record, no authority will ever be found to hold the wife liable on a mortgage of her real property which was executed in the form and manner in which the mortgage in question was executed.
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The real question involved is fully discussed in Mechem on Agency, volume 1, page 784, in which the author says: "It is to be observed that the question here is not how authority to execute sealed instruments is to be conferred, but how such an authority is to be executed. It is assumed that the agent was authorized to bind his principal, but the question is, has he done so." That is the question here. Upon that point, there is a full discussion in the following sections, and numerous authorities are cited: "SEC. 1093. Deed by agent must purport to be made and sealed in the name of the principal.It is a general rule in the law of agency that in order to bind the principal by a deed executed by an agent, the deed must upon its face purport to be made, signed and sealed in the name of the principal. If, on the contrary, though the agent describes himself as 'agent/ or though he add the word 'agent' to his name, the words of grant, covenant and the like, purport upon the face of the instrument to be his, and the seal purports to be his seal, the deed will bind the agent if any one and not the principal. "SEC. 1101. Whose deed is a given deedHow question determined.In determining whether a given deed is the deed of the principal, regard may be had, First, to the party named as grantor. Is the deed stated to be made by the principal or by some other person? Secondly, to the granting clause. Is the principal or the agent the person who purports to make the grant? Thirdly, to the covenants, if any. Are these the covenants of the principal ? Fourthly, to the testimonium clause. Who is it who is to set his name and seal in testimony of the grant? Is it the principal or the agent? And Fifthly, to the signature and seal. Whose signature and seal are these? Are they those of the principal or of the agent? "If upon such an analysis the deed does not upon its face purport to be the deed of the principal, made, signed, sealed and delivered in his name and as his deed, it cannot take effect as such. "SEC. 1102. Not enough to make deed the principal's that the agent is described as such.It is not enough merely that the agent was in fact authorized to make the deed, if he has not acted in the name of the principal. Nor is it ordinarily sufficient that he describes himself in the deed as acting by virtue of a power of attorney or otherwise, or for or in behalf, or as attorney, of

the principal, or as a committee, or as trustee of a corporation, etc.; for these expressions are usually but descriptio personae, and if, in fact, he has acted in his own name and set his own hand and seal, the causes of action thereon accrue to and against him personally and not to or against the principal, despite these recitals. "SEC. 1103. Not principal's deed where agent appears as grantor and signer.Neither can the deed ordinarily be deemed to be the deed of the principal where the agent is the one who is named as the grantor or maker, and he is also the one who signs and seals it. * * * "SEC. 1108. * * * But however clearly the body of the deed may show an intent that it shall be the act of the principal, yet unless it is executed by his attorney for him, it is not his deed, but the deed of the attorney or of no one. The most usual and approved form of executing a deed by attorney is by his writing the name of the principal and adding 'by A B his attorney' or 'by his attorney A B.' ' * * *" That is good law. Applying it to the facts, under his power of attorney, Don Juan M. Poizat may have had authority to borrow money and mortgage the real property of his wife, but the law specifies how and in what manner it must be done, and the stubborn fact remains that, as to the transaction in question, that power was never exercised. The mortgage in question was executed by him and him only, and for such reason, it is not binding upon the wife, and as to her, it is null and void. It follows that the whole decree against her and her paraphernal property and the sale of that property to satisfy the mortgage are null and void, and that any title she may have had in or to her paraphernal property remains and is now vested in the wife as fully and as absolutely as if the mortgage had never been executed, the decree rendered or the property sold. As to Don Juan M. Poizat, the decree is valid and binding, and remains in full force and effect. It is an undisputed fact, which appears in the mortgage itself, that the land in question was the paraphernal property of the wife, but after the marriage, the old buildings on the property were torn down and a new building constructed and, in the absence of evidence to the contrary, it must be presumed that the new building is conjugal property of the husband and wife (Civil Code, art. 1404). As such, it is subject to the debts of the conjugal partnership for the payment or security of which the husband has the power to mortgage or otherwise encumber the property (Civil Code, art. 1413).
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It is very probable that this particular question was not fully presented to or considered by the lower court. The mortgage as to the paraphernal property of the wife is declared null and void ab initio, and as to her personally, the decree is declared null and void, and as to her paraphernal property, the sale is set aside and vacated, and held for naught, leaving it free and clear from the mortgage, decree and sale, and in the same condition as if the mortgage had never been executed, with costs in favor of the appellant. So ordered. Johnson, Malcolm, Ostrand, and Romualdez, JJ., concur. STREET, J., with whom concur AVANCEA, C. J., VILLAMOR, and VILLAREAL, JJ., dissenting: In the year 1913 the plaintiff, the Philippine Sugar Estates Development Co., Ltd., Inc., let J. M. Poizat have nearly P100,000 of money on the supposed security of a mortgage on property belonging to his wife, Gabriela Andrea de Coster, executed by Poizat under a power of attorney from her. The plaintiff has now to learn that the security on which it relied is worthless and that it did not even so much as have Gabriela Andrea de Coster in court in the foreclosure proceeding. In the decision so holding the undersigned are unable to concur. To dispose first of the point as to the jurisdiction of the court over the person and property of Gabriela Andrea de Coster, it is only necessary to refer to the third paragraph from the end of the power of attorney (Exhibit A to the opposition of Gabriela Andrea de Coster) under which Poizat acted. To express in a few words the substance of this paragraph in the part relevant to the present discussion, Poizat is given full authority to represent his wife in all judicial proceedings in Philippine courts, including, among other things, the making of appearances, submission of answers, receiving of service of process, and to take in her behalf any procedural steps and measures required by the law of procedure in order to make effective and bring to termination the matters in which he, as attorney in fact, may be concerned. If this power is not sufficient to authorize Poizat to accept service and employ a lawyer to appear in court for the principal, as was done in this case, it would seem to be useless for lawyers to exercise their ingenuity in the attempt to draft such authority. But the disastrous feature of the decision is found in the pronouncement that the mortgage on which the plaintiff's money was obtained is a nullity; and upon this point the court holds that Gabriela Andrea de Coster was not bound

because the contract is signed "Juan M. Poizat," instead of "Gabriela Andrea de Coster, by Juan M. Poizat." But the document expressly recites in its preamble that it is executed by Juan M. Poizat, acting both in representation of himself and in the character of attorney in fact of his wife, Gabriela Andrea de Coster, in virtue of the authority conferred upon him in the power of attorney already mentioned. Furthermore, throughout the body of the document the idea is repeatedly expressed that J. M. Poizat obligates both himself and his wife. We submit that under the doctrine informing the Civil Codewhich should control in this jurisdictionthe mortgage instrument was lawfully executed and in a form sufficient to bind the principal as well as the agent. Certainly it would never occur to a civilian lawyer that the document in question is informally executed; and the circumstance that a learned Spanish notary (Don Enrique Barrera y Caldes) intervened in the execution of this instrument would alone suffice to show that it is done in conformity with approved Spanish modelsa f act otherwise apparent. Even in the United States and Great Britain, where strict doctrines might be expected to prevail in such matters, owing to the technical rules involving the law of real property in those countries, ample authority is found to the effect that the principal will be bound by a contract signed by the agent only, when it appears from the face of the instrument that he is acting in the character of agent. (2 C. J., 672.) From the portentous way in which the opinion of the court refers to the question of the sufficiency of the signature to the mortgage as the "storm centre of the case," one would suppose that this question had been at least raised by the litigants and had been the subject of discussion in the lower court as well as in the briefs of the attorneys here. Nothing of the sort is true, for this capital point, on which the case is made principally to turn, has been jumped up exclusively in this court; and the voluminous briefs will be searched in vain for the slightest reference to the subject. In fact both parties appear to have assumed that the mortgage was executed with all proper formality. Apart from the fact that the question was not raised in the lower court, no assignment of error in this court calls in question the sufficiency of the mode of execution of the instrument. Under these circumstances this court should have confined itself to the matters put in issue by the litigants; and it should not have gone out of its way to take up a point not discussed by the parties, and upon which in fact the losing party has never been heard. It is a good rule of practicesometimes respected by usthat an appellate court will not permit an appellant to raise a point upon appeal which was not put in issue in the court below and upon which no
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assignment of error has been made. In our opinion the order appealed from should be affirmed. Order reversed. DECISION UPON PETITION FOR REHEARING February 15, 1926 JOHNS, J.:

in holding that the exceptional provision applies to this case in the sense of considering the soil as an accessory to the building, contrary to the general rule contained in the Civil Code (arts. 358-364 and 1368). But conceding that article 1404 does apply, yet, under the provisions of that article, the owner of the land is entitled to an indemnity for its value. Since, according to the spirit of the law contained in article 349 of the Civil Code, no one can be deprived of his property without previous indemnity, and it not appearing in the instant case that such indemnity was ever paid, the land in question cannot now be considered as conjugal property. But it further appears that the mortgage upon which plaintiff relies contains the following recitals: " * * * which property must be the subject of a new registration wherein it must be stated that the lot forming a part thereof pertains to said Doa Gabriela Andrea de Coster in full ownership and fee simple as paraphernal property, and the building newly erected thereon to the conjugal partnership between Don Juan M. Poizat and his wife, the aforesaid Doa Gabriela Andrea de Coster * * *" (Italics ours.) The plaintiff, having taken and accepted the mortgage, is bound by those recitals. It further appears that this property is registered under the Torrens System, and that the title to the land is vested in the wife, and is not conjugal property, and that the wife is at least the owner of the land. In a supplemental plea filed January 21, 1926, petitioner cites and relies on the case of the National Bank vs. Quintos and Ansaldo (46 Phil., 370), in which article 1408 of the Civil Code was construed and applied. It must be conceded that this article applies only to those cases wherein there is a presumption that the debt contracted by the husband is for the common benefit of both spouses, but this presumption may be overcome by evidence to the contrary. "All debts and obligations contracted during the marriage by the husband, the legal representative of the partnership in: the normal condition thereof, are deemed contracted by the partnership. The law presumes that they are contracted for the common benefit of both. However, this presumption may be overthrown by evidence to the contrary, as we shall see when we take up article 1413." (9 Manresa, 648.) For this reason, where, as in the instant case, it appears that the loan obtained by the husband was not only not obtained for the common benefit of the conjugal partnership, but was obtained to the damage of the wife, there is no such presumption, and that article does not apply. It is further contended that the mortgage was executed with all of the legal necessary formalities, and in
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The plaintiff has filed a very able, vigorous and exhaustive petition for a rehearing, which we have given the careful consideration which the importance of the questions deserve. The first proposition advanced is that the mortgage in question is valid not only as to the buildings, but also as to the land on which they are constructed. The previous decision of this court is to the effect that, the buildings being conjugal property, the mortgage is valid as to the buildings, but that it is not valid as to the land, which is the paraphernal property of the wife. Plaintiff contends that the land is conjugal property under the provisions of article 1404 of the Civil Code. That article does not apply to the instant case. It does not appear that the buildings are of the nature therein specified. The commentator Manresa, cited in the motion for reconsideration, rightly distinguishes those buildings which, by reason of their importance, convert the land on which they are built into an accessory, from those which, on account of their small relative value, continue to remain as accessories to the land on which they are constructed, and for such reason partake of the land. "The word building is a generic term f or all architectural work with roof built f or the purpose of being used as man's dwelling, or for offices, clubs, theaters, etc. When the structure does not constitute a building, then the rule must be followed. The article cannot but be interpreted strictly. An inclosure for cattle or a 'tinada,' a stone barn, etc., follow the soil as accessories thereto." (9 Manresa, 626, 1919 ed.) It appears from the mortgage that the buildings in question to be constructed are warehouses, and as the circumstances and details do not appear in the record, such warehouses could not be construed as the class of buildings mentioned in article 1404. Hence, the facts are not sufficient to justify the court

accord with the established practice and custom in the Philippine Islands, citing blank forms given in section 127 of Act No. 496, from which plaintiff's counsel contends that it is not required that the attorney in f act, who executes a document in his own name and that of his principal, must show in his signature his double capacity by writing first his own signature and then the name of his principal, and say "by" and thereafter his own signature as attorney in fact. The Act should be construed with reference to section 81 of Act No. 136, which says: "After the enactment of a new system of registration of land titles, the notarial law of the Philippine Islands of February fifth, eighteen hundred and eightynine, its regulations of April eleventh, eighteen hundred and ninety, and the general instructions for drafting instruments subject to record in the Philippine Islands, of October third, eighteen hundred and eighty-nine, and the modifications thereof, by General Order Number Forty, issued from the office of the United States Military Governor, on September twenty-third, eighteen hundred and ninety-nine, and by General Order Number Twenty, issued from the office of the Military Governor on February third, nineteen hundred, shall be repealed and shall be of no effect after the date of such enactment, and thereafter appointments of notaries public and the performance of official duties by them shall be regulated by the subsequent provisions of this Act." The old Spanish notarial law and system of conveyances was repealed in the Philippines, and another and a different notarial law and system became the law of the land with the enactment of Act No. 496. One of the fundamental differences between the two systems consists in this. Under the Spanish system, the documents were executed in the f orm of minutes, wherein the notary was the one who spoke, and under Act No. 496, the notary is not the one who speaks, and there is no record kept of the minutes, and the intervention of a notary is limited to the acknowledgment only of the document. Under the Spanish system, to determine the capacity in which a person executed a document, it was sufficient to look at the text of the document, because its whole text was attended with the solemnity of the notary authorizing its execution. Under the present system, it is necessary to resort to the form in which the parties sign an instrument, because it is the signature rather than the text which bears the stamp of authenticity. Neither does section 127 of Act No. 496 bear the construction for which the plaintiff contends. It provides in legal effect that where one or more persons executed a conveyance, the instrument must be executed by all of the parties

to the conveyance, and that if there are two or more persons, the instrument must not only be signed by all of the parties to the conveyance, but it must be acknowledged by all of them. That clearly appears from the certificate of acknowledgment in which it is recited: "* * * personally appeared ..........................................., known to me to be the same person (or persons) who executed the f oregoing instrument, and acknowledged that the same is his (or their) free act and deed." The construction for which plaintiff contends would nullify the words "or persons" and the words "or their." The fact that those words are used in the manner in which they are used in section 127, must mean that where two or more persons give a deed or mortgage on real property, that all of them should not only sign the mortgage, but that all of them should acknowledge it as "their free act and deed." Again, in the instant case, the power of attorney was given by the wife to the husband, and the husband himself was a party to the mortgage; and the money was paid to him for and on his personal account, and his signature was necessary to bind any interest which he had in the land as the husband of the wife, and the signature of the wife in some form was necessary to bind her interest in the land. Here, you have the signature of the husband standing alone, and there is nothing upon the face of it which shows that in the signing of it, the husband ever intended to bind his wife. If Poizat had not been the husband of his wife, and if he himself was not a party to the instrument and did not have any interest in the land mortgaged, another and a very different question would be presented, and his lone signature might then bind the property of the wife. With all due respect to the learned counsel, no law, either Spanish or American, has been cited or will ever be found which, upon the facts shown in the record, will construe the lone unqualified signature of the husband as the joint and dual signature of both the husband and the wife, so as to make it binding upon the paraphernal property of the wife. Although not cited in the petition during the discussion of this case in conference, attention was called to article 1717 of the Civil Code which provides as follows: "When an agent acts in his own name, the principal shall have no right of action against the persons with whom the agent has contracted, or such persons against the principal.
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"In such case, the agent is directly liable to the person with whom he has contracted, as if the transaction were his own. Cases involving things belonging to the principal are excepted. "The provisions of this article shall be understood to be without prejudice to actions between principal and agent." In the instant case, this section should be construed with article 1713, which among other things provides that: "In order to compromise, alienate, mortgage, or to execute any other act of strict ownership, an express power is required." The mortgage in question was upon real property, and it was not a "simple contract," and where an agency is created by an express power, it must be executed with the formalities of an express power. Again, although the wife was a party to the body of the mortgage, Poizat himself had an interest in the real property, and was a party to the instrument, and his personal signature was necessary to the mortgage to bind his own personal interest, and the interest of the conjugal partnership. The power of attorney from the wife gave her husband the express power defined in article 1713, and that power should have been exercised, and the mortgage should have been executed "in the name, place, and stead of the wife." That was not done. The authorities cited in the petition for a rehearing and in the minority opinion are based upon, and refer to, the execution by the agent of a "simple contract," and for such reason are not in point. There is a very marked legal distinction between the authority of an agent to make a "simple contract," and his authority to convey or mortgage real property and the manner in which the power should be executed. It may be true that the decision of this court is based upon questions that are not as fully discussed in the appellant's brief, as they should have been, but the fact remains that they were pointed out, and attention was called to them in the argument in the brief, and that they are expressly covered by the assignments of error. Although ably presented, we are clearly of the opinion that the petition for a rehearing must be denied. So ordered. Johnson, Malcolm, Ostrand, and Romualdez, JJ., concur. AVANCEA, C. J., STREET, VILLAMOR, and VILLA-REAL, JJ., dissenting:

We insist in our dissenting opinion and reference is hereby made to what we briefly said in our separate opinion. We wish, however, to emphasize our point of view on the merits of the case with regard to appellant's liability. The theory of the majority is contained in the following paragraph of its decision upon the motion for reconsideration: " * * * If Poizat had not been the husband of his wife, and if he himself was not a party to the instrument and did not have any interest in the land mortgaged, another and a very different question would be presented, and his lone signature might then bind the property of the wife." It follows from this that the power given by the appellant to her husband Juan M. Poizat is held sufficient to mortgage the land in question, that the contract entered into by him with the plaintiff, mortgaging this land, is within the scope of this power, and that the contract thus signed by Poizat might be sufficient to bind the appellant. But it is said that it is not, by reason of the fact that Poizat was also a party to the contract and has an interest in the property mortgaged. We do not see the importance of this fact. If Poizat were not a party to the contract and had no interest in the property mortgaged, the document would, as it stands,signed by him alone,be sufficient to bind the appellant, not by what his signature says, since it says nothing, but because the document shows that he was acting on behalf of the appellant. This being the case, we see no reason why the document should not have f ull effect merely because it states that Poizat was acting on his behalf and that of the appellant. The most that can be said is that it was necessary that Poizat should have signed twice, but again we do not see the necessity of this duplicity. The signature serves only to authenticate the document,and f or this purpose one is enough,and not to express the nature and extent of the obligation, which must be determined by the document itself. But whether this be the effect of the majority opinion, or that it is necessary, in order to bind the appellant, that Poizat should have signed the document twice, the first time on his own behalf, and the second on that of the appellant, or should have signed it only once, stating that he did so in his own behalf and that of the appellant, with all due respect to the majority, we believe that the decision rendered is erroneous. The doctrine laid down by the majority is openly repugnant to the spiritualistic conception which informs article 1278 of the Civil Code, according to which contracts shall be binding whatever may be the form in which they may have
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been entered into, provided that the essential requisites for their validity are present. In some contracts, a public document is required as a special form for convenience of evidence (art. 1280, Civil Code), but not as an essential requisite for its validity, but only for its efficaciousness (art. 1279, Civil Code). In very few cases does the Civil Code require a certain form for special reasons, as a requisite to the validity of the contract as for instance in the donation, in which a public document is required (art. 633, Civil Code), and in the mortgage, which must be registered (art. 1875, Civil Code). But except in these cases, and even in these cases, once the required special form is complied with, the question as to form in the former, or the question as to other formalities in the latter, falls under the broad rule established in article 1278, and loses all its influence on the effects of the contract, it being enough that the contract be proven. In this connection, we are not unmindful of the amendments introduced by the Code of Civil Procedure to the Civil Code as to the form of contracts for their efficaciousness, but nevertheless we believe that the rule provided by article 1278 of the Civil Code subsists. In the instant case, the power given by the appellant to Poizat, as well as the mortgage executed by the latter in his own behalf and that of the appellant with the plaintiff was executed in the form required by the law, that is, in a public document registered in the registry of property. Under such circumstances, it is not proper to destroy the effects of these contracts and ignore the rights and obligations which the parties thereby desired to acquire and assume, merely by reason of a formality which no law requires, and does not seem to answer any purpose. The theory of agency, according to the Civil Code, is based on representation and its characteristic is the subrogation of the agent in the place of his principal whom he substitutes, in matters constituting the subject-matter of the agency. Thus, once it is stated in the document that the agent acts by virtue of the agency, he absorbs the personality of the principal, and by a legal fiction, he appears as the principal himself, and whatever he does within the agency is considered as done by the principal. Hijos de I. de la Rama vs. Abraham At any rate, even supposing that Poizat acted in his own name in executing the contract with the plaintiff, as he acted within the limits of the agency or power granted him by the appellant and the contract relates to things belonging to her, the plaintiff has an action against the appellant under article 1717 of the Civil Code.

Motion denied. ____________

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Philippine Sugar Estates Development Co. vs. Poizat, 48 Phil. 536(1926)]

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[No. L-14309. June 30, 1960] CALTEX (PHILIPPINES) INC., petitioner, vs. FELISA FELIAS, respondent.
HUSBAND AND WlFE; PARAPHERNAL PROPERTY; LOT DONATED BY PARENTS TO A DAUGHTER; STATUS OF BUILDING CONSTRUCTED THEREON BEFORE THE DONATION.A lot belonging to the parents and later donated by them to their daughter is paraphernal property, and the rule applicable with respect to the building constructed thereon before the donation is that of accessory following the principal. The donation transmitted to her the rights of a landowner over a building constructed on it. As such the lot and the building are not answerable for the obligations of her husband.

paragraph II of the amended complaint and a small parcel of coconut land located in Look, Nasipit, Agusan, and on August 20, 1941, sold them at public auction to the Texas Company, now petitioner herein Caltex (Philippines) Inc. The corresponding certificate of sale was annotated on the back of Transfer Certificate of Title No. 97 on August 21, 1941Upon the expiration of the one year period without judgment debtor Sawamoto making the redemption, on January 25, 1947, the provincial sheriff executed in favor of Caltex (Philippines) Inc., a final deed of sale which was duly recorded on the reconstituted Transfer Certificate of Title No. RT-65 (97) on November 26, 1947. On February 3, 1950, Felisa Felias (herein respondent) filed the present action to declare herself exclusive owner of the two parcels in question; on January 4, 1955, after hearing, the trial court rendered judgment as follows: "Considering all the foregoing, the Court renders judgment and declares: "(1) The contract of sale with the right to repurchase (Exhibit C) the true intention of the parties, and Lot No. 107, now covered by transfer certificate of title No. RT-65 (97) of the Register of Deeds of the province of Agusan, the exclusive property of defendant Vicente Dysekco; "(2) The sale at auction by the provincial sheriff of Agusan in favor of the CALTEX of lot No. 107 null and void; "(3) The CALTEX as exclusive owner of the small parcel of coconut land located at sitio Look, municipality of Nasipit, Agusan covered by tax declaration No. 3602 (Exhibit 14, CALTEX); and "(4) The complaint dismissed with costs against the plaintiff. "The register of deeds of Agusan is ordered to cancel transfer certificate of title No. RT-63(97) in the name of Felisa Felias married to Simeon Sawamoto and to issue in lieu thereof another transfer certificate of title in the name of Vicente Dysekco upon payment of the required fees." Plaintiff Felisa Felias as well as defendant Caltex (Philippines) Inc. appealed the foregoing judgment to the Court of Appeals which court rendered the decision sought to be reviewed, the dispositive portion of which reads: "In view of all the foregoing, the judgment appealed from is hereby modified; and judgment is hereby rendered

PETITION for review by certiorari of a decision of the Court of Appeals. The facts are stated in the opinion of the Court. A. P. Deen and: Eddy A. Deen for petitioner. Leopoldo Picazo for respondent. MONTEMAYOR, J.: This is a petition for certiorari to review the decision of the Court of Appeals in CA-G. R. No. 14967-R, modifying that of the trial court by declaring plaintiff Felias exclusive owner of Lot No. 107, Cadastral Survey of the City of Agusan, instead of Vicente Dysekco; by affirming said decision in so far as it declared Caltex (Philippines) Inc., absolute owner of the coconut land described in paragraph 10(6) of the amended complaint. The facts of the case as found by the Court of Appeals and which we adopt for purposes of this review, are as follows: Lot No. 107 aforementioned was originally owned by the spouses Juliano Felias and Eulalia Felion. On March 31, 1928, said spouses donated said Lot No. 107 to their daughter, Felisa Felias, herein respondent, as a result of which Original Certificate of Title No. 645 was cancelled and Transfer Certificate of Title No. 97 was issued in lieu thereof, in favor of Felisa Felias, making said lot her paraphernal property. On March 26, 1941, the trial court (Court of First Instance of Cebu) rendered judgment in Civil Case No. 1527, entitled Texas Company (Phil.,) Inc., plaintiff, vs. Simeon Sawamoto, defendant, (husband of respondent Felias) ordering the latter to pay plaintiff the sum of P661.94, with legal interest from the date complaint was filed, plus attorney's fees equivalent to 10% of the award, and the costs. A writ of execution was issued to the provincial sheriff who levied upon Lot No. 107, together with the improvements thereon described in

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"1. Declaring that plaintiff is the owner of Lot No. 107 of the Cadastral Survey of Nasipit; and ordering the Register of Deeds to cancel: entry No. 234 referring to the sale with pacto de retro; entry No. 1951, notice of levy under attachment; entry No. 2050, notice of levy under execution; entry No. 2147, sheriff's certificate of sale; entry No. 114, sheriff's deed of sale in favor of Caltex (Phil.) Inc., dated January 28, 1947; entry No. 121, affidavit of consolidation of ownership, all appearing on the memorandum of encumbrances at the back of Transfer Certificate of Title No. RT-65(97) of the land records of Agusan; and "2. Declaring that Caltex (Phil.) Inc. is the exclusive owner of the small parcel of coconut land located in sitio Look, municipality of Nasipit, Agusan, described in paragraph X (b) of the amended complaint." Petitioner Caltex (Philippines) Inc. makes the following assignment of errors: "ASSIGNMENT OF ERRORS

"Buildings constructed during the marriage on land belonging to one of the spouse shall also belong to the partnership, but the value of the land shall be paid to the spouse owning the same.", which legal provision was embodied in Article 158, paragraph 2, of the New Civil Code, which reads thus: "ART. 158. * * * "Buildings constructed at the expense of the partnership during the marriage on land belonging to one of the spouses, also pertain to the partnership, but the value of the land shall be reimbursed to the spouse who owns the same.", it automatically became conjugal property when during the marriage, and with conjugal partnership funds, a building was constructed on it. However, the Court of Appeals found as a fact that at the time the building was constructed, the lot still belonged to the parents of Felisa because the donation to her was not made until March 31,1928, whereas the building was constructed earlier, which building was assessed as early as September, 1927, at P12,000. Consequently, Article 1404 of the Old Civil Code is not applicable. The Court of Appeals itself said so, but nevertheless, it proceeded to assume that article 1404 was applicable, and proceeded to discuss the question thus: "While it is true that the building was constructed by the spouses Felisa and Simeon Sawamoto on Lot No. 107 at a -time when they were already married, nevertheless, it is equally true that then Lot No. 107 did not yet belong to Felisa Felias, one of the spousesthat land was still the property of the parents of Felisa Felias. It would seem therefore, that Article 1404 of the Spanish Civil Code would not apply. That legal precept refers to a building constructed 'on land belonging to one of the spouses.' Rather, we would say that the familiar rule of accessory following the principal should apply. "But conceding, for present purposes, that after the acquisition of the land by plaintiff, the matter of ownership of the land (on which the said building was erected) comes within the coverage of Article 1404 still the question arises: As of what time should the land be considered the property of the spouses? On this point, we have but to restate the jurisprudence established by the Supreme Tribunal of this country." We believe the assumption and the discussion to be profitless and unnecessary. For purposes of this appeal, we shall decide the issue on the basis of the fact that the building was constructed when the lot belonged not to Felisa but her parents, in which case, as the Court of Appeals itself observed, what was applicable was "the familiar rule of accessory following the principal".
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"I. The Court of Appeals erred in failing to declare that even if lot No. 107 was paraphernal, it became conjugal ipso facto upon construction of the conjugal house thereon. "II. The Court of Appeals erred in failing to declare that even if lot No. 107 is paraphernal, it is nevertheless subject to levy of execution in enforcing just obligation of plaintiff's husband, Simeon Sawamoto. "III. The Court of Appeals erred by f ailing to declare that estoppel thru negligence and actuations bar the plaintiff from claiming ownership of lot No. 107 as against defendant CALTEX." The only issues involved in this appeal is the status and ownership of Lot 107 of the cadastral survey of the City of Agusan at the time it was levied upon and later sold by the Sheriff. As already stated, the Court of Appeals found that it had been donated to Felisa Felias on March 31, 1928 by her parents, so that it became her paraphernal property. It was levied upon and sold by the Sheriff as conjugal property of the spouses Felisa and Simeon on the theory that under Article 1404, paragraph 2, of the Old Civil Code, which reads as follows: "ART. 1404. * * *

In other words, when the lot was donated to Felisa by her parents, as owners of the land on which the building was constructed, the lot became her paraphernal property. The donation transmitted to her the rights of a landowner over a building constructed on it. Therefore, at the time of the levy and sale of the sheriff, Lot No. 107 did not belong to the conjugal partnership, but it was paraphernal property of Felisa. As such, it was not answerable for the obligations of her husband 1 which resulted in the judgment against him in favor of Caltex. It may be stated in this connection that as further found by the Court of Appeals, the building constructed on Lot No. 107 was destroyed during the last war, so that "at the time the Sheriff executed the final deed of sale in favor of Caltex (Phil.) Inc. on the 27th day of January, 1947, that house which was included in both deeds was no longer in existence." In view of the foregoing, the appealed decision of the Court of Appeals is hereby affirmed, though on another ground, with costs against petitioner. Pars, C. J., Bengzon, Bautista Angelo, Labrador, Concepcin, Reyes, J. B. L., Barrera, and Gutirrez David, JJ., concur. Decision affirmed. ________________

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Caltex (Phil.) Inc. vs. Felias, 108 Phil. 873(1960)]

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No. L-21783. March 25, 1970. PACIFIC FARMS, INC., plaintiff-appellee, vs. SIMPLICIO G. ESGUERRA, ET AL., defendants, CARRIED LUMBER COMPANY, defendant-appellant.
Civil law; Property; Ownership; Right of accession; Right of accession with respect to immovable property; Art. 447 of the Civil Code applied by analogy where building was constructed out of unpaid lumber and construction materials.Pursuant to the rule that compensation should be borne by the person who has been benefited by the accession, and applying Art. 447 of the Civil Code, the purchaser for value and in good faith of the six buildings in question constructed out of unpaid lumber and construction materials is not liable for reparation of damages but only for the payment of the unpaid price of the lumber and construction materials due to the unpaid furnisher thereof who has no right to remove the materials but only to recover the value of the unpaid lumber and construction materials.

and construction materials furnished by the appellant, is indubitable Therefore, applying article 447 by analogy, we perforce consider the buildings as the principal and the lumber and construction materials that went into their construction as the accessory. Thus the appellee, if it does own the six buildings, must bear the obligation to pay for the value of the said materials; the appellantwhich apparently has no desire to remove the materials, and, even if it were minded to do so, cannot remove them without necessarily damaging the buildingshas the corresponding right to recover the value of the unpaid lumber and construction materials. (Decision, pp. 4-5; italics supplied) Indeed, because we assumed that the appellee was in good faith, we did not pronounce it liable for the reparation of damages but only for the payment of the unpaid price of the lumber and construction materials due to the appellant as unpaid furnisher thereof. Based on this same assumption, we likewise held that the appellant has no right to remove the materials but only to recover the value of the unpaid lumber and construction materials. Thus, since the appellee benefited from the accession, i.e., from the lumber and materials that went into the instruction of the six buildings, it should shoulder the compensation due to the appellant as unpaid furnisher of materials, pursuant to the rule we cited in our decision that compensation should be borne by the person who has been benefited by the accession. Under the overall environmental circumstances of the case, considering that although the appellee was in a better position to protect its own interest it took no action to intervene in the suit filed by the appellant against the Insular Farms, Inc. or to hold the latter to account therefor, notwithstanding that it concededly acquired knowledge, after its purchase from the Insular Farms, Inc., on March 21, 1958 of the six buildings in question; of the filing and pendency of the appellants suit for payment of the unpaid balance of the price of the lumber and construction materials delivered to the Insular Farms, Inc. and used in the construction of the said buildings, the Court believes that its decision upholding the sheriffs sale of the six buildings but granting the appellee the option of redeeming the same by paying to the appellant the unpaid balance with interest owing to it as supplier of the construction materials, is completely in consonance with justice and equity. ACCORDINGLY, the plaintiff-appellees motion for reconsideration dated December 12, 1969 is hereby denied.

MOTION FOR RECONSIDERATION of a decision of the Supreme Court.

The facts are stated in the resolution of the Court. R E S O L U T I O N* CASTRO, J.:

Subject of this resolution is a motion filed by the plaintiff-appellee Pacific Farms, Inc. for reconsideration of our decision of November 29, 1969. Briefly stated, the plaintiff-appellees first argument is that it should not have been found liable for the payment of the unpaid portion of the procurement price of the lumber and construction materials furnished by the appellant to its predecessor-in-interest, the Insular Farms, Inc., because it was a purchaser for value and in good faith of the six buildings is question. The flaw in this argument lies in its assumption that the reason we held the appellee liable is that it was not a buyer in good faith and for value, which is incorrect. When we applied article 447 of the Civil Code by analogy to this case, we did so on the assumption that the plaintiff-appellee was in good faith, Thus, after quoting said article, we stated: Although it does not appear from the records of this case that the land upon which the six buildings were built is owned by the appellee, nevertheless, that the appellee claims that it owns the six biiildings constructed out of the lumber

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Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Fernando, Teehankee, Barredo and Villamor, JJ., concur. Motion denied. Notes.The fact that a lessee uses material belonging to another in constructing a building upon land leased does not make the owner of the material a part owner of the building. (Liwanag vs. Yu-Sonquian, 5 Phil. 147.) When one in possession of the property of another erects buildings and makes other improvements thereon in bad faith, but with the knowledge of the owner who does not object, the case must be treated as though the parties acted in good faith. (Municipality of Oas vs. Roa, 7 Phil. 20; Merchant vs. City of Manila, 11 Phil. 16.)

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Pacific Farms, Inc. vs. Esguerra, 32 SCRA 36(1970)]

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No. L-19299. November 28, 1964. FELIZA JOVEN DE JESUS, duly assisted by her husband GREGORIO B. DE JESUS, plaintiffs-appellees, vs. PHILIPPINE NATIONAL BANK, DEL CARMEN BRANCH, and THE PAMPANGA SUGAR MILLS, defendants, PHILIPPINE NATIONAL BANK, defendant-appellant.
Appeals; When delay in perfecting appeal not considered excusable; Negligence of appellants counsel in not ascertaining date of receipt from post office of letter of notice.The delay of the appellant bank in perfecting its appeal cannot be considered due to excusable negligence where appellants counsel carelessly took for granted that the date of receipt stamped on the letter by its legal departments receiving clerk was the date of receipt from the post office. It was known or at least should have been known to him that from appellants system of handling and receiving correspondence from its legal and other departments, the date of receipt by the receiving clerks of its several departments could not be relied upon as the very same date of receipt from the post office. Counsel for appellant could have easily found out the latter date had he made proper inquiry from its postal mail clerk or its registered mail clerk, and in the circumstances of the case at bar, there was no excuse for his failure to do so. Same; Rule in perfecting appeal not relaxed where no prejudice from loss of right to appeal is shown.While the rule, on the period to perfect an appeal may in special instances be relaxed in the interest of justice, this exception is at most discretionary for the Court to apply. In the case at bar, appellant, while invoking the interest of justice, has not shown how it would stand to be prejudiced from the loss of its right to appeal. From the record no such prejudice can be gathered, especially because the judgment provided for reimbursement in appellants favor by ,the third-party defendant and the latter has not appealed therefrom.

This appeal presents a procedural question on the dismissal of an appeal as perfected out of time. Specifically, it involves application of Section 13, Rule 41 of the Rules of Court: SEC. 13. Effect of failure to file notice, bond, or record on appeal.Where the notice of appeal, appeal bond or record on appeal is not filed within the period of time herein provided, the appeal shall be dismissed. Appellant invokes liberality in the interest of justice. Appellees cite among other things our statement in Reyes vs. Court of Appeals, 74 Phil. 235, 238: we cannot fix a period with the solemnity of a statute and disregard it like a joke. If law is founded on reason, whim or fancy should play no part in its application. The controversy originated in Pampanga, in Civil Case No. 1128 of the Court of First Instance therein, entitled Feliza Joven de Jesus vs. Philippine National Bank, et al.," where judgment was rendered on February 6, 1961 as follows: WHEREFORE, finding the averments of the complaint being supported by preponderance of evidence, the court hereby renders judgment in favor of the plaintiff Feliza Joven de Jesus and against defendant Philippine National Bank, Del Carmen Branch, ordering the latter to pay the former the sum of P3,274.98 with legal interest thereon at the rate of 6% a year from September 15, 1956, the date of the filing of the complaint, until the principal shall have been fully paid, plus the other sum of P500 00 as attorneys fees of the said plaintiff, considering that the defendants action, in refusing to cancel the leasehold rights of Jacobo Lampa, was clearly unjustified, bordering bad faith, with costs. The defendant Pampanga Sugar Mills is hereby absolved from the complaint. Meanwhile, the third party defendant Jacobo Lampa is hereby ordered to pay the defendant Philippine National Bank all sums of money, it was ordered to pay the plaintiff including legal interest, and costs.(Record on Appeal, pp. 127128.), Of this decision the parties furnished copies, through counsel, by registered mail. On March 16, 1961 defendant Philippine National Bank filed its notice of appeal and a motion for extension of time to file record on appeal. On March 17, 1961, it filed its record on appeal and appeal bond, However, its appeal was dismissed on that day by the court on plaintiffs motion as filed out of time because the registry return card showed receipt- by defendant Philippine National Bank of its copy of the decision on February 13, 1961.
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APPEAL from the orders of the Court of First Instance of Pampanga. Santos, J.

The facts are stated in the opinion of the Court. Felimon Cajator for plaintiffs-appellees. R.B. de los Reyes and C.E. Medina for defendantappellant Philippine National Bank. Taada & Teehankee for defendant Pampanga Sugar Mills. BENGZON, J.P., J.:

Defendant bank filed on March 22, 1961 a motion for reconsideration and relief from, and/or to set aside the order of March 17, 1961." It alleged that movants failure to appeal on time was due to accident, mistake and/or excusable negligence, as supported by affidavits annexed to the motion. The court denied the motion on May 18, 1961. Defendant bank has appealed from the orders of March 17, 1961 and May 18, 1961. The record will show that copy of the decision sent to appellants counsel in its legal department was received on February 13, 1961. In its motion of March 22, 1961 filed before the court a, quo, appellant stated that the registered mail containing said copy was received from the post office on February 13, 1961 by Eugenio Magpoc. Although the latter is postal mail and delivery clerk of appellants cashier department, his affidavit states that as such, one of my duties is to get and receive from the Post Office all registered mail matters addressed to the Philippine National Bank, its personnel and different departments (Rec. on App., 151; italics supplied). Defendant bank admitted having filed its notice of appeal, record on appeal and appeal bond beyond the 30day period, but contended in its motion of March 22, 1961, that the delay was due to accident, mistake and/or excusable negligence. In support of such contention, it is alleged that on February 13, 1961 the registered letter was given by the banks postal mail clerk Eugenio Magpoc to Feliciano Jimenez, Jr., registered mail clerk of appellants cashier department. Due to volume of work, Feliciano Jimenez, Jr. delivered it to the receiving clerk of appellants legal department only on February 15, 1961 and failed to inform the latter that it was received two days before. Thereupon, it was stamped by said receiving clerk as received on February 15, 1961. On the basis of this date, appellants counsel computed the period to appeal. The lower court did not find excusable the negligence recited above. We see no compelling reason to disturb this finding. Appellants counsel carelessly took for granted that the date of receipt stamped on the letter by the legal departments receiving clerk was the date of receipt from the post office. It was known or at least should have been known to him that letters addressed to appellants legal department were taken from the post office by Eugenio Magpoc and sorted out by Feliciano Jimenez, Jr. Thus, from appellants system of handling and receiving correspondence for its legal and all other departments, it was clear that the date of receipt by the receiving clerks of its several departments

could not be relied upon as the very same date of receipt from the post office. Counsel for appellant could have easily found out the latter date had he inquired from Eugenio Magpoc or Feliciano Jimenez, Jr. and in the circumstances, we find no excuse for his having failed to do so. It should also be stated here that important steps required of litigants by the Rules cannot be left for lastminute action without assuming the risk of losing the right to take such steps if, through the fault of the party concerned, the period for doing so is miscalculated. Such fatal consequence has often resulted as what happened to appellants right to appeal in the case at bar. Hence, the attention and care needed on periods provided by the Rules of Court can never be over emphasized. As we have stated in Bello vs. Fernando, L-16970, January 30, 1962: The right to appeal is not a natural right nor a part of due process; it is merely a statutory privilege, and may be exercised only in the manner and in accordance with the provisions of the law (Aguila v. Navarro, 55 Phil. 898; Santiago v. Valenzuela, 78 Phil. 397). Section 3, Rule 41 of the Rules of Court requires that the notice of appeal, the appeal bond, and the record on appeal be all filed in court, and served on the adverse party, within thirty days from notice of judgment. x x x; and compliance with this period for appeal is considered absolutely indispensable for the prevention of needless delays and to the orderly and speedy discharge of judicial business (Altavas Conlu v. C.A., L-14027, January 29, 1960), so that if said period is not complied with, the judgment becomes final and executory x x x. (Layda v. Legaspi, 38 Phil. 83; Pampelina v. Suiza, 12 Phil. 99; Caisip v. Cabangon, L-14684, Aug. 26, 1960)." While the above-stated rule may in special instances be relaxed in the interest of justice, this exception is at most discretionary for the Court to apply and can be invoked only when there is lawful justification and as when circumstances of fraud, accident, mistake or excusable negligence, have intervened. (Reyes vs. Court of Appeals, 74 Phil. 235.) As already discussed, such circumstances do not exist in this case. We may also add that appellant, while invoking the interest of justice, has not shown how it would stand to be prejudiced from the loss of its right to appeal. From the record no such prejudice can be gathered, especially because the judgment provided for reimbursement in appellants favor by third-party defendant Jacobo Lampa and the latter has not appealed therefrom. WHEREFORE, the orders appealed from are hereby affirmed, with costs.
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Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon, Regala, Makalintal and Zaldivar, JJ., concur. Bengzon, C.J., took no part. Orders affirmed. _____________

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Joven-De Jesus vs. Philippine National Bank, 12 SCRA 477(1964)]

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G.R. No. 120303. July 24, 1996.* FEDERICO GEMINIANO, MARIA GEMINIANO, ERNESTO GEMINIANO, ASUNCION GEMINIANO, LARRY GEMINIANO, and MARLYN GEMINIANO, petitioners, vs. COURT OF APPEALS, DOMINADOR NICOLAS, and MARY A. NICOLAS, respondents.
Civil Law; Property; Lease; While the right to let property is an incident of title and possession, a person may be a lessor and occupy the position of a landlord to the tenant although he is not the owner of the premises let.It has been said that while the right to let property is an incident of title and possession, a person may be a lessor and occupy the position of a landlord to the tenant although he is not the owner of the premises let. After all, ownership of the property is not being transferred, only the temporary use and enjoyment thereof. Same; Same; Same; Estoppel; 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.It is undisputed that the private respondents came into possession of a 126 square-meter portion of the said lot by virtue of a contract of lease executed by the petitioners mother in their favor. The juridical relation between the petitioners mother as lessor, and the private respondents as lessees, is therefore well-established, and carries with it a recognition of the lessors title. The private respondents, as lessees who had undisturbed possession for the entire term under the lease, are then estopped to deny their landlords 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. Same; Same; Same; Private respondents cannot be considered as possessors nor builders in good faith.Being mere lessees, the private respondents knew that their occupation of the premises would continue only for the life of the lease. Plainly, they cannot be considered as possessors nor builders in good faith. Same; Same; Same; 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.In a plethora of cases, this Court has held that Article 448 of the Civil Code, in relation to Article 546 of the same Code, which allows full reimbursement of useful improvements and retention of the premises until reimbursement is made, applies only to a possessor in good faith, i.e., one who builds on land with the belief that he is the owner thereof. It does not apply where ones 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. Same; Same; Same; The right to indemnity under Article 1678 of the Civil Code arises only if the lessor opts to appropriate the improvements.It must be stressed, however, that the right to

indemnity under Article 1678 of the Civil Code arises only if the lessor opts to appropriate the improvements. Since the petitioners refused to exercise that option, the private respondents cannot compel them to reimburse the one-half value of the house and improvements. Neither can they retain the premises until reimbursement is made. The private respondents sole right then is to remove the improvements without causing any more impairment upon the property leased than is necessary.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court. Decano and Decano Law Office for petitioners. Bengzon, Baraan, Fernandez Law Offices for private respondents. DAVIDE, JR., J.:

This petition for review on certiorari has its origins in Civil Case No. 9214 of Branch 3 of the Municipal Trial Court in Cities (MTCC) in Dagupan City for unlawful detainer and damages. The petitioners ask the Court to set aside the decision of the Court of Appeals affirming the decision of Branch 40 of the Regional Trial Court (RTC) of Dagupan City, which, in turn, reversed the MTCC; ordered the petitioners to reimburse the private respondents the value of the house in question and other improvements; and allowed the latter to retain the premises until reimbursement was made. It appears that Lot No. 3765-B-1 containing an area of 314 square meters was originally owned by the petitioners mother, Paulina Amado vda. de Geminiano. On a 12-square-meter portion of that lot stood the petitioners unfinished bungalow, which the petitioners sold in November 1978 to the private respondents for the sum of P6,000.00, with an alleged promise to sell to the latter that portion of the lot occupied by the house. Subsequently, the petitioners mother executed a contract of lease over a 126 square-meter portion of the lot, including that portion on which the house stood, in favor of the private respondents for P40.00 per month for a period of seven years commencing on 15 November 1978.1 The private respondents then introduced additional improvements and registered the house in their names. After the expiration of the lease contract in November 1985, however, the petitioners mother refused to accept the monthly rentals.
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It turned out that the lot in question was the subject of a suit, which resulted in its acquisition by one Maria Lee in 1972. In 1982, Lee sold the lot to Lily Salcedo, who in turn sold it in 1984 to the spouses Agustin and Ester Dionisio. On 14 February 1992, the Dionisio spouses executed a Deed of Quitclaim over the said property in favor of the petitioners.2 As such, the lot was registered in the latters names.3 On 9 February 1993, the petitioners sent, via registered mail, a letter addressed to private respondent Mary Nicolas demanding that she vacate the premises and pay the rentals in arrears within twenty days from notice.4 Upon failure of the private respondents to heed the demand, the petitioners filed with the MTCC of Dagupan City a complaint for unlawful detainer and damages. During the pre-trial conference, the parties agreed to confine the issues to: (1) whether there was an implied renewal of the lease which expired in November 1985; (2) whether the lessees were builders in good faith and entitled to reimbursement of the value of the house and improvements; and (3) the value of the house. The parties then submitted their respective position papers and the case was heard under the Rule on Summary Procedure. On the first issue, the court held that since the petitioners mother was no longer the owner of the lot in question at the time the lease contract was executed in 1978, in view of its acquisition by Maria Lee as early as 1972, there was no lease to speak of, much less, a renewal thereof. And even if the lease legally existed, its implied renewal was not for the period stipulated in the original contract, but only on a month-to-month basis pursuant to Article 1678 of the Civil Code. The refusal of the petitioners mother to accept the rentals starting January 1986 was then a clear indication of her desire to terminate the monthly lease. As regards the petitioners alleged failed promise to sell to the private respondents the lot occupied by the house, the court held that such should be litigated in a proper case before the proper forum, not an ejectment case where the only issue was physical possession of the property. The court resolved the second issue in the negative, holding that Articles 448 and 546 of the Civil Code, which allow possessors in good faith to recover the value of improvements and retain the premises until reimbursed, did not apply to lessees like the private respondents, because the latter knew that their

occupation of the premises would continue only during the life of the lease. Besides, the rights of the private respondents were specifically governed by Article 1678, which allows reimbursement of up to one-half of the value of the useful improvements, or removal of the improvements should the lessor refuse to reimburse. On the third issue, the court deemed as conclusive the private respondents allegation that the value of the house and improvements was P180,000.00, there being no controverting evidence presented. The trial court thus ordered the private respondents to vacate the premises, pay the petitioners P40.00 a month as reasonable compensation for their stay thereon from the filing of the complaint on 14 April 1993 until they vacated, and to pay the sum of P1,000.00 as attorneys fees, plus costs.5 On appeal by the private respondents, the RTC of Dagupan City reversed the trial courts decision and rendered a new judgment: (1) ordering the petitioners to reimburse the private respondents for the value of the house and improvements in the amount of P180,000.00 and to pay the latter P10,000.00 as attorneys fees and P2,000.00 as litigation expenses; and (2) allowing the private respondents to remain in possession of the premises until they were fully reimbursed for the value of the house.6 It ruled that since the private respondents were assured by the petitioners that the lot they leased would eventually be sold to them, they could be considered builders in good faith, and as such, were entitled to reimbursement of the value of the house and improvements with the right of retention until reimbursement had been made. On appeal, this time by the petitioners, the Court of Appeals affirmed the decision of the RTC7 and denied8 the petitioners motion for reconsideration. Hence, the present petition. The Court is confronted with the issue of which provision of law governs the case at bench: Article 448 or Article 1678 of the Civil Code? The said articles read as follows: Art. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in Articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of
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the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof. xxx Art. 1678. If the lessee makes, in good faith, useful improvements which are suitable to the use for which the lease is intended, without altering the form or substance of the property leased, the lessor upon the termination of the lease shall pay the lessee one-half of the value of the improvements at that time. Should the lessor refuse to reimburse said amount, the lessee may remove the improvements, even though the principal thing may suffer damage thereby. He shall not, however, cause any more impairment upon the property leased than is necessary. With regard to ornamental expenses, the lessee shall not be entitled to any reimbursement, but he may remove the ornamental objects, provided no damage is caused to the principal thing, and the lessor does not choose to retain them by paying their value at the time the lease is extinguished. The crux of the said issue then is whether the private respondents are builders in good faith or mere lessees. The private respondents claim they are builders in good faith, hence, Article 448 of the Civil Code should apply. They rely on the lack of title of the petitioners mother at the time of the execution of the contract of lease, as well as the alleged assurance made by the petitioners that the lot on which the house stood would be sold to them. It has been said that while the right to let property is an incident of title and possession, a person may be a lessor and occupy the position of a landlord to the tenant although he is not the owner of the premises let.9 After all, ownership of the property is not being transferred,10 only the temporary use and enjoyment thereof.11 In this case, both parties admit that the land in question was originally owned by the petitioners mother. The land was allegedly acquired later by one Maria Lee by virtue of an extrajudicial foreclosure of mortgage. Lee, however, never sought a writ of possession in order that she gain possession of the property in question.12 The petitioners mother therefore remained in possession of the lot.

It is undisputed that the private respondents came into possession of a 126 square-meter portion of the said lot by virtue of a contract of lease executed by the petitioners mother in their favor. The juridical relation between the petitioners mother as lessor, and the private respondents as lessees, is therefore well-established, and carries with it a recognition of the lessors title.13 The private respondents, as lessees who had undisturbed possession for the entire term under the lease, are then estopped to deny their landlords title, or to assert a better title not only in themselves, but also in some third person while they remain in possession of the leased premises and until they surrender possession to the landlord.14 This estoppel applies even though the lessor had no title at the time the relation of lessor and lessee was created,15 and may be asserted not only by the original lessor, but also by those who succeed to his title.16 Being mere lessees, the private respondents knew that their occupation of the premises would continue only for the life of the lease. Plainly, they cannot be considered as possessors nor builders in good faith.17 In a plethora of cases,18 this Court has held that Article 448 of the Civil Code, in relation to Article 546 of the same Code, which allows full reimbursement of useful improvements and retention of the premises until reimbursement is made, applies only to a possessor in good faith, i.e., one who builds on land with the belief that he is the owner thereof. It does not apply where ones only interest is that of a lessee under a rental contract; otherwise, it would always be in the power of the tenant to improve his landlord out of his property. Anent the alleged promise of the petitioners to sell the lot occupied by the private respondents house, the same was not substantiated by convincing evidence. Neither the deed of sale over the house nor the contract of lease contained an option in favor of the respondent spouses to purchase the said lot. And even if the petitioners indeed promised to sell, it would not make the private respondents possessors or builders in good faith so as to be covered by the provisions of Article 448 of the Civil Code. The latter cannot raise the mere expectancy of ownership of the aforementioned lot because the alleged promise to sell was not fulfilled nor its existence even proven. The first thing that the private respondents should have done was to reduce the alleged promise into writing, because under Article 1403 of the Civil Code, an agreement for the sale of real property or an interest therein is unenforceable, unless some note or memorandum thereof be produced. Not having taken any steps in order that the alleged promise to sell may be enforced, the private

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respondents cannot bank on that promise and profess any claim nor color of title over the lot in question. There is no need to apply by analogy the provisions of Article 448 on indemnity as was done in Pecson vs. Court of Appeals,19 because the situation sought to be avoided and which would justify the application of that provision, is not present in this case. Suffice it to say, a state of forced coownership would not be created between the petitioners and the private respondents. For, as correctly pointed out by the petitioners, the rights of the private respondents as lessees are governed by Article 1678 of the Civil Code which allows reimbursement to the extent of one-half of the value of the useful improvements. It must be stressed, however, that the right to indemnity under Article 1678 of the Civil Code arises only if the lessor opts to appropriate the improvements. Since the petitioners refused to exercise that option,20 the private respondents cannot compel them to reimburse the one-half value of the house and improvements. Neither can they retain the premises until reimbursement is made. The private respondents sole right then is to remove the improvements without causing any more impairment upon the property leased than is necessary.21 WHEREFORE, judgment is hereby rendered GRANTING the instant petition; REVERSING and SETTING ASIDE the decision of the Court of Appeals of 27 January 1995 in CA-G.R. SP No. 34337; and REINSTATING the decision of Branch 3 of the Municipal Trial Court in Cities of Dagupan City in Civil Case No. 9214 entitled Federico Geminiano, et al. vs. Dominador Nicolas, et al. Costs against the private respondents. SO ORDERED. Narvasa (C.J., Chairman), Melo, Francisco and Panganiban, JJ., concur. Petition granted, judgment reversed and set aside and that of the court a quo reinstated. Note.Agreements for the sale of real property shall be unenforceable by action unless the same or some note or memorandum thereof be in writing and subscribed by the party charged or by his agent. (Diwa vs. Donato, 234 SCRA 608 [1994]) o0o

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No. L-33422. May 30, 1983.* ROSENDO BALUCANAG, petitioner, vs. HON. JUDGE ALBERTO J. FRANCISCO and RICHARD STOHNER, respondents.
Civil Law; Leases; Ejectment; Builder in good faith, not a case of; Principle of possessor in good faith; Art. 448, Civil Code, applies only where one builds on land in the belief that he is owner of the land, but does not apply where ones interest in the land is of a lessee under a rental contract.But even in the absence of said stipulation, respondent Stohner cannot be considered a builder in good faith. Article 448 of the Civil Code, relied upon by respondent judge, applies only to a case where one builds on land in the belief that he is the owner thereof and it does not apply where ones only interest in the land is that of a lessee under a rental contract. In the case at bar, there is no dispute that the relation between Balucanag and Stohner is that of lessor and lessee, the former being the successor in interest of the original owner of the lot. As we ruled in Lopez, Inc. vs. Phil. and Eastern Trading Co., Inc., x x x the principle of possessor in good faith refers only to a party who occupies or possess property in the belief that he is the owner thereof and said good faith ends only when he discovers a flaw in his title so as to reasonably advise or inform him that after all he may not be the legal owner of said property. It cannot apply to a lessee because as such lessee he knows that he is not the owner of the leased premises. Neither can he deny the ownership or title of his lessor. x x x A lessee who introduces improvements in the leased premises, does so at his own risk in the sense that he cannot recover their value from the lessor, much less retain the premises until such reimbursement. x x x Same; Same; Same; Useful improvements; Application in case at bar of Art. 1678, Civil Code, which gives the lessor the option to appropriate useful improvements by paying one-half of their value, and the lessees right to remove the improvements even if the leased premises may suffer damage.The law applicable to the case at bar is Article 1678 of the Civil Code, x x x This article gives the lessor the option to appropriate the useful improvements by paying one-half of their value; and the lessee cannot compel the lessor to appropriate the improvements and make reimbursement, for the lessees right under the law is to remove the improvements even if the leased premises may suffer damage thereby. But he shall not cause any more damage upon the property than is necessary. Same; Same; Same; Implied new lease; Continued possession of the premises by lessee after expiration of the period with the acquiescence of lessor and new owner creates an implied new lease or tacita reconduccion, the period of what is established by Art. 1687 of the Civil Code.It appears that while the lease contract entered into by Stohner and Mrs. Charvet had expired on August 31, 1957, he nevertheless continued in possession of the premises with the acquiescence of Mrs. Charvet and later, of Balucanag. An implied new lease or tacita reconduccion was thus created between the parties, the period of which is established by Article 1687 of the Civil Code. Same; Same; Same; If period of lease not fixed, duration of new lease deemed to be month to month and lessor may terminate lease after each month with due notice; Case at bar.Under the above article, the duration of the new lease must be deemed from month to month, the agreed rental in the instant case being payable on a monthly basis. The lessor may thus terminate the

lease after each month with due notice upon the lessee. After such notice, the lessees right to continue in possession ceases and his possession becomes one of detainer. Furthermore, Stohners failure to pay the stipulated rentals entitles petitioner to recover possession of the premises.

Abad Santos, J., concurring and dissenting: Leases; There being an agreement on the disposition of the lessees improvements the same shall govern rather than Art. 1678.However, I cannot give my assent to that portion of the judgment with respect to the house constructed by Stohner. Stohner as a lessee is not a builder in good faith. This is elementary in property law. Article 1678 of the Civil Code concerning improvements made by the lessee on the leased premises applies only in the absence of stipulation on the matter between the lessor and the lessee. In the instant case there is such a stipulation. PETITION for review of the decision of the Court of First Instance of Manila.

The facts are stated in the opinion of the Court. Alfredo C. Estrella for petitioner. Pascual C. Garcia for respondents. ESCOLIN, J.: This petition for review of the decision of the Court of First Instance of Manila in Civil Case No. 67503 calls for a determination of the respective rights of the lessor and the lessee over the improvements introduced by the latter in the leased premises. Cecilia dela Cruz Charvet was the owner of a 177.50 square meter lot located in Zamora Street, Pandacan, Manila, covered by Transfer Certificate of Title No. 25664. On August 31, 1952, Mrs. Charvet leased said lot to respondent Richard Stohner for a period of five [5] years at the monthly rental of P40.00, payable in advance within the first ten [10] days of each month. The lease contract1 provided, among others, that: IV. The lessee may erect such buildings upon and make such improvements to the leased land as he shall see fit. All such buildings and improvements shall remain the property of the lessee and he may remove them at any time, it being agreed, however, that should he not remove the said buildings and
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improvements within a period of two months after the expiration of this Agreement, the Lessor may remove the said buildings and improvements or cause them to be removed at the expense of the Lessee. During the existence of the lease, Stohner made fillings on the land and constructed a house thereon, said improvements being allegedly valued at P35,000.00. On March 8, 1966, Mrs. Charvet sold the said lot to petitioner Rosendo Balucanag.2 For Stohners failure to pay the rents, Balucanag, thru counsel, wrote Stohner a letter demanding that he vacate the premises.3 In reply thereto, Stohner, also thru counsel, claimed that he was a builder in good faith of the residential house erected in the land. He offered the following proposals for a possible compromise, to wit: [a] Mr. Stohner will purchase the said lot from your client with the interest of 12% per annum on the value, or [b] Your client Mr. Rosendo Balucanag will reimburse our client in the total amount of P35,000.00 for the improvements and construction he has made on the lot in question. As no agreement was reached, Balucanag instituted in the City Court of Manila an ejectment suit against Stohner and, after due trial, the court rendered a decision, the decretal portion of which reads as follows: IN VIEW OF THE FOREGOING CONSIDERATIONS, judgment is hereby rendered, ordering the defendant to pay the plaintiff the sum of P360.00 as back rentals from December, 1965 to August 1966 at the rate of P40.00 a month and to vacate the premises. The defendant is further ordered to pay the sum of P100.00 as Attorneys fees which is considered reasonable within the premises. On appeal, the Court of First Instance of Manila, Branch IX, presided by respondent Judge Alberto J. Francisco, after conducting a trial de novo, rendered a decision, setting aside the judgment of the city court and dismissing the petitioners complaint. Respondent judge held that Stohner was a builder in good faith because he had constructed the residential house with the consent of the original lessor, Mrs. Charvet, and also because the latter, after the expiration of the lease contract on August 31, 1957, had neither sought

Stohners ejectment from the premises, nor the removal of his house therefrom. Invoking Articles 448 and 546 of the Civil Code4, respondent judge concluded that Stohner, being a builder in good faith, cannot be ejected until he is reimbursed of the value of the improvements. Frustrated in his effort to have the decision reconsidered, Balucanag filed the instant petition for review. We find the petition impressed with merit. Paragraph IV of the lease contract entered into by Stohner with Mrs. Charvet specifically provides that x x x such buildings and improvements shall remain the property of the lessee and he may remove them at any time, it being agreed, however, that should he not remove the said buildings and improvements within a period of two months after the expiration of this Agreement, the Lessor may remove the said buildings and improvements or cause them to be removed at the expense of the Lessee. Respondent Stohner does not assail the validity of this stipulation. Neither has he advanced any reason why he should not be bound by it. But even in the absence of said stipulation, respondent Stohner cannot be considered a builder in good faith. Article 448 of the Civil Code, relied upon by respondent judge, applies only to a case where one builds on land in the belief that he is the owner thereof and it does not apply where ones only interest in the land is that of a lessee under a rental contract. In the case at bar, there is no dispute that the relation between Balucanag and Stohner is that of lessor and lessee, the former being the successor in interest of the original owner of the lot. As we ruled in Lopez, Inc. vs. Phil. and Eastern Trading Co., Inc.,5 x x x x the principle of possessor in good faith refers only to a party who occupies or possess property in the belief that he is the owner thereof and said good faith ends only when he discovers a flaw in his title so as to reasonably advise or inform him that after all he may not be the legal owner of said property. It cannot apply to a lessee because as such lessee he knows that he is not the owner of the leased premises. Neither can he deny the ownership or title of his lessor. x x x A lessee who introduces improvements in the leased premises, does so ai his own risk in the sense that he cannot recover their value from the lessor, much less retain the premises until such reimbursement. x x x The law applicable to the case at bar is Article 1678 of the Civil Code, which 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 the termination of the lease
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shall pay the lessee one-half of the value of the improvements at the 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. x x x. This article gives the lessor the option to appropriate the useful improvements by paying one-half of their value,6 and the lessee cannot compel the lessor to appropriate the improvements and make reimbursement, for the lessees right under the law is to remove the improvements even if the leased premises may suffer damage thereby. But he shall not cause any more damage upon the property than is necessary. One last point. It appears that while the lease contract entered into by Stohner and Mrs. Charvet had expired on August 31, 1957, he nevertheless continued in possession of the premises with the acquiescence of Mrs. Charvet and later, of Balucanag. An implied new lease or tacita reconduccion was thus created between the parties, the period of which is established by Article 1687 of the Civil Code thus: Art. 1687. If the period for the lease has not been fixed, it is understood to be from year to year, if the rent agreed upon is annual; from month to month, if it is monthly; from week to week, if the rent is weekly; and from day to day, if the rent is to be paid daily. x x x. Under the above article, the duration of the new lease must be deemed from month to month, the agreed rental in the instant case being payable on a monthly basis. The lessor may thus terminate the lease after each month with due notice upon the lessee. After such notice, the lessees right to continue in possession ceases and his possession becomes one of detainer. Furthermore, Stohners failure to pay the stipulated rentals entitles petitioner to recover possession of the premises. WHEREFORE, the decision in Civil Case No. 67503 is hereby set aside, with costs against respondent Stohner. The latter is ordered to vacate the premises in question and to pay Rogelio Balucanag the rentals due from March 1969 up to the time he surrenders the premises, at the rate of P40.00 a month. SO ORDERED. Makasiar (Chairman), Aquino, Concepcion, Jr., and Guerrero, JJ., concur.

Abad Santos, J., see separate opinion. De Castro, J., took no part. ABAD SANTOS, J., concurring and dissenting:

I concur in setting aside the decision in Civil Case No. 67503 of the defunct Court of First Instance of Manila; and in ordering the respondent Stohner to pay the costs, to vacate the premises in question, and to pay the petitioner the rentals due from March 1969 to the time he surrenders the premises at the rate of P40.00 monthly. However, I cannot give my assent to that portion of the judgment with respect to the house constructed by Stohner. Stohner as a lessee is not a builder in good faith. This is elementary in property law. Article 1678 of the Civil Code concerning improvements made by the lessee on the leased premises applies only in the absence of stipulation on the matter between the lessor and the lessee. In the instant case there is such a stipulation. A copy of the Lease Agreement which is found on page 13 of the Rollo reads: IV. The lessee may erect such buildings upon and make such improvements to the leased land as he shall see fit. All such buildings and improvements shall remain the property of the lessee and he may remove them at any time, it being agreed, however, that should he not remove the said buildings and improvements within a period of two months after the expiration of this Agreement, the Lessor may remove the said buildings and improvements or cause them to be removed at the expense of the Lessee. The above-quoted stipulation has the force of law between the parties (Art. 1159, Civil Code) and supersedes Art. 1678 of the Civil Code. Accordingly, the judgment with respect to the house which was constructed by Stohner should be in line with the contract of lease. Decision set aside. Notes.Under P.D. 20 and Batas 25 a lessor may not eject a lessee if the ground thereof is the expiration of the period of an indefinite lease. (Crisostomo vs. Court of Appeals, 116 SCRA 199.)
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In ejectment cases, the tenant must deposit in court the monthly rentals specified in the dispositive portion of the courts decision regardless of statement in the body of the opinion or the contract of the parties on giving discounts if rental is paid on time. (Balagtas Realty Corp. vs. Romillo, Jr., 114 SCRA 28.) The ejectment of a tenant from the leased premises is not valid where the tenant had not defaulted in payment of rentals and the lease had no fixed term the relationship between the parties being one falling under P.D. 20. (Villamin vs. Echiverri, Jr., 119 SCRA 266. P.D. 20 will not be applicable if it causes inequities against the property owner whose property rights are also protected by the Constitution. (Sinclair vs. Court of Appeals, 115 SCRA 318.) o0o

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G.R. No. 156437. March 1, 2004.* NATIONAL HOUSING AUTHORITY, petitioner, vs. GRACE BAPTIST CHURCH and the COURT OF APPEALS, respondents.
Civil Law; Contracts; Estoppel; The principle of estoppel does not operate against the Government for the act of its agents or their inaction.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, or, as in this case, their inaction. Same; Same; 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; However, contracts are not the only source of law that govern the rights and obligations between the parties.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. 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. 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. Same; Same; When there is absolutely no acceptance of an offer or if the offer is expressly rejected, there is no meeting of the minds.In Vda. de Urbano v.Government Service Insurance System, 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.

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 NHAs 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 managers 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.

PETITION for review on certiorari of the decision and resolution of the Court. The facts are stated in the opinion of the Court. Jose M. Manuel, Jr. for NHA. Marcelino Arias for respondent. YNARES-SANTIAGO, J.:

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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 courts 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 NHAs 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.15Moreover, 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 petitioners 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,17or, 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. Itis 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
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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. Davide, Jr. (C.J., Chairman), Carpio and Azcuna, JJ., concur. Panganiban, J., On Official Leave. Petition granted, assailed decision and resolution reversed and set aside. Note.There can be no contract in the true sense in the absence of the element of agreement or of mutual assent of the parties. (Luxuria Homes, Inc. vs. Court of Appeals, 302 SCRA 315 [1999]) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [National Housing Authority vs. Grace Baptist Church, 424 SCRA 147(2004)]

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G.R. No. 151815. February 23, 2005.* SPOUSES JUAN NUGUID AND ERLINDA T. NUGUID, petitioners, vs. HON. COURT OF APPEALS AND PEDRO P. PECSON, respondents.
Civil Law; Property; 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; 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.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 goodfaith builders 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.

period beginning November 22, 1993 to December 1997. The appellate court, however, reduced the trial courts award in favor of Pecson from the said P1,344,000 to P280,000. Equally assailed by the petitioners is the appellate courts Resolution2 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,3 dated February 8, 1989, the RTC upheld the spouses title but declared that the four-door two-storey apartment building was not included in the auction sale.4 This was affirmed in toto by the Court of Appeals and thereafter by this Court, in its Decision5 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 256square meter commercial lot. As a result, the Nuguid spouses moved for delivery of possession of the lot and the apartment building. In its Order6 of November 15, 1993, the trial court, relying upon Article 5467 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
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PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court. Benjamin C. Reyes for petitioners. Manuel T. Molina for respondent. QUISUMBING, J.:

This is a petition for review on certiorari of the Decision1 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

allowed the offset of the amount of P53,000 due from the Nuguids against the amount of rents collected by Pecson from June 23, 1993 to September 23, 1993 from the tenants of the apartment.8 Pecson duly moved for reconsideration, but on November 8, 1993, the RTC issued a Writ of Possession,9 directing the deputy sheriff to put the spouses Nuguid in possession of the subject property with all the improvements thereon and to eject all the occupants therein. 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 44810 of the Civil Code, affirmed the order of payment of construction costs but rendered the issue of possession moot on appeal, thus: WHEREFORE, while it appears that private respondents [spouses Nuguid] have not yet indemnified petitioner [Pecson] with the cost of the improvements, since Annex I shows that the Deputy Sheriff has enforced the Writ of Possession and the premises have been turned over to the possession of private respondents, the quest of petitioner that he be restored in possession of the premises is rendered moot and academic, although it is but fair and just that private respondents pay petitioner the construction cost of P53,000.00; and that petitioner be ordered to account for any and all fruits of the improvements received by him starting on June 23, 1993, with the amount of P53,000.00 to be offset therefrom. IT IS SO ORDERED.11 [Italics supplied.] Frustrated by this turn of events, Pecson filed a petition for review docketed as G.R. No. 115814 before this Court. On May 26, 1995, the Court handed down the decision in G.R. No 115814, to wit: WHEREFORE, the decision of the Court of Appeals in CA-G.R. SP No. 32679 and the Order of 15 November 1993 of the Regional Trial Court, Branch 101, Quezon City in Civil Case No. Q-41470 are hereby SET ASIDE. The case is hereby remanded to the trial court for it to determine the current market value of the apartment building on the lot. For this purpose, the parties shall be allowed to adduce evidence on the current market value of the apartment building. The value so determined shall be forthwith paid by the private respondents [Spouses Juan and Erlinda Nuguid] to the petitioner

[Pedro Pecson] otherwise the petitioner shall be restored to the possession of the apartment building until payment of the required indemnity. No costs. SO ORDERED.12 [Emphasis supplied.] In so ruling, this Court pointed out that: (1) Article 448 of the Civil Code is not apposite to the case at bar where the owner of the land is the builder, sower, or planter who then later lost ownership of the land by sale, but may, however, be applied by analogy; (2) the current market value of the improvements should be made as the basis of reimbursement; (3) Pecson was entitled to retain ownership of the building and, necessarily, the income therefrom; (4) the Court of Appeals erred not only in upholding the trial courts 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 Courts 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 Order13 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 Order14 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.
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Meantime, defendants are directed to pay plaintiff the balance of P100,000.00. SO ORDERED.15 On December 1997, after paying the said P100,000 balance to Pedro Pecson the spouses Nuguid prayed for the closure and termination of the case, as well as the cancellation of the notice of lis pendens on the title of the property on the ground that Pedro Pecsons claim for rentals was devoid of factual and legal bases.16 After conducting a hearing, the lower court issued an Order dated July 31, 1998, directing the spouses to pay the sum of P1,344,000 as reimbursement of the unrealized income of Pecson for the period beginning November 22, 1993 up to December 1997. The sum was based on the computation of P28,000/month rentals of the four-door apartment, thus: The Court finds plaintiffs 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 plaintiffs 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 P1,344,000.00.17 The Nuguid spouses filed a motion for reconsideration but this was denied for lack of merit.18

The Nuguid couple then appealed the trial courts ruling to the Court of Appeals, their action docketed as CA-G.R. CV No. 64295. In the Court of Appeals, the order appealed from in CA-G.R. CV No. 64295, was modified. The CA reduced the rentals from P1,344,000 to P280,000 in favor of the appellee.19 The said amount represents accrued rentals from the determination of the current market value on January 31, 199720 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 COURTS 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.21 Now herein respondent, Pecson, disagrees with herein petitioners contention. He argues that petitioners are wrong in claiming that inasmuch as his claim for rentals was not determined in the dispositive portion of the decision in G.R. No. 115814, it could not be the subject of execution. He points out that in moving for an accounting, all he asked was that the value of the fruits of the property during the period he was dispossessed be accounted for, since this Court explicitly recognized in G.R. No. 115814, he was entitled to the property. He points out that this Court ruled that [t]he petitioner [Pecson] not having been so paid, he was entitled to retain ownership of the building and, necessarily, the income therefrom.22 In other words, says respondent, accounting was necessary. For accordingly, he was entitled to rental income from the property. This should be given effect. The Court could have very well specifically included rent (as fruit or income of the property), but could not have done so at the time the Court pronounced judgment because its value had yet to be
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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 Courts decision, dated May 25, 1993, in G.R. No. 105360, the apartment building was already in existence and occupied by tenants. In its decision dated May 26, 1995 in G.R. No. 115814, the Court declared the rights and obligations of the litigants in accordance with Articles 448 and 546 of the Civil Code. These provisions of the Code are directly applicable to the instant case. Under Article 448, the landowner is given the option, either to appropriate the improvement as his own upon payment of the proper amount of indemnity or to sell the land to the possessor in good faith. Relatedly, Article 546 provides that a builder in good faith is entitled to full reimbursement for all the necessary and useful expenses incurred; it also gives him right of retention until full reimbursement is made. While the law aims to concentrate in one person the ownership of the land and the improvements thereon in view of the impracticability of creating a state of forced co-ownership,23 it guards against unjust enrichment insofar as the good-faith builders improvements are concerned. The right of retention is considered as one of the measures devised by the law for the protection of builders in good faith. Its object is to guarantee full and prompt reimbursement as it permits the actual possessor to remain in possession while he has not been reimbursed (by the person who defeated him in the case for possession of the property) for those necessary expenses and useful improvements made by him on the thing possessed.24 Accordingly, a builder in good faith cannot be compelled to pay rentals during the period of retention25 nor be disturbed in his possession by ordering him to vacate. In addition, as in this case, the owner of the land is prohibited from offsetting or compensating the necessary and useful expenses with the fruits received by the builder-possessor in good faith. Otherwise, the security provided by law would be impaired. This is so because the right to the expenses and the right to the fruits both pertain to the possessor, making compensation juridically impossible; and one cannot be used to reduce the other.26

As we earlier held, since petitioners opted to appropriate the improvement for themselves as early as June 1993, when they applied for a writ of execution despite knowledge that the auction sale did not include the apartment building, they could not benefit from the lots improvement, until they reimbursed the improver in full, based on the current market value of the property. Despite the Courts recognition of Pecsons 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 respondents right of retention. Worse, petitioners took advantage of the situation to benefit from the highly valued, income-yielding, four-unit apartment building by collecting rentals thereon, before they paid for the cost of the apartment building. It was only four years later that they finally paid its full value to the respondent. Petitioners interpretation of our holding in G.R. No. 115814 has neither factual nor legal basis. The decision of May 26, 1995, should be construed in connection with the legal principles which form the basis of the decision, guided by the precept that judgments are to have a reasonable intendment to do justice and avoid wrong.27 The text of the decision in G.R. No. 115814 expressly exempted Pecson from liability to pay rentals, for we found that the Court of Appeals erred not only in upholding the trial courts 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 Pecsons 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.

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We need not belabor now the appellate courts recognition of herein respondents 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 fourdoor 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 Courts 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. Davide, Jr. (C.J., Chairman), Ynares-Santiago, Carpio and Azcuna, JJ., concur. Petition denied, judgment set aside. Note.A lessee is undoubtedly a builder in bad faith if despite the absence of perfected contract of lease and in utter disregard of the lessors numerous protests, he continued his construction activities upon the latters land. (Bugatti vs. Court of Appeals, 343 SCRA 335 [2000]) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Nuguid vs. Court of Appeals, 452 SCRA 243(2005)]

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G.R. No. 123672. December 14, 2005.* FERNANDO CARRASCOSO, JR., petitioner, vs. THE HONORABLE COURT OF APPEALS, LAURO LEVISTE, as Director and Minority Stockholder and On Behalf of Other Stockholders of El Dorado Plantation, Inc. and EL DORADO PLANTATION, INC., represented by one of its minority stockholders, Lauro P. Leviste, respondents. G.R. No. 164489. December 14, 2005.* PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, petitioner, vs. LAURO LEVISTE, as Director and Minority Stockholder and On Behalf of Other Stockholders of El Dorado Plantation, Inc., EL DORADO PLANTATION, INC., represented by Minority Stockholder, Lauro P. Leviste, and FERNANDO CARRASCOSO, JR., respondents.
Obligations and Contracts; Sales; Words and Phrases; Reciprocal obligations are those which arise from the same cause and in which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other; A contract of sale is a reciprocal obligationthe seller obligates itself to transfer the ownership of and deliver a determinate thing, and the buyer obligates itself to pay therefor a price certain in its equivalent.Reciprocal obligations are those which arise from the same cause, and in which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other. They are to be performed simultaneously such that the performance of one is conditioned upon the simultaneous fulfillment of the other. The right of rescission of a party to an obligation under Article 1191 is predicated on a breach of faith by the other party who violates the reciprocity between them. A contract of sale is a reciprocal obligation. The seller obligates itself to transfer the ownership of and deliver a determinate thing, and the buyer obligates itself to pay therefor a price certain in money or its equivalent. The non-payment of the price by the buyer is a resolutory condition which extinguishes the transaction that for a time existed, and discharges the obligations created thereunder. Such failure to pay the price in the manner prescribed by the contract of sale entitles the unpaid seller to sue for collection or to rescind the contract. Same; Same; Warranties; The breach of an express warranty makes the seller liable for damages; The requisites must be established in order that there be an express warrant in a contract of sale.The breach of an express warranty makes the seller liable for damages. The following requisites must be established in order that there be an express warranty in a contract of sale: (1) the express warranty must be an affirmation of fact or any promise by the seller relating to the subject matter of the sale; (2) the natural tendency of such affirmation or promise is to induce the buyer to purchase the thing; and (3) the buyer purchases the thing relying on such affirmation or promise thereon. Same; Same; Actions; Lis Pendens; Words and Phrases; A notice of lis pendens is an announcement to the whole world that a particular real property is in litigation, and serves as a

warning that one who acquires an interest over the said property does so at his own risk, or that he gambles on the result of the litigation over the said property.A notice of lis pendens is an announcement to the whole world that a particular real property is in litigation, and serves as a warning that one who acquires an interest over said property does so at his own risk, or that he gambles on the result of the litigation over said property. Once a notice of lis pendens has been duly registered, any cancellation or issuance of title over the land involved as well as any subsequent transaction affecting the same would have to be subject to the outcome of the suit. In other words, a purchaser who buys registered land with full notice of the fact that it is in litigation between the vendor and a third party stands in the shoes of his vendor and his title is subject to the incidents and result of the pending litigation. x x x Notice of lis pendens has been conceived and, more often than not, availed of, to protect the real rights of the registrant while the case involving such rights is pending resolution or decision. With the notice of lis pendens duly recorded, and while it remains uncancelled, the registrant could rest secure that he would not lose the property or any part of it during the litigation. The filing of a notice of lis pendens in effect (1) keeps the subject matter of litigation within the power of the court until the entry of the final judgment so as to prevent the defeat of the latter by successive alienations; and (2) binds a purchaser of the land subject of the litigation to the judgment or decree that will be promulgated thereon whether such a purchaser is a bona fide purchaser or not; but (3) does not create a nonexistent right or lien. Same; Same; Same; Words and Phrases; In a contract of sale, the title passes to the vendee upon the delivery of thing sold but in a contract to sell, ownership is not transferred upon the delivery of the property but upon full payment of the purchase price.In a contract of sale, the title passes to the vendee upon the delivery of the thing sold; whereas in a contract to sell, ownership is not transferred upon delivery of the property but upon full payment of the purchase price. In the former, the vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded; whereas in the latter, title is retained by the vendor until the full payment of the price, such payment being a positive suspensive condition and failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective. Sales; Same; Conditional Contracts of Sale; In a conditional contract of sale, if the suspensive condition is fulfilled, the contract of sale is thereby perfected, such that if there had already been previous delivery of the property subject of the sale to the buyer, ownership thereto automatically transfers to the buyer by operation of law without any further act having to be performed by the seller.In a conditional contract of sale, if the suspensive condition is fulfilled, the contract of sale is thereby perfected, such that if there had already been previous delivery of the property subject of the sale to the buyer, ownership thereto automatically transfers to the buyer by operation of law without any further act having to be performed by the seller. Whereas in a contract to sell, upon fulfillment of the suspensive condition, ownership will not automatically transfer to the buyer although the property may have been previously delivered to him. The prospective seller still has to convey title to the prospective buyer by entering into a contract of absolute sale.

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Corporation Law; Evidence; Presumptions; Lis Pendens; Knowledge of facts acquired or possessed by an officer of the corporation in the course of his employment, and in relation to other matters within the scope of his authority, is a notice to the corporation, whether he communicates them or not; Self-serving, uncorroborated assertions are indubitably inadequate to prove that the corporation had notice of an Agreement to Buy and Sell before the annotation of the notice of lis pendens on the title.Respecting Carrascosos allegation that some of the directors and officers of El Dorado had knowledge of his dealings with PLDT, it is true that knowledge of facts acquired or possessed by an officer or agent of a corporation in the course of his employment, and in relation to matters within the scope of his authority, is notice to the corporation, whether he communicates such knowledge or not. In the case at bar, however, apart from Carrascosos claim that he in fact notified several of the directors about his intention to sell the 1,000 hectare portion of the property to PLDT, no evidence was presented to substantiate his claim. Such self-serving, uncorroborated assertion is indubitably inadequate to prove that El Dorado had notice of the July 11, 1975 Agreement to Buy and Sell before the annotation of the notice of lis pendens on his title. Contracts; Rescission; Where a contract is rescinded, it is the duty of the Court to require both parties to surrender that which they have respectively received and to place each other as far as practicable in his original situation.The appellate courts decision ordering the rescission of the March 23, 1972 Deed of Sale of Real Property between El Dorado and Carrascoso being in order, mutual restitution follows to put back the parties to their original situation prior to the consummation of the contract. The exercise of the power to rescind extinguishes the obligatory relation as if it had never been created, the extinction having a retroactive effect. The rescission is equivalent to invalidating and unmaking the juridical tie, leaving things in their status before the celebration of the contract. Where a contract is rescinded, it is the duty of the court to require both parties to surrender that which they have respectively received and to place each other as far as practicable in his original situation, the rescission has the effect of abrogating the contract in all parts. Property; Builders in Good Faith; Article 448 of the Civil Code refers to builders, sowers, or planters who believe themselves to be owners of the land or, at least, to have a claim of title thereto.As regards the improvements introduced by PLDT on the 1,000 hectare portion of the property, a distinction should be made between those which it built prior to the annotation of the notice of lis pendens and those which it introduced subsequent thereto. When a person builds in good faith on the land of another, Article 448 of the Civil Code governs: 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 a case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after the proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof. The above provision covers cases in which the builders, sowers or planters believe themselves to be owners of the land or, at least, to have a

claim of title thereto. Good faith is thus identified by the belief that the land is owned; or that by some title one has the right to build, plant, or sow thereon. Same; Builders in Bad Faith; A person who builds in bad faith on the land of another, loses what is built, planted or sown without right to indemnity.When a person builds in bad faith on the land of another, Articles 449 and 450 govern: Art. 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. Art. 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.

PETITIONS for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court. Taada, Vivo & Tan Law Office for Carrascoso, Jr. Siguion Reyna, Montecillo & Ongsiako for PLDT. Constante A. Ancheta and Alfredo Datingaling for respondents Lauro P. Leviste, et al. Minerva C. Genovea for Heirs of P. Leviste and El Dorado, etc. CARPIO-MORALES, J.:

El Dorado Plantation, Inc. (El Dorado) was the registered owner of a parcel of land (the property) with an area of approximately 1,825 hectares covered by Transfer Certificate of Title (TCT) No. T-931 situated in Sablayan, Occidental Mindoro. On February 15, 1972, at a special meeting of El Dorados Board of Directors, a Resolution2 was passed authorizing Feliciano Leviste, then President of El Dorado, to negotiate the sale of the property and sign all documents and contracts bearing thereon.

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On March 23, 1972, by a Deed of Sale of Real Property,3 El Dorado, through Feliciano Leviste, sold the property to Fernando O. Carrascoso, Jr. (Carrascoso). The pertinent provisions of the Deed of Sale read: NOW, THEREFORE, for and in consideration of the sum of ONE MILLION EIGHT HUNDRED THOUSAND (1,800,000.00) PESOS, Philippine Currency, the Vendor hereby sells, cedes, and transfer (sic) unto the herein VENDEE, his heirs, successors and assigns, the above-described property subject to the following terms and consitions (sic): 1. Of the said sum of P1,800,000.00 which constitutes the full consideration of this sale, P290,000.00 shall be paid, as it is hereby paid, to the Philippines (sic) National Bank, thereby effecting the release and cancellation fo (sic) the present mortgage over the above-described property. 2. That the sum of P210,000.00 shall be paid, as it is hereby paid by the VENDEE to the VENDOR, receipt of which amount is hereby acknowledged by the VENDOR. 3.The remaining balance of P1,300,000.00 plus interest thereon at the rate of 10% per annum shall be paid by the VENDEE to the VENDOR within a period of three (3) years, as follows: (a)One (1) year from the date of the signing of this agreement, the VENDEE shall pay to the VENDOR the sum of FIVE HUNDRED NINETEEN THOUSAND EIGHT HUNDRED THIRTY THREE & 33/100 (P519,833.33) PESOS. (b)Two (2) years from the date of signing of this agreement, the VENDEE shall pay to the VENDOR the sum of FIVE HUNDRED NINETTEN (sic) THOUSAND EIGHT HUNDRED AND THIRTY-THREE & 33/100 (P519,833.33) PESOS. (c)Three (3) years from the date of signing of this agreement, the VENDEE shall pay to the VENDOR the sum of FIVE Hundred NINETEEN THOUSAND EIGHT HUNDRED AND THIRTY-THREE & 33/100 (P519,833.33) PESOS. 4. The title of the property, subject of this agreement, shall pass and be transferred to the VENDEE who shall have full authority to register the same and obtain the corresponding transfer certificate of title in his name. xxx

6.THE VENDOR certifies and warrants that the property above-described is not being cultivated by any tenant and is therefore not covered by the provisions of the Land Reform Code. If, therefore, the VENDEE becomes liable under the said law, the VENDOR shall reimburse the VENDEE for all expenses and damages he may incur thereon.4 (Italics supplied) From the above-quoted provisions of the Deed of Sale, Carrascoso was to pay the full amount of the purchase price on March 23, 1975. On even date, the Board of Directors of El Dorado passed a Resolution reading: RESOLVED that by reason of the sale of that parcel of land covered by TCT No. T-93 to Dr. FERNANDO O. CARRASCOSO, JR., the corporation interposes no objection to the property being mortgage (sic) by Dr. FERNANDO O. CARRASCOSO, JR. to any bank of his choice as long as the balance on the Deed of Sale shall be recognized by Dr. FERNANDO O. CARRASCOSO, JR.; RESOLVED, FURTHER, that the corporation authorizes the prefered (sic) claim on the property to be subordinated to any mortgage that may be constituted by Dr. FERNANDO O. CARRASCOSO, JR.; RESOLVED, FINALLY, that in case of any mortgage on the property, the corporation waives the preference of any vendors lien on the property.5 (Emphasis and italics supplied) Feliciano Leviste also executed the following affidavit on the same day: 1. That by reason of the sale of that parcel of land covered by Transfer Certificate of Title T-93 as evidenced by the Deed of Sale attached hereto as Annex A and made an integral part hereof, the El Dorado Plantation, Inc. has no objection to the aforementioned property being mortgaged by Dr. Fernando O. Carrascoso, Jr. to any bank of his choice, as long as the payment of the balance due the El Dorado Plantation, Inc. under the Deed of Sale, Annex A hereof, shall be recognized by the vendee therein, Dr. Fernando O. Carrascoso, Jr. though subordinated to the preferred claim of the mortgagee bank. 2. That in case of any mortgage on the property, the vendor hereby waives the preference of any vendors lien on the property, subject matter of the deed of sale.
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3. That this affidavit is being executed to avoid any question on the authority of Dr. Fernando O. Carrascoso, Jr. to mortgage the property subject of the Deed of Sale, Annex A hereof, where the purchase price provided therein has not been fully paid. 4. That this affidavit has been executed pursuant to a board resolution of El Dorado Plantation, Inc.6 (Emphasis and italics supplied) On the following day, March 24, 1972, Carrascoso and his wife Marlene executed a Real Estate Mortgage7 over the property in favor of Home Savings Bank (HSB) to secure a loan in the amount of P1,000,000.00. Of this amount, P290,000.00 was paid to Philippine National Bank to release the mortgage priorly constituted on the property and P210,000.00 was paid to El Dorado pursuant to above-quoted paragraph Nos. 1 and 2 of the terms and conditions of the Deed of Sale.8 The March 23, 1972 Deed of Sale of Real Property was registered and annotated on El Dorados TCT No. T-93 as Entry No. 152409 on April 5, 1972. On even date, TCT No. T-93 covering the property was cancelled and TCT No. T-605510 was in its stead issued by the Registry of Deeds of Occidental Mindoro in the name of Carrascoso on which the real estate mortgage in favor of HSB was annotated as Entry No. 15242.11 On May 18, 1972, the real estate mortgage in favor of HSB was amended to include an additional three year loan of P70,000.00 as requested by the spouses Carrascoso.12 The Amendment of Real Estate Mortgage was also annotated on TCT No. T-6055 as Entry No. 15486 on May 24, 1972.13 The 3-year period for Carrascoso to fully pay for the property on March 23, 1975 passed without him having complied therewith. In the meantime, on July 11, 1975, Carrascoso and the Philippine Long Distance Telephone Company (PLDT), through its President Ramon Cojuangco, executed an Agreement to Buy and Sell14 whereby the former agreed to sell 1,000 hectares of the property to the latter at a consideration of P3,000.00 per hectare or a total of P3,000,000.00. The July 11, 1975 Agreement to Buy and Sell was not registered and annotated on Carrascosos TCT No. T-6055. Lauro Leviste (Lauro), a stockholder and member of the Board of Directors of El Dorado, through his counsel, Atty. Benjamin Aquino, by letter15 dated

December 27, 1976, called the attention of the Board to Carrascosos failure to pay the balance of the purchase price of the property amounting to P1,300,000.00. And Lauros lawyer manifested that: Because of the default for a long time of Mr. Carrascoso to pay the balance of the consideration of the sale, Don Lauro Leviste, in his behalf and in behalf of the other shareholders similarly situated like him, want a rescission of the sale made by the El Dorado Plantation, Inc. to Mr. Carrascoso. He desires that the Board of Directors take the corresponding action for rescission.16 Lauros desire to rescind the sale was reiterated in two other letters17 addressed to the Board dated January 20, 1977 and March 3, 1977. Jose P. Leviste, as President of El Dorado, later sent a letter of February 21, 197718 to Carrascoso informing him that in view of his failure to pay the balance of the purchase price of the property, El Dorado was seeking the rescission of the March 23, 1972 Deed of Sale of Real Property. The pertinent portions of the letter read: xxx I regret to inform you that the balance of P1,300,000.00 and the interest thereon have long been due and payable, although you have mortgaged said property with the Home Savings Bank for P1,000,000.00 on March 24, 1972, which was subsequently increased to P1,070,000.00 on May 18, 1972. You very well know that the El Dorado Plantation, Inc., is a close family corporation, owned exclusively by the members of the Leviste family and I am one of the co-owners of the land. As nothing appears to have been done on your part after our numerous requests for payment of the said amount of P1,300,000.00 and the interest of 10% per annum due thereon, please be advised that we would like to rescind the contract of sale of the land.19 (Italics supplied) Jose Leviste, by letter20 dated March 10, 1977, informed Lauros counsel Atty. Aquino of his (Joses) February 21, 1977 letter to Carrascoso, he lamenting that Carrascoso has not deemed it fit to give [his] letter the courtesy of a reply and advis[ing] that some of the Directors of [El Dorado] could not see their way clear in complying with the demands of your client [Lauro] and have failed to reach a consensus to bring the corresponding action for rescission of the contract against . . . Carrascoso.21
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Lauro and El Dorado finally filed on March 15, 1977 a complaint22 for rescission of the March 23, 1972 Deed of Sale of Real Property between El Dorado and Carrascoso with damages before the Court of First Instance (CFI) of Occidental Mindoro, docketed as Civil Case No. R-226. Lauro and El Dorado also sought the cancellation of TCT No. T-6055 in the name of Carrascoso and the revival of TCT No. T-93 in the name of El Dorado, free from any liens and encumbrances. Furthermore, the two prayed for the issuance of an order for Carrascoso to: (1) reconvey the property to El Dorado upon return to him of P500,000.00, (2) secure a discharge of the real estate mortgage constituted on the property from HSB, (3) submit an accounting of the fruits of the property from March 23, 1972 up to the return of possession of the land to El Dorado, (4) turn over said fruits or the equivalent value thereof to El Dorado and (5) pay the amount of P100,000.00 for attorneys fees and other damages.23 Also on March 15, 1977, Lauro and El Dorado caused to be annotated on TCT No. T-6055 a Notice of Lis Pendens, inscribed as Entry No. 39737.24 In the meantime, Carrascoso, as vendor and PLDT, as vendee forged on April 6, 1977 a Deed of Absolute Sale25 over the 1,000 hectare portion of the property subject of their July 11, 1975 Agreement to Buy and Sell. The pertinent portions of the Deed are as follows: WHEREAS, the VENDOR and the VENDEE entered into an agreement To Buy and Sell on July 11, 1975, which is made a part hereof by reference; WHEREAS, the VENDOR and the VENDEE are now decided to execute the Deed of Absolute Sale referred to in the aforementioned agreement to Buy and Sell; WHEREFORE, for and in consideration of the foregoing premises and the terms hereunder stated, the VENDOR and the VENDEE have agreed as follows: 1. For and in consideration of the sum of THREE MILLION PE-SOS (P3,000,000.00), Philippine currency, of which ONE HUNDRED TWENTY THOUSAND PESOS P120,000.00 have (sic) already been received by the VENDOR, the VENDOR hereby sells, transfers and conveys unto the VENDEE one thousand hectares (1,000 has.) of his parcel of land covered by T.C.T. No. T-6055 of the Registry of Deeds of Mindoro, delineated as Lot No. 3-B-1 in the subdivision survey plan x x x

2. The VENDEE shall pay to the VENDOR upon the signing of this agreement, the sum of TWO MILLION FIVE HUNDRED THOUSAND PESOS (P2,500,000.00) in the following manner: a) The sum of TWO MILLION THREE HUNDRED THOUSAND PESOS (P2,300,000.00) to Home Savings Bank in full payment of the VENDORs mortgaged obligation therewith; b) The sum of TWO HUNDRED THOUSAND PESOS (P200,000.00) to VENDOR; The remaining balance of the purchase price in the sum of THREE HUNDRED EIGHTY THOUSAND PESOS (P380,000.00), less such expenses which may be advanced by the VENDEE but which are for the account of the VENDOR under Paragraph 6 of the Agreement to Buy and Sell, shall be paid by the VENDEE to the VENDOR upon issuance of title to the VENDEE.26 (Italics supplied) In turn, PLDT, by Deed of Absolute Sale27 dated May 30, 1977, conveyed the aforesaid 1,000 hectare portion of the property to its subsidiary, PLDT Agricultural Corporation (PLDTAC), for a consideration of P3,000,000.00, the amount of P2,620,000.00 of which was payable to PLDT upon signing of said Deed, and P380,000.00 to Carrascoso upon issuance of title to PLDTAC. In the meantime, on October 19, 1977, the El Dorado Board of Directors, by a special meeting,28 adopted and approved a Resolution ratifying and conferring the prosecution of Civil Case No. R-226 of the Court of First Instance of Occidental Mindoro, entitled Lauro P. Leviste vs. Fernando Carascoso (sic), etc. initiated by stockholder Mr. Lauro P. Leviste.29 In his Answer with Compulsory Counterclaim,30 Carrascoso alleged that: (1) he had not paid his remaining P1,300,000.00 obligation under the March 23, 1972 Deed of Sale of Real Property in view of the extensions of time to comply therewith granted him by El Dorado; (2) the complaint suffered from fatal defects, there being no showing of compliance with the condition precedent of exhaustion of intra-corporate remedies and the requirement that a derivative suit instituted by a complaining stockholder be verified under oath; (3) El Dorado committed a gross misrepresentation when it warranted that the property was not being cultivated by any tenant to take it out of the coverage of the Land Reform Code; and (4) he suffered damages due to the premature filing of the complaint for which Lauro and El Dorado must be held liable.
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On February 21, 1978, the April 6, 1977 and May 30, 1977 Deeds of Absolute Sale and the respective Articles of Incorporation of PLDT and PLDTAC were annotated on TCT No. T-6055 as Entry Nos. 24770,31 42774,32 4276933 and 24772,34 respectively. On even date, Carrascosos TCT No. T-6055 was cancelled and TCT No. T-1248035 covering the 1,000 hectare portion of the property was issued in the name of PLDTAC. The March 15, 1977 Notice of Lis Pendens was carried over to TCT No. T-12480. On July 31, 1978, PLDT and PLDTAC filed an Urgent Motion for Intervention36 which was granted by the trial court by Order37 of September 7, 1978. PLDT and PLDTAC thereupon filed their Answer In Intervention with Compulsory Counterclaim and Crossclaim38 against Carrascoso on November 13, 1978, alleging that: (1) when Carrascoso executed the April 6, 1977 Deed of Absolute Sale in favor of PLDT, PLDT was not aware of any litigation involving the 1,000 hectare portion of the property or of any flaw in his title, (2) PLDT is a purchaser in good faith and for value; (3) when PLDT executed the May 30, 1977 Deed of Absolute Sale in favor of PLDTAC, they had no knowledge of any pending litigation over the property and neither were they aware that a notice of lis pendens had been annotated on Carrascosos title; and (4) Lauro and El Dorado knew of the sale by Carrascoso to PLDT and PLDTs actual possession of the 1,000 hectare portion of the property since June 30, 1975 and of its exercise of exclusive rights of ownership thereon through agricultural development.39 By Decision40 of January 28, 1991, Branch 45 of the San Jose Occidental Mindoro Regional Trial Court to which the CFI has been renamed, dismissed the complaint on the ground of prematurity, disposing as follows, quoted verbatim: WHEREFORE, in view of all the foregoing considerations, judgment is hereby rendered: 1. Dismissing the plaintiffs complaint against the defendant on the ground of prematurity; 2. Ordering the plaintiffs to pay to the defendant the sum of P2,980,000.00 as actual and compensatory damages, as well as the sum of P100,000.00 as and for attorneys fees; provided, however, that the aforesaid amounts must first be set off from the latters unpaid balance to the former; 3.Dismissing the defendants-intervenors counterclaim and cross-claim; and

4. Ordering the plaintiffs to pay to (sic) the costs of suit. SO ORDERED.41 (Italics supplied) Carrascoso, PLDT and PLDTAC filed their respective appeals to the Court of Appeals. By Decision42 of January 31, 1996, the appellate court reversed the decision of the trial court, disposing as follows, quoted verbatim: WHEREFORE, not being meritorious, PLDTs/PLDTACs appeal is hereby DISMISSED and finding El Dorados appeal to be impressed with merit, We REVERSE the appealed Decision and render the following judgment: 1.The Deed of Sale of Real Property (Exhibit C) is hereby rescinded and TCT No. T-12480 (Exhibit Q) is cancelled while TCT No. T-93 (Exhibit A), is reactivated. 2. Fernando Carrascoso, Jr. is commanded to: 2.1. return the possession of the 825 [hectare-] remaining portion of the land to El Dorado Plantation, Inc. without prejudice to the landholdings of legitimate tenants thereon; 2.2. return the net fruits of the land to El Dorado Plantation, Inc. from March 23, 1972 to July 11, 1975, and of the 825-hectare-remaining portion minus the tenants landholdings, from July 11, 1975 up to its delivery to El Dorado Plantation, Inc. including whatever he may have received from the tenants if any by way of compensation under the Operation Land Transfer or under any other pertinent agrarian law; 2.3 Pay El Dorado Plantation, Inc. an attorneys fee of P20,000.00 and litigation expenses of P30,000.00; 2.4 Return to Philippine Long Distance Telephone Company/PLDT Agricultural Corporation P3,000,000.00 plus legal interest from April 6, 1977 until fully paid; 3. PLDT Agricultural Corporation is ordered to surrender the possession of the 1000-hectare Farm to El Dorado Plantation, Inc.; 4. El Dorado Plantation, Inc. is directed to return the P500,000.00 to Fernando Carrascoso, Jr. plus legal interest from March 23, 1972 until fully paid. The performance of this obligation will however await the full compliance by Fernando Carrascoso, Jr. of his obligation to account for and deliver the net fruits of the land mentioned above to El Dorado Plantation, Inc.
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5. To comply with paragraph 2.2 herein, Carrascoso is directed to submit in (sic) the court a quo a full accounting of the fruits of the land during the period mentioned above for the latters approval, after which the net fruits shall be delivered to El Dorado, Plantation, Inc. 6. El Dorado Plantation, Inc. should inform Philippine Long Distance Telephone Co. and PLDT Agricultural Corporation in writing within ten (10) days after finality of this decision regarding the exercise of its option under Art. 448 of the Civil Code. SO ORDERED.43 (Italics supplied) PLDT and PLDTAC filed on February 22, 1996, a Motion for Reconsideration44 of the January 31, 1996 CA Decision, while Carrascoso went up this Court by filing on March 25, 1996 a petition for review,45 docketed as G.R. No. 123672, assailing the January 31, 1996 CA Decision and seeking the reinstatement of the January 28, 1991 Decision of the trial court except with respect to its finding that the acquisition of PLDT and PLDTAC of the 1,000 hectare portion of the property was subject to the notice of lis pendens. Lauro, in the meantime, died, hence, on April 16, 1996, a Motion for Substitution of Party46 was filed praying that his heirs, represented by Conrad C. Leviste, be substituted as respondents. The Motion was granted by Resolution47 of July 10, 1996. PLDT and PLDTAC filed their Comment48 to Carrascosos petition and prayed that judgment be rendered finding them to be purchasers in good faith to thus entitle them to possession and ownership of the 1,000 hectare portion of the property, together with all the improvements they built thereon. Reiterating that they were not purchasers pendente lite, they averred that El Dorado and Lauro had actual knowledge of their interests in the said portion of the property prior to the annotation of the notice of lis pendens to thereby render said notice ineffective. El Dorado and the heirs of Lauro, both represented by Conrad C. Leviste, also filed their Comment49 to Carrascosos petition, praying that it be dismissed for lack of merit and that paragraph 6 of the dispositive portion of the January 31, 1996 CA Decision be modified to read as follows: 6. El Dorado Plantation, Inc. should inform Philippine Long Distance Telephone Co. and PLDT Agricultural Corporation in writing within ten (10) days after finality of this decision regarding the exercise of its option under

Arts. 449 and 450 of the Civil Code, without right to indemnity on the part of the latter should the former decide to keep the improvements under Article 449.50 (Italics supplied) Carrascoso filed on November 13, 1996 his Reply51 to the Comment of El Dorado and the heirs of Lauro. In the meantime, as the February 22, 1996 Motion for Reconsideration filed by PLDT and PLDTAC of the CA decision had remained unresolved, this Court, by Resolution52 of June 30, 2003, directed the appellate court to resolve the same. By Resolution53 of July 8, 2004, the CA denied PLDT and PLDTACs Motion for Reconsideration for lack of merit. PLDT54 thereupon filed on September 2, 2004 a petition for review55 before this Court, docketed as G.R. No. 164489, seeking to reverse and set aside the January 31, 1996 Decision and the July 8, 2004 Resolution of the appellate court. It prayed that judgment be rendered upholding its right, interest and title to the 1,000 hectare portion of the property and that it and its successors-ininterest be declared owners and legal possessors thereof, together with all improvements built, sown and planted thereon. By Resolution56 of August 25, 2004, G.R. No. 164489 was consolidated with G.R. No. 123672. In his petition, Carrascoso faults the CA as follows: I

THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION AND COMMITTED A MISTAKE OF LAW IN NOT DECLARING THAT THE ACTION FOR RESCISSION WAS PREMATURELY FILED. II

THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION AND COMMITTED A MISTAKE OF LAW IN DISREGARDING THE CRUCIAL

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SIGNIFICANCE OF THE WARRANTY OF NON-TENANCY EXPRESSLY STIPULATED IN THE CONTRACT OF SALE. III

P1,300,000.00 only after the mortgage in favor of HSB is paid in full; and the filing of the complaint for rescission with damages on March 15, 1977 was premature as he fully paid his obligation to HSB only on April 5, 1977 as evidenced by the Cancellation of Mortgage59 signed by HSB President Gregorio B. Licaros. Carrascoso further posits that extensions of the period to pay El Dorado were verbally accorded him by El Dorados directors and officers, particularly Jose and Angel Leviste. Article 1191 of the Civil Code provides: Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him. The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. The court shall decree the rescission claimed, unless there be just cause authorizing the fixing of a period. This is understood to be without prejudice to the rights of third persons who have acquired the thing, in accordance with Articles 1385 and 1388 and the Mortgage Law. Reciprocal obligations are those which arise from the same cause, and in which each party is a debtor and a creditor of the other, such that the obligation of one is dependent upon the obligation of the other.60 They are to be performed simultaneously such that the performance of one is conditioned upon the simultaneous fulfillment of the other.61 The right of rescission of a party to an obligation under Article 1191 is predicated on a breach of faith by the other party who violates the reciprocity between them.62 A contract of sale is a reciprocal obligation. The seller obligates itself to transfer the ownership of and deliver a determinate thing, and the buyer obligates itself to pay therefor a price certain in money or its equivalent.63 The non-payment of the price by the buyer is a resolutory condition which extinguishes the transaction that for a time existed, and discharges the obligations created thereunder.64 Such failure to pay the price in the manner prescribed by the
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THE COURT OF APPEALS ACTED WITH GRAVE ABUSE OF DISCRETION IN REVERSING THE DECISION OF THE TRIAL COURT.57 (Italics supplied) PLDT, on the other hand, faults the CA as follows: I

THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN HOLDING THAT PETITIONER AND PLTAC (sic) TOOK THEIR RIGHT, INTEREST AND TITLE TO THE FARM SUBJECT TO THE NOTICE OF LIS PENDENS, THE SAME IN DISREGARD OF THE PROTECTION ACCORDED THEM UNDER ARTICLES 1181 AND 1187 OF THE NEW CIVIL CODE. II

THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN HOLDING THAT PETITIONER AND PLDTAC TOOK THEIR RIGHT, INTEREST AND TITLE TO THE FARM SUBJECT TO THE NOTICE OF LIS PENDENS, THE SAME IN DISREGARD OF THE LEGAL PRINCIPLE THAT RESPONDENTS EL DORADO ET AL.S PRIOR, ACTUAL KNOWLEDGE OF PETITIONER PLDTS AGREEMENT TO BUY AND SELL WITH RESPONDENT CARRASCOSO RESULTING IN THE DELIVERY TO, AND POSSESSION, OCCUPATION AND DEVELOPMENT BY, SAID PETITIONER OF THE FARM, IS EQUIVALENT TO REGISTRATION OF SUCH RIGHT, INTEREST AND TITLE AND, THEREFORE, A PRIOR REGISTRATION NOT AFFECTED BY THE LATER NOTICE OF LIS PENDENS.58 (Italics supplied) Carrascoso posits that in the El Dorado Board Resolution and the Affidavit of Feliciano Leviste, both dated March 23, 1972, no objection was interposed to his mortgaging of the property to any bank provided that the balance of the purchase price of the property under the March 23, 1972 Deed of Sale of Real Property is recognized, hence, El Dorado could collect the unpaid balance of

contract of sale entitles the unpaid seller to sue for collection or to rescind the contract.65 In the case at bar, El Dorado already performed its obligation through the execution of the March 23, 1972 Deed of Sale of Real Property which effectively transferred ownership of the property to Carrascoso. The latter, on the other hand, failed to perform his correlative obligation of paying in full the contract price in the manner and within the period agreed upon. The terms of the Deed are clear and unequivocal: Carrascoso was to pay the balance of the purchase price of the property amounting to P1,300,000.00 plus interest thereon at the rate of 10% per annum within a period of three (3) years from the signing of the contract on March 23, 1972. When Jose Leviste informed him that El Dorado was seeking rescission of the contract by letter of February 21, 1977, the period given to him within which to fully satisfy his obligation had long lapsed. The El Dorado Board Resolution and the Affidavit of Jose Leviste interposing no objection to Carrascosos mortgaging of the property to any bank did not have the effect of suspending the period to fully pay the purchase price, as expressly stipulated in the Deed, pending full payment of any mortgage obligation of Carrascoso. As the CA correctly found: The adverted resolution (Exhibit 2) does not say that the obligation of Carrascoso to pay the balance was extended. Neither can We see in it anything that can logically infer said accommodation. A partially unpaid seller can agree to the buyers mortgaging the subject of the sale without changing the time fixed for the payment of the balance of the price. The two agreements are not incompatible with each other such that when one is to be implemented, the other has to be suspended. In the case at bench, there was no impediment for Carrascoso to pay the balance of the price after mortgaging the land. Also, El Dorados subordinating its preferred claim or waiving its superior vendors lien over the land in favor of the mortgagee of said property only means that in a situation where the unpaid price of the Land and loan secured by the mortgage over the Land both become due and demandable, the mortgagee shall have precedence in going after the Land for the satisfaction of the loan. Such accommodations do not necessarily imply the modification of

the period fixed in the contract of sale for the payment by Carrascoso of the balance. The palpable purpose of El Dorado in not raising any objection to Carrascosos mortgaging the land was to eliminate any legal impediment to such a contract. That was so succinctly expressed in the Affidavit (Exhibit 2-A) of President Feleciano (sic) Leviste. El Dorados yielding its superior lien over the land in favor of the mortgagee was plainly intended to overcome the natural reluctance of lending institutions to accept a land whose price has not yet been fully paid as collateral of a loan.66 (Italics supplied) Respecting Carrascosos insistence that he was granted verbal extensions within which to pay the balance of the purchase price of the property by El Dorados directors and officers Jose and Angel Leviste, this Court finds the same unsubstantiated by the evidence on record. It bears recalling that Jose Leviste wrote Carrascoso, by letter of February 21, 1977, calling his attention to his failure to comply, despite numerous requests, with his obligation to pay the amount of P1,300,000.00 and 10% annual interest thereon, and advising him that we would like to rescind the contract of sale. This letter reiterated the term of payment agreed upon in the March 23, 1972 Deed of Sale of Real Property and Carrascososs non-compliance therewith. Carrascoso, harping on Jose Levistes March 10, 1977 letter to Lauros counsel wherein he (Jose Leviste) stated that some of the Directors of the corporation could not see their way clear in complying with the demands of [Lauro] and have failed to reach a consensus to bring the corresponding action for rescission of the contract against Dr. Fernando Carrascoso, argues that the extensions priorly given to him no doubt lead to the logical conclusion on some of the directors inability to file suit against him.67 The argument is specious. As the CA found, even if some officers of El Dorado were initially reluctant to file suit against him, the same should not be interpreted to mean that this was brought about by a prior extension of the period to pay the balance of the purchase price of the property as such reluctance could have been due to a myriad of reasons totally unrelated to the period of payment of the balance. The bottomline however is, if El Dorado really intended to extend the period of payment of the balance there was absolutely no reason why it did not do it in
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writing in clear and unmistakable terms. That there is no such writing negates all the speculations of the court a quo and pretensions of Carrascoso. xxx The unalterable fact here remains that on March 23, 1973, with or without demand, the obligation of Carrascoso to pay P519,933.33 became due. The same was true on March 23, 1974 and on March 23, 1975 for equal amounts. Since he did not perform his obligation under the contract of sale, he, therefore, breached it. Having breached the contract, El Dorados cause of action for rescission of that contract arose.68 (Italics supplied) Carrascoso goes on to argue that the appellate court erred in ignoring the import of the warranty of non-tenancy expressly stipulated in the March 23, 1972 Deed of Sale of Real Property. He alleges that on March 8, 1972 or two weeks prior to the execution of the Deed of Sale, he discovered, while inspecting the property on board a helicopter, that there were people and cattle in the area; when he confronted El Dorado about it, he was told that the occupants were caretakers of cattle who would soon leave;69 four months after the execution of the Deed of Sale, upon inquiry with the Bureau of Lands and the Bureau of Soils, he was informed that there were people claiming to be tenants in certain portions of the property;70 and he thus brought the matter again to El Dorado which informed him that the occupants were not tenants but squatters.71 Carrascoso now alleges that as a result of what he concludes to be a breach of the warranty of non-tenancy committed by El Dorado, he incurred expenses in the amount of P2,890,000.00 for which he should be reimbursed, his unpaid obligation to El Dorado amounting to P1,300,000.00 to be deducted therefrom.72 The breach of an express warranty makes the seller liable for damages.73 The following requisites must be established in order that there be an express warranty in a contract of sale: (1) the express warranty must be an affirmation of fact or any promise by the seller relating to the subject matter of the sale; (2) the natural tendency of such affirmation or promise is to induce the buyer to purchase the thing; and (3) the buyer purchases the thing relying on such affirmation or promise thereon.74 Under the March 23, 1972 Deed of Sale of Real Property, El Dorado warranted that the property was not being cultivated by any tenant and was, and therefore, not covered by the provisions of the Land Reform Code. If

Carrascoso would become liable under the said law, he would be reimbursed for all expenses and damages incurred thereon. Carrascoso claims to have incurred expenses in relocating persons found on the property four months after the execution of the Deed of Sale. Apart from such bare claim, the records are bereft of any proof that those persons were indeed tenants.75 The fact of tenancy76 not having been priorly established,77 El Dorado may not be held liable for actual damages. Carrascoso further argues that both the trial and appellate courts erred in holding that the sale of the 1,000 hectare portion of the property to PLDT, as well as its subsequent sale to PLDTAC, is subject to the March 15, 1977 Notice of Lis Pendens. PLDT additionally argues that the CA incorrectly ignored the Agreement to Buy and Sell which it entered into with Carrascoso on July 11, 1975, positing that the efficacy of its purchase from Carrascoso, upon his fulfillment of the condition it imposed resulting in its decision to formalize their transaction and execute the April 6, 1977 Deed of Sale, retroacted to July 11, 1975 or before the annotation of the Notice of Lis Pendens.78 The pertinent portions of the July 11, 1975 Agreement to Buy and Sell between PLDT and Carrascoso read: 2. That the VENDOR hereby agrees to sell to the VENDEE and the latter hereby agrees to purchase from the former, 1,000 hectares of the abovedescribed parcel of land as shown in the map hereto attached as Annex A and made an integral part hereof and as hereafter to be more particularly determined by the survey to be conducted by Certeza & Co., at the purchase price of P3,000.00 per hectare or for a total consideration of Three Million Pesos (P3,000,000.00) payable in cash. 3. That this contract shall be considered rescinded and cancelled and of no further force and effect, upon failure of the VENDOR to clear the aforementioned 1,000 hectares of land of all the occupants therein located, within a period of one (1) year from the date of execution of this Agreement. However, the VENDEE shall have the option to extend the life of this Agreement by another six months, during which period the VENDEE shall definitely inform the VENDOR of its decision on whether or not to finalize the deed of absolute sale for the aforementioned 1,000 hectares of land.

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The VENDOR agrees that the amount of P500.00 per family within the aforementioned 1,000 hectares of land shall be spent by him for relocation purposes, which amount however shall be advanced by the VENDEE and which shall not exceed the total amount of P120,000.00, the same to be thereafter deducted by the VENDEE from the aforementioned purchase price of P3,000,000.00. The aforementioned advance of P120,000.00 shall be remitted by the VENDEE to the VENDOR upon the signing of this Agreement. xxx It is likewise further agreed that the VENDEE shall have the right to enter into any part of the aforementioned 1,000 hectares at any time within the period of this Agreement for purposes of commencing the development of the same. xxx 5. Title to the aforementioned land shall also be cleared of all liens or encumbrances and if there are any unpaid taxes, existing mortgages, liens and encumbrances on the land, the payments to be made by the VENDEE to the VENDOR of the purchase price shall first be applied to liquidate said mortgages, liens and/or encumbrances, such that said payments shall be made directly to the corresponding creditors. Thus, the balance of the purchase price will be paid to the VENDOR after the title to the land is cleared of all such liens and encumbrances. xxx 7. The VENDOR agrees that, during the existence of this Agreement and without the previous written permission from the VENDEE, he shall not sell, cede, assign and/or transfer the parcel of land subject of this Agreement.79 A notice of lis pendens is an announcement to the whole world that a particular real property is in litigation, and serves as a warning that one who acquires an interest over said property does so at his own risk, or that he gambles on the result of the litigation over said property.80 Once a notice of lis pendens has been duly registered, any cancellation or issuance of title over the land involved as well as any subsequent transaction affecting the same would have to be subject to the outcome of the suit. In other words, a purchaser who buys registered land with full notice of the fact that it is in litigation between the vendor and a third party stands in the shoes of his

vendor and his title is subject to the incidents and result of the pending litigation.81 x x x Notice of lis pendens has been conceived and, more often than not, availed of, to protect the real rights of the registrant while the case involving such rights is pending resolution or decision. With the notice of lis pendens duly recorded, and while it remains uncancelled, the registrant could rest secure that he would not lose the property or any part of it during the litigation. The filing of a notice of lis pendens in effect (1) keeps the subject matter of litigation within the power of the court until the entry of the final judgment so as to prevent the defeat of the latter by successive alienations; and (2) binds a purchaser of the land subject of the litigation to the judgment or decree that will be promulgated thereon whether such a purchaser is a bona fide purchaser or not; but (3) does not create a nonexistent right or lien. The doctrine of lis pendens is founded upon reason of public policy and necessity, the purpose of which is to keep the subject matter of the litigation within the power of the court until the judgment or decree shall have been entered; otherwise by successive alienations pending the litigation, its judgment or decree shall be rendered abortive and impossible of execution. The doctrine of lis pendens is based on considerations of public policy and convenience, which forbid a litigant to give rights to others, pending the litigation, so as to affect the proceedings of the court then progressing to enforce those rights, the rule being necessary to the administration of justice in order that decisions in pending suits may be binding and may be given full effect, by keeping the subject matter in controversy within the power of the court until final adjudication, that there may be an end to litigation, and to preserve the property that the purpose of the pending suit may not be defeated by successive alienations and transfers of title.82 (Italics in the original) In ruling against PLDT and PLDTAC, the appellate court held: PLDT and PLDTAC argue that in reality the Farm was bought by the former on July 11, 1975 when Carrascoso and it entered into the Agreement to Buy and Sell (Exhibit 15). How can an agreement to buy and sell which is a preparatory contract be the same as a contract of sale which is a principal contract? If PLDTs contention is correct that it bought the Farm on July 11, 1975, why did it buy the same property again on April 6, 1977? There is simply no way PLDT and PLDTAC can extricate themselves from the effects of said Notice of Lis Pendens. It is admitted that PLDT took possession of the Farm on July 11, 1975 after the execution of the Agreement to Buy and Sell but it did so
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not as owner but as prospective buyer of the property. As prospective buyer which had actual on (sic) constructive notice of the lis pendens, why did it pursue and go through with the sale if it had not been willing to gamble with the result of this case?83 (Italics supplied) Further, in its July 8, 2004 Resolution, the CA held: PLDT cannot shield itself from the notice of lis pendens because all that it had at the time of its inscription was an Agreement to Buy and Sell with CARRASCOSO, which in effect is a mere contract to sell that did not pass to it the ownership of the property. xxx Ownership was retained by CARRASCOSO which EL DORADO may very well recover through its action for rescission. xxx PLDTs possession at the time the notice of lis pendens was registered not being a legal possession based on ownership but a mere possession in fact and the Agreement to Buy and Sell under which it supposedly took possession not being registered, it is not protected from an adverse judgment that may be rendered in the case subject of the notice of lis pendens.84 (Italics supplied) In a contract of sale, the title passes to the vendee upon the delivery of the thing sold; whereas in a contract to sell, ownership is not transferred upon delivery of the property but upon full payment of the purchase price.85 In the former, the vendor has lost and cannot recover ownership until and unless the contract is resolved or rescinded; whereas in the latter, title is retained by the vendor until the full payment of the price, such payment being a positive suspensive condition and failure of which is not a breach but an event that prevents the obligation of the vendor to convey title from becoming effective.86 PLDT argues that the July 11, 1975 Agreement to Buy and Sell is a conditional contract of sale, thus calling for the application of Articles 118187 and 118788 of the Civil Code as held in Coronel v. Court of Appeals.89 The Court is not persuaded. For in a conditional contract of sale, if the suspensive condition is fulfilled, the contract of sale is thereby perfected, such that if there had already been previous delivery of the property subject of the sale to the buyer, ownership

thereto automatically transfers to the buyer by operation of law without any further act having to be performed by the seller.90 Whereas in a contract to sell, upon fulfillment of the suspensive condition, ownership will not automatically transfer to the buyer although the property may have been previously delivered to him. The prospective seller still has to convey title to the prospective buyer by entering into a contract of absolute sale.91 A perusal of the contract92 adverted to in Coronel reveals marked differences from the Agreement to Buy and Sell in the case at bar. In the Coronel contract, there was a clear intent on the part of the therein petitioners-sellers to transfer title to the therein respondent-buyer. In the July 11, 1975 Agreement to Buy and Sell, PLDT still had to definitely inform Carrascoso of its decision on whether or not to finalize the deed of absolute sale for the 1,000 hectare portion of the property, such that in the April 6, 1977 Deed of Absolute Sale subsequently executed, the parties declared that they are now decided to execute such deed, indicating that the Agreement to Buy and Sell was, as the appellate court held, merely a preparatory contract in the nature of a contract to sell. In fact, the parties even had to stipulate in the said Agreement to Buy and Sell that Carrascoso, during the existence of the Agreement, shall not sell, cede, assign and/or transfer the parcel of land, which provision this Court has held to be a typical characteristic of a contract to sell.93 Being a contract to sell, what was vested by the July 11, 1975 Agreement to Buy and Sell to PLDT was merely the beneficial title to the 1,000 hectare portion of the property. The right of Daniel Jovellanos to the property under the contract [to sell] with Philamlife was merely an inchoate and expectant right which would ripen into a vested right only upon his acquisition of ownership which, as aforestated, was contingent upon his full payment of the rentals and compliance with all his contractual obligations thereunder. A vested right is an immediate fixed right of present and future enjoyment. It is to be distinguished from a right that is expectant or contingent. It is a right which is fixed, unalterable, absolute, complete and unconditional to the exercise of which no obstacle exists, and which is perfect in itself and not dependent upon a contingency. Thus, for a property right to be vested, there must be a transition from the potential or contingent to the actual, and the proprietary interest must have attached to a thing; it must have become fixed or established and is no longer open to doubt or controversy.94 (Italics supplied)

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In the case at bar, the July 11, 1975 Agreement to Buy and Sell was not registered, which act of registration is the operative act to convey and affect the land. An agreement to sell is a voluntary instrument as it is a willful act of the registered owner. As such voluntary instrument, Section 50 of Act No. 496 [now Section 51 of PD 1529] expressly provides that the act of registration shall be the operative act to convey and affect the land. And Section 55 of the same Act [now Section 53 of PD 1529] requires the presentation of the owners duplicate certificate of title for the registration of any deed or voluntary instrument. As the agreement to sell involves an interest less than an estate in fee simple, the same should have been registered by filing it with the Register of Deeds who, in turn, makes a brief memorandum thereof upon the original and owners duplicate certificate of title. The reason for requiring the production of the owners duplicate certificate in the registration of a voluntary instrument is that, being a willful act of the registered owner, it is to be presumed that he is interested in registering the instrument and would willingly surrender, present or produce his duplicate certificate of title to the Register of Deeds in order to accomplish such registration. However, where the owner refuses to surrender the duplicate certificate for the annotation of the voluntary instrument, the grantee may file with the Register of Deeds a statement setting forth his adverse claim, as provided for in Section 110 of Act No. 496. x x x95 (Italics supplied) In Valley Golf Club, Inc. v. Salas,96 where a Deed of Absolute Sale covering a parcel of land was executed prior to the annotation of a notice of lis pendens by the original owner thereof but which Deed was registered after such annotation, this Court held: The advance payment of P15,000.00 by the CLUB on October 18, 1960 to ROMERO, and the additional payment by the CLUB of P54,887.50 as full payment of the purchase price on October 26, 1960, also to ROMERO, cannot be held to be the dates of sale such as to precede the annotation of the adverse claim by the SISTERS on October 25, 1960 and the lis pendens on October 27, 1960. It is basic that it is the act of registration of the sale that is the operative act to convey and affect the land. That registration was not effected by the CLUB until December 4, 1963, or three (3) years after it had made full payment to ROMERO. x x x xxx

As matters stand, therefore, in view of the prior annotations of the adverse claim and lis pendens, the CLUB must be legally held to have been aware of the flaws in the title. By virtue of the lis pendens, its acquisition of the property was subject to whatever judgment was to be rendered in Civil Case No. 6365. x x x The CLUBs cause of action lies, not against the SISTERS, to whom the property had been adjudged by final judgment in Civil Case No. 6365, but against ROMERO who was found to have had no right to dispose of the land.97 (Italics supplied) PLDT further argues that El Dorados prior, actual knowledge of the July 11, 1975 Agreement to Buy and Sell is equivalent to prior registration not affected by the Notice of Lis Pendens. As such, it concludes that it was not a purchaser pendente lite nor a purchaser in bad faith. PLDT anchors its argument on the testimony of Lauro and El Dorados counsel Atty. Aquino from which it infers that Atty. Aquino filed the complaint for rescission and caused the notice of lis pendens to be annotated on Carrascosos title only after reading newspaper reports on the sale to PLDT of the 1,000 hectare portion of the property. The pertinent portions of Atty. Aquinos testimony are reproduced hereunder: Q: Do you know, Atty. Aquino, what you did after the filing of the complaint in the instant case of Dr. Carrascoso? A: Yes, I asked my associates to go to Mamburao and had the notice of Lis Pendens covering the property as a result of the filing of the instant complaint. Q: Do you know the notice of Lis Pendens? A: Yes, it is evidenced by a [Transfer] Certificate Copy of Title of Dr. Carrascoso entitled Notice of Lis Pendens. Q:

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As a consequence of the filing of the complaint which was annotated, you have known that? xxx A: Q: Yes. In your testimony, you mentioned that you had come cross (sic) reading the sale of the subject litigation (sic) between Dr. Fernando Carrascoso, the defendant herein and the PLDT, one of defendants-intervenor, may I say when? A: I cannot remember now, but it was in the newspaper where it was informed or mentioned of the sold property to PLDT.

xxx Q: After the annotation of the notice of Lis Pendens, do you know, if any further transaction was held on the property? A: As we have read in the newspaper, that Dr. Carrascoso had sold the property in favor of the PLDT, Co. Q:

xxx Q: Will you tell to the Honorable Court what newspaper was that?

And what did you do? A: A: We verified the portion of the property having recorded under entry No. 24770 x x x and we also discovered that the articles incorporated (sic) and other corporate matters had been organized and established of the PLDT, Co., and had been annotated. Well, I cannot remember what is that newspaper. That is only a means of [confirming] the transaction. What was [confirmed] to us is whether there was really transaction (sic) and we found out that there was in the Register of Deeds and that was the reason why we obtained the case. Q: xxx Q: Do you know what happened to the property? A: It was sold by the PLDT to its sub-PLDT Agitating (sic) Co. when at that time there was already notice of Lis Pendens. xxx Q: Well, may I say, is there any reason, the answer is immaterial. The question is as regard the matter of time when counsel is being able (sic) to read the newspaper allegedly (interrupted)

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The idea of the question, your Honor, is to establish and ask further the notice of [lis pendens] with regards (sic) to the transfer of property to PLDT, would have been accorded prior to the pendency of the case.

One of the stockholders and director of the plaintiff-corporation, sir. Q: Will you please tell us the other officers?

xxx A: I cannot remember.98 PLDT also relies on the following testimony of Carrascoso: A: Yes, sir. It was Trinidad Andaya Leviste and Assemblyman Expedito Leviste. Q: You mentioned Doctor a while ago that you mentioned to the late Governor Feliciano Leviste regarding your transaction with the PLDT in relation to the subject property you allegedly mention (sic) your intention to sell with the PLDT? A: It was Dr. Jose Leviste and Dr. Angel Leviste that was constantly in touched (sic) with me with respect to my transaction with the PLDT, sir. Q: Any other officer of the corporation who knows with instruction aside from Dr. Angel Leviste and Dr. Jose Leviste?

A: Expedito Leviste, sir. Q: Will you tell the position of Expedito Leviste? A: He was the corporate secretary, sir. Q: If you know, was Dr. Jose Leviste also a director at that time? A: Yes, sir.99 On the other hand, El Dorado asserts that it had no knowledge of the July 11, 1975 Agreement to Buy and Sell prior to the filing of the complaint for rescission against Carrascoso and the annotation of the notice of lis pendens on his title. It further asserts that it always acted in good faith: x x x The contract to sell between the Petitioner [Carrascoso] and PLDT was executed in July 11, 1975. There is no evidence that El Dorado was notified of this contract. The property is located in Mindoro, El Dorado is based in Manila. The land was planted to rice. This was not an unusual activity on the land, thus it could have been the Petitioner who was using the land. Not having been notified of this sale, El Dorado could not have stopped PLDT from developing the land. The absolute sale of the land to PLDT took place on April 6, 1977, or AFTER the filing of this case on March 15, 1977 and the annotation of a notice of lis pendens on March 16, 1977. In spite of the notice of lis pendens, PLDT then PLDTAC persisted not only in buying the land but also in putting up improvements on the property such as buildings, roads, irrigation systems and
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xxx Q: What is the position of Mrs. Trinidad Andaya Leviste with the plaintiffcorporation? A:

drainage. This was done during the pendency of this case, where PLDT and PLDTAC actively participated as intervenors. They were not innocent bystanders. x x x100 This Court finds the above-quoted testimony of Atty. Aquino to be susceptible of conflicting interpretations. As such, it cannot be the basis for inferring that El Dorado knew of the July 11, 1975 Agreement to Buy and Sell prior to the annotation of the notice of lis pendens on Carrascosos title. Respecting Carrascosos allegation that some of the directors and officers of El Dorado had knowledge of his dealings with PLDT, it is true that knowledge of facts acquired or possessed by an officer or agent of a corporation in the course of his employment, and in relation to matters within the scope of his authority, is notice to the corporation, whether he communicates such knowledge or not.101 In the case at bar, however, apart from Carrascosos claim that he in fact notified several of the directors about his intention to sell the 1,000 hectare portion of the property to PLDT, no evidence was presented to substantiate his claim. Such self-serving, uncorroborated assertion is indubitably inadequate to prove that El Dorado had notice of the July 11, 1975 Agreement to Buy and Sell before the annotation of the notice of lis pendens on his title. PLDT is, of course, not without recourse. As held by the CA: Between Carrascoso and PLDT/PLDTAC, the former acted in bad faith while the latter acted in good faith. This is so because it was Carrascosos refusal to pay his just debt to El Dorado that caused PLDT/PLDTAC to suffer pecuniary losses. Therefore, Carrascoso should return to PLDT/PLDTAC the P3,000,000.00 price of the farm plus legal interest from receipt thereof until paid.102 (Italics supplied) The appellate courts decision ordering the rescission of the March 23, 1972 Deed of Sale of Real Property between El Dorado and Carrascoso being in order, mutual restitution follows to put back the parties to their original situation prior to the consummation of the contract. The exercise of the power to rescind extinguishes the obligatory relation as if it had never been created, the extinction having a retroactive effect. The rescission is equivalent to invalidating and unmaking the juridical tie, leaving things in their status before the celebration of the contract.

Where a contract is rescinded, it is the duty of the court to require both parties to surrender that which they have respectively received and to place each other as far as practicable in his original situation, the rescission has the effect of abrogating the contract in all parts.103 (Italics supplied) The April 6, 1977 and May 30, 1977 Deeds of Absolute Sale being subject to the notice of lis pendens, and as the Court affirms the declaration by the appellate court of the rescission of the Deed of Sale executed by El Dorado in favor of Carrascoso, possession of the 1,000 hectare portion of the property should be turned over by PLDT to El Dorado. As regards the improvements introduced by PLDT on the 1,000 hectare portion of the property, a distinction should be made between those which it built prior to the annotation of the notice of lis pendens and those which it introduced subsequent thereto. When a person builds in good faith on the land of another, Article 448 of the Civil Code governs: 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 a case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after the proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof. The above provision covers cases in which the builders, sowers or planters believe themselves to be owners of the land or, at least, to have a claim of title thereto.104 Good faith is thus identified by the belief that the land is owned; or that by some title one has the right to build, plant, or sow thereon.105 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 building, planting or sowing, after payment to the builder, planter or sower of the necessary and useful expenses,106 and in the proper case, expenses for pure luxury or mere pleasure.107

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The owner of the land may also oblige the builder, planter or sower to purchase and pay the price of the land. If the owner chooses to sell his land, the builder, planter or sower must purchase the land, otherwise the owner may remove the improvements thereon. The builder, planter or sower, however, is not obliged to purchase the land if its value is considerably more than the building, planting or sowing. In such case, the builder, planter or sower must pay rent to the owner of the land. If the parties cannot come to terms over the conditions of the lease, the court must fix the terms thereof. The right to choose between appropriating the improvement or selling the land on which the improvement of the builder, planter or sower stands, is given to the owner of the land.108 On the other hand, when a person builds in bad faith on the land of another, Articles 449 and 450 govern: Art. 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. Art. 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. In the case at bar, it is undisputed that PLDT commenced construction of improvements on the 1,000 hectare portion of the property immediately after the execution of the July 11, 1975 Agreement to Buy and Sell with the full consent of Carrascoso.109 Thus, until March 15, 1977 when the Notice of Lis Pendens was annotated on Carrascosos TCT No. T-6055, PLDT is deemed to have been in good faith in introducing improvements on the 1,000 hectare portion of the property. After March 15, 1977, however, PLDT could no longer invoke the rights of a builder in good faith. Should El Dorado then opt to appropriate the improvements made by PLDT on the 1,000 hectare portion of the property, it should only be made to pay for those improvements at the time good faith existed on the part of PLDT or until March 15, 1977,110 to be pegged at its current fair market value.111

The commencement of PLDTs payment of reasonable rent should start on March 15, 1977 as well, to be paid until such time that the possession of the 1,000 hectare portion is delivered to El Dorado, subject to the reimbursement of expenses as aforestated, that is, if El Dorado opts to appropriate the improvements.112 If El Dorado opts for compulsory sale, however, the payment of rent should continue up to the actual transfer of ownership.113 WHEREFORE, the petitions are DENIED. The Decision dated January 13, 1996 and Resolution dated July 8, 2004 of the Court of Appeals are AFFIRMED with MODIFICATION in that 1) the Regional Trial Court of San Jose, Occidental Mindoro, Branch 45 is further directed to: a. determine the present fair price of the 1,000 hectare portion of the property and the amount of the expenses actually spent by PLDT for the improvements thereon as of March 15, 1977; b. include for determination the increase in value (plus value) which the 1,000 hectare portion may have acquired by reason of the existence of the improvements built by PLDT before March 15, 1977 and the current fair market value of said improvements; 2) El Dorado is ordered to exercise its option under the law, whether to appropriate the improvements, or to oblige PLDT to pay the price of the land, and 3) PLDT shall pay El Dorado the amount of Two Thousand Pesos (P2,000.00) per month as reasonable compensation for its occupancy of the 1,000 hectare portion of the property from the time that its good faith ceased to exist until such time that possession of the same is delivered to El Dorado, subject to the reimbursement of the aforesaid expenses in favor of PLDT or until such time that the payment of the purchase price of the 1,000 hectare portion is made by PLDT in favor of El Dorado in case the latter opts for its compulsory sale. Costs against petitioners. SO ORDERED. Sandoval-Gutierrez, Corona and Garcia, JJ., concur.
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Panganiban (Chairman), J., No part. Former counsel of a party. Petitions denied, judgment and resolution affirmed with modification. Notes.Where the complaint is one for damages arising from breach of a written contractand not a suit to enforce warranties against hidden defects the governing law is Article 1715 of the Civil Code, but since this provision does not contain a specific prescriptive period, the general law on prescription, Article 1144, will apply. (Engineering & Machinery Corporation vs. Court of Appeals, 252 SCRA 156 [1996]) The facts that two corporations may be sister companies, and that they may be sharing personnel and resources, without more, is insufficient to prove that their separate corporate personalities are being used to defeat public convenience, justify wrong, protect fraud, or defend crime. (Padilla vs. Court of Appeals, 370 SCRA 208 [2001]) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Carrascoso, Jr. vs. Court of Appeals, 477 SCRA 666(2005)]

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G.R. No. 157605. December 13, 2005.* SPS. ENRIQUETA RASDAS, and TOMAS RASDAS, SPS. ESPERANZA A. VILLA, and ERNESTO VILLA, and LOLITA GALLEN, petitioners, vs. JAIME ESTENOR, respondent.
Actions; Civil Procedure; Under Section 6, Rule 16 of the 1997 Rules of Civil Procedure, the allowance for a preliminary hearing, while left in the discretion of the court, is authorized only if no motion to dismiss has been filed but any of the grounds for a motion to dismiss had been pleaded as affirmative defense in the answer.We observe at the onset that it does appear that the RTCs act of staging preliminary hearing on the affirmative defense of lack of jurisdiction and res judicata is not in regular order. Under Section 6, Rule 16 of the 1997 Rules of Civil Procedure, the allowance for a preliminary hearing, while left in the discretion of the court, is authorized only if no motion to dismiss has been filed but any of the grounds for a motion to dismiss had been pleaded as an affirmative defense in the answer. In this case, respondents had filed a motion to dismiss on the ground of res judicata, but the same was denied. They thus filed an answer alleging res judicata as a special affirmative defense, but later presented a Motion for Preliminary Hearing which was granted, leading to the dismissal of the case. Same; Same; The general rule must be reiterated that the preliminary hearing contemplated under Section 6, Rule 16 applies only if no motion to dismiss has been filed; An exception was carved out in California and Hawaiian Sugar Company v. Pioneer Insurance, 346 SCRA 214 (2000), wherein the Court noted that while Section 6 disallowed a preliminary hearing of affirmative defenses once a motion to dismiss has been filed, such hearing could nonetheless be had if the trial court had not categorically resolved the motion to dismiss.The general rule must be reiterated that the preliminary hearing contemplated under Section 6, Rule 16 applies only if no motion to dismiss has been filed. This is expressly provided under the rule, which relevantly states [i]f no motion to dismiss has been filed, any of the grounds for dismissal provided for in [Rule 16] may be pleaded as an affirmative defense in the answer and, in the discretion of the court, a preliminary hearing may be had thereon as if a motion to dismiss had been filed. An exception was carved out in California and Hawaiian Sugar Company v. Pioneer Insurance, wherein the Court noted that while Section 6 disallowed a preliminary hearing of affirmative defenses once a motion to dismiss has been filed, such hearing could nonetheless be had if the trial court had not categorically resolved the motion to dismiss. Such circumstance does not obtain in this case, since the trial court had already categorically denied the motion to dismiss prior to the filing of the answer and the motion for preliminary hearing. Same; Same; Words and Phrases; Builder in Bad Faith; Petitioners are not entitled to the just compensation they seek through the present complaint; Under Article 448 of the Civil Code, the builder in bad faith on the land of another loses what is built without right to indemnity.It is clear that petitioners are not entitled to the just compensation they seek through the present complaint. Under Article 448 of the Civil Code, the builder in bad faith on the land of another loses what is built without right to indemnity. Petitioners were in bad faith when they built the structures as they had known that the subject property did not belong to them. Are these conclusions though sufficient to justify dismissal on the ground of res judicata?

Res Judicata; Two Aspects.The doctrine of res judicata has two aspects. The first, known as bar by prior judgment, or estoppel by verdict, is the effect of a judgment as a bar to the prosecution of a second action upon the same claim, demand or cause of action. The second, known as conclusiveness of judgment or otherwise known as the rule of auter action pendant, ordains that issues actually and directly resolved in a former suit cannot again be raised in any future case between the same parties involving a different cause of action. It has the effect of preclusion of issues only. Same; Conclusiveness of Judgment; Conclusiveness of judgment states that a fact or question which was in issue in a former suit and there was judicially passed upon and determined by a court of competent jurisdiction, is conclusively settled by the judgment therein as far as the parties to that action and persons in privity with them are concerned and cannot be again litigated in any future action between such parties or their privies, in the same court or any other court of concurrent jurisdiction on either the same or different cause of action, while the judgment remains unreversed by proper authority.It appears that both the RTC and the Court of Appeals deemed that the first aspect of res judicata, bar by prior judgment, applied in this case. We hold that it is the second kind of res judicata, conclusiveness of judgment, that barred the instant complaint. As previously explained by this Court: [C]onclusiveness of judgmentstates that a fact or question which was in issue in a former suit and there was judicially passed upon and determined by a court of competent jurisdiction, is conclusively settled by the judgment therein as far as the parties to that action and persons in privity with them are concerned and cannot be again litigated in any future action between such parties or their privies, in the same court or any other court of concurrent jurisdiction on either the same or different cause of action, while the judgment remains unreversed by proper authority. It has been held that in order that a judgment in one action can be conclusive as to a particular matter in another action between the same parties or their privies, it is essential that the issue be identical. If a particular point or question is in issue in the second action, and the judgment will depend on the determination of that particular point or question, a former judgment between the same parties or their privies will be final and conclusive in the second if that same point or question was in issue and adjudicated in the first suit. Identity of cause of action is not required but merely identity of issues. Same; Same; In cases wherein the doctrine of conclusiveness of judgment is applicable, there is identity of parties but not of causes of actionthe judgment is conclusive in the second case, only as those matters actually and directly controverted and determined, and not as to matters merely involved therein.In cases wherein the doctrine of conclusiveness of judgment is applicable, there is, as in the two cases subject of this petition, identity of parties but not of causes of action. The judgment is conclusive in the second case, only as to those matters actually and directly controverted and determined, and not as to matters merely involved therein. Herein, the fact that petitioners were in possession in bad faith as early as 1965 was already determined in the first case. In order that they could successfully litigate their second cause of action, petitioners will have to convince that they were in possession in good faith at the time they built their structures, an argument that deviates the previous determination made in the final judgment that resolved the first case.

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Same; Same; When a fact has been once determined in the course of a judicial proceeding, and a final judgment has been rendered in accordance therewith, it cannot be again litigated between the same parties without virtually impeaching the correctness of the former decision, which, from motives of public policy, the law does not permit to be done.The reasons for establishing the principle of conclusiveness of judgment are founded on sound public policy, and to grant this petition would have the effect of unsettling this well-settled doctrine. It is allowable to reason back from a judgment to the basis on which it stands, upon the obvious principle that where a conclusion is indisputable, and could have been drawn only from certain premises, the premises are equally indisputable with the conclusion. When a fact has been once determined in the course of a judicial proceeding, and a final judgment has been rendered in accordance therewith, it cannot be again litigated between the same parties without virtually impeaching the correctness of the former decision, which, from motives of public policy, the law does not permit to be done. Same; Same; Issues not previously ventilated cannot be raised for the first time on appeal, much less when first proposed in the reply to the comment on the petition for review.We are disinclined to accord merit to this argument. For one, it was raised for the first time in the Reply before this Court. It was not even raised in the Complaint filed with the RTC, hence it could not be said that petitioners cause of action is grounded on Article 453. Issues not previously ventilated cannot be raised for the first time on appeal, much less when first proposed in the reply to the comment on the petition for review. Even assuming the issue is properly litigable, the Court can find no basis to declare that respondents were in bad faith as a matter of fact. Certainly, nothing in the first decision of the Court of Appeals conclusively establishes that claim, its factual determination being limited to the finding that petitioners alone were had been in possession of the property in bad faith. We are not wont to ascribe points of fact in the said decision which were not expressly established or affirmed.

The antecedent facts, as culled from the assailed Decision1 of the Court of Appeals Tenth Division, follow. The dispute centers on a parcel of land with an area of 703 square meters, situated in Ilagan, Isabela. On 29 October 1992, respondent as plaintiff filed a Complaint For Recovery Of Ownership And Possession With Damages against petitioners as defen-dants. The complaint was docketed as Civil Case No. 673 and tried by the Regional Trial Court (RTC) of Ilagan, Isabela, Branch 16. In the same complaint, respondent asserted that he was the owner of the subject property, which was then in the possession of petitioners. On 6 November 1995, the RTC decided Civil Case No. 673 in favor of petitioners. Respondent appealed the RTC decision before the Court of Appeals, and his appeal was docketed as CA-G.R. No. 52338. On 25 September 1997, the Court of Appeals reversed the judgment of the RTC, and declared respondent as the owner of the subject property. As a result, petitioners were ordered to vacate the land. The dispositive portion of the appellate courts decision reads: WHEREFORE, the Decision of the trial court dated November 6, 1995 is REVERSED and SET ASIDE, and a new one is rendered declaring the plaintiff as the owner of the land in question; and ordering the defendants-appellees to vacate the same and jointly and severally to pay the plaintiff reasonable compensation of P300.00 a month for the use and enjoyment of the land from June 1991 up to the time the land is vacated; attorneys fees of P10,000.00 and litigation expenses of P5,000.00. Costs against the defendants-appellees. SO ORDERED.2 The decision became final and executory after a petition for certiorari assailing its validity was dismissed by this Court.3 Thereafter, a Writ of Execution and Writ of Demolition was issued against petitioners, who were ordered to demolish their houses, structures, and improvements on the property. Petitioners as plaintiffs then filed a Complaint dated 6 July 1999 against respondent for just compensation and preliminary injunction with temporary restraining order. The case was docketed as Civil Case No. 1090, and heard by the same RTC Branch 16 that ruled on the first complaint. Notwithstanding the earlier pronouncement of the Court of Appeals, petitioners asserted therein
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PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court. Marciano S. Bascos for petitioners. Nemio D. Somera for respondent. TINGA, J.:

The main issue in this Petition for Review under Rule 45 is whether the complaint below is barred by res judicata. We find that res judicata indeed obtains in this case, albeit of a mode different from that utilized by the trial court and the Court of Appeals in dismissing the complaint.

that they were the lawful owners of the subject property,4 although they ultimately conceded the efficacy of the appellate courts final and executory decision. Still, they alleged that they were entitled to just compensation relating to the value of the houses they had built on the property, owing to their purported status as builders in good faith. They claimed that the Court of Appeals decision did not declare them as builders in bad faith, and thus, they were entitled to be reimbursed of the value of their houses before these could be demolished.5 They posited that without such reimbursement, they could not be ejected from their houses. Respondent as defendant countered with a Motion to Dismiss, arguing that petitioners complaint was barred by res judicata, owing to the final and executory judgment of the Court of Appeals. The Motion to Dismiss was initially denied by the RTC in an Order dated 4 August 1999,6 and pre-trial ensued. However, before trial proper could begin, respondent filed a motion for preliminary hearing on the affirmative defense of lack of jurisdiction and res judicata. This motion was resolved in an Order dated 16 February 2000, wherein the RTC declared itself constrained to apply the principle of res judicata, thus reversing its earlier order. In doing so, the RTC concluded that the earlier decision of the Court of Appeals had already effectively settled that petitioners were in fact builders in bad faith. Citing Mendiola v. Court of Appeals,7 the RTC held that the causes of action between the final judgment and the instant complaint of petitioners were identical, as it would entail the same evidence that would support and establish the former and present causes of action. Accordingly, the RTC ordered the dismissal of petitioners complaint. The counsel for petitioners was likewise issued a warning for having violated the prohibition on forum-shopping on account of the filing of the complaint barred by res judicata. The finding of res judicata was affirmed by the Court of Appeals in its assailed Decision. It is this finding that is now subject to review by this Court. Petitioners argue that since respondents Motion to Dismiss on the ground of res judicata had already been denied, the consequent preliminary hearing on the special defenses which precluded the dismissal of the complaint was null and void.8 Petitioners also claim that there was no identity of causes of action in Civil Case No. 673, which concerned the ownership of the land, and in Civil Case No. 1090, which pertained to just compensation under Article 448 of the Civil Code. Even assuming that res judicata obtains, petitioners claim that the said rule may be disregarded if its application would result in grave injustice.

We observe at the onset that it does appear that the RTCs act of staging preliminary hearing on the affirmative defense of lack of jurisdiction and res judicata is not in regular order. Under Section 6, Rule 16 of the 1997 Rules of Civil Procedure, the allowance for a preliminary hearing, while left in the discretion of the court, is authorized only if no motion to dismiss has been filed but any of the grounds for a motion to dismiss had been pleaded as an affirmative defense in the answer. In this case, respondents had filed a motion to dismiss on the ground of res judicata, but the same was denied. They thus filed an answer alleging res judicata as a special affirmative defense, but later presented a Motion for Preliminary Hearing which was granted, leading to the dismissal of the case. The general rule must be reiterated that the preliminary hearing contemplated under Section 6, Rule 16 applies only if no motion to dismiss has been filed. This is expressly provided under the rule, which relevantly states [i]f no motion to dismiss has been filed, any of the grounds for dismissal provided for in [Rule 16] may be pleaded as an affirmative defense in the answer and, in the discretion of the court, a preliminary hearing may be had thereon as if a motion to dismiss had been filed. An exception was carved out in California and Hawaiian Sugar Company v. Pioneer Insurance,9 wherein the Court noted that while Section 6 disallowed a preliminary hearing of affirmative defenses once a motion to dismiss has been filed, such hearing could nonetheless be had if the trial court had not categorically resolved the motion to dismiss.10 Such circumstance does not obtain in this case, since the trial court had already categorically denied the motion to dismiss prior to the filing of the answer and the motion for preliminary hearing. We observe in this case that the judge who had earlier denied the motion to dismiss, Hon. Teodulo E. Mirasol, was different from the judge who later authorized the preliminary hearing,11 Hon. Isaac R. de Alban, a circumstance that bears some light on why the RTC eventually changed its mind on the motion to dismiss. Still, this fact does not sanction the staging of a preliminary hearing on affirmative defenses after the denial of the motion to dismiss. If a judge disagrees with his/her predecessors previous ruling denying a motion to dismiss, the proper recourse is not to conduct a preliminary hearing on affirmative defenses, but to utilize the contested ground as part of the basis of the decision on the merits. On the part of the movant whose motion to dismiss had already been filed and denied, the proper remedy is to file a motion for reconsideration of the denial of

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the motion. If such motion for reconsideration is denied, the ground for the dismissal of the complaint may still be litigated at the trial on the merits. Clearly, the denial of a motion to dismiss does not preclude any future reliance on the grounds relied thereupon. However, nothing in the rules expressly authorizes a preliminary hearing of affirmative defenses once a motion to dismiss has been filed and denied. Thus, the strict application of Section 6, Rule 16 in this case should cause us to rule that the RTC erred in conducting the preliminary hearing. However, there is an exceptional justification for us to overlook this procedural error and nonetheless affirm the dismissal of the complaint. The complaint in question is so evidently barred by res judicata, it would violate the primordial objective of procedural law to secure a just, speedy and inexpensive disposition of every action and proceeding12 should the Court allow this prohibited complaint from festering in our judicial system. Indeed, the rule sanctioning the liberal construction of procedural rules is tailor-made for a situation such as this, when a by-the-numbers application of the rule would lead to absurdity, such as the continued litigation of an obviously barred complaint. Why is the subject complaint barred by res judicata? It is uncontroverted that in the decision by the Court of Appeals in Civil Case No. 673, it was observed: When the occupancy of the lot by Luis Aggabao which was transmitted to his son Vivencio Aggabao, and later transmitted to the latters children . . . expired in April 1965, the late Vivencio Aggabao verbally begged and pleaded to plaintiff-appellant that he be allowed to stay on the premises of the land in question as his children, herein appellees, were still studying and it would be very hard for them to transfer residence at that time. The plaintiff, out of Christian fellowship and compassion, allowed the appellees to stay temporarily on the land in question. .... In this case, the possession of the land by the appellees derived from their father Luis Aggabao from March 31, 1955 to March 31, 1965 was by virtue of a stipulation in the deed of sale (Exh. G), while their possession derived from their father, Vivencio Aggabao, from March 31, 1965 to 1982 (the latter died in 1982) was only by tolerance because of the pleading of Vivencio Aggabao to the plaintiff-appellant that he be allowed to stay because of the children going to school. . . .13

Evidently, the Court of Appeals had previously ruled in the first case that as early as 1965, the father of the petitioners (and their predecessor-in-interest) had already known that he did not own the property, and that his stay therein was merely out of tolerance. Such conclusion in fact bolstered the eventual conclusion that respondents were the owners of the land and that petitioners should vacate the same. This fact should be seen in conjunction with the findings of the RTC and the Court of Appeals in this case that the structures for which petitioners sought to be compensated were constructed in 1989 and 1990, or long after they had known they were not the owners of the subject property. These premises remaining as they are, it is clear that petitioners are not entitled to the just compensation they seek through the present complaint. Under Article 448 of the Civil Code, the builder in bad faith on the land of another loses what is built without right to indemnity.14 Petitioners were in bad faith when they built the structures as they had known that the subject property did not belong to them. Are these conclusions though sufficient to justify dismissal on the ground of res judicata? The doctrine of res judicata has two aspects.15 The first, known as bar by prior judgment, or estoppel by verdict, is the effect of a judgment as a bar to the prosecution of a second action upon the same claim, demand or cause of action. The second, known as conclusiveness of judgment or otherwise known as the rule of auter action pendant, ordains that issues actually and directly resolved in a former suit cannot again be raised in any future case between the same parties involving a different cause of action.16 It has the effect of preclusion of issues only.17 It appears that both the RTC and the Court of Appeals deemed that the first aspect of res judicata, bar by prior judgment, applied in this case.18 We hold that it is the second kind of res judicata, conclusiveness of judgment, that barred the instant complaint. As previously explained by this Court: [C]onclusiveness of judgmentstates that a fact or question which was in issue in a former suit and there was judicially passed upon and determined by a court of competent jurisdiction, is conclusively settled by the judgment therein as far as the parties to that action and persons in privity with them are concerned and cannot be again litigated in any future action between such parties or their privies, in the same court or any other court of concurrent jurisdiction on either the same or different cause of action, while the judgment remains unreversed by proper authority. It has been held that in order that a
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judgment in one action can be conclusive as to a particular matter in another action between the same parties or their privies, it is essential that the issue be identical. If a particular point or question is in issue in the second action, and the judgment will depend on the determination of that particular point or question, a former judgment between the same parties or their privies will be final and conclusive in the second if that same point or question was in issue and adjudicated in the first suit. Identity of cause of action is not required but merely identity of issues.19 Stated differently, any right, fact, or matter in issue directly adjudicated or necessarily involved in the determination of an action before a competent court in which judgment is rendered on the merits is conclusively settled by the judgment therein and cannot again be litigated between the parties and their privies whether or not the claim, demand, purpose, or subject matter of the two actions is the same.20 Indeed, in cases wherein the doctrine of conclusiveness of judgment is applicable, there is, as in the two cases subject of this petition, identity of parties but not of causes of action. The judgment is conclusive in the second case, only as to those matters actually and directly controverted and determined, and not as to matters merely involved therein.21 Herein, the fact that petitioners were in possession in bad faith as early as 1965 was already determined in the first case. In order that they could successfully litigate their second cause of action, petitioners will have to convince that they were in possession in good faith at the time they built their structures, an argument that deviates the previous determination made in the final judgment that resolved the first case. The reasons for establishing the principle of conclusiveness of judgment are founded on sound public policy, and to grant this petition would have the effect of unsettling this well-settled doctrine. It is allowable to reason back from a judgment to the basis on which it stands, upon the obvious principle that where a conclusion is indisputable, and could have been drawn only from certain premises, the premises are equally indisputable with the conclusion.22 When a fact has been once determined in the course of a judicial proceeding, and a final judgment has been rendered in accordance therewith, it cannot be again litigated between the same parties without virtually impeaching the correctness of the former decision, which, from motives of public policy, the law does not permit to be done.23

Contrary to the holdings of both courts below, in the case of Mendiola v. Court of Appeals24 which they relied upon, this Court observed that the causes of action in the two cases involved were so glaringly similar that it had to affirm the dismissal of the second case by virtue of the bar of former judgment rule. One final note. Petitioners, in their Reply before this Court, raise the argument that assuming that they were builders in bad faith, respondents should likewise be considered as being in bad faith, as the structures were built with their knowledge and without their opposition. That being the case, Article 453 of the Civil Code would apply to the effect both parties could thus be deemed as being in good faith. Accordingly, petitioners would still be entitled to compensation on the structures they built. We are disinclined to accord merit to this argument. For one, it was raised for the first time in the Reply before this Court. It was not even raised in the Complaint filed with the RTC, hence it could not be said that petitioners cause of action is grounded on Article 453. Issues not previously ventilated cannot be raised for the first time on appeal,25 much less when first proposed in the reply to the comment on the petition for review. Even assuming the issue is properly litigable, the Court can find no basis to declare that respondents were in bad faith as a matter of fact. Certainly, nothing in the first decision of the Court of Appeals conclusively establishes that claim, its factual determination being limited to the finding that petitioners alone were had been in possession of the property in bad faith. We are not wont to ascribe points of fact in the said decision which were not expressly established or affirmed. WHEREFORE, the petition is DENIED. Costs against petitioners. SO ORDERED. Puno (Chairman), Austria-Martinez, Callejo, Sr. and Chico-Nazario, JJ., concur. Petition denied. Note.Absolute identity of parties is not a condition sine qua non for res judicata to applya shared identity of interest is sufficient to invoke the coverage of the principle. (Cruz vs. Court of Appeals, 332 SCRA 447 [2000]) o0o Copyright 2012 Central Book Supply, Inc. All rights reserved. [Rasdas vs. Estenor, 477 SCRA 538(2005)]
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G.R. No. 157044. October 5, 2005.* RODOLFO V. ROSALES, (represented by his heirs, RODOLFO, JR., ROMEO ALLAN, LILLIAN RHODORA, ROY VICTOR, ROGER LYLE and ALEXANDER NICOLAI, all surnamed ROSALES) and LILY ROSQUETAROSALES, petitioners, vs. MIGUEL CASTELLTORT, JUDITH CASTELLTORT, and LINA LOPEZ-VILLEGAS, assisted by her Attorney-inFact, RENE VILLEGAS, respondents.
Civil Law; Property; Ownership; A builder in good faith is one who builds with the belief that the land he is building on is his, or that by some title one has the right to build thereon, and is ignorant of any defect or flaw in his title.A builder in good faith is one who builds with the belief that the land he is building on is his, or that by some title one has the right to build thereon, and is ignorant of any defect or flaw in his title. Article 527 of the Civil Code provides that good faith is always presumed, and upon him who alleges bad faith on the part of a possessor rests the burden of proof. Same; Same; Same; Under Article 448 of the New Civil Code, the landowner can choose between appropriating the building by paying the proper indemnity or obliging the builder to pay the price of the land, unless its value is considerably more than that of the structures, in which case the builder in good faith shall pay reasonable rent.As correctly found by the CA, both parties having acted in good faith at least until August 21, 1995, the applicable provision in this case is Article 448 of the Civil Code which reads: 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. Under the foregoing provision, the landowner can choose between appropriating the building by paying the proper indemnity or obliging the builder to pay the price of the land, unless its value is considerably more than that of the structures, in which case the builder in good faith shall pay reasonable rent. If the parties cannot come to terms over the conditions of the lease, the court must fix the terms thereof. Same; Same; Possession; Possession acquired in good faith does not lose this character except in the case and from the moment facts exist which show that the possessor is not unaware that he possesses the thing improperly or wrongfully.Possession acquired in good faith does not lose this character except in the case and from the moment facts exist which show that the possessor is not unaware that he possesses the thing improperly or wrongfully. The good faith ceases or is legally interrupted from the moment defects in the title are made known to the possessor, by extraneous evidence or by suit for recovery of the property by the true owner.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court. Renato E. Taguiam for petitioners. Edgardo B. Arellano for respondents Miguel and Judith Castelltort. Albano, Siccuan and Associates Law Office for respondent Lina-Lopez Villegas. CARPIO-MORALES, J.:

The present petition for review on certiorari assails the October 2, 2002 Decision1 and February 6, 2003 Resolution2 of the Court of Appeals (CA) in CA-G.R. CV No. 64046 and seeks to reinstate the April 21, 1999 Decision3 of the Regional Trial Court (RTC) of Calamba, Laguna, Branch 34 in Civil Case No. 2229-95-C. Spouses-petitioners Rodolfo V. Rosales and Lily RosquetaRosales (petitioners) are the registered owners of a parcel of land with an area of approximately 315 square meters, covered by Transfer Certificate of Title (TCT) No. 368564 and designated as Lot 17, Block 1 of Subdivision Plan LRC Psd-55244 situated in Los Baos, Laguna. On August 16, 1995, petitioners discovered that a house was being constructed on their lot, without their knowledge and consent, by respondent Miguel Castelltort (Castelltort).5 It turned out that respondents Castelltort and his wife Judith had purchased a lot, Lot 16 of the same Subdivision Plan, from respondent Lina Lopez-Villegas (Lina) through her son-attorney-in-fact Rene Villegas (Villegas) but that after a survey thereof by geodetic engineer Augusto Rivera, he pointed to Lot 17 as the Lot 16 the Castelltorts purchased. Negotiations for the settlement of the case thus began, with Villegas offering a larger lot near petitioners lot in the same subdivision as a replacement thereof.6 In the alternative, Villegas proposed to pay the purchase price of
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petitioners lot with legal interest.7 Both proposals were, however, rejected by petitioners8 whose counsel, by letter9 of August 24, 1995, directed Castelltort to stop the construction of and demolish his house and any other structure he may have built thereon, and desist from entering the lot. Petitioners subsequently filed on September 1, 1995 a complaint10 for recovery of possession and damages with prayer for the issuance of a restraining order and preliminary injunction against spouses-respondents Miguel and Judith Castelltort before the RTC of Calamba, Laguna, docketed as Civil Case No. 2229-95-C. To the complaint, the Castelltorts claimed in their Answer with Counterclaim11 that they were builders in good faith. Lina, represented by her son-attorney-in-fact Villegas, soon filed a Motion for Intervention12 before the RTC which was granted by Order13 of December 19, 1995. In her Answer to the complaint,14 Lina alleged that the Castelltorts acted in good faith in constructing the house on petitioners lot as they in fact consulted her before commencing any construction thereon, they having relied on the technical description of the lot sold to them, Lot 16, which was verified by her officially designated geodetic engineer. Nevertheless, Lina proposed to give petitioners a lot containing an area of 536 square meters together with the house and duplex structure built thereon or, if petitioners choose, to encumber the 536 square meter lot as collateral to get immediate cash through a financing scheme in order to compensate them for the lot in question.15 Ruling out good faith, the RTC, by Decision of April 21, 1999, found for petitioners in this wise: In the instant case, there is no well-founded belief of ownership by the defendants of the land upon which they built their house. The title or mode of acquisition upon which they based their belief of such ownership stemmed from a Contract to Sell (Exhibit P) of which they were not even parties, the designated buyer being Elizabeth Yson Cruz and the sale even subjected to the judicial reconstitution of the title. And by their own actions, particularly defendant Miguel Castelltort, defendants betrayed this very belief in their ownership when realizing the inutility of anchoring their ownership on the basis of the Contract of Sale, defendant Miguel Castelltort in his testimony declared

Elizabeth Yson Cruz as his wife (tsn, pp. 7-8, March 24, 1998) despite an admission in their answer that they are the spouses named as defendants (tsn, p. 8, January 12, 1998) and which declaration is an utter falsehood as the Contract to Sell itself indicates the civil status of said Elizabeth Yson Cruz to be single. Even if we are to concede that defendants built their house in good faith on account of the representation of attorney-in-fact Rene Villegas, their failure to comply with the requirements of the National Building Code, particularly the procurement of a building permit, stained such good faith and belief. xxx From any and all indications, this deliberate breach is an unmitigated manifestation of bad faith. And from the evidence thus adduced, we hold that defendants and the intervenor were equally guilty of negligence which led to the construction of the defendants house on plaintiffs property and therefore jointly and severally liable for all the damages suffered by the plaintiffs.16 (Italics supplied) The dispositive portion of the trial courts Decision reads, quoted verbatim: ACCORDINGLY, in view of all the foregoing, judgment is hereby rendered in favor of plaintiffs and against the defendants, ordering the latter to surrender the possession of the property covered by TCT No. 36856 of the Register of Deeds of Laguna including any and all improvements built thereon to the plaintiffs. Defendants and intervenors are likewise jointly and severally directed to pay to plaintiffs the following damages: a) TWO THOUSAND (P2,000.00) PESOS per month from February 1995 by way of reasonable compensation for the use of plaintiffs property until the surrender of the same; b) FIFTY THOUSAND (P50,000.00) PESOS by way of moral damages; c) THIRTY THOUSAND (P30,000.00) PESOS as exemplary damages; d) TWENTY THOUSAND (P20,000.00) PESOS as attorneys fees and cost of suit.

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The counterclaim interposed by the defendants in their responsive pleading is hereby dismissed for lack of merit. SO ORDERED.17 Respondents thereupon filed their respective appeals with the CA. Petitioner Rodolfo Rosales, in the meantime, died on December 7, 2001. His heirs Rodolfo, Jr., Romeo Allan, Lillian Rhodora, Roy Victor, Roger Lyle and Alexander Nicolai, all surnamed Rosales, filed their Appearance18 as his substitute. By Decision of October 2, 2002, the CA granted the appeal and set aside the April 21, 1999 RTC Decision. The dispositive portion of the Decision reads, quoted verbatim: WHEREFORE, premises considered, the instant appeal is hereby GRANTED and the assailed decision of the court a quo REVERSED AND SET ASIDE. In accordance with the cases of Technogas Philippines Manufacturing Corp. vs. Court of Appeals and Depra vs. Dumlao, applying Article 448 of the Civil Code, this case is REMANDED to the Regional Trial Court of Calamba, Laguna, Branch 34, for further proceedings, as follows: 1. to determine the present fair price of appellees 315 square meter area of land and the amount of the expenses actually spent by the appellants for building the house as of 21 August 1995, which is the time they were notified of appellees rightful claim over Lot 17. 2. to order the appellees to exercise their option under the law (Article 448, Civil Code), whether to appropriate the house as their own by paying to the appellants the amount of the expenses spent for the house as determined by the court a quo in accordance with the limitations as aforestated or to oblige the appellants to pay the price of the land. In case the appellees exercise the option to oblige the appellants to pay the price of the land but the latter reject such purchase because, as found by the court, the value of the land is considerably more than that of the house, the court shall order the parties to agree upon the terms of a forced lease, and give the court a quo a formal written notice of such agreement and its provisos. If no agreement is reached by the parties, the court a quo shall then fix the terms of the forced lease, provided that the monthly rental to be fixed by the Court shall not be less that Two Thousand Pesos (P2,000.00) per month, payable within

the first five (5) days of each calendar month and the period thereof shall not be more than two (2) years, counted from the finality of the judgment. Upon the expiration of the forced lease, or upon default by the appellants in the payment of rentals for two (2) consecutive months, the appellees shall be entitled to terminate the forced lease, to recover their land, and to have the improvement removed by the appellants at the latters expense. The rentals herein provided shall be tendered by the appellants to the court for payment to the appellees, and such tender shall constitute evidence of whether or not compliance was made within the period fixed by the court. In any event, the appellants shall pay the appellees the amount of Two Thousand Pesos (P2,000.00) as reasonable compensation for their occupancy of the encroached property from the time said appellants good faith cease (sic) to exist until such time the possession of the property is delivered to the appellees subject to the reimbursement of the aforesaid expenses in favor of the appellants or until such time the payment of the purchase price of the said lot be made by the appellants in favor of the appellees in case the latter opt for the compulsory sale of the same. SO ORDERED.19 (Emphasis in the original) In reversing the trial court, the CA held: xxx x x x A perusal of the records readily reveals that said court instead relied on flimsy, if not immaterial, allegations of the appellees, which have no direct bearing in the determination of whether the appellants are builders in bad faith. For one, the pivotal issue to be resolved in this case, i.e. whether appellant Miguel is a builder in good faith, was ignored by the court a quo. The instant case does not in any way concern the personal and property relations of spouses-appellants and Elizabeth Yson Cruz which is an altogether different matter that can be ventilated by the concerned parties through the institution of a proper action. x x x The court a quo should have focused on the issue of whether appellant Miguel built, in good faith, the subject house without notice of the adverse claim of the appellees and under the honest belief that the lot which he used in the construction belongs to him. x x x x x x As it is, appellant Miguel relied on the title which the intervenor showed to him which, significantly, has no annotation that would otherwise show a prior
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adverse claim. Thus, as far as appellant Miguel is concerned, his title over the subject lot, as well as the title of the intervenor thereto, is clean and untainted by an adverse claim or other irregularities. For another, the appellants failure to secure a building permit from the Municipal Engineers Office on their construction on Lot 17 does not impinge on the good faith of the appellants. In fact, it can be told that a building permit was actually filed by appellant Miguel with respect to Lot 16 and it was only due to the confusion and misapprehension by the intervenor of the exact parameters of the property which caused appellants belief that Lot 17 [the questioned lot], is his. This fact bolsters appellant Miguels good faith in building his house on appellees lot under the mistaken belief that the same is his property. Otherwise, he should have secured a building permit on Lot 17 instead or should not have bothered to take the necessary measures to obtain a building permit on Lot 16 in the first place. By and large, the records show that, as testified to by Engr. Rebecca T. Lanuang, appellant Miguel had already applied for a building permit as early as February 1994 and was in fact issued a temporary building permit pending the completion of the requirements for said permit. Although the building permit was belatedly issued in January 1996, this does not in any way detract from appellant Miguels good faith. xxx In holding the appellants as builders in bad faith, the court a quo defied law and settled jurisprudence considering that the factual basis of its findings and the incontrovertible evidence in support thereof prove that the appellant Miguel, in good faith, built the house on appellees land without knowledge of an adverse claim or any other irregularities that might cast a doubt as to the veracity of the assurance given to him by the intervenor. Having been assured by the intervenor that the stone monuments were purposely placed, albeit wrongfully, by the land surveyor in said land to specifically identify the lot and its inclusive boundaries, the appellants cannot be faulted for having relied on the expertise of the land surveyor who is more equipped and experienced in the field of land surveying. Although under the Torrens system of land registration, the appellant is presumed to have knowledge of the metes and bounds of the property with which he is dealing, appellant however, considering that he is a layman not versed in the technical description of his property, cannot be faulted in his reliance on the survey plan that was delivered to him by the intervenor and the stone monuments that were placed in the encroached property.

xxx Peremptorily, contrary to the flawed pronouncements made by the court a quo that appellant Miguel is deemed as a builder in bad faith on the basis of a mere assertion that he built his house without initially satisfying himself that he owns the said property, this Court finds reason to maintain good faith on the part of the appellant. Admittedly, the appellants house erroneously encroached on the property of the appellees due to a mistake in the placement of stone monuments as indicated in the survey plan, which error is directly attributable to the fault of the geodetic engineer who conducted the same. This fact alone negates bad faith on the part of appellant Miguel. xxx Moreover, it is quite illogical for appellant Miguel to knowingly build his house on a property which he knew belongs to another person. x x x xxx In view of the good faith of both parties in this case, their rights and obligations are to be governed by Article 448, which has been applied to improvements or portions of improvements built by mistaken belief on land belonging to the adjoining owner. x x x x x x20 (Emphasis and italics supplied) Petitioners Motion for Reconsideration21 dated October 22, 2002 having been denied by the CA by Resolution of March 13, 2002, the present petition was filed raising the following issues: I. WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE ABUSE OF DISCRETION IN MAKING A FINDING THAT IS CONTRARY TO THE ADMISSIONS BY THE PARTIES II. WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR OF LAW IN CONCLUDING THAT THE TRIAL COURT, IN DECIDING THE CASE, RELIED ON FLIMSY, IF NOT IMMATERIAL, ALLEGATIONS OF THE PETITIONERS, WHICH HAVE NO

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DIRECT BEARING IN THE DETERMINATION RESPONDENTS ARE BUILDERS IN GOOD FAITH III.

OF

WHETHER

THE

WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR OF LAW IN RENDERING A DECISION THAT IS UNENFORCEABLE AGAINST BOTH RESPONDENT JUDITH CASTELLTORT AND THIRD-PARTY ELIZABETH CRUZ22 Petitioners initially hammer against respondents proving that Castelltort and a certain Elizabeth Cruz are the builders of the house on the subject property, they faulting them with estoppel for alleging in their Answer before the trial court that they (respondents Castelltort and Judith) caused the construction of their house which they bought from a certain Lina Lopez-Villegas. Petitioners rely on the following doctrine established in Elayda v. Court of Appeals:23 an admission made in the pleadings cannot be controverted by the party making such admission and are conclusive as to him and that all proofs submitted by him contrary thereto or inconsistent therewith, should be ignored, whether objection is interposed by the party or not x x x Petitioners contention is hardly relevant to the case at bar. Whether it was Castelltort and Judith or Castelltort and Elizabeth Cruz who purchased the property from Lina is not material to the outcome of the instant controversy. As found by the CA: The fact remains that appellant [Castelltort] is the builder of the house on Lot 17 x x x The court a quo should have focused on the issue of whether appellant Miguel built, in good faith, the subject house without notice of the adverse claim of the appellees and under the honest belief that the lot which he used in the construction belongs to him. x x x it cannot be gainsaid that appellant Miguel has a title over the land that was purchased from the intervenor x x x24 At all events, as this Court held in the case of Gardner v. Court of Appeals:25

against the findings herein made nor support the reversal by respondent Court. As a general rule, facts alleged in a partys pleading are deemed admissions of that party and binding upon it, but this is not an absolute and inflexible rule. An Answer is a mere statement of fact which the party filing it expects to prove, but it is not evidence. As Ariosto SANTOS himself, in open Court, had repudiated the defenses he had raised in his Answer and against his own interest, his testimony is deserving of weight and credence.26 (Italics supplied) The issue determinative of the controversy in the case at bar hinges on whether Castelltort is a builder in good faith. A builder in good faith is one who builds with the belief that the land he is building on is his, or that by some title one has the right to build thereon, and is ignorant of any defect or flaw in his title.27 Article 527 of the Civil Code provides that good faith is always presumed, and upon him who alleges bad faith on the part of a possessor rests the burden of proof.28 In the case at bar, Lot 16 was sold by Lina, through her attorney-in-fact Villegas, to Castelltort and a certain Elizabeth Cruz29 for a consideration of P500,000.00. While prior to the sale, what Villegas showed Castelltort as evidence of his mother Linas ownership of the property was only a photocopy of her title TCT No. (T-42171) T-1855030 he explaining that the owners duplicate of the title was lost and that judicial reconstitution thereof was ongoing, Castelltort acted in the manner of a prudent man and went to the Registry of Deeds of Laguna to procure a certified true copy of the TCT.31 The certified true copy bore no annotation indicating any prior adverse claim on Lot 16. The records indicate that at the time Castelltort began constructing his house on petitioners lot, he believed that it was the Lot 16 he bought and delivered to him by Villegas. In his cross-examination, Villegas testified: Q: You said the surveyor placed a mujon along boundary of the property?

In its Resolution reversing the original Decision, respondent Court discredited the testimony of Ariosto SANTOS for being at variance with the allegations in his Answer. The fact, however, that the allegations made by Ariosto SANTOS in his pleadings and in his declarations in open Court differed will not militate

A: Yes.
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Q: When were the mujons placed in the boundary of the property? A: These mujons were the basis for my locating the property in pointing to Mr. Castelltort.

Both lots 16 and 17 are practically the same. The (sic) have the same frontage. There is only a difference of 4 square meters, one is 311 square meters and the other 315 square meters. Both sides were fenced, as drawn they were facing the same road. They are practically the same. Q: But at the time or immediately before Mr. Castelltort started the construction of the house, was there any remarkable distinction between these two properties? A: None.32 (Emphasis and italics supplied) The confusion in the identification of Lot 16 was eventually traced to the error committed by geodetic engineer Augusto Riveras employees in placing stone monuments on petitioners property, instead of on Lot 16, the lot sold to Castelltort, based on the survey made by the engineer in 1992. The engineer so testified: Q: Now, aside from inspecting personally the site, what else did your men or assistants do? A: After computing the subdivision lots, they went back to the field to plant those subdivision corners with concrete monuments. Q:

xxx Q: Is it not a fact that before Miguel Castelltort started constructing that house he sought your advice or permission to construct the same over that particular lot? A: Yes. Q: And you gave your consent? A: Yes, because based on my knowledge also that that was the lot as pointed by Engr. Rivera.

xxx Q: Was there any remarkable difference between lot 16 and 17 at the time that this particular lot was sold to Miguel Castelltort and Elizabeth Cruz?

Which is (sic) also called as mohons? A: Yes, sir. Q:

xxx A:

Now, can you point to this Honorable Court where exactly did your men place these additional mohons and how many? A:
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Later on we discovered that they placed the mohons in the adjoining lot, lot 17.

xxx Q: x x x when again did you meet Mr. Rene Villegas or after how many months or year? A: Maybe after a year, sir. Q: And you met him again because he had a problem regarding the property of one Engr. Rosales? A: Yes, sir. Q: And when he confided to you this matter, did you go to the site of Lot 16 or 17? A: Yes, sir. Q: And what did you see there? A: A house being constructed then I rechecked the location of the house and it turned out to be in Lot 17. xxx Q:

Considering that you found out that a mistake was actually made by your assistants Dennis Orencio, Mario Carpio and Sovejano when you allowed them to proceed on their own to make this computation, did you confront these men of yours afterwards? A: Yes, sir. Q: In what manner? A: I actually reprimanded them verbally and also I dismissed Mario Carpio from my office. xxx Q: And did you investigate how your men committed this mistake of planting these monuments on another lot when corners 4 & 1 were clearly planted on the ground? A: I myself rechecked it and found out that they committed an error. xxx Q: And now, you are saying that your men committed a mistake by placing thereon monuments by planting these monuments not on Lot 16 but on Lot 17? A: When I investigated how did they commit (sic) a mistake it came to be like this. Before when we surveyed first this in 1992, at that time Dante Villegas contracted my services there was a fence here then when we went back, the road was already removed so they committed an error that this point is Lot 19, they thought that it was Lot 19, the back portion.
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xxx Q: In this particular case, did you find out how your men checked the succeeding lots, how they determine (sic) the exact location of lot 16? A: They just relied on one side of the subdivision. Q: By just counting the number of lots? A: Yes, sir. Q: Without making any actual measurement? A: They made an actual measurement but the reference point is not the one, the correct one because they also checked it with the other corner of the road going back.

xxx Q: Now, you said that when you went to the place because you heard from Rene Villegas that there was a mistake you no longer could find the monuments on lines 1 and 4 and according to you the reason is that a fence was already constructed? A: Yes, sir. Q: For clarification, is this line 1 & 4 on Lot 16 a common line 1 & 4 on Lot 17? A: Yes, sir a common line. Q: In other words, this line 1 & 4 devides (sic) Lot 16 & 17? A: Yes, sir. Q:

xxx Q: And how did they commit a mistake when you said they checked the lot at the back of Lot 16? A: Because they were quite confident since we had already relocated the property two years ago so they thought that they get (sic) the right lot without checking the other side of the subdivision.

So that when these monuments were placed on lines 1 & 4 somebody could mistake it for Lot 17 also because there were monuments now 1 & 4 for lot 16 since these are common lines for Lot 17 also with Lot 16, it could also be construed that these are monuments for Lot 17? A: Yes, sir possible.33 (Italics supplied) As correctly found by the CA, both parties having acted in good faith at least until August 21, 1995, the applicable provision in this case is Article 448 of the Civil Code which reads:
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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. Under the foregoing provision, the landowner can choose between appropriating the building by paying the proper indemnity or obliging the builder to pay the price of the land, unless its value is considerably more than that of the structures, in which case the builder in good faith shall pay reasonable rent.34 If the parties cannot come to terms over the conditions of the lease, the court must fix the terms thereof. 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.35 The landowner cannot refuse to exercise either option and compel instead the owner of the building to remove it from the land.36 The raison detre for this provision has been enunciated thus: Where the builder, planter or sower has acted in good faith, a conflict of rights arises between the owners, and it becomes necessary to protect the owner of the improvements without causing injustice to the owner of the land. In view of the impracticability of creating a state of forced co-ownership, the law has provided a just solution by giving the owner of the land the option to acquire the improvements after payment of the proper indemnity, or to oblige the builder or planter to pay for the land and the sower the proper rent. He cannot refuse to exercise either option. It is the owner of the land who is authorized to exercise the option, because his right is older, and because, by the principle of accession, he is entitled to the ownership of the accessory thing.37 Possession acquired in good faith does not lose this character except in the case and from the moment facts exist which show that the possessor is not unaware that he possesses the thing improperly or wrongfully.38 The good faith ceases or is legally interrupted from the moment defects in the title are

made known to the possessor, by extraneous evidence or by suit for recovery of the property by the true owner.39 In the case at bar, Castelltorts good faith ceased on August 21, 1995 when petitioners personally apprised him of their title over the questioned lot. As held by the CA, should petitioners then opt to appropriate the house, they should only be made to pay for that part of the improvement built by Castelltort on the questioned property at the time good faith still existed on his part or until August 21, 1995. The CA, however, failed to qualify that said part of the improvement should be pegged at its current fair market value consistent with this Courts pronouncement in Pecson v. Court of Appeals.40 And, as correctly found by the CA, the commencement of Castelltorts payment of reasonable rent should start on August 21, 1995 as well, to be paid until such time that the possession of the property is delivered to petitioners, subject to the reimbursement of expenses, that is, if such option is for petitioners to appropriate the house. This Court quotes the CAs ratiocination with approval: x x x Generally, Article 448 of the Civil Code provides that the payment of reasonable rent should be made only up to the date appellees serve notice of their option as provided by law upon the appellants and the court a quo; that is, if such option is for appellees to appropriate the encroaching structure. In such event, appellants would have a right to retain the land on which they have built in good faith until they are reimbursed the expenses incurred by them. This is so because the right to retain the improvements while the corresponding indemnity is not paid implies the tenancy or possession in fact of the land on which it is built, planted or sown. However, considering that appellants had ceased as builders in good faith at the time that appellant Miguel was notified of appellees lawful title over the disputed property, the payment of reasonable rent should accordingly commence at that time since he can no longer avail of the rights provided under the law for builders in good faith.41 If the option chosen by petitioners is compulsory sale, however, the payment of rent should continue up to the actual transfer of ownership.42

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Respecting petitioners argument that the appellate court erred in rendering a decision that is unenforceable against Judith who is not the owner of the house and Elizabeth Cruz who was found to be a part owner of the house built on their lot but is not a party to the case, the same does not lie. While one who is not a party to a proceeding shall not be affected or bound43 by a judgment rendered therein,44 like Elizabeth Cruz, this does not detract from the validity and enforceability of the judgment on petitioners and respondents Castelltorts. WHEREFORE, the petition is DENIED. The Decision dated October 2, 2002 and Resolution dated February 6, 2003 of the Court of Appeals are AFFIRMED with MODIFICATION such that the trial court shall include for determination the increase in value (plus value) which petitioners 315 square meter lot may have acquired by reason of the existence of that portion of the house built before respondents Miguel and Judith Castelltort were notified of petitioners rightful claim on said lot, and the current fair market value of said portion. SO ORDERED. Panganiban (Chairman), Sandoval-Gutierrez, Corona and Garcia, JJ., concur. Petition denied, judgment and resolution affirmed with modification. Notes.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. (Lopez vs. Sarabia, 439 SCRA 35 [2004]) 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. (Id.) The right to indemnity under Article 1678 arises only if the lessor opts to appropriate the improvements. (Id.) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Rosales vs. Castelltort, 472 SCRA 144(2005)]

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No. L-26694. December 18, 1973.* NELITA MORENA VDA. DE BACALING, petitioner, vs. HECTOR LAGUNA, HON. VALERION ROVIRA, Judge, Court of First Instance and HON. JUDGE ROSENDA BALTAZAR, Judge, City Court of Iloilo, respondents.
Settlement of estate; Contracts entered into by administrator binding upon his successor.It is elementary that the effect of revocation of letters testamentary or of administration is to terminate the authority of the executor or administrator, but the acts of the executor or administrator, done in good faith prior to the revocation of the letters, will be protected, and a similar protection will be extended to rights acquired under a previous grant of administration. Leases; Lessees are not possessors in good faith and are not entitled as of right to reimbursement of expenses to transfer house to another place.The rule is well-settled that lessees, like petitioner, are not possessors in good faith, because they knew that their occupancy of the premises continues only during the life of the lease, 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. Their rights are governed by article 1678 of the Civil Code which allows reimbursement of lessees up to one-half of the value of their improvements if the lessor so elects. Due process; No denial of due process where guardian ad litem of minor children duly notified of issuance of demolition order.There is evidence to show that Acting Fiscal Alfonso Ihemberger, guardian, ad litem of the minor children of the late Ramon Bacaling, has been duly apprised of the issuance of the assailed special order to demolish, as shown by the certification of the counsel for petitioner at the foot of his opposition filed with the CFI of Iloilo and as also shown by the certification of private respondents counsel at the foot of his opposition likewise filed with the same Court. Certiorari; Meaning of grave abuse of discretion.Grave abuse of discretion means such capricious and arbitrary exercise of judgment as is equivalent, in the eyes of the law, to lack of jurisdiction. Even mere abuse of discretion is not sufficient by itself to justify the issuance of a writ of certiorari. For that purpose the abuse of discretion must be grave and patent, and it must be shown that it was exercised arbitrarily or despotically, which is not the case made out by the present petition. Dilatory tactics; Dilatory tactics of parties subject to courts condemnation.The present petition smacks of a dilatory tactic and a frivolous attempt resorted to by petitioner to frustrate the prompt termination of the ejectment case and to prolong litigation unnecessarily. Such conduct deserves the vigorous condemnation of this Court.

Apeles L. Padilla for respondents. ESGUERRA, J.: I. Nature of the Case The petitioner seeks a writ of certiorari with preliminary injunction to annul an Order of Hon. Rosendo Baltazar, as Judge of the City Court of Iloilo, dated June 30, 1966, ordering the demolition of the residential house of petitioner.1 Assailed likewise is an Order, dated August 25, 1966, of Hon. Valerio V. Rovira, as Judge of the Court of First Instance of Iloilo, stationed at Iloilo City, approving said demolition.2 II. Facts of the Case The record of this case discloses the following facts: Private respondent Hector Laguna is the registered owner of a residential land known as lot No. 3508 situated at La Paz, Iloilo City.3 Many years back, petitioner and her late husband, Dr. Ramon Bacaling, with the acquiescence of private respondent Laguna, constructed a residential house on a portion of said lot fronting Huevana Street, paying a monthly rental of P80.00.4 Unable to pay the lease rental from July 1959 to September 1961, totalling P2,160.00, an action for ejectment (Civil Case No. 6823) was filed by private respondent Laguna against petitioner in her capacity as judicial administratrix of the estate of her late husband, Dr. Bacaling, in the City Court of Iloilo City.5 The filing of said case spawned various court suits. Petitioner on July 23, 1962, filed certiorari proceedings in this. Court (G.R. No. L-20061) but was dismissed for lack of merit on August 3, 1962.6 With this setback, petitioner on November 12, 1962, filed with the Court of First Instance of Iloilo a petition for certiorari with preliminary injunction (Civil Case No. 6162) but the same was dismissed on December 1, 1962.7 Unsuccessful in her motion for reconsideration, petitioner went to the Court of Appeals by way of certiorari (CA-G.R. No. 31882-R) but her petition was dismissed by that Court on March 7, 1967.8 Suffering from these series of legal reverses, the petitioner entered into a compromise agreement on July 29, 1964, with private respondent Laguna relative to Civil Case No. 6823.9 Said agreement inter alia, provides as follows: 1. Defendant (petitioner herein) agreed to vacate the premises and remove x x x the residential house therefrom x x x before December 31, 1966;
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ORIGINAL PETITION in the Supreme Court. Certiorari with preliminary injunction. The facts are stated in the opinion of the Court. Nicanor D. Sorongon for petitioner.

2. For the use and occupation x x x of the said premises x x x from June 1964 to December 31, 1969, the said defendant will pay plaintiff a monthly rent x x x of Eighty (P80.00) Pesos per calendar month. x x x; 3. Upon failure of defendant to comply with any x x x provision of the amicable settlement within x x x fifty (50) days x x x the plaintiff shall be entitled to immediate execution to restore plaintiff in possession of the premises and to recover all the unpaid monthly rents from June 1, 1964 until said premises are vacated by defendant; 4. Defendant waive her right, under Sec. 6, Rule 39, Rules of Court, to bar enforcement of the execution of the judgment in the case at anytime within one (1) year from December 31, 1969. In a decision dated July 30, 1964, the City Court of Iloilo City approved the amicable settlement and enjoined the parties to comply with its terms. For failure of the petitioner to satisfy the conditions of the settlement within the 50day period, private respondent Laguna moved for execution which the Court granted on July 7, 1965.10 On July 14, 1965, petitioner moved for reconsideration to quash the writ of execution, but before the Court could resolve the motion, petitioner on July 19, 1965, served notice of her intention to take the case to the Court of Appeals.11 Meanwhile on July 23, 1965, respondent Laguna filed an opposition to the petitioners July 14, 1965, motion, alleging that as judicial administratrix as of July 29, 1964, she was legally authorized to enter into the amicable settlement which was the basis of the decision dated July 30, 1964, of the City Court of Iloilo sought to be executed and, therefore, her act was binding upon the present judicial administrator, Atty. Roberto Dineros, who replaced petitioner upon her discharge as such on November 28, 1964.12 Denying the petitioners motion for reconsideration and to quash writ of execution on September 30, 1965, the City Court however, held in abeyance the enforcement of the alias writ of execution until the Court of First Instance of Iloilo stamped its imprimatur, considering the pendency of Special Proceedings No. 1469 and of the fact that the properties involved therein are in custodia legis.13 Thereafter, on October 25, 1965, private respondent Laguna moved the Court of First Instance of Iloilo in Special Proceedings No. 1469 for the approval of the City Courts order of execution which was granted despite petitioners opposition.14 With the denial of petitioners motion for reconsideration on December 4, 1965, a petition for certiorari with preliminary

injunction was brought before the Court of Appeals (CA-G.R. No. 36939-R) which dismissed the same on January 18, 1966.15 On April 14, 1966, the respondent City Judge of Iloilo City issued an alias writ of execution upon representations of private respondent Laguna, copies of which were served by the sheriff upon the petitioner and Atty. Roberto Dineros in his capacity as judicial administrator of the estate of the deceased, Dr. Ramon Bacaling, in Special Proceedings No. 1469.16 On June 30, 1966, a Special Order of Demolition was issued by the respondent City Judge upon motion of private respondent Laguna and over petitioners opposition, subject, however, to the approval of the Court of First Instance of Iloilo in Special Proceedings No. 1469.17 Upon the denial of petitioners motion for reconsideration, respondent Laguna on July 12, 1966, filed a manifestation in the Court of First Instance of Iloilo in Special Proceedings No. 1469, praying for the confirmation of the Order to demolish the house under custodia legis.18 On August 4, 1966, petitioner interposed an opposition alleging: 1. That she was no longer in control of the estate funds when the stipulated obligations in the amicable settlement became due and payable; 2. That the residential house to be demolished is worth P35,000.00 for which she is entitled to reimbursement as a builder in good faith, in addition to reasonable expenses they may incur in transferring the same to another place; and 3. That the guardian ad litem of the minor children was not notified of the motion for the issuance of an order of demolition;19 On August 25, 1966, respondent Laguna by way of reply disputed petitioners claim and supported the legality of the courts ruling.20 On the same date, the probate court in Special Proceedings No. 1469 approved the order of demolition of the house in controversy.21 Impugning the said Order as violative of the provisions of Sec. 14, Rule 39, of the Rules of Court, and of the constitutional mandate on due process, petitioner moved to reconsider the same but the motion was denied by the Court on September 26, 1966.22 Frustrated in her effort to set aside the Order of Demolition, petitioner brought this present action of certiorari with preliminary injunction. Upon giving due course to the petition, this Court issued a temporary restraining order on October 21, 1966, to prevent the enforcement of the order of demolition in Special Proceedings No. 1469 of the Court of First Instance of Iloilo, but when
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served upon the respondents, the building in question was already partially demolished.23 Upon petitioners posting a bond of P1,000.00, this Court on November 10, 1966, issued a writ of preliminary injunction restraining the herein respondents from proceeding with the order of demolition, until further orders.24 III Issues of the Case The issues raised in the instant petition boil down to the following: 1. Whether or not the acts of the petitioner as judicial administratrix prior to her discharge or removal are valid and binding upon her successor; 2. Whether or not petitioner is a builder in good faith and, therefore, entitled to reimbursement, and/or reasonable expenses that may be incurred in transferring the house to another place; 3. Whether or not due process was denied to the minor children of deceased Ramon Bacaling, and petitioner in connection with the motion for the issuance of the order of demolition. IV. Discussion Petitioner claims before this Court that since she was no longer the judicial administratrix of the estate of her late husband, Dr. Ramon Bacaling, and was no longer in control of estate funds when the stipulated obligations in the amicable settlement became due and payable, the special order of demolition could not be enforced. Such a view is not tenable. Under Section 3, Rule 82 of the Rules of Court, petitioners lawful acts before the revocation of her letters of administration or before her removal shall have the same validity as if there was no such revocation or removal. It is elementary that the effect of revocation of letters testamentary or of administration is to terminate the authority of the executor or administrator, but the acts of the executor or administrator, done in good faith prior to the revocation of the letters, will be protected, and a similar protection will be extended to rights acquired under a previous grant of administration.25 In connection with the petitioners contention that she be considered a builder in good faith and, therefore, entitled to reimbursement in addition to reasonable expenses that may be incurred in transferring the house to another place, the same cannot stand legal scrutiny. The rule is well-settled that lessees, like petitioner, are not possessors in good faith, because they knew that their

occupancy of the premises continues only during the life of the lease, 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. Their rights are governed by Article 1678 of the Civil Code which allows reimbursement of lessees up to one-half of the value of their improvements if the lessor so elects.26 It is next urged by petitioner that there was denial of due process for failure of private respondent to notify the guardian ad litem of the minor children of the deceased, Ramon Bacaling, of the motion for execution. A perusal of the pleadings yields the conclusion that petitioner failed to meet the burden of demonstrating that there was denial of due process. On the contrary, there is evidence to show that Acting Fiscal Alfonso Illemberger, guardian ad litem of the minor children of the late Ramon Bacaling, has been duly apprised of the issuance of the assailed special order to demolish, as shown by the certification of the counsel for petitioner at the foot of his opposition dated August 4, 1966,27 filed with the Court of First Instance of Iloilo, and as also shown by the certification of private respondents counsel at the foot of his opposition dated September 15, 1966,28 likewise filed with the same Court. V. Conclusion The petitioner is not entitled to the writ of certiorari. In the case at bar, there is absolutely no showing that the respondent courts acted so arbitrarily, despotically or capriciously as to amount to lack of jurisdiction in issuing the questioned orders. Grave abuse of discretion which is a ground for certiorari means such capricious and arbitrary exercise of judgment as is equivalent, in the eyes of the law, to lack of jurisdiction.29 Even mere abuse of discretion is not sufficient by itself to justify the issuance of a writ of certiorari. For that purpose the abuse of discretion must be grave and patent, and it must be shown that it was exercised arbitrarily or despotically, which is not the case made out by the present petition.30 There is something more to be said about the nature and apparent purpose of this case which has its genesis in the case for illegal detainer (Civil Case No. 6823) brought before the Iloilo City Court. What transpired therein presents a glaring example of a summary proceeding which was deliberately protracted and made to suffer undue delay in its disposal. It was originally filed on
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September 13, 1960;31 it reached the appellate courts five (5) times, twice before the Court of Appeals32, Once before the Court of First Instance of Iloilo33, and twice before this Court.34 The present petition smacks of a dilatory tactic and a frivolous attempt resorted to by petitioner to frustrate the prompt termination of the ejectment case and to prolong litigation unnecessarily. Such conduct on the part of petitioner and her counsel deserves the vigorous condemnation of this Court,35 because it evinces a flagrant misuse of the remedy of certiorari which should only be resorted to in cases of lack of jurisdiction or grave abuse of discretion by an inferior court. A recourse of this kind unduly taxes the energy and patience of courts and simply wastes the precious time that they could well devote to really meritorious cases. VI. Judgment IN THE LIGHT OF THE FOREGOING CONSIDERATIONS, the instant petition should be, as it is hereby, dismissed. The writ of preliminary injunction issued by this Court on November 10, 1966, is immediately set aside. 36 Treble costs against the petitioner for the reasons above set forth. 37 Makalintal, C.J., Castro, Teehankee, Makasiar and Muoz Palma, JJ., concur. Petition dismissed. Notes.The right of the lessee with respect to improvements made on the property by him is governed by the provisions of articles 579 and 1678 of the Civil Code. Under article 579 the lessee is entitled to remove the improvements made by him so far-as it is possible to do so without injury to the property. This means that he may remove the improvements provided he leaves the property in substantially the same condition as when he entered upon it, Articles 448 and 546 of the Civil Code, which define the rights between the owner of a piece of land and builders of improvements thereon in good faith, are not applicable as between landlord and tenant, since the Code supplies specific provisions designed to cover their rights. Besides, the tenant cannot be said to be a builder in good faith as he has no pretension to be an owner. (Rivera vs. Trinidad, 48 Phil. 396; Fojas vs. Velasco, 51 Phil. 520; Lopez, Inc. vs. Phil. & Eastern Trading Co., Inc., 98 Phil. 348). o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Vda. de Bacaling vs. Laguna, 54 SCRA 243(1973)]

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G.R. No. 144635. June 26, 2006.* PROGRAMME INCORPORATED, petitioner, vs. PROVINCE OF BATAAN,1 respondent.
Appeals; Only questions of law are proper subject of a petition for review on certiorari in the Supreme Court, unless any of the known exceptions is extant in the case.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. 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. There is none. Evidence; Judicial Admissions; An admission, verbal, or written, made by a party in the course of the proceedings in the same case, does not require proof; To be considered as a judicial admission, the same must be made in the same case in which it is offered.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. [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. (emphasis ours) To be considered as a judicial admission, the same must be made in the same case in which it is offered. Property; Builders in Good Faith; The benefits granted to a possessor in good faith cannot be maintained by a lessee against the lessor because, such benefits are intended to apply only to a case where one builds or sows or plants on the land which he believes himself to have a claim of title and not to lands where ones 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. Petitioners reference to Article 448 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 ones 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.

Appeals; Attorneys; Pleadings and Practice; Where the petition for review on certiorari is clearly without legal and factual basis, the petitioners counsel should not have even filed the appeal.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, petitioners counsel should not have even filed this appeal. It is obvious that the intention was merely to delay the disposition of the case.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals. The facts are stated in the opinion of the Court. Benito R. Cuesta I for petitioner. Crisostomo G. Banzon for respondents. 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 Bataans 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, [BASECOs] 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
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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 nonpayment of taxes to respondent Province of Bataan. The title of the property was transferred to respondent. BASECOs 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. On appeal, the CA addressed the issue of ownership of Piazza Hotel and Mariveles Lodge as follows: [W]e affirm the trial courts 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 respondents 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 BASECOs (respondents 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 x x x15 (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
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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 x x x for monthly rentals of P6,500.00.20 Petitioner could not possibly be the owner of a building merely leased to it.21 Furthermore, petitioners 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 ones 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 Petitioners 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 petitioners 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. _______________

23 Tolentino, COMMENTARIES AND JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES, Vol. V (1992) (Central Lawbook Publishing, Inc., Quezon City, Philippines), p. 255. Citations omitted. 24 The Civil Code provides: 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. 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, petitioners 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, petitioners counsel, for filing this flimsy appeal, payable within ten (10) days from finality of this decision. SO ORDERED.
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Puno (Chairperson), Sandoval-Gutierrez, Azcuna and Garcia, JJ., concur. Petition denied, judgment and resolution affirmed. Notes.In spite of the presence of judicial admissions in a partys pleading, the trial court is still given leeway to consider other evidence presented. (Atillo III vs. Court of Appeals, 266 SCRA 596 [1997]) A stipulation of facts by the parties in a criminal case is recognized as declarations constituting judicial admissions, hence, binding upon the parties. (Alano vs. Court of Appeals, 283 SCRA 269 [1997]) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Programme Incorporated vs. Province of Bataan, 492 SCRA 529(2006)]

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G.R. No. 170923.

January 20, 2009.*

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.

SULO SA NAYON, INC. and/or PHILIPPINE VILLAGE HOTEL, INC. and JOSE MARCEL E. PANLILIO, petitioners, vs. NAYONG PILIPINO FOUNDATION, respondent.
Lease; Ejectment; Unlawful Detainer; The word vacate is not a talismanic word that must be employed in all notices to vacatethe tenants must pay rentals which are fixed and which became payable in the past, failing which they must move out.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. Same; Builders in Good Faith; Introduction of valuable improvements on the leased premises does not give the lessee the right of retention and reimbursement which rightfully belongs to a builder in good faiththe doctrine is 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 since his rights are governed by Article 1678.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. Same; Same; Contracts; Basic is the doctrine that laws are deemed incorporated in each and every contractexisting laws always form part of any contract.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.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals. The facts are stated in the opinion of the Court. Linderbergh S. Villamil for petitioners. The Government Corporate Counsel for respondent. PUNO, C.J.: On appeal are the Court of Appeals (CAs) October 4, 2005 Decision1 in CAG.R. SP No. 74631 and December 22, 2005 Resolution,2 reversing the November 29, 2002 Decision3 of the Regional Trial Court (RTC) of Pasay City in Civil Case No. 02-0133. The RTC modified the Decision4 of the Metropolitan Trial Court (MeTC) of Pasay City which ruled against petitioners and ordered them to vacate the premises and pay their arrears. The RTC declared petitioners as builders in good faith and upheld their right to indemnity. The facts are as follows: Respondent Nayong Pilipino Foundation, a government-owned and controlled corporation, is the owner of a parcel of land in Pasay City, known as the Nayong Pilipino Complex. Petitioner Philippine Village Hotel, Inc. (PVHI), formerly called Sulo sa Nayon, Inc., is a domestic corporation duly organized and existing under Philippine laws. Petitioner Jose Marcel E. Panlilio is its Senior Executive Vice President. On June 1, 1975, respondent leased a portion of the Nayong Pilipino Complex, consisting of 36,289 square meters, to petitioner Sulo sa Nayon, Inc. for the construction and operation of a hotel building, to be known as the Philippine Village Hotel. The lease was for an initial period of 21 years, or until May 1996. It is renewable for a period of 25 years under the same terms and conditions upon due notice in writing to respondent of the intention to renew at least 6 months before its expiration. Thus, on March 7, 1995, petitioners sent respondent a letter notifying the latter of their intention to renew the contract for another 25 years. On July 4, 1995, the parties executed a Voluntary Addendum to the Lease Agreement. The addendum was signed by petitioner Jose Marcel E. Panlilio in his official capacity as Senior Executive Vice President of the PVHI and by Chairman Alberto A. Lim of the Nayong Pilipino Foundation. They
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agreed to the renewal of the contract for another 25 years, or until 2021. Under the new agreement, petitioner PVHI was bound to pay the monthly rental on a per square meter basis at the rate of P20.00 per square meter, which shall be subject to an increase of 20% at the end of every 3-year period. At the time of the renewal of the lease contract, the monthly rental amounted to P725,780.00. Beginning January 2001, petitioners defaulted in the payment of their monthly rental. Respondent repeatedly demanded petitioners to pay the arrears and vacate the premises. The last demand letter was sent on March 26, 2001. On September 5, 2001, respondent filed a complaint for unlawful detainer before the MeTC of Pasay City. The complaint was docketed as Civil Case No. 708-01. Respondent computed the arrears of petitioners in the amount of twenty-six million one hundred eighty-three thousand two hundred twenty-five pesos and fourteen centavos (P26,183,225.14), as of July 31, 2001. On February 26, 2002, the MeTC rendered its decision in favor of respondent. It ruled, thus: . . . . The court is convinced by the evidence that indeed, defendants defaulted in the payment of their rentals. It is basic that the lessee is obliged to pay the price of the lease according to the terms stipulated (Art. 1657, Civil Code). Upon the failure of the lessee to pay the stipulated rentals, the lessor may eject (sic) and treat the lease as rescinded and sue to eject the lessee (C. Vda[.] De Pamintuan v. Tiglao, 53 Phil. 1). For non-payment of rentals, the lessor may rescind the lease, recover the back rentals and recover possession of the leased premises. . . xxx . . . . Improvements made by a lessee such as the defendants herein on leased premises are not valid reasons for their retention thereof. The Supreme Court has occasion to address a similar issue in which it ruled that: The fact that petitioners allegedly made repairs on the premises in question is not a reason for them to retain the possession of the premises. There is no provision of law which grants the lessee a right of retention over the leased premises on that ground. Article 448 of the Civil Code, in relation to Article 546, which provides for full reimbursement of useful improvements and retention of the premises until reimbursement is made, applies only to a possessor in good faith, i.e., one who builds on a land in the belief that he is the owner thereof. This right of retention does not apply to a mere lessee, like the petitioners, otherwise, it would always be in his power to improve his landlord out of the latters

property (Jose L. Chua and Co Sio Eng vs. Court of Appeals and Ramon Ibarra, G.R. No. 109840, January 21, 1999). Although the Contract of Lease stipulates that the building and all the improvements in the leased premises belong to the defendants herein, such will not defeat the right of the plaintiff to its property as the defendants failed to pay their rentals in violation of the terms of the contract. At most, defendants can only invoke [their] right under Article 1678 of the New Civil Code which grants them the right to be reimbursed one-half of the value of the building upon the termination of the lease, or, in the alternative, to remove the improvements if the lessor refuses to make reimbursement. The dispositive portion of the decision reads as follows: WHEREFORE, premises considered, judgment is hereby rendered in favor of Nayong Pilipino Foundation, and against the defendant Philippine Village Hotel, Inc[.], and all persons claiming rights under it, ordering the latter to: 1. VACATE the subject premises and surrender possession thereof to plaintiff; 2. PAY plaintiff its rental arrearages in the sum of TWENTY SIX MILLION ONE HUNDRED EIGHTY THREE THOUSAND TWO HUNDRED TWENTY FIVE PESOS AND 14/100 (P26,183,225.14) incurred as of July 31, 2001; 3. PAY plaintiff the sum of SEVEN HUNDRED TWENTY FIVE THOUSAND SEVEN HUNDRED EIGHTY PESOS (P725,780.00) per month starting from August 2001 and every month thereafter by way of reasonable compensation for the use and occupation of the premises; 4. PAY plaintiff the sum of FIFTY THOUSAND PESOS (P50,000.00) by way of attorneys fees[; and] 5. PAY the costs of suit. The complaint against defendant Jose Marcel E. Panlilio is hereby dismissed for lack of cause of action. The said defendants counterclaim however is likewise dismissed as the complaint does not appear to be frivolous or maliciously instituted. SO ORDERED.5

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Petitioners appealed to the RTC which modified the ruling of the MeTC. It held that: . . . it is clear and undisputed that appellants-lessees were expressly required to construct a first-class hotel with complete facilities. The appellants were also unequivocally declared in the Lease Agreement as the owner of the improvements so constructed. They were even explicitly allowed to use the improvements and building as security or collateral on loans and credit accommodations that the Lessee may secure for the purpose of financing the construction of the building and other improvements (Section 2; pars. A to B, Lease Agreement). Moreover, a time frame was setforth (sic) with respect to the duration of the lease initially for 21 years and renewable for another 25 years in order to enable the appellants-lessees to recoup their huge money investments relative to the construction and maintenance of the improvements. xxx Considering therefore, the elements of permanency of the construction and substantial value of the improvements as well as the undispute[d] ownership over the land improvements, these, immensely engender the application of Art. 448 of the Civil Code. The only remaining and most crucial issue to be resolved is whether or not the appellants as builders have acted in good faith in order for Art. 448 in relation to Art. 546 of the Civil Code may apply with respect to their rights over improvements. xxx . . . it is undeniable that the improvement of the hotel building of appellants (sic) PVHI was constructed with the written consent and knowledge of appellee. In fact, it was precisely the primary purpose for which they entered into an agreement. Thus, it could not be denied that appellants were builders in good faith. Accordingly, and pursuant to Article 448 in relation to Art. 546 of the Civil Code, plaintiff-appellee has the sole option or choice, either to appropriate the building, upon payment of proper indemnity consonant to Art. 546 or compel the appellants to purchase the land whereon the building was erected. Until such time that plaintiff-appellee has elected an option or choice, it has no right of removal or demolition against appellants unless after having selected a compulsory sale, appellants fail to pay for the land (Ignacio vs. Hilario, 76 Phil. 605). This, however, is without prejudice from the parties agreeing to adjust their rights in some other way as they may mutually deem fit and proper.

The dispositive portion of the decision of the RTC reads as follows: WHEREFORE, and in view of the foregoing, judgment is hereby rendered modifying the decision of [the] MTC, Branch 45 of Pasay City rendered on February 26, 2002 as follows: 1. Ordering plaintiff-appellee to submit within thirty (30) days from receipt of a copy of this decision a written manifestation of the option or choice it selected, i.e., to appropriate the improvements upon payment of proper indemnity or compulsory sale of the land whereon the hotel building of PVHI and related improvements or facilities were erected; 2. Directing the plaintiff-appellee to desist and/or refrain from doing acts in the furtherance or exercise of its rights and demolition against appellants unless and after having selected the option of compulsory sale and appellants failed to pay [and] purchase the land within a reasonable time or at such time as this court will direct; 3. Ordering defendants-appellants to pay plaintiff-appellee [their] arrears in rent incurred as of July 31, 2001 in the amount of P26,183,225.14; 4. Ordering defendants-appellants to pay to plaintiff-appellee the unpaid monthly rentals for the use and occupation of the premises pending this appeal from July to November 2002 only at P725,780.00 per month; 5. The fourth and fifth directives in the dispositive portion of the trial courts decision including that the last paragraph thereof JME Panlilios complaint is hereby affirmed; 6. The parties are directed to adjust their respective rights in the interest of justice as they may deem fit and proper if necessary. SO ORDERED.6 Respondent appealed to the CA which held that the RTC erroneously applied the rules on accession, as found in Articles 448 and 546 of the Civil Code when it held that petitioners were builders in good faith and, thus, have the right to indemnity. The CA held: By and large, respondents are admittedly mere lessees of the subject premises and as such, cannot validly claim that they are builders in good faith in order to solicit the application of Articles 448 and 546 of the Civil Code in their favor. As it is, it is glaring error on the part of the RTC to apply the
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aforesaid legal provisions on the supposition that the improvements, which are of substantial value, had been introduced on the leased premises with the permission of the petitioner. To grant the respondents the right of retention and reimbursement as builders in good faith merely because of the valuable and substantial improvements that they introduced to the leased premises plainly contravenes the law and settled jurisprudential doctrines and would, as stated, allow the lessee to easily improve the lessor out of its property. . . . . Introduction of valuable improvements on the leased premises does not strip the petitioner of its right to avail of recourses under the law and the lease contract itself in case of breach thereof. Neither does it deprive the petitioner of its right under Article 1678 to exercise its option to acquire the improvements or to let the respondents remove the same. Petitioners Motion for Reconsideration was denied. Hence, this appeal.7 Petitioners assign the following errors: I 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. V THE HONORABLE COURT OF APPEALS COMMITTED A GRAVE REVERSIBLE ERROR IN NOT HOLDING THAT THE COURTS A QUO DID NOT ACQUIRE JURISDICTION OVER THE UNLAWFUL DETAINER CASE FOR NON-COMPLIANCE WITH JURISDICTIONAL REQUIREMENTS DUE TO THE ABSENCE OF A NOTICE TO VACATE UPON PETITIONERS.8 First, we settle the issue of jurisdiction. Petitioners argue that the MeTC did not acquire jurisdiction to hear and decide the ejectment case because they never received any demand from respondent to pay rentals and vacate the premises, since such demand is a jurisdictional requisite. We reiterate the ruling of the MeTC, RTC and CA. Contrary to the claim of petitioners, documentary evidence proved that a demand letter dated March 26, 2001 was sent by respondent through registered mail to petitioners, requesting them to pay the rental arrears or else it will be constrained to file the appropriate legal action and possess the leased premises. Further, petitioners argument that the demand letter is inadequate because it contained no demand to vacate the leased premises does not persuade. We have ruled that: . . . . The word vacate is not a talismanic word that must be employed in all notices. The alternatives in this case are clear cut. The tenants must pay
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rentals which are fixed and which became payable in the past, failing which they must move out. There can be no other interpretation of the notice given to them. Hence, when the petitioners demanded that either he pays P18,000 in five days or a case of ejectment would be filed against him, he was placed on notice to move out if he does not pay. There was, in effect, a notice or demand to vacate.9 In the case at bar, the language of the demand letter is plain and simple: respondent demanded payment of the rental arrears amounting to P26,183,225.14 within ten days from receipt by petitioners, or respondent will be constrained to file an appropriate legal action against petitioners to recover the said amount. The demand letter further stated that respondent will possess the leased premises in case of petitioners failure to pay the rental arrears within ten days. Thus, it is clear that the demand letter is intended as a notice to petitioners to pay the rental arrears, and a notice to vacate the premises in case of failure of petitioners to perform their obligation to pay. Second, we resolve the main issue of whether the rules on accession, as found in Articles 448 and 546 of the Civil Code, apply to the instant case. Article 448 and Article 546 provide: Art. 448. The owner of the land on which anything has been built, sown or planted in good faith, shall have the right to appropriate as his own the works, sowing or planting, after payment of the indemnity provided for in Articles 546 and 548, or to oblige the one who built or planted to pay the price of the land, and the one who sowed, the proper rent. However, the builder or planter cannot be obliged to buy the land if its value is considerably more than that of the building or trees. In such case, he shall pay reasonable rent, if the owner of the land does not choose to appropriate the building or trees after proper indemnity. The parties shall agree upon the terms of the lease and in case of disagreement, the court shall fix the terms thereof. Art. 546. Necessary expenses shall be refunded to every possessor; but only the possessor in good faith may retain the thing until he has been reimbursed therefor. Useful expenses shall be refunded only to the possessor in good faith with the same right of retention, the person who has defeated him in the possession having the option of refunding the amount of the expenses or of paying the increase in value which the thing may have acquired by reason thereof.

We uphold the ruling of the CA. The late Senator Arturo M. Tolentino, a leading expert in Civil Law, explains: This article [Article 448] is manifestly intended to apply only to a case where one builds, plants, or sows on land in which he believes himself to have a claim of title,10 and not to lands where the only interest of the builder, planter or sower is that of a holder, such as a tenant.11 In the case at bar, petitioners have no adverse claim or title to the land. In fact, as lessees, they recognize that the respondent is the owner of the land. What petitioners insist is that because of the improvements, which are of substantial value, that they have introduced on the leased premises with the permission of respondent, they should be considered builders in good faith who have the right to retain possession of the property until reimbursement by respondent. We affirm the ruling of the CA that introduction of valuable improvements on the leased premises does not give the petitioners the right of retention and reimbursement which rightfully belongs to a builder in good faith. Otherwise, such a situation would allow the lessee to easily improve the lessor out of its property. We reiterate the doctrine that a lessee is neither a builder in good faith nor in bad faith12 that would call for the application of Articles 448 and 546 of the Civil Code. His rights are governed by Article 1678 of the Civil Code, which reads: Art. 1678. If the lessee makes, in good faith, useful improvements which are suitable to the use for which the lease is intended, without altering the form or substance of the property leased, the lessor upon the termination of the lease shall pay the lessee one-half of the value of the improvements at that time. Should the lessor refuse to reimburse said amount, the lessee may remove the improvements, even though the principal thing may suffer damage thereby. He shall not, however, cause any more impairment upon the property leased than is necessary. With regard to ornamental expenses, the lessee shall not be entitled to any reimbursement, but he may remove the ornamental objects, provided no damage is caused to the principal thing, and the lessor does not choose to retain them by paying their value at the time the lease is extinguished. Under Article 1678, the lessor has the option of paying one-half of the value of the improvements which the lessee made in good faith, which are suitable for the use for which the lease is intended, and which have not altered the form
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and substance of the land. On the other hand, the lessee may remove the improvements should the lessor refuse to reimburse. Petitioners argue that to apply Article 1678 to their case would result to sheer injustice, as it would amount to giving away the hotel and its other structures at virtually bargain prices. They allege that the value of the hotel and its appurtenant facilities amounts to more than two billion pesos, while the monetary claim of respondent against them only amounts to a little more than twenty-six million pesos. Thus, they contend that it is the lease contract that governs the relationship of the parties, and consequently, the parties may be considered to have impliedly waived the application of Article 1678. We cannot sustain this line of argument by petitioners. Basic is the doctrine that laws are deemed incorporated in each and every contract. Existing laws always form part of any contract. Further, the lease contract in the case at bar shows no special kind of agreement between the parties as to how to proceed in cases of default or breach of the contract. Petitioners maintain that the lease contract contains a default provision which does not give respondent the right to appropriate the improvements nor evict petitioners in cases of cancellation or termination of the contract due to default or breach of its terms. They cite paragraph 10 of the lease contract, which provides that: 10. DEFAULT.. . . Default shall automatically take place upon the failure of the LESSEE to pay or perform its obligation during the time fixed herein for such obligations without necessity of demand, or, if no time is fixed, after 90 days from the receipt of notice or demand from the LESSOR. . . In case of cancellation or termination of this contract due to the default or breach of its terms, the LESSEE will pay all reasonable attorneys fees, costs and expenses of litigation that may be incurred by the LESSOR in enforcing its rights under this contract or any of its provisions, as well as all unpaid rents, fees, charges, taxes, assessment and others which the LESSOR may be entitled to. Petitioners assert that respondent committed a breach of the lease contract when it filed the ejectment suit against them. However, we find nothing in the above quoted provision that prohibits respondent to proceed the way it did in enforcing its rights as lessor. It can rightfully file for ejectment to evict petitioners, as it did before the court a quo.

IN VIEW WHEREOF, petitioners appeal is DENIED. The October 4, 2005 Decision of the Court of Appeals in CA-G.R. SP No. 74631 and its December 22, 2005 Resolution are AFFIRMED. Costs against petitioners. SO ORDERED. Carpio, Corona, Azcuna and Leonardo-De Castro, JJ., concur. Petition denied, judgment and resolution affirmed. Notes.Good faith is an intangible and abstract quality with no technical meaning or statutory definition, and it encompasses, among other things, an honest belief, the absence of malice and the absence of design to defraud or to seek an unconscionable advantage. (Philippine National Bank vs. De Jesus, 411 SCRA 557 [2003]) Article 448 of the Civil Code covers only cases in which the builders, sowers or planters believe themselves to be owners of the land or, at least, to have a claim of title theretoit does not apply when the interest is that of a mere tenant. (Quevada vs. Court of Appeals, 502 SCRA 233 [2006]) o0o Copyright 2012 Central Book Supply, Inc. All rights reserved. [Sulo sa Nayon Inc. vs. Nayong Pilipino Foundation, 576 SCRA 655(2009)]

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No. L-25462. February 21, 1980.* MARIANO FLOREZA, petitioner, vs. MARIA D. de EVANGELISTA and SERGIO EVANGELISTA, respondents.
Civil Law; Builder in good faith, not a case of; Applicability of Art 448 of the Civil Code.We uphold the Court of Appeals in its conclusion that Article 448 of the Civil Code is inapplicable to the factual milieu herein. Said codal provision applies only when the builder, planter, or sower believes he has the right so to build, plant or sow because he thinks he owns the land or believes himself to have a claim of title. In this case, petitioner makes no pretensions of ownership whatsoever. Same; Same; Rights of a person who made useful improvements on the lot of another before effectivity of the pacto de retro sale of the lot; Rights akin to those of the usufructuary.Since petitioner cannot be classified as a builder in good faith within the purview of Article 448 of the Civil Code, nor as a vendee a retro, who made useful improvements during the lifetime of the pacto de retro, petitioner has no right to reimbursement of the value of the house which he had erected on the residential lot of the EVANGELISTAS, much less to retention of the premises until he is reimbursed. The rights of petitioner are more akin to those of a usufructuary who, under Article 579 of the Civil Code (Art. 487 of the old Code), may make on the property useful improvements but with no right to be indemnified therefor. He may, however, remove such improvements should it be possible to do so without damage to the property. For if the improvements made by the usufructuary were subject to indemnity, we would have a dangerous and unjust situation in which the usufructuary could dispose of the owners funds by compelling him to pay for improvements which perhaps he would not have made. Same; Damages; Liability for damages for retention of property although redemption thereof had been made.Having retained the property although a redemption had been made, he should be held liable for damages in the form of rentals for the continued use of the subject residential lot at the rate of P10.00 monthly from January 3, 1955, and not merely from the date of demand on May 4, 1956, as held by the Court of Appeals, until the house was removed and the property vacated by petitioner or his heirs.

This is a Petition for Review on Certiorari of the Decision of the Court of Appeals (CA-G.R. No. 23516-R) promulgated on November 4, 1965, entitled Maria de Evangelista and Sergio Evangelista, (now the respondents) vs. Mariano Floreza (petitioner herein), reversing the judgment of the Court of First Instance of Rizal rendered on July 17, 1957, and instead ordering petitioner to vacate respondents residential lot, to remove his house at his own expenses and to pay rental from May 5, 1956. Plaintiffs Maria de Evangelista and Sergio Evangelista, who are mother and son, (the EVANGELISTAS, for short) are the owners of a residential lot located at Sumilang St., Tanay, Rizal, with an area of 204.08 sq. ms., assessed at P410.00. In May 1945, the EVANGELISTAS borrowed from FLOREZA the amount of P100.00. On or about November 1945, with the consent of the EVANGELISTAS, FLOREZA occupied the above residential lot and built thereon a house of light materials (barong-barong) without any agreement as to payment for the use of said residential lot owing to the fact that the EVANGELISTAS has then a standing loan of P100.00 in favor of FLOREZA.1 On the following dates, the EVANGELISTAS again borrowed the indicated amounts: September 16, 1946 - P100.00;2 August 17, 1947 - P200.00;3 January 30, 1949 - P200.00;4 April 1, 1949 - P140.00,5 or a total of P740.00 including the first loan. The last three items are evidenced by private documents stating that the residential lot stands as security therefor and that the amounts covered thereunder are payable within six years from date, without mention of interest. The document executed on September 16, 1946 stated specifically that the loan was without interest walang anumang patubo. On January 10, 1949, FLOREZA demolished this house of light materials and in its place constructed one of strong materials assessed in his name at P1,410.00 under Tax Declaration No. 4448. FLOREZA paid no rental as before.6 On August 1, 1949, the EVANGELISTAS, for and in consideration of P1,000.00 representing the total outstanding loan of P740.00 plus P260.00 in cash, sold their residential lot to FLOREZA, with a right to repurchase within a period of 6 years from date, or up to August 1, 1955, as evidenced by a notarial document, Exh. B, registered under Act 3344 on December 6, 1949, as Inscription No. 2147.7
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PETITION for review on certiorari of the decision of the Court of Appeals. The facts are stated in the opinion of the Court. R. D. Hipolito & B. P. Fabir for petitioner. E. G. Tanjuatco & Associates for respondents. MELENCIO-HERRERA, J.:

On January 2, 1955, or seven months before the expiry of the repurchase period, the EVANGELISTAS paid in full the repurchase price of P1,000.00. On April 25, 1956, the EVANGELISTAS, through their counsel, wrote FLOREZA a letter8 asking him to vacate the premises as they wanted to make use of their residential lot besides the fact that FLOREZA had already been given by them more than one year within which to move his house to another site. On May 4, 1956, the EVANGELISTAS made a formal written demand to vacate, within five days from notice, explaining that they had already fully paid the consideration for the repurchase of the lot.9 FLOREZA refused to vacate unless he was first reimbursed the value of his house. Hence, the filing of this Complaint on May 18, 1956 by the EVANGELISTAS. The EVANGELISTAS prayed that: 1) they be declared the owners of the house of strong materials built by FLOREZA on their residential lot, without payment of indemnity; or, in the alternative to order FLOREZA to remove said house; 2) that FLOREZA pay them the sum of P10.00 per month as the reasonable value for the use and occupation of the same from January 2, 1955 (the date the repurchase price was paid) until FLOREZA removes the house and delivers the lot to them; and 3) to declare the transaction between them and FLOREZA as one of mortgage and not of pacto de retro. In his Answer, FLOREZA admitted the repurchase but controverted by stating that he would execute a deed of repurchase and leave the premises upon payment to him of the reasonable value of the house worth P7,000.00. In a Decision dated July 17, 1957, the Court of First Instance of Rizal opined that the question of whether the transaction between the parties is one of mortgage or pacto de retro is no longer material as the indebtedness of P1,000.00 of the EVANGELISTAS to FLOREZA had already been fully paid. And, applying Article 448 of the Civil Code,10 it rendered a decision dispositively decreeing: FOR ALL THE FOREGOING CONSIDERATIONS, the Court hereby renders judgment granting the plaintiffs the right to elect, as owners of the land, to purchase the house built on the said lot in question by the defendant for P2,500 or to sell their said land to the defendant for P1,500. In the event that the plaintiffs shall decide not to purchase the house in question, the defendant should be allowed to remain in plaintiffs premises by paying a monthly rental of P10.00 which is the reasonable value for the use of the same per month as alleged by plaintiffs in their complaint. The Court also orders the defendant to pay a monthly rental of P10.00 for the use of the land in question from May 18,

1956, the date of the commencement of this action. The counterclaim of the defendant is hereby ordered dismissed. Without pronouncement as to costs. SO ORDERED.11 Both parties appealed to the Court of Appeals. On November 4, 1965, the Court of Appeals concluded that Article 448 of the Civil Code, supra, was inapplicable; that FLOREZA was not entitled to reimbursement for his house but that he could remove the same at his expense; and accordingly rendered judgment thus: WHEREFORE, judgment is hereby rendered: (1) adjudging the defendantappellant Mariano Floreza to vacate plaintiffs residential lot described in the complaint and to pay rental of P10.00 a month from May 5, 1956, until he (defendant) shall have vacated the premises; (2) ordering defendant to remove his house from the land in question within 30 days from the time this decision becomes final and executory; (3) ordering the Register of Deeds of Rizal to cancel inscription No. 2147, Page 210, Vol. 36, in the Registration Book under Act 3344 upon payment of his lawful fees; and (4) taxing the costs in both instances against defendant-appellant Mariano Floreza.12 Hence, this Petition for Review on Certiorari by FLOREZA, seeking a reversal of the aforestated judgment and ascribing the following errors: 1) That the Court of Appeals erred in holding that petitioner Floreza was a builder in bad faith without likewise holding that respondents as owners of the land in dispute, were likewise in bad faith and therefore both parties should in accordance with Art. 453 of the New Civil Code be considered as having acted in good faith. 2) That the Court of Appeals erred in completely ignoring the issue raised on appeal as to whether or not respondents as owners of the questioned lot, were in bad faith in the sense that they had knowledge of and acquiesced to the construction of the house of petitioner on their lot. 3) That the Court of Appeals erred in not applying Art. 448 of the New Civil Code in the adjudication of the rights of petitioner and respondent. 4) That the Court of Appeals erred in declaring that petitioner is not entitled to reimbursement for the value of his house and that he should instead remove the same at his expense.
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5) That the Court of Appeals erred in adjudging petitioner to vacate respondents lot in question and to pay rentals commencing from May 5, 1956, until he shall have vacated the premises, notwithstanding that petitioner is entitled under Arts. 448 and 546 of the New Civil Code, to retention without payment of rental while the corresponding indemnity of his house had not been paid. 6) That the Court of Appeals erred in taxing costs against petitioner. 7) That the Court of Appeals erred in not awarding petitioners counterclaim. During the pendency of this appeal, petitioner Maria D. de Evangelista died and was ordered substituted by her son, petitioner Sergio, as her legal representative, in a Resolution dated May 14, 1976. On October 20, 1978, the EVANGELISTAS filed a Motion to Dismiss stating that FLOREZA had since died and that his heirs had voluntarily vacated the residential lot in question. The date FLOREZA passed away and the date his heirs had voluntarily vacated the property has not been stated. Required to comment, petitioner (represented by his heirs), through counsel, confirmed his death and the removal of the house and manifested that thereby the question of reimbursement had become moot and academic. He objected to the dismissal of the case, however, on the ground that the issue of rentals still pends. On January 21, 1980, complying with a Resolution of this Court, the EVANGELISTAS clarified that the dismissal they were praying for was not of the entire case but only of this Petition for Review on Certiorari. We are not in agreement that the question of reimbursement of the value of the improvement erected on the subject property has become moot. Petitioners right of retention of subject property until he is reimbursed for the value of his house, as he had demanded, is inextricably linked with the question of rentals. For if petitioner has the right to indemnity, he has the right of retention and no rentals need be paid. Conversely, if no right of retention exists, damages in the form of rentals for the continued use and occupation of the property should be allowed. We uphold the Court of Appeals in its conclusion that Article 448 of the Civil Code is inapplicable to the factual milieu herein. Said codal provision applies only when the builder, planter, or sower believes he had the right so to build, plant or sow because he thinks he owns the land or believes himself to have a claim of title.13 In this case, petitioner makes no pretensions of ownership whatsoever.

Petitioner concedes that he was a builder in bad faith but maintains that the EVANGEUSTAS should also be held in bad faith, so that both of them being in bad faith, Article 453 of the Civil Code14 should apply. By the same token, however, that Article 448 of the same Code is not applicable, neither is Article 453 under the ambiance of this case. Would petitioner, as vendee a retro, then be entitled to the rights granted in Article 1616 of the Civil Code (Art. 1518 of the old Code)? To quote: Art. 1616. The vendor cannot avail himself of the right of repurchase without returning to the vendee the price of the sale, and in addition: (1) The expenses of the contract, and any other legitimate payments made by reason of the sale; (2) The necessary and useful expenses made on the thing sold. The question again calls for a negative answer. It should be noted that petitioner did not construct his house as a vendee a retro. The house had already been constructed as far back as 1949 (1945 for the house of light materials) even before the pacto de retro sale in 1949. Petitioner incurred no useful expense, therefore, after that sale. The house was already there at the tolerance of the EVANGELISTAS in consideration of the several loans extended to them. Since petitioner cannot be classified as a builder in good faith within the purview of Article 448 of the Civil Code, nor as a vendee a retro, who made useful improvements during the lifetime of the pacto de retro, petitioner has no right to reimbursement of the value of the house which he had erected on the residential lot of the EVANGELISTAS, much less to retention of the premises until he is reimbursed. The rights of petitioner are more akin to those of a usufructuary who, under Article 579 of the Civil Code (Art 487 of the old Code), may make on the property useful improvements but with no right to be indemnified therefor. He may, however, remove such improvements should it be possible to do so without damage to the property: For if the improvements made by the usufructuary were subject to indemnity, we would have a dangerous and unjust situation in which the usufructuary could dispose of the owners funds by compelling him to pay for improvements which perhaps he would not have made.15 We come now to the issue of rentals. It is clear that from the date that the redemption price had been paid by the EVANGELISTAS on January 2, 1955, petitioners right to the use of the residential lot without charge had ceased. Having retained the property although a redemption had been made, he should
347 | P r o p e r t y

be held liable for damages in the form of rentals for the continued use of the subject residential lot16 at the rate of P10.00 monthly from January 3, 1955, and not merely from the date of demand on May 4, 1956, as held by the Court of Appeals, until the house was removed and the property vacated by petitioner or his heirs. WHEREFORE, the judgment appealed from is hereby affirmed, with the modification that payment of rentals by the heirs of Mariano Floreza, who are hereby ordered substituted for him, shall commence on January 3, 1955 until the date that the residential lot in question was vacated. Costs against petitioner. SO ORDERED. Teehankee (Chairman), Makasiar, Fernandez, Guerrero, and De Castro, JJ., concur. Judgment affirmed. Notes.Improvements on a parcel of land which fall under Article 415 of the New Civil Code are immovable property insofar as third persons are concerned and the mortgage con stituted thereon must be susceptible of registration as a real estate mortgage. (Tolentino vs. Baltazar, 1 SCRA 822). Pursuant to the right of retention granted to possessors in good faith by Article 546 of the Civil Code, which is applicable to builders in good faith (Art. 448), the latter may be ordered to vacate the land upon payment by the landowner of indemnity for improvements. (People vs. Repato, 6 SCRA 207). Where a house stands on a rented land belonging to another person, it may be the subject-matter of a chattel mortgage as person or movable property if so stipulated in the document of mortgage, and in an action by the mortgage for foreclosure, the validity of the chattel mortgage cannot be assailed by one of the parties to the contract of mortgage. (Navarro vs. Pineda, 9 SCRA 631). Article 167 of the Civil Code on disposition of the fruits of property redeemed applies only when the parties failed to provide a sharing arrangement thereon. (Budlong vs. Pondoc, 79 SCRA 24). A vendee a retro has a right to share in the harvest of palay planted when said vendee was still owner of the land. (Almeda, vs. Daluro, 79 SCRA 327).

It is not always necessary for owner of real property to wait after expiration of 12 months before he may maintain a forcible entry suit in the nature of accion publiciana in the Court of First Instance. (Banayos vs. Susana Realty, Inc., 71 SCRA 557). Article 593 of the Civil Code in its second paragraph grants to the possessor, who was deprived of the possession of his real property through forcible entry, the right to secure from an inferior court in the action for forcible entry a writ of preliminary mandatory injunction to restore him in his possession. (Laureano vs. Adil, 72 SCRA 148). The damages contemplated in Section 8 of Rule 70 refer to the reasonable compensation for the use and occupation of the property which is generally measured by its fair rental value. (Laureano vs. Adil, 72 SCRA 148). Trial court should give reasonable time for defendant to make deposit to stay execution pending appeal of ejectment case. (Sanchez vs. Zosa, 68 SCRA 171). o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Floreza vs. Evangelista, 96 SCRA 130(1980)]

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G.R. No. 153652. January 16, 2004.* ALFREDO YASAY DEL ROSARIO, petitioner, vs. SPS. JOSE E. MANUEL and CONCORDIA MANUEL, represented by Attorney-in-fact, PATRICIA ARIOLA, respondents.
Remedial Law; Ejectment; Prior physical possession is not always a condition sine qua non in an ejectment case; What respondents filed is a complaint for unlawful detainer; Prior physical possession is not required.Prior physical possession is not always a condition sine qua non in an ejectment case. We must distinguish the two kinds of ejectment, namely, forcible entry and unlawful detainer. In forcible entry, the plaintiff is deprived of physical possession of his land or building by means of force, intimidation, threat, strategy or stealth. In this light, he must allege and prove prior physical possession. In illegal detainer, the defendant unlawfully withholds possession after the expiration or termination of his right thereto under any contract, express or implied. What respondents filed is a complaint for unlawful detainer. Prior physical possession is not required. Hence, respondents need not allege the same in their complaint. Same; Same; One whose stay is merely tolerated becomes a deforciant occupant the moment he is required to leave.As found by the trial court, petitioners possession of the land was by mere tolerance of the respondents. We have held in a number of cases that one whose stay is merely tolerated becomes a deforciant occupant the moment he is required to leave. He is bound by his implied promise, in the absence of a contract, that he will vacate upon demand. Same; Same; Petitioner is not a builder in good faith.Anent the second issue, petitioner is not a builder in good faith. Considering that he occupies the land by mere tolerance, he is aware that his occupation of the same may be terminated by respondents any time.

On August 12, 1999, spouses Jose and Concordia Manuel, respondents, filed with the Municipal Trial Court (MTC), San Mateo, Rizal a complaint1 for unlawful detainer against Alfredo Yasay del Rosario, petitioner, docketed as Civil Case No. 1360. They alleged that they are the true and lawful owners of a 251 square meter lot located at Sta. Ana, San Mateo, Rizal. Because of their compassion, they allowed petitioner, whose house was destroyed by a strong typhoon, to occupy their lot. They agreed that he could build thereon a temporary shelter of light materials. But without their consent, what he constructed was a house of concrete materials. In 1992, respondents asked petitioner to vacate the lot. This was followed by repeated verbal demands but to no avail, prompting them to bring the matter to the barangay. But the parties failed to reach an amicable settlement. On June 25, 1999, the barangay chairman issued a Certification to File Action. In his answer to the complaint, petitioner claimed that sometime in 1968, respondents allowed him to build his house on the lot, provided he would guard the premises to prevent landgrabbers and squatters from occupying the area. In 1995, when respondents visited this country, they agreed verbally to sell the portion on which his house was constructed. A year later, he made an offer to buy the 60 square meter portion occupied by him and to spend for its survey. But what respondents wanted to sell was the whole area containing 251 square meters. He then informed them that he would first consult his children and they said they will wait. Instead, they filed the instant complaint. On September 22, 2000, the trial court rendered a Decision in favor of respondents, thus: WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs-spouses Jose and Concordia Manuel represented by their attomey-in-fact Patricia Ariola and against defendant Alfredo Yasay del Rosario, ordering him and/or all persons claiming rights under him to vacate the subject property covered by TCT No. N-11399, and surrender possession thereof to the plaintiffs, to pay P500.00 per month as reasonable compensation for the use of said property from the date of filing of this Complaint on August 12, 1999 until the same is vacated and possession thereof surrendered to the plaintiffs and to pay the cost.2 On appeal, the Regional Trial Court (RTC) of San Mateo, Rizal rendered a Decision dated May 10, 2001 affirming in toto the Decision of the trial court.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court. Marcelino P. Arias for petitioner. Gregorio E. Ariola, Jr. for respondents. SANDOVAL-GUTIERREZ, J.: This is a petition for review on certiorari assailing the Court of Appeals Decision dated May 22, 2002 in CA-G.R. SP No. 67902, entitled Alfredo Yasay del Rosario, petitioner vs. Sps. Jose and Concordia Manuel, represented by Attorney-in-fact, Patricia Ariola, MTQ Fourth Judicial Region, San Mateo, Rizal, and RTC, Fourth Judicial Region, Branch 77, San Mateo, Rizal.

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On November 29, 2001, herein petitioner filed with the Court of Appeals a petition for review, docketed as CA-G.R. SP No. 67902. On May 22, 2002, Court of Appeals issued a Resolution dismissing the petition for having been filed out of time, to wit: Considering the filing of the second motion for reconsideration is prohibited x x x hence, does not toll the running of the reglementary period to appeal; considering further that, the perfection of an appeal in the manner and within the period laid down by law is not only mandatory but also jurisdictional and failure to do so renders the questioned decision final and executory, depriving the appellate court or body of jurisdiction to alter the final judgment much less to entertain the appeal; considering finally that, in the instant case, petitioner who had fifteen (15) days from receipt of the Order dated 26 July 2001, denying his first motion for reconsideration within which to file a petition for review filed the present petition only on 29 November 2001, this Court resolves to DISMISS the instant petition for review, for having been filed out of time.3 Considering that the petition with the Court of Appeals was not seasonably filed, the instant petition should be dismissed outright. Assuming arguendo that the petition before us is sufficient in form and substance, the same would still be dismissed for lack of merit. The petition raises the following issues: (1) whether or not the MTC has jurisdiction over the ejectment case; and (2) whether or not petitioner is a builder in good faith, hence, entitled to reimbursement under Article 448 of the Civil Code. Petitioner claimed that the trial court has no jurisdiction over the case considering that there is no allegation in the complaint that respondents have prior physical possession of the lot and that they were ousted therefrom by force, threat, strategy or stealth. Prior physical possession is not always a condition sine qua non in an ejectment case. We must distinguish the two kinds of ejectment, namely, forcible entry and unlawful detainer. In forcible entry, the plaintiff is deprived of physical possession of his land or building by means of force, intimidation, threat, strategy or stealth. In this light, he must allege and prove prior physical possession. In illegal detainer, the defendant unlawfully withholds possession after the expiration or termination of his right thereto under any contract, express or implied.4 What respondents filed is a complaint for unlawful detainer. Prior physical possession is not required. Hence, respondents need not allege the same in their complaint.

As found by the trial court, petitioners possession of the land was by mere tolerance of the respondents. We have held in a number of cases that one whose stay is merely tolerated becomes a deforciant occupant the moment he is required to leave.5 He is bound by his implied promise, in the absence of a contract, that he will vacate upon demand.6 Anent the second issue, petitioner is not a builder in good faith. Considering that he occupies the land by mere tolerance, he is aware that his occupation of the same may be terminated by respondents any time. WHEREFORE, the petition is hereby DENIED. The assailed Decision of the Court of Appeals is AFFIRMED. SO ORDERED. Vitug (Chairman), Corona and Carpio-Morales, JJ., concur. Petitioner denied, judgment affirmed. Note.The only issue to be resolved in ejectment cases is the question as to who is entitled to the physical or material possession of the premises or possession de facto. (Lagrosa vs. Court of Appeals, 312 SCRA 298 [1999]) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Del Rosario vs. Manuel, 420 SCRA 128(2004)]

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G.R. No. 157605. December 13, 2005.* SPS. ENRIQUETA RASDAS, and TOMAS RASDAS, SPS. ESPERANZA A. VILLA, and ERNESTO VILLA, and LOLITA GALLEN, petitioners, vs. JAIME ESTENOR, respondent.
Actions; Civil Procedure; Under Section 6, Rule 16 of the 1997 Rules of Civil Procedure, the allowance for a preliminary hearing, while left in the discretion of the court, is authorized only if no motion to dismiss has been filed but any of the grounds for a motion to dismiss had been pleaded as affirmative defense in the answer.We observe at the onset that it does appear that the RTCs act of staging preliminary hearing on the affirmative defense of lack of jurisdiction and res judicata is not in regular order. Under Section 6, Rule 16 of the 1997 Rules of Civil Procedure, the allowance for a preliminary hearing, while left in the discretion of the court, is authorized only if no motion to dismiss has been filed but any of the grounds for a motion to dismiss had been pleaded as an affirmative defense in the answer. In this case, respondents had filed a motion to dismiss on the ground of res judicata, but the same was denied. They thus filed an answer alleging res judicata as a special affirmative defense, but later presented a Motion for Preliminary Hearing which was granted, leading to the dismissal of the case. Same; Same; The general rule must be reiterated that the preliminary hearing contemplated under Section 6, Rule 16 applies only if no motion to dismiss has been filed; An exception was carved out in California and Hawaiian Sugar Company v. Pioneer Insurance, 346 SCRA 214 (2000), wherein the Court noted that while Section 6 disallowed a preliminary hearing of affirmative defenses once a motion to dismiss has been filed, such hearing could nonetheless be had if the trial court had not categorically resolved the motion to dismiss.The general rule must be reiterated that the preliminary hearing contemplated under Section 6, Rule 16 applies only if no motion to dismiss has been filed. This is expressly provided under the rule, which relevantly states [i]f no motion to dismiss has been filed, any of the grounds for dismissal provided for in [Rule 16] may be pleaded as an affirmative defense in the answer and, in the discretion of the court, a preliminary hearing may be had thereon as if a motion to dismiss had been filed. An exception was carved out in California and Hawaiian Sugar Company v. Pioneer Insurance, wherein the Court noted that while Section 6 disallowed a preliminary hearing of affirmative defenses once a motion to dismiss has been filed, such hearing could nonetheless be had if the trial court had not categorically resolved the motion to dismiss. Such circumstance does not obtain in this case, since the trial court had already categorically denied the motion to dismiss prior to the filing of the answer and the motion for preliminary hearing. Same; Same; Words and Phrases; Builder in Bad Faith; Petitioners are not entitled to the just compensation they seek through the present complaint; Under Article 448 of the Civil Code, the builder in bad faith on the land of another loses what is built without right to indemnity.It is clear that petitioners are not entitled to the just compensation they seek through the present complaint. Under Article 448 of the Civil Code, the builder in bad faith on the land of another loses what is built without right to indemnity. Petitioners were in bad faith when they built the structures as they had known that the subject property did not belong to them. Are these conclusions though sufficient to justify dismissal on the ground of res judicata? Res Judicata; Two Aspects.The doctrine of res judicata has two aspects. The first, known as bar by prior judgment, or estoppel by verdict, is the effect of a judgment as a bar to the prosecution of a second action upon the same claim, demand or cause of action. The second, known as conclusiveness of judgment or otherwise known as the rule of auter action pendant, ordains that issues actually and directly resolved in a former suit cannot again be raised in any future case between the same parties involving a different cause of action. It has the effect of preclusion of issues only.

Same; Conclusiveness of Judgment; Conclusiveness of judgment states that a fact or question which was in issue in a former suit and there was judicially passed upon and determined by a court of competent jurisdiction, is conclusively settled by the judgment therein as far as the parties to that action and persons in privity with them are concerned and cannot be again litigated in any future action between such parties or their privies, in the same court or any other court of concurrent jurisdiction on either the same or different cause of action, while the judgment remains unreversed by proper authority.It appears that both the RTC and the Court of Appeals deemed that the first aspect of res judicata, bar by prior judgment, applied in this case. We hold that it is the second kind of res judicata, conclusiveness of judgment, that barred the instant complaint. As previously explained by this Court: [C]onclusiveness of judgmentstates that a fact or question which was in issue in a former suit and there was judicially passed upon and determined by a court of competent jurisdiction, is conclusively settled by the judgment therein as far as the parties to that action and persons in privity with them are concerned and cannot be again litigated in any future action between such parties or their privies, in the same court or any other court of concurrent jurisdiction on either the same or different cause of action, while the judgment remains unreversed by proper authority. It has been held that in order that a judgment in one action can be conclusive as to a particular matter in another action between the same parties or their privies, it is essential that the issue be identical. If a particular point or question is in issue in the second action, and the judgment will depend on the determination of that particular point or question, a former judgment between the same parties or their privies will be final and conclusive in the second if that same point or question was in issue and adjudicated in the first suit. Identity of cause of action is not required but merely identity of issues. Same; Same; In cases wherein the doctrine of conclusiveness of judgment is applicable, there is identity of parties but not of causes of actionthe judgment is conclusive in the second case, only as those matters actually and directly controverted and determined, and not as to matters merely involved therein.In cases wherein the doctrine of conclusiveness of judgment is applicable, there is, as in the two cases subject of this petition, identity of parties but not of causes of action. The judgment is conclusive in the second case, only as to those matters actually and directly controverted and determined, and not as to matters merely involved therein. Herein, the fact that petitioners were in possession in bad faith as early as 1965 was already determined in the first case. In order that they could successfully litigate their second cause of action, petitioners will have to convince that they were in possession in good faith at the time they built their structures, an argument that deviates the previous determination made in the final judgment that resolved the first case. Same; Same; When a fact has been once determined in the course of a judicial proceeding, and a final judgment has been rendered in accordance therewith, it cannot be again litigated between the same parties without virtually impeaching the correctness of the former decision, which, from motives of public policy, the law does not permit to be done.The reasons for establishing the principle of conclusiveness of judgment are founded on sound public policy, and to grant this petition would have the effect of unsettling this wellsettled doctrine. It is allowable to reason back from a judgment to the basis on which it stands, upon the obvious principle that where a conclusion is indisputable, and could have been drawn only from certain premises, the premises are equally indisputable with the conclusion. When a fact has been once determined in the course of a judicial proceeding, and a final judgment has been rendered in accordance therewith, it cannot be again litigated between the same parties without virtually impeaching the correctness of the former decision, which, from motives of public policy, the law does not permit to be done. Same; Same; Issues not previously ventilated cannot be raised for the first time on appeal, much less when first proposed in the reply to the comment on the petition for review.We are disinclined to accord merit to this argument. For one, it was raised for the first time in the Reply before this Court. It was not even raised in the Complaint filed with the RTC, hence it could not be said that petitioners cause of action is grounded on Article 453. Issues not previously ventilated cannot be raised for the first time on appeal, much less when first proposed in the reply to the comment on the petition for review. Even assuming the issue is properly 351 | P r o p e r t y

litigable, the Court can find no basis to declare that respondents were in bad faith as a matter of fact. Certainly, nothing in the first decision of the Court of Appeals conclusively establishes that claim, its factual determination being limited to the finding that petitioners alone were had been in possession of the property in bad faith. We are not wont to ascribe points of fact in the said decision which were not expressly established or affirmed.

PETITION for review on certiorari of a decision of the Court of Appeals.

WHEREFORE, the Decision of the trial court dated November 6, 1995 is REVERSED and SET ASIDE, and a new one is rendered declaring the plaintiff as the owner of the land in question; and ordering the defendants-appellees to vacate the same and jointly and severally to pay the plaintiff reasonable compensation of P300.00 a month for the use and enjoyment of the land from June 1991 up to the time the land is vacated; attorneys fees of P10,000.00 and litigation expenses of P5,000.00. Costs against the defendants-appellees. SO ORDERED.2 The decision became final and executory after a petition for certiorari assailing its validity was dismissed by this Court.3 Thereafter, a Writ of Execution and Writ of Demolition was issued against petitioners, who were ordered to demolish their houses, structures, and improvements on the property. Petitioners as plaintiffs then filed a Complaint dated 6 July 1999 against respondent for just compensation and preliminary injunction with temporary restraining order. The case was docketed as Civil Case No. 1090, and heard by the same RTC Branch 16 that ruled on the first complaint. Notwithstanding the earlier pronouncement of the Court of Appeals, petitioners asserted therein that they were the lawful owners of the subject property,4 although they ultimately conceded the efficacy of the appellate courts final and executory decision. Still, they alleged that they were entitled to just compensation relating to the value of the houses they had built on the property, owing to their purported status as builders in good faith. They claimed that the Court of Appeals decision did not declare them as builders in bad faith, and thus, they were entitled to be reimbursed of the value of their houses before these could be demolished.5 They posited that without such reimbursement, they could not be ejected from their houses. Respondent as defendant countered with a Motion to Dismiss, arguing that petitioners complaint was barred by res judicata, owing to the final and executory judgment of the Court of Appeals. The Motion to Dismiss was initially denied by the RTC in an Order dated 4 August 1999,6 and pre-trial ensued. However, before trial proper could begin, respondent filed a motion for preliminary hearing on the affirmative defense of lack of jurisdiction and res judicata. This motion was resolved in an Order dated 16 February 2000, wherein the RTC declared itself constrained to apply the principle of res judicata, thus
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The facts are stated in the opinion of the Court. Marciano S. Bascos for petitioners. Nemio D. Somera for respondent. TINGA, J.:

The main issue in this Petition for Review under Rule 45 is whether the complaint below is barred by res judicata. We find that res judicata indeed obtains in this case, albeit of a mode different from that utilized by the trial court and the Court of Appeals in dismissing the complaint. The antecedent facts, as culled from the assailed Decision1 of the Court of Appeals Tenth Division, follow. The dispute centers on a parcel of land with an area of 703 square meters, situated in Ilagan, Isabela. On 29 October 1992, respondent as plaintiff filed a Complaint For Recovery Of Ownership And Possession With Damages against petitioners as defen-dants. The complaint was docketed as Civil Case No. 673 and tried by the Regional Trial Court (RTC) of Ilagan, Isabela, Branch 16. In the same complaint, respondent asserted that he was the owner of the subject property, which was then in the possession of petitioners. On 6 November 1995, the RTC decided Civil Case No. 673 in favor of petitioners. Respondent appealed the RTC decision before the Court of Appeals, and his appeal was docketed as CA-G.R. No. 52338. On 25 September 1997, the Court of Appeals reversed the judgment of the RTC, and declared respondent as the owner of the subject property. As a result, petitioners were ordered to vacate the land. The dispositive portion of the appellate courts decision reads:

reversing its earlier order. In doing so, the RTC concluded that the earlier decision of the Court of Appeals had already effectively settled that petitioners were in fact builders in bad faith. Citing Mendiola v. Court of Appeals,7 the RTC held that the causes of action between the final judgment and the instant complaint of petitioners were identical, as it would entail the same evidence that would support and establish the former and present causes of action. Accordingly, the RTC ordered the dismissal of petitioners complaint. The counsel for petitioners was likewise issued a warning for having violated the prohibition on forum-shopping on account of the filing of the complaint barred by res judicata. The finding of res judicata was affirmed by the Court of Appeals in its assailed Decision. It is this finding that is now subject to review by this Court. Petitioners argue that since respondents Motion to Dismiss on the ground of res judicata had already been denied, the consequent preliminary hearing on the special defenses which precluded the dismissal of the complaint was null and void.8 Petitioners also claim that there was no identity of causes of action in Civil Case No. 673, which concerned the ownership of the land, and in Civil Case No. 1090, which pertained to just compensation under Article 448 of the Civil Code. Even assuming that res judicata obtains, petitioners claim that the said rule may be disregarded if its application would result in grave injustice. We observe at the onset that it does appear that the RTCs act of staging preliminary hearing on the affirmative defense of lack of jurisdiction and res judicata is not in regular order. Under Section 6, Rule 16 of the 1997 Rules of Civil Procedure, the allowance for a preliminary hearing, while left in the discretion of the court, is authorized only if no motion to dismiss has been filed but any of the grounds for a motion to dismiss had been pleaded as an affirmative defense in the answer. In this case, respondents had filed a motion to dismiss on the ground of res judicata, but the same was denied. They thus filed an answer alleging res judicata as a special affirmative defense, but later presented a Motion for Preliminary Hearing which was granted, leading to the dismissal of the case. The general rule must be reiterated that the preliminary hearing contemplated under Section 6, Rule 16 applies only if no motion to dismiss has been filed. This is expressly provided under the rule, which relevantly states [i]f no motion to dismiss has been filed, any of the grounds for dismissal provided for in [Rule 16] may be pleaded as an affirmative defense in the answer and, in the discretion of the court, a preliminary hearing may be had thereon as if a motion to dismiss had been filed. An exception was carved out in California and

Hawaiian Sugar Company v. Pioneer Insurance,9 wherein the Court noted that while Section 6 disallowed a preliminary hearing of affirmative defenses once a motion to dismiss has been filed, such hearing could nonetheless be had if the trial court had not categorically resolved the motion to dismiss.10 Such circumstance does not obtain in this case, since the trial court had already categorically denied the motion to dismiss prior to the filing of the answer and the motion for preliminary hearing. We observe in this case that the judge who had earlier denied the motion to dismiss, Hon. Teodulo E. Mirasol, was different from the judge who later authorized the preliminary hearing,11 Hon. Isaac R. de Alban, a circumstance that bears some light on why the RTC eventually changed its mind on the motion to dismiss. Still, this fact does not sanction the staging of a preliminary hearing on affirmative defenses after the denial of the motion to dismiss. If a judge disagrees with his/her predecessors previous ruling denying a motion to dismiss, the proper recourse is not to conduct a preliminary hearing on affirmative defenses, but to utilize the contested ground as part of the basis of the decision on the merits. On the part of the movant whose motion to dismiss had already been filed and denied, the proper remedy is to file a motion for reconsideration of the denial of the motion. If such motion for reconsideration is denied, the ground for the dismissal of the complaint may still be litigated at the trial on the merits. Clearly, the denial of a motion to dismiss does not preclude any future reliance on the grounds relied thereupon. However, nothing in the rules expressly authorizes a preliminary hearing of affirmative defenses once a motion to dismiss has been filed and denied. Thus, the strict application of Section 6, Rule 16 in this case should cause us to rule that the RTC erred in conducting the preliminary hearing. However, there is an exceptional justification for us to overlook this procedural error and nonetheless affirm the dismissal of the complaint. The complaint in question is so evidently barred by res judicata, it would violate the primordial objective of procedural law to secure a just, speedy and inexpensive disposition of every action and proceeding12 should the Court allow this prohibited complaint from festering in our judicial system. Indeed, the rule sanctioning the liberal construction of procedural rules is tailor-made for a situation such as this, when a by-the-numbers application of the rule would lead to absurdity, such as the continued litigation of an obviously barred complaint.
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Why is the subject complaint barred by res judicata? It is uncontroverted that in the decision by the Court of Appeals in Civil Case No. 673, it was observed: When the occupancy of the lot by Luis Aggabao which was transmitted to his son Vivencio Aggabao, and later transmitted to the latters children . . . expired in April 1965, the late Vivencio Aggabao verbally begged and pleaded to plaintiff-appellant that he be allowed to stay on the premises of the land in question as his children, herein appellees, were still studying and it would be very hard for them to transfer residence at that time. The plaintiff, out of Christian fellowship and compassion, allowed the appellees to stay temporarily on the land in question. .... In this case, the possession of the land by the appellees derived from their father Luis Aggabao from March 31, 1955 to March 31, 1965 was by virtue of a stipulation in the deed of sale (Exh. G), while their possession derived from their father, Vivencio Aggabao, from March 31, 1965 to 1982 (the latter died in 1982) was only by tolerance because of the pleading of Vivencio Aggabao to the plaintiff-appellant that he be allowed to stay because of the children going to school. . . .13 Evidently, the Court of Appeals had previously ruled in the first case that as early as 1965, the father of the petitioners (and their predecessor-in-interest) had already known that he did not own the property, and that his stay therein was merely out of tolerance. Such conclusion in fact bolstered the eventual conclusion that respondents were the owners of the land and that petitioners should vacate the same. This fact should be seen in conjunction with the findings of the RTC and the Court of Appeals in this case that the structures for which petitioners sought to be compensated were constructed in 1989 and 1990, or long after they had known they were not the owners of the subject property. These premises remaining as they are, it is clear that petitioners are not entitled to the just compensation they seek through the present complaint. Under Article 448 of the Civil Code, the builder in bad faith on the land of another loses what is built without right to indemnity.14 Petitioners were in bad faith when they built the structures as they had known that the subject property did not belong to them. Are these conclusions though sufficient to justify dismissal on the ground of res judicata?

The doctrine of res judicata has two aspects.15 The first, known as bar by prior judgment, or estoppel by verdict, is the effect of a judgment as a bar to the prosecution of a second action upon the same claim, demand or cause of action. The second, known as conclusiveness of judgment or otherwise known as the rule of auter action pendant, ordains that issues actually and directly resolved in a former suit cannot again be raised in any future case between the same parties involving a different cause of action.16 It has the effect of preclusion of issues only.17 It appears that both the RTC and the Court of Appeals deemed that the first aspect of res judicata, bar by prior judgment, applied in this case.18 We hold that it is the second kind of res judicata, conclusiveness of judgment, that barred the instant complaint. As previously explained by this Court: [C]onclusiveness of judgmentstates that a fact or question which was in issue in a former suit and there was judicially passed upon and determined by a court of competent jurisdiction, is conclusively settled by the judgment therein as far as the parties to that action and persons in privity with them are concerned and cannot be again litigated in any future action between such parties or their privies, in the same court or any other court of concurrent jurisdiction on either the same or different cause of action, while the judgment remains unreversed by proper authority. It has been held that in order that a judgment in one action can be conclusive as to a particular matter in another action between the same parties or their privies, it is essential that the issue be identical. If a particular point or question is in issue in the second action, and the judgment will depend on the determination of that particular point or question, a former judgment between the same parties or their privies will be final and conclusive in the second if that same point or question was in issue and adjudicated in the first suit. Identity of cause of action is not required but merely identity of issues.19 Stated differently, any right, fact, or matter in issue directly adjudicated or necessarily involved in the determination of an action before a competent court in which judgment is rendered on the merits is conclusively settled by the judgment therein and cannot again be litigated between the parties and their privies whether or not the claim, demand, purpose, or subject matter of the two actions is the same.20 Indeed, in cases wherein the doctrine of conclusiveness of judgment is applicable, there is, as in the two cases subject of this petition, identity of parties but not of causes of action. The judgment is conclusive in the second
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case, only as to those matters actually and directly controverted and determined, and not as to matters merely involved therein.21 Herein, the fact that petitioners were in possession in bad faith as early as 1965 was already determined in the first case. In order that they could successfully litigate their second cause of action, petitioners will have to convince that they were in possession in good faith at the time they built their structures, an argument that deviates the previous determination made in the final judgment that resolved the first case. The reasons for establishing the principle of conclusiveness of judgment are founded on sound public policy, and to grant this petition would have the effect of unsettling this well-settled doctrine. It is allowable to reason back from a judgment to the basis on which it stands, upon the obvious principle that where a conclusion is indisputable, and could have been drawn only from certain premises, the premises are equally indisputable with the conclusion.22 When a fact has been once determined in the course of a judicial proceeding, and a final judgment has been rendered in accordance therewith, it cannot be again litigated between the same parties without virtually impeaching the correctness of the former decision, which, from motives of public policy, the law does not permit to be done.23 Contrary to the holdings of both courts below, in the case of Mendiola v. Court of Appeals24 which they relied upon, this Court observed that the causes of action in the two cases involved were so glaringly similar that it had to affirm the dismissal of the second case by virtue of the bar of former judgment rule. One final note. Petitioners, in their Reply before this Court, raise the argument that assuming that they were builders in bad faith, respondents should likewise be considered as being in bad faith, as the structures were built with their knowledge and without their opposition. That being the case, Article 453 of the Civil Code would apply to the effect both parties could thus be deemed as being in good faith. Accordingly, petitioners would still be entitled to compensation on the structures they built. We are disinclined to accord merit to this argument. For one, it was raised for the first time in the Reply before this Court. It was not even raised in the Complaint filed with the RTC, hence it could not be said that petitioners cause of action is grounded on Article 453. Issues not previously ventilated cannot be raised for the first time on appeal,25 much less when first proposed in the reply to the comment on the petition for review. Even assuming the issue is properly litigable, the Court can find no basis to declare that respondents were in bad

faith as a matter of fact. Certainly, nothing in the first decision of the Court of Appeals conclusively establishes that claim, its factual determination being limited to the finding that petitioners alone were had been in possession of the property in bad faith. We are not wont to ascribe points of fact in the said decision which were not expressly established or affirmed. WHEREFORE, the petition is DENIED. Costs against petitioners. SO ORDERED. Puno (Chairman), Austria-Martinez, Callejo, Sr. and Chico-Nazario, JJ., concur. Petition denied. Note.Absolute identity of parties is not a condition sine qua non for res judicata to applya shared identity of interest is sufficient to invoke the coverage of the principle. (Cruz vs. Court of Appeals, 332 SCRA 447 [2000]) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Rasdas vs. Estenor, 477 SCRA 538(2005)]

355 | P r o p e r t y

No. L-25359. September 28, 1968. ARADA LUMUNGO, JUHURI, DAWA, ET AL., petitioners, vs. ASAAD USMAN, JOSE ANGELES and DOMINGA USMAN, ET AL., respondents.
Civil law; Purchase; Sale of property in dispute; Builder in bad faith; Case at bar.ln the case at bar, the Court of Appeals found as a fact that when Dominga Usman sold and transferred her rights in and to the property in question to Jose Angeles, the latter made the purchase with the knowledge that the property subject matter of the sale was already in dispute by and between def endants, one of whom is the husband of Dominga Usman, on the one hand, and the plaintiffs on the other. Angeles was, therefore, aware of sufficient facts to induce a reasonable prudent man to inquire into the status of the title to the property in question, which was an easy matter for him to ascertain, said property being registered under the Torrens system (Maacop v. Cansino, L13971, Feb. 27, 1961). In short, Jose Angeles was a purchaser and a builder in bad faith when he planted thereon about 3,000 coconuts, most of which are now fruit-bearing. In this connection, it should be noted that said trees are improvements, not "necessary expenses of preservation," which a builder, planter or sower in bad faith may recover under Articles 452 and 546, first paragraph, of the Civil Code, The provision applicable to this case is, accordingly, Article 449 of the Civil Code, which provides that "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;" Obviously, equitable consideration (reimbursement of the improvements at the rate of P1.50 per fruitbearing coconut tree, in favor of Jose Angeles based on equity), cannot prevail over the aforementioned express statutory provision to the contrary (Barrios v. Go Thong, L-17192, March 30, 1963), apart from the fact that he who seeks equity must come to court with clean hands (Jurado v. Flores, 79 Phil. 460).

Nos. 892, 893, 894 and 1121 of the same cadastre. The defendants in case No. 155 are Asaad Usman, Akmadul and Hada, whereas those in case No. 156 are Asaad Usman, Fatima Angeles, Hadjaratul Julkanain, Inkiran and Sitti Haridja, who were subsequently joined by Dominga Usman and Jose Angeles, as defendants-intervenors. After a joint trial of the two (2) cases, the Court of First Instance of Sulu rendered a decision, the dispositive part of which reads as follows: "WHEREFORE, judgment is hereby rendered declaring plaintiffs to have a better right to the possession of Lots Nos. 892, 893, 894, 1121 and 871, Siasi and Lapak Cadastral Survey, located at Lapak, Siasi, Sulu and described in Transfer Certificates of Title Nos. T-419, T-422, T-420 and T-421 and Original Certificate of Title No. 8023. The defendants are ordered to vacate said lots in f avor of the plaintif f s if they have not already done so. "On the other hand, the plaintiffs are ordered to reimburse to the defendantintervenor, JOSE ANGELES, the sum of P4,-500.00 representing the value of the 3,000 coconut trees introduced by him and his predecessors in interest on Lots 892, 893 and 894. Should plaintiffs fail to do so within ninety (90) days from the date this decision becomes final, the three lots shall be ordered sold at public auction, the proceeds of which shall be applied to the P4,500.00 herein adjudged to Jose Angeles, and the balance to be delivered to the plaintiffs." Both parties appealed from this decision to the Court of Appeals, but, later, the defendants withdrew their appeal, which, accordingly, was dismissed. Thus the only question left for determination by the Court of Appeals was plaintiffs' appeal from the trial court's decision, insofar as it sentenced them to pay P4,500.00 to intervenor Jose Angeles. After appropriate proceedings, the Court of Appeals reduced this amount to P2,500.00 and affirmed the decision of the Court of First Instance in all other respects, with costs against defendantsintervenors. The case is now bef ore us upon petition f or review on certiorari filed by the plaintiffs. The pertinent facts are set f orth in the decision of the trial court, which were adopted in that of the Court of Appeals, from which we quote: "It x x x appears that, having allegedly collaborated with the enemy during the Japanese Occupation of Sulu, Datu Idiris Amilhussin was arrested and detained when the American Liberation Forces came to Sulu in the year 1945. On March 1, 1946, Datu Idiris was prosecuted for Treason before the People's
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PETITION for review by certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court. Dominador Sobrevias for petitioners. Marciano Almario for respondents. CONCEPCION, C.J.: Review on certiorari of a decision of the Court of Appeals, on appeal from a decision of the Court of First Instance of Sulu in Civil Cases Nos. 155 and 156 of said court, both instituted by plaintiffs herein, Arada Lumungo (deceased), substituted by her heirs, Juhuri Dawa, Kayajuja, Sadatul, Sarapatul, Jaramatul, Alma, Kalukasa and Vicente, all surnamed Juhuri, to recover the possession of lot No. 871 of the Siasi Cadastre, in the f irst case, and in the second, of lots

Court, docketed as Criminal Case No. 1334 in said Court Justice of the Peace Asaad Usman of Siasi and his wife Dominga Usman, became interested in Lots Nos. 892, 893, 894, 1121 and 871. Jamasali Usman, brother of Atty. Asaad Usman, also became interested in Lot No. 1226(?). Datu Idiris was desperately in need of money to pay his attorney's fees and the premium on his bailbond. He sent his wife to Jamasali for money. Jamasali proposed to buy Lot No. 1227(?). Upon the execution of a Pacto de Retro sale (Exhibit "DDD"), Jamasali gave Datu Idiris partial payments of the P3,000.00 mentioned in the document. Sometime in the year 1946, Atty. Usman visited Datu Idiris in the Provincial Jail and promised to help him in his case and to secure his bailbond for his temporary liberty. But Atty. Usman asked Datu Idiris to sell to his wife, Dominga Miranda Usman, the five lots in question. Datu Idiris agreed. "Through the help of Atty. Usman, the bailbond of Datu Idiris was perfected. Consequently, on January 11, 1947, he was released from the Provincial Jail. True to his word, on March 14, 1947, Datu Idiris executed an agreement with Dominga Usman (Exhibit "33"). He also caused Datu Amirul Amilhussin, brother of Datu Idiris, to sign a -similar document, being one of the co-owners of said lots (Exh. "34"). Upon execution of the agreement, Dominga Usman paid Datu Idiris P300.00; subsequently, Atty. Usman paid him P500.00 and P10.00. Thus, Datu Idiris received all in all from the spouses, ?'810.00 in consideration of the tenor stated in the document, Exhibit "33". In the meantime, Atty. Usman took possession of the five lots in question and cultivated the same. "As the whole amount of P3,000.00 mentioned in the sale of Pacto de Retro executed by Datu Idiris in favor of Jamasali Usman was not fully paid, Datu Idiris, upon his being released from confinement, demanded from Jamasali to complete payment. He also demanded from Atty. Usman the payment of the balance of the purchase price of the lots described in Exhibit "33". After Datu Idiris had been repeatedly refused said payments by both Jamasali and Atty. Usman, he became exasperated. He wrote two complaints, one to the Secretary of Justice, dated June 15, 1946, and the other, to the President of the Philippines, dated March 8, 1948, complaining against Justice of the Peace Asaad Usman and Jamasali Usman. After filing these complaints, Justice of the Peace Usman immediately caused the revocation of the bailbond of Datu Idiris before the People's Court. On March 31, 1948, he was rearrested and committed to the Provincial Jail again. A serious misunderstanding developed between Datu Idiris, on one hand and Atty. Usman and Jamasali Usman, on the other. Several complaints for murder were caused to be filed before the Court of Justice of the Peace Usman against Datu Idiris. In the meantime, Atty.

Usman wrote letters of demand upon Datu Idiris asking him to produce the titles to the above five lots to enable him to have a sufficient deed of sale conveying the said five lots in favor of his wife. Datu Idiris, on the other hand, had been demanding from Atty. Usman to pay the balance of the purchase price of the land. Despite those mutual demands, no one complied therewith. On December 10, 1951, Datu Idiris proposed, thru Atty. Flor, to call off the deal, stated in documents, Exhibits "33" and "34", promising to return the P810.00 which he received from the spouses, Dominga Usman and Atty. Usman agreed to call off the deal. Datu Idiris, however, never paid the P10.00. Despite this, Dominga Usman and Atty. Usman never went to Court to file art action to compel Datu Idiris either to comply with his obligation to execute and deliver a good and sufficient deed conveying titles to the five lots in question, or to pay back the P810.00. What Dominga Usman did when Datu Idiris failed to pay her the P810.00 was to sell lots 892, 893 and 894 to Jose Angeles for P1,000.00. Jose Angeles, upon taking possession of the land, planted same with coconuts, which, together with those already planted by Dominga Usman, numbered about 3,000, most of which are now fruit-bearing. " On Feb. 2, 1962, Datu Idiris filed a civil complaint against Atty. Asaad Usman for recovery 01 possession of the five lots 10 question which was docketed as Civil Case No. 87 of this Court. Atty. Usman, instead of informing the Court that he and his wife had the legal right to possess those lots by virtue of the agreement had between Datu Idiris and his wife embodied in Exhibit "33", manifested in open Court on September 26, 1952, that he was not interested in the possession or ownership of the land, and that he did not buy the land from Datu Idiris. So, on said date, this Court dictated an order as follows: " 'In Open Court, when this case was called for hearing, the defendant Attorney Asaad Usman manifested that he does not claim ownership nor possession to the two parcels of land described in paragraph 2 of the complaint of the plaintiff. Thereupon, the plaintiff (moved) the Court to enter judgment, to which motion the defendant interposed no objection. Such being the case, the Court has no alternative but to enter judgment as it is hereby entered in favor of the plaintiff Datu Idiris Amilhussin, and against the defendantdeclaring the plaintiff the owner and possessor of the two parcels of land above mentioned, and inas-much as the defendant is not in possession of the land, the Court finds it unnecessary to enter an order ejecting the said defendant from the two parcels of land. without prejudice to any claim of any other third party, without pronouncement as to costs.'

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" 'On the other hand, the def endant moved f or the dismissal of his counterclaim. The Court orders the dismissal of the same, also without pronouncement as to cost.' "Upon the promulgation of the above-quoted judgment, Datu Idiris, who was badly in need of money, went around, offering to sell the land to another. Spouses Juhuri Dawa and Arada Lumungo, being interested in acquiring those lots, asked Atty. Dominador Sobrevias to verify if they could buy the same. Atty. Sobrevias went to the Office of the Register of Deeds and found no annotation of encumbrances on the Original Certificates of Title of the five lots. Besides, since the Court had already adjudged in the above-quoted order that Atty. Usman did not have any claim of possession or ownership over the land, and that he did not buy the land from Datu Idiris, Atty. Sobrevias advised his clients that they may buy the lots. Accordingly, a deed of sale, Exhibits "L" to "L-2", was executed. Upon presentation of this deed of sale to the Register of Deeds, Original Certificates of Title Nos. 8986, 8123, 8087 and 8122 were cancelled and in lieu thereof, Transfer Certificates of Title Nos. T-419, T-420, T-422, and T-421 were issued in the names of the plaintiffs. Plaintiffs took possession of the property, but they were allegedly driven from the land, About three years ago, the defendants left Lots Nos. 892, 893, 894 and 1121. Plainiffs took possession thereof. The defendants are still in possession of Lot No. 871."1 Defendants maintained in the Court of Appeals that the sale made by Datu Idiris Amilhussin to plaintiffs Arada Lumungo and Juhuri Dawa, on September 30, 1952, is null and void because the lots thus sold had previously been conveyed by Datu Idiris and Datu Amirul Amilhussin to intervenor Dominga Usman, wife of defendant Asaad Usman, and because the sale to said plaintiffs was not approved by the provincial governor of Sulu, as required by the Administrative Code of Mindanao and Sulu. The Court of Appeals overruled these objections upon the ground that the sale to Dominga Usman "did not materialize" and was "called off" by mutual agreement of the vendors and the vendee, and that said lack of approval by the provincial governor is a defense available to the contracting parties only, not to the defendants herein who are not parties to said transaction. Then the Court of Appeals went on to say: "Upon the other hand, it is to be noted that when intervenor Dominga Usman who claimed to have purchased the lots in question from one of the original owners, sold and transferred her alleged ownership over the same to her cointervenor Jose Angeles, the latter made the purchase with the knowledge that the property subject matter of the sale was already in dispute by and between

herein defendants, one of whom is the husband of intervenor Dominga Usman, on the one hand, and herein plaintiffs on the other. Nevertheless, as well stated by the court a quo, equity should come in to protect the rights of intervenor Jose Angeles who introduced some improvements on three of the lots subjectmatter of the litigation, namely, lots Nos. 892, 898 and 894. "The Court found for a fact that around 3,000 coconut trees were planted on those lots aforementioned, some of them already fruit-bearing. It appears from the records that not all, but a portion, of the 3,000 were planted by intervenor Jose Angeles. The value placed by the lower court of P1.50 per fruit-bearing coconut tree is reasonable enough, inasmuch as the lower court was in a better position to make the assessment, it being more closely in contact with the conditions and circumstances of the locality. We are not prepared to disturb such finding for lack of evidence to warrant such an action on our part. "IN VIEW OF THE FOREGOING CONSIDERATIONS, with the only modification that the amount of indemnity should be reduced from P4,500.00 to P2,500.00, the rest of the judgment appealed from is hereby affirmed with costs against defendantsintervenors"2 The only issue posed by plaintiffs' petition for review is whether or not Jose Angeles is entitled to reimburse-ment for the coconut trees planted by him on the property in litigation. In this connection, it should be noted that said trees are improvements, not "necessary expenses of preservation", which a builder, planter or sower in bad faith may recover under Arts. 452 and 546, first paragraph, of the Civil Code. Upon the other hand, the Court of Appeals found as a fact that when Dominga Usman sold and transferred her rights in and to the property in question to Jose Angeles "the latter made the purchase with the knowledge that the property subject matter of the sale was already in dispute by and between herein defendants, one of whom is the husband of intervenor Dominga Usman, on the one hand, and herein plaintiffs on the other/' Angeles was, therefore, aware of sufficient facts to induce a reasonably prudent man to inquire into the status of the title to the property in question, which was an easy matter for him to ascertain, said property being registered under the Torrens System,3 Indeed, Jose Angeles is a nephew of defendant Asaad Usman, and the controversy between the latter and Datu Idiris was a matter of public knowledge, for Usman was a justice of the peace, and Datu Idiris had filed charges against him, as such, with the Department of Justice and the Office of the President, to which Usman countered by causing the bail bond of Datu
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Idiris to be cancelled and his corresponding reincarceration, as well as the filing of complaints for murder against him. Besides, on February 2, 1952, or several months prior to the sale to Angeles on September 30, 1952, Datu Idiris had filed Civil Case No. 87 of the Court of First Instance of Sulu against Asaad Usman to recover the lots in question, and the latter stated in that case, on September 26, 1952. or four (4) days before the aforementioned sale, that he was not interested in either the possession or the ownership of said lots and that he had not bought the same from the former. It may not be amiss to note, also, that at the time of the alleged sale in his favor, Jose Angeles was a law student; that, in fact, on August 9, 1957, he entered his appearance as counsel for the defendants, in collaboration with Asaad Usman; and that the consideration for said sale, involving a land of 46 hectares, was only P1,000. In short, the foregoing facts, and the above-quoted findings of both the trial court and the Court of Appeals, leave no room f or doubt that Jose Angeles was a purchaser and a builder in bad faith.4 The provision applicable to this case is, accordingly, Article 449 of the Civil Code, which provides that, "(h)e who builds, plants or sows in bad faith on the land of another, loses what is built, planted or sown without right to indemnity." Obviously, the alleged equity in favor of Jose Angeles, on which the lower courts have relied, cannot prevail over the aforementioned express statutory provision to the contrary,5 apart from the fact that he who seeks equity must come with clean hands.6 WHEREFORE, the decision of the Court of Appeals should be as it is hereby modified by eliminating therefrom the contested award of P2,500.00 in favor of Jose Angeles, and, thus modified, said decision is hereby affirmed in all other respects, with the costs. It is so ordered. Reyes, J.B.L., Makalintal, Sanchez, Castro, Angeles, Fernando and Capistrano, JJ., concur. Dizon and Zaldivar, JJ., did not take part. Decision affirmed with modification. ______________

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Lumungo vs. Usman, 25 SCRA 255(1968)]
359 | P r o p e r t y

[No. 2017. November 24, 1906.] THE MUNICIPALITY OF OAS, plaintiff and appellee, vs. BARTOLOME ROA, defendant and appellant.
1.REALTY; EVIDENCE; OWNERSHIP.The defendant in 1892 signed a resolution of a municipality which recited that the latter was the owner of the land in question, it being a part of the public square. In 1894 the defendant bought the land from the person then in possession thereof. Held, That in subsequent litigation between the municipality and the defendant this resolution was competent evidence against him upon the question of the ownership of the land. 2.ID.; ID.; ID.; ESTOPPEL.Under the evidence, however, the defendant was not estopped from presenting proof to overcome this admission. (Code of Civil Procedure, sec. 333.) 3.CIVIL PROCEDURE; ADMISSION.As a general rule an admission of a material fact made by a party to a suit is competent evidence against him. 4.ID.; ID.Section 278 of the Code of Civil Procedure refers to admissions made by one not a party to the suit. 5.REALTY; MUNICIPAL PATRIMONIAL PROPERTY.The land having been devoted by the municipality to other public uses than that of a square became a part of its bienes patrimoniales. 6.ID.; ACCESSION; GOOD FAITH.The defendant was not a purchaser in good faith. The plaintiff, having permitted the erection by the defendant of a building on the land without objection, acted in bad faith. To the case are applicable articles 361 and 364 of the Civil Code, and the plaintiff must either buy the building or sell the land.

As we look at the case, the only question involved is one of fact. Was the property in question a part of the public square of the town of Oas? The testimony upon this point in favor of the plaintiff consisted of statements made by witnesses to the effect that this land had always been a part of the public square, and of certain resolutions adopted by the principala of the pueblo reciting the same fact, the most important of these being the minutes of the meeting of the 27th of February, 1892. In that document it is expressly stated that this land was bought in 1832 by the then parish priest for the benefit of the pueblo. It recites various proceedings taken thereafter in connection with this ownership, including among them an order of the corregidor of Nueva Caceres prohibiting the erection of houses upon the land by reason of the fact above recitednamely, that the land belonged to the pueblo. This resolution terminated with an order to the occupant of the building then standing upon the property that be should not repair it. The defendant signed this resolution. It further appears that the same building was almost entirely destroyed by a baguio on the 13th and 14th of May, 1893, and that the authorities of the pueblo ordered the complete demolition thereof. The resolution of the 31st of May, 1893, declared that the then owner of the building, Jos Castillo, had no right to reconstruct it because it was situated upon land which did not belong to him. This resolution was also signed by the defendant. The evidence on the part of the defendant tends to show that in 1876 Juana Riarte and Juana Riquiza sold the land in question to Juan Roco, and that on the 17th day of December, 1894, Jos Castillo sold it to the defendant No deed of conveyance from Juan Roco to Jos Castillo was presented in evidence, but Castillo, testifying as a witness, said that he had bought the property by verbal contract from Roco, his father-in-law, The defendant, after his purchase in 1894, procured a possesory information which was allowed by an order of the justice of the peace of Oas on the 19th day of January, 1895, and recorded in the Registry of Property on the 28th of March of the same year. In this state of the evidence, we can not say that the proof is plainly and manifestly against the decision of the court below. Unless it is so, the finding of fact made by that court can not be reversed. (De la Rama vs. De la Rama, 201 U. S., 303.) The two statements signed by Roa, one in 1892 and the other in 1893, are competent evidence against him. They are admissions by him to the effect that at that time the pueblo was the owner of the property in question. They are, of course, not conclusive against him. He was entitled to, and did present
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APPEAL from a judgment of the Court of First Instance of Albay. The facts are stated in the opinion of the court. Del-Pan, Ortigas & Fisher, for appellant. Enrique Llopiz, for appellee. WILLARD, J.:

The plaintiff brought this action for the recovery of a tract of land in the pueblo of Oas, claiming that it was a part of the public square of said town. The defendant in his answer alleged that he was the owner of the property. Judgment was rendered in favor of the plaintiff and the defendant has brought the case here by bill of exceptions.

evidence to overcome the effect of these admissions. The evidence does not make out a case of estoppel against hiiiu (Sec. 333, par. 1, Code of Civil Procedure.) The admissibility of these statements made by Roa do not rest upon section 278 of the Code of Civil Procedure, which relates to declarations or admissions made by persons not a party to the suit, but it rests upon the principle that when the defendant in a suit has himself made an admission of any fact pertinent to the issue involved, it can be received against him. This action was commenced on the 17th of December, 1902. There is no evidence of any adverse occupation of this land for thirty years, consequently the extraordinary period of prescription does not apply. The defendant can not rely upon the ordinary. period of prescription of ten years because he was not a holder in good faith. He knew at the time of his purchase in 1894, and had so stated in writing, that the pueblo was the owner of the property. 80 that, even if the statute of limitations ran against a municipality in reference to a public square, it could not avail the defendant in this case. It appears that Roa has constructed upon the property, and that there now stands thereon, a substantial building. As early as 1852 this land had been used by the municipality for other purposes than that of a public square. It had constructed thereon buildings for the storage of property of the State, quarters for the cuadrilleros, and others of a like character. It therefore had ceased to be property used by the public and had become a part of the bienes patrimoniales of the pueblo. (Civil Code, arts. 341, 344.) To the case are applicable those provisions of the Civil Code which relate to the construction by one person of a building upon land belonging to another. Article 364 of the Civil Code is as follows: "When there has been bad faith, not only on the part of the person who built, sowed, or planted 011 another's land, but also on the part of the owner of the latter, the rights of both shall be the same as if they had acted in good faith. "Bad faith on the part of the owner is understood whenever the act has been executed ID his presence with his knowledge and tolerance and without objection." The defendant constructed the building in bad faith for, as we have said, he had knowledge of the fact that his grantor was not the owner thereof. There was bad faith also on the part of the plaintiff in accordance with the express provisions of article 364 since it allowed Roa to construct the building without

any opposition on its part and to so occupy it for eight years. The rights of the parties must, therefore, be determined as if they both had acted in good faith. Their rights in such cases are governed by article 361 of the Civil Code, which is as follows: "The owner of the land on which building, sowing, or planting is done in good faith shall have a right to appropriate as his own the work, sowing, or planting after the indemnity mentioned in articles 453 and 454, or, to oblige the person who has built or planted, to pay to him the value of the land and to force the person who sowed to pay the proper rent." The judgment of the court below is so modified as to declare that the plaintiff is the owner of the land and that it has the option of buying the building thereon, which is the property of the defendant, or of selling to him the land on which it stands. The plaintiff is entitled to recover the costs of both instances. After the expiration of twenty days let judgment be entered in accordance herewith and at the proper time thereafter let the record be remanded to the court below for proper action. So ordered. Johnson, Carson, and Tracey, JJ., concur. Judgment modified.

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Municipality of Oas vs. Roa, 7 Phil., 20(1906)]

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G.R. No. 68166. February 12, 1997.* HEIRS OF EMILIANO NAVARRO, petitioner, vs. INTERMEDIATE APPELLATE COURT & HEIRS OF SINFOROSO PASCUAL, respondents. Civil Law; Property; Accretion; Essential Requisites to Acquire Property by Accretion under Article 457; Accretion Distinguished from Alluvium.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. Accretion is the process whereby the soil is deposited, while alluvium is the soil deposited on the estate fronting the river bank; 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. 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 but is not automatically registered property, hence, subject to acquisition through prescription by third persons. Same; Same; Same; The disputed land is an accretion not on a river bank but on a sea bank.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 the Civil Code but Article 4 of the Spanish Law of Waters of 1866. Same; Same; Same; 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.In the cases of Government of the P.I. v. Colegio de San Jose, Republic v. Court of Appeals, Republic v. Alagad, and Meneses v. Court of Appeals, 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. Same; Same; Same; As part of the public domain, the 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. 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. 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. 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. PETITION for review of a decision and the resolutions of the then Intermediate Appellate Court.

The facts are stated in the opinion of the Court. Heirs of Emiliano Navarro vs. Intermediate Appellate Court Yolanda Quisumbing-Javellana & Associates for petitioner. Joracio R. Viola, Sr. for private 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
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Talisay River and the Bulacan River flow down towards the Manila Bay and act as boundaries of the applicants registered land on the east and on the west. The land sought to be registered was formed at the northern tip of the applicants land. Applicants 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 decision1 and (2) two subsequent resolutions2 of the Intermediate Appellate Court3 (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 Instance5 (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 Navarros 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 filed 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 Pascuals 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 Pascuals 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 became 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 Pascuals 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 he had 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
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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 decisions dispositive portion reads: WHEREFORE, judgment is rendered: (1) Dismissing plaintiff [private respondent] Sinforoso Pascuals 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, assigned 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 iswhether 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 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 x x x. xxx

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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 x x x 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 Serranos 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 x x x 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 courts 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 x x x sandwitched [sic] by two big rivers x x x 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 x x x 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] x x x. 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. x x x 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 x x x.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 Navarros 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
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corner 1; and fifty (50) meters from corner 5 towards corner 6 of Plan Psu175181. x x x9 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 facts 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 seen14 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 bays 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
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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 claimants 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 x x x Manila Bay cannot be considered as a sea. We find said contention untenable. A bay is part of the sea, being a mere indentation 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 the 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 x x x 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 at 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 x x x 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 Pascuals 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 Serranos observations in his dissenting opinion when he stated that: As appellants (titled) land x x x 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 x x x 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 x x x 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

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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. x x x x x x 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 x x x 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. Padilla (Chairman), Bellosillo and Kapunan, JJ., concur.

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Vitug, J., I concur; the amendatory provisions of the Water Code (P.D. 1067) did not affect Article 4 of the Spanish Law of Waters of 1866. Petition denied and dismissed. Note.The requisites for the acquisition of property through accretion are: (a) that the deposition of soil or sediment be gradual and imperceptible; (b) that it be the result of the action of the waters of the river (or sea); and (c) that the land where accretion takes place is adjacent to the banks of rivers (or the sea coast). (Meneses vs. Court of Appeals, 246 SCRA 162 [1995]) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Heirs of Emiliano Navarro vs. Intermediate Appellate Court, 268 SCRA 74(1997)]

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THE GOVERNMENT OF THE PHILIPPINE ISLANDS, applicant and appellant, vs. COLEGIO DE SAN JOSE ET AL., claimants. COLEGIO DE SAN JOSE, appellee. 1 REGISTRATION OF LAND; LANDS BORDERING ON LAGUNA DE BAY; BED OF
LAGUNA DE BAY.The natural bed or basin of Laguna de Bay is the ground covered by its waters at their highest ordinary level during the dry season, that is, from December to August. Their highest level during the rainy season, or from September to November, is extraordinary. 2.ID.; ID.; OWNERSHIP AND PROPERTY.The two parcels of land in litigation form an integral part of the Hacienda de San Pedro Tunasan belonging to the claimant Colegio de San Jose. These two parcels of land continue to be the property of the claimant Colegio de San Jose though accidentally inundated by the waters of Laguna de Bay. 3.ID.; ID.; ID.; LAW OF WATERS; ACCESSION.Even supposing that the said two parcels of land have been formed by accession or deposits of sediment by the waters of said Laguna de Bay, they still belong to the aforesaid claimant Colegio de San Jose as owner of the land of the Hacienda de San Pedro Tunasan, which borders on the said Laguna de Bay. (Art. 84, Law of Waters of August 3, 1866.) 4.ID.; ID.; ID.; ID.The provisions of the Law of Waters regulating the ownership and use of sea waters are not applicable to the ownership and use of lakes, which are governed by special provisions.

Exhibits Y-1 and Y-2, and providing for the issuance of the proper decree once said decision becomes final. In support of the appeal, the appellant assigns the following alleged errors as committed by the court below in its judgment, to wit: "1. The lower court erred in not holding that the parcels of land in question are part of the bed of Laguna Lake and, therefore, belong to the public domain. "2. The lower court erred in finding that said lands are included in the title of the appellee and in finding that the appellee has been in the possession and occupation of the same. "3. The lower court erred in qualifying as extraordinary inundations the fact that the lands in dispute are under water during the rainy season. "4. The lower court erred in decreeing the registration of the lands in dispute to the appellee and in denying the appellant's motion for a new trial." The pertinent facts necessary to decide the questions of fact and of law raised in the instant appeal, are as f ollows: During the months of September, October and November every year, the waters of Laguna de Bay cover a long strip of land along the eastern border of the two parcels of land in question, the width of which strip varies from 50 to 70 meters according to the evidence of the Colegio de San Jose and up to the eastern border of the pass claimed by the municipality of San Pedro Tunasan, according to some witnesses for the Insular Government; and, according to other witnesses for the Insular Government, the flooded strip includes the aforementioned pass itself, which is usually completely covered with water, so that the people can fish in said flooded strip. The claimant Colegio de San Jose contends, and its evidence tends to prove, that the above-named parcels of land are a part of the Hacienda de San Pedro Tunasan belonging to said claimant, which has been in possession thereof since time immemorial by means of its tenants or lessees and farmers. On the other hand, the Government of the Philippine Islands contends that the said two parcels of land belong to the public domain, and its evidence tends to prove that they have always been known as the shores of Laguna de Bay, and they are situated alongside the highway running parallel to said shore; that the water of the lake has receded a great distance on that side; that said parcels of land had been under water formerly; that at present, during the rainy season,
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APPEAL from a judgment of the Court of First Instance of Laguna. Recto, J. The facts are stated in the opinion of the court. Attorney-General Jaranilla for appellant. Vicente O. Romualdez for appellee. VlLLA-REAL, J.: This is an appeal taken by the Government of the Philippine Islands from a decision of the Court of First Instance of Laguna, rendered in cadastral case No. 30, G. L. R. O. Record No. 359 of the municipality of San Pedro, Province of Laguna, ordering the registration of the two parcels of land known as lots 1 and 2 described in the application, in favor of the Colegio de San Jose in accordance with the provisions of law, without special pronouncement as to the costs, it being understood, however, that the lease of said lands executed by the aforesaid Colegio de San Jose in favor of Carlos Young y Baldwin is valid and subsists under the terms and conditions set forth in the instruments,

the water of the lake reaches the highway, and that when the water recedes the people of the place occupy and cultivate said lands during the dry season. The only question to be decided in the present appeal is whether the two aforesaid parcels of land in controversy belong to the Hacienda de San Pedro Tunasan and are owned by the claimant Colegio de San Jose, or whether they belong to the public domain as a part of the bed of Laguna de Bay. It is of primary importance to determine whether the body of water called Laguna de Bay is naturally and legally a lake or a lagoon. The Enciclopedia Jurdica Espaola, volume XXI, pages 124 and 125, defines "lake" and "lagoon" as follows: "LAKE, A body of water formed in depressions of the earth. Ordinarily fresh water, coming from rivers, brooks, or springs, and connected with the sea by them." "LAGOON. A small lake, ordinarily of fresh water, and not very deep, fed by floods, the hollow bed of which is bounded by elevations of land." Laguna de Bay is a body of water formed in depressions of the earth; it contains fresh water coming from rivers and brooks or springs, and is connected with Manila Bay by the Pasig River. According to the definition just quoted, Laguna de Bay is a lake. Inasmuch as Laguna de Bay is a lake, we must resort to the legal provisions governing the ownership and use of lakes and their beds and shores, in order to determine the character and ownership of the parcels of land in question. Article 407 of the Civil Code says the following in its pertinent part: "ART. 407, The following are of public ownership: * * * * * * *

"ART. 44. Natural ponds and lakes existing upon public lands and fed by public waters, belong to the public domain/' * * * * * * *

It is beyond discussion that Laguna de Bay belongs to the public domain, being a natural lake existing upon public lands, and fed by public waters from rivers, brooks and springs. Now then, what is the bed of Laguna de Bay? Article 74 of the Law of Waters cited above defines the bed of a lake as f ollows: "ART. 74. The natural bed or basin of lakes, ponds, or pools, is the ground covered by their waters when at their highest ordinary depth." This definition raises the question: Which is the natural bed or basin of Laguna de Bay? The evidence shows that during the dry season, that is, during the months of December, January, February, March, April, May, June, July and August, the water of the lake at its highest depth reaches no farther than the line form-ing the northeastern boundary of the two parcels of land in controversy, and that it is only during the wet season, that is, during the months of September, October and November that said water rises to the highway, completely covering said parcels of land. Therefore, the waters of Laguna de Bay have two different levels during the year: One during the dry season, which obtains during nine months, and the other during the wet season, which continues for three months. Which of these two heights marks the land limit of the waters of Laguna de Bay, that is, which of them forms its natural bed or basin? The law says, the highest ordinary depth. Now then, which of the two aforesaid depths of the waters of Laguna de Bay is the ordinary one? The word "ordinary" is defined in the Dictionary of the Spanish Academy as follows: "ORDINARY. Not exceeding the average; common, natural, occurring always or most of the time; not going beyond what often happens or takes place." The word extraordinary is defined in the same dictionary as follows:

"4. Lakes and ponds formed by nature on public lands, and their channels." * * * * * * *

And article 44 of the Law of Waters of August 3, 1866, provides as follows:

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"EXTRAORDINARY. Uncommon, transcending the general rule, order, or measure; exceeding, surpassing, or going beyond that which is ordinary, commonly met with, current, settled, or admitted by the majority." According to the foregoing definitions of the words "ordinary" and "extraordinary," the highest depth of the waters of Laguna de Bay during the dry season is the ordinary one, and the highest depth they attain during the rainy season is the extraordinary one; inasmuch as the former is the one which is regular, common, natural, which occurs always or most of the time during the year, while the latter is uncommon, transcends the general rule, order or measure, and goes beyond that which is the ordinary depth. If, according to the definition given by article 74 of the Law of Waters quoted above, the natural bed or basin of the lakes is the ground covered by their waters when at their highest ordinary depth, the natural bed or basin of Laguna de Bay is the ground covered by its waters when at their highest depth during the dry season, that is, up to the northeastern boundary of the two parcels of land in question. Inasmuch as, according to article 407 of the Civil Code, cited above, lakes and their beds belong to the public domain. and inasmuch as, according to article 74 of the Law of Waters cited above, the bed of a lake is the ground covered by its waters at their highest ordinary depth; whereas the waters of Laguna de Bay at their highest depth reach no f arther than the northeastern boundary of the two parcels of land in question, said parcels are outside said bed and, consequently, do not belong to the public domain. The Government of the Philippine Islands also contends that as the waters of Laguna de Bay have receded very much, as a result of which the two parcels of land under discussion, which had been under water before, were left uncovered, the claimant Colegio de San Jose which owned the estate bordering upon said Laguna de Bay, did not acquire said two parcels of land, in accordance with the provisions of article 367 of the Civil Code, as follows: "ART. 367. The owners of estates bordering on ponds or lagoons, do not acquire the land left dry by the natural decrease of the waters, nor lose those inundated by them in extraordinary floods." As may be seen, the legal provision quoted above, cited by the appellant in support of its contention, refers to ponds and lagoons, and has therefore no application to the case at bar, which refers to a lake, a lagoon being legally distinct in character from a lake.

Having pointed out that the inundation of the two parcels of land in question during the months of September, October and November, is extraordinary, the legal provision applicable to the case is that contained in article 77 of the aforesaid Law of Waters, which reads: "ART. 77. Lands accidentally inundated by the waters of lakes, or by creeks, rivers, and other streams, shall continue to be the property of their respective owners." If, as we have seen, the two parcels of land in litigation form no part of the bed of Laguna de Bay, and, consequently, do not belong to the public domain, they must belong to the claimant Colegio de San Jose as a part of the Hacienda de San Pedro Tunasan, owned by it, the northeastern part of which borders on said lake, and in accordance with the legal provision just quoted, the fact that they are inundated by its waters during extraordinary risings, which take place during the months of September, October and November, does not deprive said claimant of the ownership thereof. Article 84 of the said Law of Waters further provides: "ART. 84. Accretions deposited gradually upon lands contiguous to creeks, streams, rivers, and lakes, by accessions or sediments from the waters thereof, belong to the owners of such lands." * * * * * * *

Even if, therefore, the two parcels of land in litigation were considered as accretions gradually deposited by accessions or sediments from the.waters of Laguna de Bay, they would still, according to the legal provision just quoted, belong to the claimant Colegio de San Jose as owner of the lands bordering on said Laguna de Bay. The appellant also contends that the two parcels of land form a part of the shores of Laguna de Bay and are therefore of public ownership, citing paragraph 3 of article 1 of the Law of Waters, which says: "ART. 1. The following are part of the national domain open to public use: * * * * * * *

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"3. The shores.By the shore is understood that space covered and uncovered by the movement of the tide. Its interior or terrestrial limit is the line reached by the highest equinoctial tides. Where the tides are not appreciable, the shore begins on the land side at the line reached by the sea during ordinary storms or tempests." As the court below correctly held, this legal provision refers to the waters of the sea, being included under Title I, which treats of the ownership and use of said waters of the sea. Lake waters, being terrestrial waters, their ownership and use are governed by Title II of said Law of Waters. In the same manner as the shore of the sea is that space covered and uncovered by the waters during tides, the exterior or terrestrial limit being the line reached by the highest equinoctial tides, so the shore of a lake is that space covered and uncovered by the waters during the tides, its interior or terrestrial limit being the line reached by its highest ordinary depth. In the instant case, the interior or terrestrial limit of the Laguna de Bay is the ground covered by its waters in its highest ordinary depth, that is, up to the northeastern boundary of the two parcels of land in question. Summarizing, we find: (1) That the natural bed or basin of Laguna de Bay is the ground covered by its waters at their highest ordinary depth during the dry season, that is, during the months of December, January, February, March, April, May, June, July and August; (2) that the highest depth reached by said waters during the rainy season, or during the months of September, October and November, is extraordinary; (3) that the two parcels of land in litigation form an integral part of the Hacienda de San Pedro Tunasan belonging to the claimant Colegio de San Jose; (4) that said two parcels of land, being accidentally inundated by the waters of Laguna de Bay continue to be the property of the claimant Colegio de San Jose (art. 77, Law of Waters of August 3, 1866); (5) that even supposing that the said two parcels of land have been formed by accession or deposits of sediment by the waters of said Laguna de Bay, they still belong to the said claimant Colegio de San Jose, as owner of the land of the Hacienda de San Pedro Tunasan, bordering on said Laguna de Bay (art. 84, Law of Waters of August 3, 1866); (6) that the provisions of the Law of Waters regulating the ownership and use of the waters of the sea are not applicable to the ownership and use of lakes, which are governed by special provisions. In view of the foregoing considerations, we are of opinion and so hold, that the judgment appealed from should be affirmed, without special pronouncement as to costs. So ordered.

Avancea, C. J., Johnson, Street, Villamor and Johns, JJ., concur. Judgment affirmed. _____________

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Government of the P. I. vs. Colegio de San Jose, 53 Phil. 423(1929)]

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G.R. No. 95748. November 21, 1996.* ANASTACIA VDA. DE AVILES, ET AL., petitioners, vs. COURT OF APPEALS and CAMILO AVILES, respondents.
Civil Law; Property; Boundary disputes are not cognizable in a special civil action to quiet title.We agree with respondent Court. The facts presented unmistakably constitute a clear case of boundary dispute, which is not cognizable in a special civil action to quiet title. Quieting of title is a common law remedy for the removal of any cloud upon or doubt or uncertainty with respect to title to real property. Same; Same; To avail of the remedy of quieting of title, a plaintiff must show that there is an instrument, record, claim, encumbrance or proceeding which constitutes or casts a cloud, doubt, question or shadow upon the owners title to or interest in real property.In fine, to avail of the remedy of quieting of title, a plaintiff must show that there is an instrument, record, claim, encumbrance or proceeding which constitutes or casts a cloud, doubt, question or shadow upon the owners title to or interest in real property. Thus, petitioners have wholly misapprehended the import of the foregoing rule by claiming that respondent Court erred in holding that there was no x x x evidence of any muniment of title, proceeding, written contract, x x x, and that there were, as a matter of fact, two such contracts, viz., (i) the Agreement of Partition executed by private respondent and his brothers (including the petitioners father and predecessor-ininterest), in which their respective shares in the inherited property were agreed upon, and (ii) the Deed of Sale evidencing the redemption by petitioner Anastacia Vda. de Aviles of the subject property in a foreclosure sale. However, these documents in no way constitute a cloud or cast a doubt upon the title of petitioners. Rather, the uncertainty arises from the parties failure to situate and fix the boundary between their respective properties.

These are the key issues raised in this petition to review on certiorari the Decision2 of the respondent Court promulgated on September 28, 1990 in CAG.R. CV No. 18155, which affirmed the decision dated December 29, 1987 of the Regional Trial Court, Branch 38,3 Lingayen, Pangasinan, dismissing a complaint for quieting of title. The Facts In an action for quieting of title commenced before the aforementioned trial court, the following facts, stripped of unnecessary verbiage, were established by the respondent Court:4 PLAINTIFFS aver that they are the actual possessors of a parcel of land situated in Malawa, Lingayen, Pangasinan, more particularly described as fishpond, cogonal, unirrigated rice and residential land, bounded on the N by Camilo Aviles; on the E by Malawa River, on the S by Anastacio Aviles and on the W by Juana and Apolonio Joaquin, with an area of 18,900 square meters and declared under Tax Declaration No. 31446. This property is the share of their father, Eduardo Aviles and brother of the defendant, in the estate of their deceased parents, Ireneo Aviles and Anastacia Salazar. SINCE 1957, Eduardo Aviles was in actual possession of the afore-described property. In fact, the latter mortgaged the same with the Rural Bank and Philippine National Bank branch in Lingayen. When the property was inspected by a bank representative, Eduardo Aviles, in the presence of the boundary owners, namely, defendant Camilo Aviles, Anastacio Aviles and Juana and Apolonio Joaquin(,) pointed to the inspector the existing earthen dikes as the boundary limits of the property and nobody objected. When the real estate mortgage was foreclosed, the property was sold at public auction but this was redeemed by plaintiffs mother and the land was subsequently transferred and declared in her name. ON March 23, 1983, defendant Camilo Aviles asserted a color of title over the northern portion of the property with an area of approximately 1,200 square meters by constructing a bamboo fence (thereon) and moving the earthen dikes, thereby molesting and disturbing the peaceful possession of the plaintiffs over said portion. UPON the other hand, defendant Camilo Aviles admitted the agreement of partition (Exh. 1) executed by him and his brothers, Anastacio and Eduardo. In accordance therewith, the total area of the property of their parents which they divided is 46,795 square meters and the area alloted (sic) to Eduardo Aviles is 16,111 square meters more or less, to Anastacio Aviles is 16,214 square meters more or less, while the area alloted to defendant Camilo
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PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court. Ulysses T. Sevilla for petitioners. Teodoro C. Fernandez and Manuel Y. Fernandez for private respondent. PANGANIBAN, J.: Is the special civil action of Quieting of Title under Rule 64 the proper remedy for settling a boundary dispute? Did the respondent Court1 commit a reversible error when it did not declare the respective rights of the parties over the disputed property in said action?

Aviles is 14,470 square meters more or less. The respective area(s) alloted to them was agreed and measured before the execution of the agreement but he was not present when the measurement was made. Defendant agreed to have a smaller area because his brother Eduardo asked him that he wanted a bigger share because he has several children to support. The portion in litigation however is part of the share given to him in the agreement of partition. At present, he is only occupying an area of 12,686 square meters which is smaller than his actual share of 14,470 square meters. Tax Declarations Nos. 23575, 481 and 379 covering his property from 1958 (Exhs. 7, 8 and 9) show that the area of his property is 14,470 square meters. The riceland portion of his land is 13,290 square meters, the fishpond portion is 500 square meters and the residential portion is 680 square meters, or a total of 14,470 square meters. That the topography of his land is not the same, hence, the height of his pilapils are likewise not the same. In its decision dated December 29, 1987, the trial court disposed of the case thus:5 WHEREFORE, premises considered, judgment is hereby rendered as follows: 1. Ordering the parties to employ the services of a Land Surveyor of the Bureau of Lands, Region I, San Fernando, La Union, to relocate and determine the extent and the boundary limit of the land of the defendant on its southern side in order that the fourteen thousand four hundred seventy (14,470) square meters which is the actual area given to the defendant be determined; 2. Ordering the complaint dismissed for lack of basis and merits; 3. Ordering the plaintiffs to pay the defendant the sum of two thousand (P2,000.00) pesos as attorneys fees and to further pay the costs of the proceedings; 4. All other claims are denied for lack of basis. Dissatisfied with the trial courts decision, petitioners appealed to the respondent appellate Court. In its now-assailed Decision, the Court of Appeals affirmed in part the decision of the trial court, reasoning that a special civil action for quieting of title is not the proper remedy for settling a boundary dispute, and that petitioners should have instituted an ejectment suit instead. The dispositive portion of the impugned Decision reads as follows:

WHEREFORE, in view of the foregoing, the decision dated December 29, 1987 dismissing the complaint is hereby AFFIRMED but without necessarily agreeing with the ration detre (sic) proferred by the Court a quo. The portion thereof ordering the parties to employ the service of a land surveyor to relocate and determine the extent and boundary limit of the land of the defendant on its southern portion in order that the fourteen thousand four hundred seventy (14,470) square meters which is the actual area given to the defendant be determined is hereby REVERSED and SET ASIDE. Costs against plaintiffsappellants. The Issues Disagreeing with the respondent Court, petitioners now raise the following issues:6 a. Whether or not the Hon. Court of Appeals is correct when it opined that the x x x complaint for quieting of title instituted by the petitioners against private respondent before the court a quo is not the proper remedy but rather, it should be a case for eejectment (sic). b. Whether or not the Hon. Court of Appeals is correct in rendering a decision, now subject of the instant petition, without fully determining the respective rights of the herein parties. Petitioners deem to be without basis the respondent Courts holding that quieting of title is not the proper remedy in the case a quo. They assert that private respondent is occupying the disputed lot because he claimed it to be part of his share in the partitioned property of his parents, whereas petitioners are claiming the said lot as part and parcel of the land allotted to Eduardo Aviles, petitioners predecessor-in-interest. They contend that they have been occupying the aforesaid land as heirs of Eduardo Aviles in open, actual, continuous, peaceful, public and adversed (sic) (possession) against the whole world. Further, they argue that, if indeed the disputed lot belonged to private respondent, why then did it take him almost 26 long years from June 27, 1957 or until March 27, 1983 to assert his ownership; why did he not assert his ownership over the property when Eduardo Aviles was still alive; and why did he not take any action when the mortgage over the disputed property was foreclosed?7 Private respondent corrects the petitioners claim in regard to the date when he had the bamboo fence constructed. He alleges that the petitioners maliciously concocted the story that private respondent had purportedly encroached some
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1,200 meters on their property when, in fact, he was merely repairing the old bamboo fence existing where it had always been since 1957.8 The Courts Ruling First Issue: Quieting of Title Not Proper Remedy For Settling Boundary Dispute We agree with respondent Court. The facts presented unmistakably constitute a clear case of boundary dispute, which is not cognizable in a special civil action to quiet title. Quieting of title is a common law remedy for the removal of any cloud upon or doubt or uncertainty with respect to title to real property.9 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 a title to real property or any interest therein. In fine, to avail of the remedy of quieting of title, a plaintiff must show that there is an instrument, record, claim, encumbrance or proceeding which constitutes or casts a cloud, doubt, question or shadow upon the owners title to or interest in real property. Thus, petitioners have wholly misapprehended the import of the foregoing rule by claiming that respondent Court erred in holding that there was no x x x evidence of any muniment of title, proceeding, written contract, x x x, and that there were, as a matter of fact, two such contracts, viz., (i) the Agreement of Partition executed by private respondent and his brothers (including the petitioners father and predecessor-in-interest), in which their respective shares in the inherited property were agreed upon, and (ii) the Deed of Sale evidencing the redemption by petitioner Anastacia Vda. de Aviles of the subject property in a foreclosure sale. However, these documents in no way constitute a cloud or cast a doubt upon the title of petitioners. Rather, the uncertainty arises from the parties failure to situate and fix the boundary between their respective properties.

As correctly held by the respondent Court, (i)n fact, both plaintiffs and defendant admitted the existence of the agreement of partition dated June 8, 1957 and in accordance therewith, a fixed area was alloted (sic) to them and that the only controversy is whether these lands were properly measured. There is no adverse claim by the defendant which is apparently valid, but is, in truth and in fact, invalid, ineffective, voidable, or unenforceable and which constitutes a cloud thereon. Corollarily, and equally as clear, the construction of the bamboo fence enclosing the disputed property and the moving of earthen dikes are not the clouds or doubts which can be removed in an action for quieting of title. An action to quiet title or to remove cloud may not be brought for the purpose of settling a boundary dispute. The precedent on this matter cited by the respondent Court in its Decision is herewith reproduced in full:10 In Ashurst v. McKenzie (1890) 92 Ala. 484, 9 So. 262, where the complainants predecessor in title and the defendant had, during their occupancy, destroyed and obliterated the boundary line between their adjoining tracts of land, and there was now a dispute as to its location, it was held that a bill did not lie to remove a cloud on the complainants title. The court said: There is no allegation or evidence of any muniment of title, proceeding, written contract, or paper showing any color of title in the defendant, which could cast a shadow on the title of complainants to any part of the land; there is no overlapping of description in the muniments held by either. The land of complainants and defendant join. The line which separates them is in dispute and is to be determined by evidence aliunde. Each admits that the other has title up to his line wherever it may be, and the title papers of neither fix its precise location. So that there is no paper the existence of which clouds the title of either party, and nothing could be delivered up and canceled under the decree of the court undertaking to remove a cloud. Another similarly instructive precedent reported in the same reference is also quoted below: In Kilgannon v. Jenkinson (1883) 51 Mich. 240, 16 N.W. 390, the court, dismissing a bill to quiet title, said: The fundamental dispute is about the correct position of the line between lots 3 and 7. The case is not one where a complainant in possession of a specific piece of land, and a defendant out of possession, but claiming some right or title, are contending as to which one has the better right to that same parcel; but it is a case where the titles are not opposed, and the basis and existence of all right and claim depend simply
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upon where the original line runs. When that is once settled, there can remain no semblance of claim or cloud to be passed on, and the issue on that particular question is one regularly triable at law . . .11 Second Issue: Should Parties Rights Have Been Declared? Petitioners also chide the respondent Court (and the trial court) for not declaring the respective rights of the parties with respect to the land in question, arguing that when one is disturbed in any form in his rights of property over an immovable by the unfounded claims of others, he has the right to ask from the competent courts: x x x that their respective rights be determined x x x. As support for their thesis, petitioners cite the ancient case of Bautista vs. Exconde.12 Rule 64 of the Rules of Court, dealing with actions for declaratory relief, specifies in Section 1 thereof the grounds, conditions precedent or requisites for bringing such petitions.13 This Court has previously held that Under this rule, only a person who is interested under a deed, will, contract or other written instrument, and whose rights are affected by a statute or ordinance, may bring an action to determine any question of construction or validity arising under the instrument or statute and for a declaration of his rights or duties thereunder. This means that the subject matter must refer to a deed, will, contract or other written instrument, or to a statute or ordinance, to warrant declaratory relief. Any other matter not mentioned therein is deemed excluded. This is under the principle of expressio unius est exclussio alterius.14 Inasmuch as the enumeration of the causes, grounds or conditions precedent in the first paragraph of said Sec. 1 is exclusive, by parity of reasoning, it follows that similar remedies provided for in the second paragraph of the same section would also be marked with the same exclusivity as to bar any other cause possibly clouding ones title as a ground for such petitions. Thus, even assuming arguendo that the action to quiet title had been brought under Rule 64, the same would still not have prospered, the subject matter thereof not referring to a deed, will, contract or other written instrument, or to a statute or ordinance, but to a boundary dispute, and therefore not warranting the grant of declaratory relief. From another perspective, we hold that the trial court (and likewise the respondent Court) cannot, in an action for quieting of title, order the determination of the boundaries of the claimed property, as that would be tantamount to awarding to one or some of the parties the disputed property in

an action where the sole issue is limited to whether the instrument, record, claim, encumbrance or proceeding involved constitutes a cloud upon the petitioners interest or title in and to said property. Such determination of boundaries is appropriate in adversarial proceedings where possession or ownership may properly be considered and where evidence aliunde, other than the instrument, record, claim, encumbrance or proceeding itself, may be introduced. An action for forcible entry, whenever warranted by the period prescribed in Rule 70, or for recovery of possession de facto, also within the prescribed period, may be availed of by the petitioners, in which proceeding the boundary dispute may be fully threshed out. WHEREFORE, in view of the foregoing considerations, the instant petition is hereby DENIED and the Decision appealed from is AFFIRMED. Costs against petitioners. SO ORDERED. Narvasa (C.J., Chairman), Davide, Jr., Melo and Francisco, JJ., concur. Petition denied, judgment affirmed. Note.The pendency of an action for quieting of title before the Regional Trial Court does not divest the city or municipal trial court of its jurisdiction over the ejectment covering the same property. (Oblea vs. Court of Appeals, 244 SCRA 101 [1995]) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Vda. de. Aviles vs. Court of Appeals, 264 SCRA 473(1996)]

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G.R. No. 154270. March 9, 2010.* TEOFISTO OO, PRECY O. NAMBATAC, VICTORIA O. MANUGAS and POLOR O. CONSOLACION, petitioners, vs. VICENTE N. LIM, respondent.
Land Titles; Actions; Direct and Indirect or Collateral Attack on the Title; The attack is direct when the objective is to annul or set aside such judgement or enjoin its enforcement; 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.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. 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. Civil Law; Quieting of Title; Quieting of title is a common law remedy for the removal of any cloud, doubt, or uncertainty affecting title to real property.Quieting of title is a common law remedy for the removal of any cloud, doubt, or uncertainty affecting title to real property. 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. 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. Prescription; 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. 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. 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. Land Registration; 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.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.

PETITION for review on certiorari of a decision of the Court of Appeals. The facts are stated in the opinion of the Court. Paulino B. Labrado for petitioners. Mercado, Cordero, Bael, Acua & Sepulveda for respondent. 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), Lims 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 owners 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 Oo and Estefania Apas (Spouses Oo), the lots registered owners; and that although the deed evidencing the sale had been lost without being registered, Antonio Oo (Antonio), the only legitimate heir of Spouses Oo, 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 Assessors Office of Cebu.
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Zosimo Oo and petitioner Teofisto Oo (Oos) opposed Lims petition, contending that they had the certificate of title in their possession as the successors-in-interest of Spouses Oo. On account of the Oos 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 Oos be ordered to surrender the reconstituted owners 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 Oos claimed that their predecessors-in-interest, Spouses Oo, 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 plaintiffs 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 Oo in favor of Luisa NarviosLim; (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 Oos, except on two occasions in 1993 when the Oos 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 Antonios signature was a forgery. CA Ruling On appeal, the Oos 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 Oos) 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. The CA affirmed the RTC, however, and found that Spouses Oo 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 owners duplicate was still intact in the possession of the Oos. 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 owners 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 Oo in favor of Luisa Narvios-Lim, and issue a new transfer certificate

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of title to and in the name of the latter upon cancellation of the outstanding original and owners duplicate certificate of title. (2) In the event defendants-appellants neglect or refuse to present the owners 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.

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 Lims complaint pertinently alleged: 18. If indeed, the genuine original of the Owners Duplicate of the Reconstituted Original Certificate of Title No. RO-9699 (O-20449) for Lot 943, Balamban Cadastre xxx is in Defendants (Oos) possession, then VNL submits the following PROPOSITIONS: xxx

SO ORDERED.10 The CA denied the Oos 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 Oo 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
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18.2. Therefore, the Original of Owners Duplicate Certificate (which Respondents [Defendants Oos] claim in their Opposition is in their possession) must be surrendered to VNL upon order of this Court, after the Court shall have determined VNLs mothers 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 Lims 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 Lims title, and the confirmation of Lims 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 Luisas 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 Lims 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 Antonios 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 Antonios 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
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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.

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Oo vs. Lim, 614 SCRA 514(2010)]

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No. L-38745. August 6, 1975.* LUCIA TAN, plaintiff-appellee, vs. ARADOR VALDEHUEZA and REDICULO VALDEHUEZA, defendants-appellants.
Judgment; Effect of; Res judicata; Identity of cause of action; Absence of inconsistency between prior and subsequent judgments; Case at bar.Applying the test of absence of inconsistency between prior and subsequent judgments, the failure of Tan, in case 2002, to secure an injunction against the Valdehuezas to prevent them from entering the land and gathering nuts is not inconsistent with her being adjudged, in case 2574, as owner of the land with right to recover possession thereof. Case 2002 involved only the possession of the land and the fruits thereof, while case 2574 involves ownership of the land, with possession as a mere attribute of ownership. The judgment in the first case could not and did not encompass the judgment in the second, although the second judgment would encompass the first. Contracts; Mortgage; Mortgage binding between parties even if instrument not recorded. Under article 1875 of the Civil Code of 1889, registration was a necessary requisite for the validity of a mortgage even as between the parties, but under article 2125 of the new Civil Code (in effect since August 30, 1950), this is no longer so. if the instrument is not recorded, the mortgage is nonetheless binding between the parties. Same; Sales; Equitable mortgage; Where vendor remains in possession of land and pays taxes thereon, contract presumed as equitable mortgage.The Valdehuezas having remained in possession of the land and the realty taxes having been paid by them, the contracts which purported to be pacto de retro transactions are presumed to be equitable mortgages, whether registered or not, there being no third parties involved. Same; Interest; No interest due where not expressly stipulated in writing.The imposition of legal interest on the amounts subject of the equitable mortgages is without legal basis, for, no interest shall be due unless it has been expressly stipulated in writing. Property; Quieting of title; Plaintiff need not be in possession of property.The new Civil Code provides that suitors in actions to quiet title need not be in possession of said property.

This appeal was certified to this Court by the Court of Appeals as involving questions purely of law. The decision a quo was rendered by the Court of First Instance of Misamis Occidental (Branch I) in an action instituted by the plaintiff-appellee Lucia Tan against the defendants-appellants Arador Valdehueza and Rediculo Valdehueza (docketed as civil case 2574) for (a) declaration of ownership and recovery of possession of the parcel of land described in the first cause of action of the complaint, and (b) consolidation of ownership of two portions of another parcel of (unregistered) land described in the second cause of action of the complaint, purportedly sold to the plaintiff in two separate deeds of pacto de retro. After the issues were joined, the parties submitted the following stipulation of facts: 1. That parties admit the legal capacity of plaintiff to sue; that defendants herein, Arador, Rediculo, Pacita, Concepcion and Rosario, all surnamed Valdehueza, are brothers and sisters; that the answer filed by Arador and Rediculo stand as the answer of Pacita, Concepcion and Rosario. 2. That the parties admit the identity of the land in the first cause of action. 3. That the parcel of land described in the first cause of action was the subject matter of the public auction sale held on May 6, 1955 at the Capitol Building in Oroquieta, Misamis Occidental, wherein the plaintiff was the highest bidder and as such a Certificate of Sale was executed by MR. VICENTE D. ROA who was then the Ex-Officio Provincial Sheriff in favor of LUCIA TAN the herein plaintiff. Due to the failure of defendant Arador Valdehueza to redeem the said land within the period of one year as being provided by law, MR. VICENTE D. ROA who was then the Ex-Officio Provincial Sheriff executed an ABSOLUTE DEED OF SALE in favor of the plaintiff LUCIA TAN. A copy of the NOTICE OF SHERIFFS SALE is hereby marked as Annex A, the CERTIFICATE OF SALE is marked as Annex B and the ABSOLUTE DEED OF SALE is hereby marked as Annex C and all of which are made as integral parts of this stipulation of facts. 4. That the party-plaintiff is the same plaintiff in Civil Case No. 2002; that the parties defendants Arador, Rediculo and Pacita, all Valdehueza were the same
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APPEAL from a decision of the Court of First Instance of Misamis Occidental. Catolico, J.

The facts are stated in the opinion of the Court. Alaric P. Acosta for plaintiff-appellee. Lorenzo P. de Guzman for defendants-appellants. CASTRO, J.:

parties-defendants in the same said Civil Case No. 2002; the complaint in Civil Case No. 2002 to be marked as Exhibit 1; the answer as Exhibit 2 and the order dated May 22, 1963 as Exhibit 3, and said exhibits are made integral part of this stipulation. 5. That defendants ARADOR VALDEHUEZA and REDICULO VALDEHUEZA have executed two documents of DEED OF PACTO DE RETRO SALE in favor of the plaintiff herein, LUCIA TAN of two portions of a parcel of land which is described in the second cause of action with the total amount of ONE THOUSAND FIVE HUNDRED PESOS (P1,500.00), Philippine Currency, copies of said documents are marked as Annex D and Annex E, respectively and made as integral parts of this stipulation of facts. 6. That from the execution of the Deed of Sale with right to repurchase mentioned in the second cause of action, defendants Arador Valdehueza and Rediculo Valdehueza remained in the possession of the land; that land taxes to the said land were paid by the same said defendants. Civil case 2002 referred to in stipulation of fact no. 4 was a complaint for injunction filed by Tan on July 24, 1957 against the Valdehuezas, to enjoin them from entering the abovedescribed parcel of land and gathering the nuts therein x x x. This complaint and the counterclaim were subsequently dismissed for failure of the parties to seek for the immediate trial thereof, thus evincing lack of interest on their part to proceed with the case.1 The Deed of Pacto de Retro referred to in stipulation of fact no. 5 as Annex D (dated August 5, 1955) was not registered in the Registry of Deeds, while the Deed of Pacto de Retro referred to as Annex E (dated March 15, 1955) was registered. On the basis of the stipulation of facts and the annexes, the trial court rendered judgment, as follows: WHEREFORE, judgment is hereby rendered in favor of the plaintiff: 1. Declaring Lucia Tan the absolute owner of the property described in the first cause of action of the amended complaint; and ordering the herein defendants not to encroach and molest her in the exercise of her proprietary rights; and, from which property they must be dispossessed; 2. Ordering the defendants, Arador Valdehueza and Rediculo Valdehueza, jointly and severally to pay to the plaintiff, Lucia Tan, on Annex E the amount

of P1,200, with legal interest of 6% as of August 15, 1966, within 90 days to be deposited with the Office of the Clerk of Court within 90 days from the date of service of this decision, and that in default of such payment, the property shall be sold in accordance with the Rules of Court for the release of the mortgage debt, plus costs; 3. And as regards the land covered by deed of pacto de retro annex D, the herein defendants Arador Valdehueza and Rediculo Valdehueza are hereby ordered to pay the plaintiff the amount of P300 with legal interest of 6% from August 15, 1966, the said land serving as guaranty of the said amount of payment; 4. Sentencing the defendants Arador Valdehueza and Rediculo Valdehueza to pay jointly and severally to the herein plaintiff Lucia Tan the amount of 1,000.00 as attorneys fees; and 5. To pay the costs of the proceedings. The Valdehuezas appealed, assigning the following errors: That the lower court erred in failing to adjudge on the first cause of action that there exists res judicata; and That the lower court erred in making a finding on the second cause of action that the transactions between the parties were simple loan, instead, it should be declared as equitable mortgage. We affirm in part and modify in part. 1. Relying on Section 3 of Rule 17 of the Rules of Court which pertinently provides that a dismissal for failure to prosecute shall have the effect of an adjudication upon the merits, the Valdehuezas submit that the dismissal of civil case 2002 operated, upon the principle of res judicata, as a bar to the first cause of action in civil case 2574. We rule that this contention is untenable as the causes of action in the two cases are not identical. Case 2002 was for injunction against the entry into and the gathering of nuts from the land, while case 2574 seeks to remove any doubt or cloud of the plaintiffs ownership x x x (Amended complaint, Rec. on App., p. 27), with a prayer for declaration of ownership and recovery of possession. Applying the test of absence of inconsistency between prior and subsequent judgments,2 we hold that the failure of Tan, in case 2002, to secure an injunction against the Valdehuezas to prevent them from entering the land and
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gathering nuts is not inconsistent with her being adjudged, in case 2574, as owner of the land with right to recover possession thereof. Case 2002 involved only the possession of the land and the fruits thereof, while case 2574 involves ownership of the land, with possession as a mere attribute of ownership. The judgment in the first case could not and did not encompass the judgment in the second, although the second judgment would encompass the first. Moreover, the new Civil Code provides that suitors in actions to quiet title need not be in possession of said property.3 2. The trial court treated the registered deed of pacto de retro as an equitable mortgage but considered the unregistered deed of pacto de retro as a mere case of simple loan, secured by the property thus sold under pacto de retro, on the ground that no suit lies to foreclose an unregistered mortgage. It would appear that the trial judge had not updated himself on law and jurisprudence; he cited, in support of his ruling, article 1875 of the old Civil Code and decisions of this Court circa 1910 and 1912. Under article 1875 of the Civil Code of 1889, registration was a necessary requisite for the validity of a mortgage even as between the parties, but under article 2125 of the new Civil Code (in effect since August 30, 1950), this is no longer so.4 If the instrument is not recorded, the mortgage is nonetheless binding between the parties. (Article 2125, 2nd sentence) The Valdehuezas having remained in possession of the land and the realty taxes having been paid by them, the contracts which purported to be pacto de retro transactions are presumed to be equitable mortgages,5 whether registered or not, there being no third parties involved. 3. The Valdehuezas claim that their answer to the complaint of the plaintiff affirmed that they remained in possession of the land and gave the proceeds of the harvest to the plaintiff; it is thus argued that they would suffer double prejudice if they are to pay legal interest on the amounts stated in the pacto de retro contracts, as the lower court has directed, and that therefore the court should have ordered evidence to be adduced on the harvest. The record does not support this claim, Nowhere in the original and the amended complaints is an allegation of delivery to the plaintiff of the harvest from the land involved in the second cause of action. Hence, the defendants answer had none to affirm.

In submitting their stipulation of facts, the parties prayed for its approval and maybe made the basis of the decision of this Honorable Court. (emphasis supplied) This, the court did. It cannot therefore be faulted for not receiving evidence on who profited from the harvest. 4. The imposition of legal interest on the amounts subject of the equitable mortgages, P1,200 and P300, respectively, is without legal basis, for, No interest shall be due unless it has been expressly stipulated in writing. (Article 1956, new Civil Code) Furthermore, the plaintiff did not pray for such interest; her thesis was a consolidation of ownership, which was properly rejected, the contracts being equitable mortgages. With the definitive resolution of the rights of the parties as discussed above, we find it needless to pass upon the plaintiffs petition for receivership. Should the circumstances so warrant, she may address the said petition to the court a quo. ACCORDINGLY, the judgment a quo is hereby modified, as follows: (a) the amounts of P1,200 and P300 mentioned in Annexes E and D shall bear interest at six percent per annum from the finality of this decision; and (b) the parcel of land covered by Annex D shall be treated in the same manner as that covered by Annex E, should the defendants fail to pay to the plaintiff the sum of P300 within 90 days from the finality of this decision. In all other respects the judgment is affirmed. No costs. Makalintal, C.J., Makasiar, Esguerra and Muoz Palma, JJ., concur. Teehankee, J., is on leave; Martin, J., did not take part. Judgment affirmed with modification. Notes.a) Essential requisites for res judicata.The essential requisites for the existence of res judicata are: (1) the former judgment must be final; (2) it must have been rendered by a court having jurisdiction of the subject matter and the parties; (3) it must be a judgment on the merits; and (4) there must be, between the first and second actions (1) identity of parties (b) identity of subject matter and (c) identity of cause of action. (Ipekdjian Merchandising Co., Inc. vs. Court of Tax Appeals, L-15430, September 30, 1963). b) Pacto de retro transactions. The court will not construe an instrument to be one of a sale con pacto de retro, with the stringent and onerous effects that follow, unless the
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terms of the instrument and all the circumstances positively require it. Whenever, under the terms of the writing, any other construction can fairly and reasonably be made, such construction will be adopted. Sales with a right to repurchase, as defined by the Civil Code, are not favored, and the contract will be construed as a mere loan unless the court can see that, if enforced according to its terms, it is not an unconscionable one. (Aquino vs. Deala, No. 43304, October 21, 1936, 63 Phil. 582). o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Tan vs. Valdehueza, 66 SCRA 61(1975)]

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G.R. No. 152440. January 31, 2005.* FELICITACION B. BORBAJO, petitioner, vs. HIDDEN VIEW HOMEOWNERS, INC., SPS. MARCELINA A. SARCON, ELY D. SARCON, ROBERTO ALVAREZ, CORAZON NOMBRADO, and GILBERT ANDRALES, in their personal capacities, respondents.
Land Titles; Torrens Title; Frauds; A Torrens title can be attacked only for fraud, within one year after the date of the issuance of the decree of registration.It is a well-known doctrine that the issue as to whether title was procured by falsification or fraud can only be raised in an action expressly instituted for the purpose. A Torrens title can be attacked only for fraud, within one year after the date of the issuance of the decree of registration. Such attack must be direct, and not by a collateral proceeding. The title represented by the certificate cannot be changed, altered, modified, enlarged, or diminished in a collateral proceeding. The certificate of title serves as evidence of an indefeasible title to the property in favor of the person whose name appears therein. Civil Law; Easements; An easement can exist only when the servient and the dominant estates belong to different owners.Both from the text of Article 649 of the Civil Code and the perspective of elementary common sense, the dominant estate cannot be the servient estate at the same time. One of the characteristics of an easement is that it can be imposed only on the property of another, never on ones own property. An easement can exist only when the servient and the dominant estates belong to different owners. Actions; Pleadings and Practice; Injunction; Requisites; The requisites to justify an injunctive relief are the following.The requisites to justify an injunctive relief are: (a) the existence of a right in esse or the existence of a right to be protected; and (b) the act against which injunction is to be directed as a violation of such right. A preliminary injunction order may be granted only when the application for the issuance of the same shows facts entitling the applicant to the relief demanded. A preliminary injunction is not proper when its purpose is to take the property out of the possession or control of one party and transfer the same to the hands of another who did not have such control at the inception of the case and whose legal title has not clearly been established.

TINGA, J.: Before this Court is a Rule 45 petition assailing the Decision1 dated 21 September 2001 of the Court of Appeals which reversed the Decision2 dated 14 September 1999 of the Regional Trial Court (RTC) of Cebu City, Branch 58. The factual antecedents are as follows: Jose C. Bontuyan (Bontuyan), Lucy Solon, Georgina Solon, Helen Solon and Vicente Solon, Jr. (the Solons) were the registered owners of a parcel of agricultural land (Lot 10183-A), covering an area of 13,910 square meters situated at Barangay Bacayan, Cebu City as evidenced by Transfer Certificate of Title (TCT) No. 73709 of the Register of Deeds of Cebu City.3 At the instance of Bontuyan, the property was surveyed on 19 May 1991 to convert it into a subdivision. On 6 June 1991, the corresponding subdivision plan, showing three (3) road lots as such, was submitted to the Cebu Office of the Department of Environment and Natural Resources (DENR). On 24 July 1991, the Regional Technical Director of the DENR, Lands Management Sector, Region Office VII, in Cebu, approved the subdivision plan.4 Meanwhile, in his own behalf and as attorney-in-fact of the Solons and following the subdivision scheme in the plan, Bontuyan sold the resulting lots to different individuals,5 as evidenced by the Deed of Absolute Sale6 dated 18 June 1991. Among the lots sold are the ones which later became the subject of this case, the three (3) road lots. The road lots were sold to petitioner Felicitacion B. Borbajo, married to Danilo S. Borbajo, and Prescillana B. Bongo (Bongo), married to Patricio P. Bongo.7 However, they obtained the titles to the lots more than a month later on 30 July 1991.8 Using the advance payments of his lot purchasers, Bontuyan proceeded to develop a subdivision which was later named Hidden View Subdivision I by its residents and home-owners.9 Later, he applied for and secured from the Housing and Land Use Regulatory Board (HLURB) a License to Sell10 dated 29 July 1991. Borbajo also decided to develop into a subdivision the other properties adjacent to Hidden View Subdivision I which she acquired. Thus, she applied for and received SSA 674-5-94 issued by the Cebu City Planning and Development Department, covering the parcel of land embraced by TCT No. 127642, to be subdivided into twenty-three (23) lots.11 She named this new subdivision ST Ville Properties. On 29 July 1994, she secured Certificate of Registration No. 05005 for the ST Ville Properties project and a License to Sell
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PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court. Bienvenido V. Baring, Jr. for petitioner. Omar B. Redulla for respondents.

the same from the HLURB. She also secured a Certificate of Registration dated 18 August 1994 for another subdivision project called Hidden View Subdivision II from the HLURB, with the corresponding License to Sell issued on 16 August 1994. The two new subdivision projects were located at the back of Hidden View Subdivision I. The residents and homeowners of Hidden View Subdivision I heard reports to the effect that Borbajo had purchased the entire subdivision from Bontuyan through an oral agreement. They also heard that they have no right to use the road lots, since the lots have already been registered in Borbajos name. As a consequence, the Hidden View Homeowners, Inc. invited Borbajo to a meeting. When confronted by the homeowners about her claim that she had bought the subdivision from Bontuyan, Borbajo confirmed her claim of ownership over the subdivision and the road lots. She also told them that they have no right regarding the road right-of-way.12 The incident prompted the homeowners of Hidden View Subdivision I to inquire with the HLURB about the validity of the registration of the subdivision road lots in the name of Borbajo. They also asked whether she had the necessary documents for the development of Hidden View Subdivision II and ST Ville Properties. In a letter13 dated 17 March 1997, HLURB Regional Officer Antonio Decatoria, Sr. replied that under the law the owner or developer of the subdivision should have legal title or right over the road lots of the subdivision and that if the title or right is in the name of other persons it follows that there is failure to comply with the requirements of the law. The HLURB Officer pointed out that Hidden View Subdivision II and ST Ville Properties had not filed an application for registration and license to sell with the HLURB.14 On 10 August 1997, the homeowners caused the construction of a guardhouse at the entrance of Hidden View Subdivision I and hired the services of a security guard to prevent unauthorized persons and construction vehicles from passing through their subdivision. The measures adversely affected the residents of the subdivisions at the back, as well as Borbajo herself since her delivery trucks and heavy equipment used in the construction of her housing projects then on-going had been effectively prevented from passing through the road lots.15 On 28 August 1997, Borbajo filed before the RTC of Cebu City, Branch 58, an action for damages and injunction against Hidden View Homeowners, Inc., spouses Marcelina A. Sarcon and Ely D. Sarcon, Roberto Alvarez and Corazon

Nombrado and Gilbert Andrales (respondents herein). Borbajo prayed for the issuance of a temporary restraining order (TRO) directing respondents to maintain the status quo and to desist from preventing her delivery trucks and other construction vehicles, and her construction workers, from passing through the road lots, and, after hearing on the merits, that judgment be rendered making the restraining order or preliminary injunction permanent and ordering the defendants to pay damages.16 The trial court issued a TRO effective for seventy-two (72) hours. After due hearing, it also granted Borbajos application for a writ of preliminary injunction. It denied respondents motion to dismiss on the ground that it is the HLURB which has jurisdiction over the case.17 After trial, the trial court rendered its decision dated 14 September 1999, the dispositive portion of which reads: WHEREFORE, premises considered, judgment is hereby rendered enjoining the defendants to close [sic] the road lots in question, hence, making the injunction permanent, subject to the right of the defendants to regulate the passage thereof by the plaintiff and the general public; and directing the plaintiff to donate the road lots in question to the government of Cebu City. No pronouncement as to any damages and as to costs. SO ORDERED.18 On appeal, the Court of Appeals reversed the lower court decision. The decretal portion of the appellate courts decision dated 21 September 2001 reads: WHEREFORE, premises considered, the present appeal is hereby GRANTED. The appealed Decision in Civil Case No. CEB-20796 is hereby REVERSED and SET ASIDE and a new one is hereby rendered DISMISSING the complaint. The counterclaim of defendants-appellants is likewise dismissed for lack of legal and factual bases. No pronouncement as to costs. SO ORDERED.19 Undaunted, Borbajo elevated the case to this Court. In her petition, Borbajo imputes error to the appellate court (a) in reversing the decision of the trial court which declared her to be the developer of Hidden
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View Subdivision I, (b) in finding that she had fraudulently secured the registration of the three (3) road lots, and (c) in declaring that she is not entitled to the injunctive relief.20 Borbajo contends that the appellate court erred in reversing the finding of the RTC that she is the developer of Hidden View Subdivision I. According to her, and as borne out by her testimony before the RTC, she was the true developer of Hidden View Subdivision I even though the License to Sell was issued in the name of Bontuyan. The appellate court allegedly violated prevailing jurisprudence when it held that she fraudulently secured the registration of the three (3) road lots since a certificate of title cannot be collaterally attacked except in direct proceedings instituted for that purpose. In fact, Hidden View Homeowners, Inc. has filed a separate case for annulment of title against Borbajo which is now pending before Branch 9 of the RTC of Cebu City. Further, she claims that she is entitled to the injunctive relief considering that she is the registered owner of these road lots in question and, hence, she has a right in esse which deserves legal protection.21 On the other hand, respondents argue that the sale of the road lots made by Bontuyan in favor of Borbajo was illegal and contrary to the provisions of Presidential Decree (P.D.) No. 957 which requires that the road lots in a subdivision development shall be in the name of the developer or owner, of which Borbajo is neither.22 They aver that Borbajo fraudulently obtained her titles to the road lots through a falsified deed of sale which was the document presented to the Office of the Register of Deeds.23 They also point out that the use by Borbajo of the road lots for the ingress and egress of heavy equipment has continuously resulted in the rapid deterioration of the roads. Moreover, the road lots are not the nearest point between the development project of Borbajo and the provincial road.24 Finally, they assert that they are merely exercising acts of ownership which include the right to prevent others from enjoying the thing owned by them. Respondents oppose the issuance of a preliminary injunction because notwithstanding the registration of the subject road in Borbajos name, her title thereto is tainted by the discovery of fraud she allegedly perpetrated in securing the questioned titles.25 The result which Borbajo seeks to achieve which is to reinstate the preliminary injunction issued by the lower court has to be granted, but not for the reasons which she has raised nor for the grounds which the lower court relied upon. The ultimate question for resolution is whether respondents may legally prevent Borbajo from using and passing through the three (3) road lots within

Hidden View Subdivision I. It is worthy of note that the right of respondents to use the road lots themselves is not in dispute. In resolving the controversy, the lower court addressed only the issue of whether respondents have the right to close the road lots, and the question of damages.26 It concluded that respondents cannot legally close the road lots because these are intended for public use. It opted not to resolve the question pertaining to the validity of Borbajos acquisition of the road lots and her title thereto on the ground that a Torrens title cannot be collaterally attacked.27 For its part, the Court of Appeals addressed the trial courts errors assigned by the respondents herein. The trial court allegedly erred in: (a) finding that Borbajo was the developer of Hidden View Subdivision I; (b) finding that the manner by which Borbajo acquired the road lots is irrelevant to the resolution of the issues in this case; (c) finding that the road lots are open to the public and the only right of the residents therein is to regulate its use; (d) not finding that the elements of an easement of a right-of-way are not present; (e) finding that the injunction was properly issued and the court ordered Borbajo to donate the road lots in favor of the local government unit; and (f) failing to award damages to the respondents.28 The appellate court found that the injunctive writ was erroneously issued as the same was not based on an actual right sought to be protected by law. The fact that Borbajo was the developer of Hidden View Subdivision I was not clearly established by evidence. Although Borbajo has claimed that she was the developer of the subdivision and that Bontuyans name was indicated in the License to Sell, such claim carried scant weight in the absence of a certificate of registration of the subdivision project issued in her name by the HLURB and other documents which prove that she was indeed the developer.29 Further, the appellate court ruled that the fact of registration of the road lots in Borbajos name was insufficient to defeat the right of the homeowners of the subdivision and preclude them from regulating their use and administration thereof in accordance with existing laws and regulations.30 It likewise held that Borbajo had not complied with the requisites of a compulsory easement of right-of-way and pointed out the general rule that mere convenience for the dominant estate is not what is required by law as the basis for setting up a compulsory easement.31 Hence, this instant judicial recourse. Noticeably, the appellate court dwelt at length on the question of whether Borbajo was the developer of the Hidden View Subdivision I as she claimed. Apparently, Borbajo submitted this point, with her focus set on the provisions of
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P.D. No. 957, as amended, ordaining that road lots may be titled only in the name of the owner of the subdivision or its developer. In the process, however, the Court of Appeals lost sight of the settled and decisive fact that Borbajo is one of the registered co-owners of the road lots along with Bongo. The evidence reveals that Borbajo and Bongo were issued TCTs, all dated 30 July 1991, for the three (3) road lots situated within the Hidden View Subdivision I. These titles were issued pursuant to the Deed of Absolute Sale dated 18 June 1991 which also mentioned the road lots as such. As a registered co-owner of the road lots, Borbajo is entitled to avail of all the attributes of ownership under the Civil Codejus utendi, fruendi, abutendi, disponendi et vindicandi.32 Article 428 of the New Civil Code is explicit that the owner has the right to enjoy and dispose of a thing, without other limitations than those established by law. A co-owner, such as Borbajo, is entitled to use the property owned in common under Article 486 of the Civil Code. Therefore, respondents cannot close the road lots to prevent Borbajo from using the same. The Court of Appeals ruled that the road lots cannot be sold to any person pursuant to P.D. No. 957, as amended. It also pointed out that fraud is manifest in the acquisition of titles thereto. However, it is a settled rule that a Torrens title cannot be collaterally attacked. It is a well-known doctrine that the issue as to whether title was procured by falsification or fraud can only be raised in an action expressly instituted for the purpose. A Torrens title can be attacked only for fraud, within one year after the date of the issuance of the decree of registration. Such attack must be direct, and not by a collateral proceeding. The title represented by the certificate cannot be changed, altered, modified, enlarged, or diminished in a collateral proceeding.33 The certificate of title serves as evidence of an indefeasible title to the property in favor of the person whose name appears therein.34 However, in upholding the efficiency value of the disputed titles for purposes of the present petition, we are not foreclosing any future determination by appropriate forum on the legality of Borbajos titles over the road lots. Verily, a separate case for annulment of titles over the road lots is now pending before the court. There are serious allegations that the issuance of the TCTs over the road lots was tainted with fraud as evidenced by alterations made on the face of the certificates and discrepancies in the records of the contract of absolute sale filed before the Office of the Register of Deeds and the Notarial Division of the RTC of Cebu City.35 If the court finds that the titles of Borbajo were

obtained fraudulently, her right to the road lots ceases as well as her right-ofway by virtue of said titles. In the meantime, however, we are bound by the value in law and the evidentiary weight of the titles in the name of Borbajo. As long as the titles are not annulled, Borbajo remains registered a co-owner and therefore her right to use the road lots subsists. Likewise, with Borbajo as a registered co-owner of the road lots, it is utterly pointless to discuss whether she is entitled to the easement of right of way. Both from the text of Article 64936 of the Civil Code and the perspective of elementary common sense, the dominant estate cannot be the servient estate at the same time. One of the characteristics of an easement is that it can be imposed only on the property of another, never on ones own property. An easement can exist only when the servient and the dominant estates belong to different owners.37 Borbajo, being a registered co-owner of the three (3) road lots, is entitled to the injunctive relief. The requisites to justify an injunctive relief are: (a) the existence of a right in esse or the existence of a right to be protected; and (b) the act against which injunction is to be directed as a violation of such right.38 A preliminary injunction order may be granted only when the application for the issuance of the same shows facts entitling the applicant to the relief demanded.39 A preliminary injunction is not proper when its purpose is to take the property out of the possession or control of one party and transfer the same to the hands of another who did not have such control at the inception of the case and whose legal title has not clearly been established.40 One final note. Respondents in their Answer41 neither claimed nor asked for the right to regulate the use of the road lots or that the road lots be donated to the Cebu City Government. Thus, there was utterly no basis for the trial court to include as it did its disposition along these lines in the decretal portion of its decision. WHEREFORE, the Decision of the Court of Appeals dated 21 September 2001 is REVERSED and SET ASIDE and the writ of preliminary injunction issued by the Regional Trial Court of Cebu City, Branch 58, is made permanent, subject to the final outcome of Civil Case No. 21239 pending before the Regional Trial Court of Cebu City, Branch 9.
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No costs. SO ORDERED. Puno (Chairman), Austria-Martinez and Chico-Nazario, JJ., concur. Callejo, Sr., J., On Official Leave. Judgment reversed and set aside. Note.The law requires that the right-of-way must be at the point least prejudicial to the servient estate, and when applicable, where the distance from the dominant estate to a public highway may be the shortest. (Sabio vs. International Corporate Bank, Inc., 364 SCRA 385 [2001]) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Borbajo vs. Hidden View Homeowners, Inc., 450 SCRA 315(2005)]

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G.R. No. 164110. February 12, 2008.* LEONOR B. CRUZ, petitioner, vs. TEOFILA M. CATAPANG, respondent.
Property; Co-Ownership; A co-owner cannot give valid consent to another to build a house on the co-owned property, which is an act tantamount to devoting the property to his or her exclusive use.As to the issue of whether or not the consent of one co-owner will warrant the dismissal of a forcible entry case filed by another co-owner against the person who was given the consent to construct a house on the co-owned property, we have held that a co-owner cannot devote common property to his or her exclusive use to the prejudice of the co-ownership. In our view, a co-owner cannot give valid consent to another to build a house on the co-owned property, which is an act tantamount to devoting the property to his or her exclusive use. Same; Same; Giving consent to a third person to construct a house on the co-owned property will injure the interest of the coownership and prevent other co-owners from using the property in accordance with their rights.Article 486 states each co-owner may use the thing owned in common provided he does so in accordance with the purpose for which it is intended and in such a way as not to injure the interest of the co-ownership or prevent the other coowners from using it according to their rights. Giving consent to a third person to construct a house on the coowned property will injure the interest of the co-ownership and prevent other co-owners from using the property in accordance with their rights. Same; Same; Alterations; Words and Phrases; None of the coowners can, without the consent of the other co-owners, validly consent to the making of an alteration by another person in the thing owned in common, and alterations include any act of strict dominion or ownership such as the construction of a house.Under Article 491, none of the co-owners shall, without the consent of the others, make alterations in the thing owned in common. It necessarily follows that none of the co-owners can, without the consent of the other co-owners, validly consent to the making of an alteration by another person, such as respondent, in the thing owned in common. Alterations include any act of strict dominion or ownership and any encumbrance or disposition has been held implicitly to be an act of alteration. The construction of a house on the co-owned property is an act of dominion. Therefore, it is an alteration falling under Article 491 of the Civil Code. There being no consent from all co-owners, respondent had no right to construct her house on the co-owned property. Same; Same; Actions; Ejectment; Forcible Entry; Consent of only one co-owner will not warrant the dismissal of the complaint for forcible entry filed against the builder.Consent of only one coowner will not warrant the dismissal of the complaint for forcible entry filed against the builder. The consent given by Norma Maligaya in the absence of the consent of petitioner and Luz Cruz did not vest upon respondent any right to enter into the co-owned property. Her entry into the property still falls under the classification through strategy or stealth. Same; Same; Same; Same; Same; Entry into a land effected clandestinely without the knowledge of the other co-owners could be categorized as possession by stealth; The one-year period within which to bring an action for forcible entry is generally counted from the date of actual entry to the land but when entry is made through stealth, then the one-year period is counted from the

time the petitioner learned about it.The Court of Appeals held that there is no forcible entry because respondents entry into the property was not through strategy or stealth due to the consent given to her by one of the co-owners. We cannot give our imprimatur to this sweeping conclusion. Respondents entry into the property without the permission of petitioner could appear to be a secret and clandestine act done in connivance with co-owner Norma Maligaya whom respondent allowed to stay in her house. Entry into the land effected clandestinely without the knowledge of the other co-owners could be categorized as possession by stealth. Moreover, respondents act of getting only the consent of one co-owner, her sister Norma Maligaya, and allowing the latter to stay in the constructed house, can in fact be considered as a strategy which she utilized in order to enter into the co-owned property. As such, respondents acts constitute forcible entry. Petitioners filing of a complaint for forcible entry, in our view, was within the one-year period for filing the complaint. The one-year period within which to bring an action for forcible entry is generally counted from the date of actual entry to the land. However, when entry is made through stealth, then the one-year period is counted from the time the petitioner learned about it. Although respondent constructed her house in 1992, it was only in September 1995 that petitioner learned of it when she visited the property. Accordingly, she then made demands on respondent to vacate the premises. Failing to get a favorable response, petitioner filed the complaint on January 25, 1996, which is within the one-year period from the time petitioner learned of the construction.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court. Wilfredo M. Bolito for petitioner. Eric P. Triste for respondent. QUISUMBING, J.: This petition for review seeks the reversal of the Decision1 dated September 16, 2003 and the Resolution2 dated June 11, 2004 of the Court of Appeals in CA-G.R. SP No. 69250. The Court of Appeals reversed the Decision3 dated October 22, 2001 of the Regional Trial Court (RTC), Branch 86, Taal, Batangas, which had earlier affirmed the Decision4 dated September 20, 1999 of the 7th Municipal Circuit Trial Court (MCTC) of Taal, Batangas ordering respondent to vacate and deliver possession of a portion of the lot co-owned by petitioner, Luz Cruz and Norma Maligaya. The antecedent facts of the case are as follows.

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Petitioner Leonor B. Cruz, Luz Cruz and Norma Maligaya are the co-owners of a parcel of land covering an area of 1,435 square meters located at Barangay Mahabang Ludlod, Taal, Batangas.5 With the consent of Norma Maligaya, one of the aforementioned co-owners, respondent Teofila M. Catapang built a house on a lot adjacent to the abovementioned parcel of land sometime in 1992. The house intruded, however, on a portion of the co-owned property.6 In the first week of September 1995, petitioner Leonor B. Cruz visited the property and was surprised to see a part of respondents house intruding unto a portion of the co-owned property. She then made several demands upon respondent to demolish the intruding structure and to vacate the portion encroaching on their property. The respondent, however, refused and disregarded her demands.7 On January 25, 1996, the petitioner filed a complaint8 for forcible entry against respondent before the 7th MCTC of Taal, Batangas. The MCTC decided in favor of petitioner, ruling that consent of only one of the co-owners is not sufficient to justify defendants construction of the house and possession of the portion of the lot in question.9 The dispositive portion of the MCTC decision reads: WHEREFORE, judgment is hereby rendered ordering the defendant or any person acting in her behalf to vacate and deliver the possession of the area illegally occupied to the plaintiff; ordering the defendant to pay plaintiff reasonable attorneys fees of P10,000.00, plus costs of suit. SO ORDERED.10 On appeal, the RTC, Branch 86, Taal, Batangas, affirmed the MCTCs ruling in a Decision dated October 22, 2001, the dispositive portion of which states: Wherefore, premises considered, the decision [appealed] from is hereby affirmed in toto. SO ORDERED.11 After her motion for reconsideration was denied by the RTC, respondent filed a petition for review with the Court of Appeals, which reversed the RTCs decision. The Court of Appeals held that there is no cause of action for forcible entry in this case because respondents entry into the property, considering the consent given by co-owner Norma Maligaya, cannot be characterized as one made through strategy or stealth which gives rise to a cause of action for

forcible entry.12 The Court of Appeals decision further held that petitioners remedy is not an action for ejectment but an entirely different recourse with the appropriate forum. The Court of Appeals disposed, thus: WHEREFORE, premises considered, the instant Petition is hereby GRANTED. The challenged Decision dated 22 October 2001 as well as the Order dated 07 January 2002 of the Regional Trial Court of Taal, Batangas, Branch 86, are hereby REVERSED and SET ASIDE and, in lieu thereof, another is entered DISMISSING the complaint for forcible entry docketed as Civil Case No. 71-T. SO ORDERED.13 After petitioners motion for reconsideration was denied by the Court of Appeals in a Resolution dated June 11, 2004, she filed the instant petition. Raised before us for consideration are the following issues: I. WHETHER OR NOT THE KNOWLEDGE AND CONSENT OF COOWNER NORMA MALIGAYA IS A VALID LICENSE FOR THE RESPONDENT TO ERECT THE BUNGALOW HOUSE ON THE PREMISES OWNED PROINDIVISO SANS CONSENT FROM THE PETITIONER AND OTHE[R] COOWNER[.] II. WHETHER OR NOT RESPONDENT, BY HER ACTS, HAS ACQUIRED EXCLUSIVE OWNERSHIP OVER THE PORTION OF THE LOT SUBJECT OF THE PREMISES PURSUANT TO THE CONSENT GRANTED UNTO HER BY CO-OWNER NORMA MALIGAYA TO THE EXCLUSION OF THE PETITIONER AND THE OTHER CO-OWNER.14 III. . . . WHETHER OR NOT RESPONDENT IN FACT OBTAINED POSSESSION OF THE PROPERTY IN QUESTION BY MEANS OF SIMPLE STRATEGY.15 Petitioner prays in her petition that we effectively reverse the Court of Appeals decision.

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Simply put, the main issue before us is whether consent given by a co-owner of a parcel of land to a person to construct a house on the co-owned property warrants the dismissal of a forcible entry case filed by another co-owner against that person. In her memorandum,16 petitioner contends that the consent and knowledge of co-owner Norma Maligaya cannot defeat the action for forcible entry since it is a basic principle in the law of co-ownership that no individual co-owner can claim title to any definite portion of the land or thing owned in common until partition. On the other hand, respondent in her memorandum17 counters that the complaint for forcible entry cannot prosper because her entry into the property was not through strategy or stealth due to the consent of one of the co-owners. She further argues that since Norma Maligaya is residing in the house she built, the issue is not just possession de facto but also one of possession de jure since it involves rights of coowners to enjoy the property. As to the issue of whether or not the consent of one coowner will warrant the dismissal of a forcible entry case filed by another co-owner against the person who was given the consent to construct a house on the co-owned property, we have held that a co-owner cannot devote common property to his or her exclusive use to the prejudice of the co-ownership.18 In our view, a co-owner cannot give valid consent to another to build a house on the co-owned property, which is an act tantamount to devoting the property to his or her exclusive use. Furthermore, Articles 486 and 491 of the Civil Code provide: Art. 486. Each co-owner may use the thing owned in common, provided he does so in accordance with the purpose for which it is intended and in such a way as not to injure the interest of the coownership or prevent the other coowners from using it according to their rights. The purpose of the co-ownership may be changed by agreement, express or implied. Art. 491. None of the co-owners shall, without the consent of the others, make alterations in the thing owned in common, eventhough benefits for all would result therefrom. However, if the withholding of the consent by one or more of the co-owners is clearly prejudicial to the common interest, the courts may afford adequate relief.

Article 486 states each co-owner may use the thing owned in common provided he does so in accordance with the purpose for which it is intended and in such a way as not to injure the interest of the co-ownership or prevent the other coowners from using it according to their rights. Giving consent to a third person to construct a house on the co-owned property will injure the interest of the co-ownership and prevent other co-owners from using the property in accordance with their rights. Under Article 491, none of the co-owners shall, without the consent of the others, make alterations in the thing owned in common. It necessarily follows that none of the co-owners can, without the consent of the other co-owners, validly consent to the making of an alteration by another person, such as respondent, in the thing owned in common. Alterations include any act of strict dominion or ownership and any encumbrance or disposition has been held implicitly to be an act of alteration.19 The construction of a house on the coowned property is an act of dominion. Therefore, it is an alteration falling under Article 491 of the Civil Code. There being no consent from all co-owners, respondent had no right to construct her house on the co-owned property. Consent of only one co-owner will not warrant the dismissal of the complaint for forcible entry filed against the builder. The consent given by Norma Maligaya in the absence of the consent of petitioner and Luz Cruz did not vest upon respondent any right to enter into the co-owned property. Her entry into the property still falls under the classification through strategy or stealth. The Court of Appeals held that there is no forcible entry because respondents entry into the property was not through strategy or stealth due to the consent given to her by one of the co-owners. We cannot give our imprimatur to this sweeping conclusion. Respondents entry into the property without the permission of petitioner could appear to be a secret and clandestine act done in connivance with co-owner Norma Maligaya whom respondent allowed to stay in her house. Entry into the land effected clandestinely without the knowledge of the other co-owners could be categorized as possession by stealth.20 Moreover, respondents act of getting only the consent of one coowner, her sister Norma Maligaya, and allowing the latter to stay in the constructed house, can in fact be considered as a strategy which she utilized in order to enter into the co-owned property. As such, respondents acts constitute forcible entry. Petitioners filing of a complaint for forcible entry, in our view, was within the one-year period for filing the complaint. The one-year period within which to
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bring an action for forcible entry is generally counted from the date of actual entry to the land. However, when entry is made through stealth, then the oneyear period is counted from the time the petitioner learned about it.21 Although respondent constructed her house in 1992, it was only in September 1995 that petitioner learned of it when she visited the property. Accordingly, she then made demands on respondent to vacate the premises. Failing to get a favorable response, petitioner filed the complaint on January 25, 1996, which is within the one-year period from the time petitioner learned of the construction. WHEREFORE, the petition is GRANTED. The Decision dated September 16, 2003 and the Resolution dated June 11, 2004 of the Court of Appeals in CAG.R. SP No. 69250 are REVERSED and SET ASIDE. The Decision dated October 22, 2001 of the Regional Trial Court, Branch 86, Taal, Batangas is REINSTATED. Costs against respondent. SO ORDERED. Carpio, Carpio-Morales, Tinga and Velasco, Jr., JJ., concur. Petition granted, judgment and resolution reversed and set aside. Notes.As co-owners of the properties, each of the heirs may properly bring an action for ejectment, forcible entry and detainer, or any kind of action for the recovery of possession of the subject properties. (Celino vs. Heirs of Alejo and Teresa Santiago, 435 SCRA 690 [2004]) Every co-owner has absolute ownership of his undivided interest in the coowned property and is free to alienate, assign or mortgage his interest except as to purely personal rights. (Cabal vs. Cabal, 454 SCRA 555 [2005]) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Cruz vs. Catapang, 544 SCRA 512(2008)]

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G.R. No. 128338. March 28, 2005.* TINING RESUENA, ALEJANDRA GARAY, LORNA RESUENA, ELEUTERIO RESUENA, EUTIQUIA ROSARIO and UNISIMA RESUENA, petitioners, vs. HON. COURT OF APPEALS, 11th DIVISION and JUANITO BORROMEO, SR., respondents.
Remedial Law; Appeals; Only questions of law may be raised in a petition for review before the Court and the same must be distinctly set forth.The issues raised by petitioners on the application of estoppel, statute of frauds, and the assignment of properties owned in common in their favor, while ostensibly raising questions of law, invite this Court to rule on questions of fact. This runs counter to the settled rule that only questions of law may be raised in a petition for review before the Court and the same must be distinctly set forth. Same; Same; A departure from the general rule may be warranted, among others, where the findings of fact of the Court of Appeals are contrary to the findings and conclusions of the trial court, or when the same is unsupported by the evidence on record.It is not the function of this Court to weigh anew the evidence already passed upon by the Court of Appeals for such evidence is deemed final and conclusive and may not be reviewed on appeal. A departure from the general rule may be warranted, among others, where the findings of fact of the Court of Appeals are contrary to the findings and conclusions of the trial court, or when the same is unsupported by the evidence on record. Same; Co-Ownership; Ejectment; Article 487 is a departure from Palarca v. Baguisi which held that an action for ejectment must be brought by all the co-owners; A co-owner may bring an action to exercise and protect the rights of all.Article 487 of the Civil Code, which provides simply that [a]ny one of the co-owners may bring an action in ejectment, is a categorical and an unqualified authority in favor of respondent to evict petitioners from the portions of Lot. No. 2587. This provision is a departure from Palarca v. Baguisi, which held that an action for ejectment must be brought by all the co-owners. Thus, a co-owner may bring an action to exercise and protect the rights of all. When the action is brought by one co-owner for the benefit of all, a favorable decision will benefit them; but an adverse decision cannot prejudice their rights. Respondents action for ejectment against petitioners is deemed to be instituted for the benefit of all co-owners of the property since petitioners were not able to prove that they are authorized to occupy the same. Civil Law; Contracts; Estoppel; A stranger to a transaction is neither bound by nor in a position to take advantage of an estoppel arising therefrom.Petitioners pose the strange claim that respondent had estopped himself from filing an ejectment case against petitioners by his aforequoted testimony in Civil Case No. R-14600. Such testimony is irrelevant to the case at bar, as it does nothing to strengthen the claim of petitioners that they had a right to occupy the properties. This testimony merely indicates that there might have been an agreement between the Spouses Bascon and Borromeo as to which of them would occupy what portion of Lot No. 2587. Yet this averment hardly establishes a definitive partition, or moreover, any right of petitioners to dwell in any portion of Lot No. 2587. Besides, [e]stoppel is effective only as between the

parties thereto or their successors in interest; thus, only the spouses Bascon or their successors in interest may invoke such estoppel. A stranger to a transaction is neither bound by, nor in a position to take advantage of, an estoppel arising therefrom. Same; Necessary Expenses; Article 546 of the Civil Code applies only to a possessor in good faith, i.e., one who builds on land with the belief that he is the owner thereof; Persons whose occupation of a realty is by sheer tolerance of its owners are not possessors in good faith.All six (6) petitioners claim the right to be reimbursed necessary expenses for the cost of constructing their houses in accordance with Article 546 of the Civil Code. It is well-settled that while the Article 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. Verily, persons whose occupation of a realty is by sheer tolerance of its owners are not possessors in good faith.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court. Delfin V. Nacua for petitioners. Jesus N. Borromeo for private respondent.

TINGA, J.: This is a Rule 45 Petition for Review on Certiorari of the Decision1 of the Court of Appeals affirming that of the Regional Trial Court (RTC) of Cebu,2 which in turn reversed that of the Metropolitan Trial Court (MTC) of Talisay, Cebu.3 The facts are as follows: Private respondent, the late Juanito Borromeo, Sr.4 (hereinafter, respondent), is the co-owner and overseer of certain parcels of land located in Pooc, Talisay, Cebu, designated as Lots Nos. 2587 and 2592 of the TalisayManglanilla Estate. Respondent owns six-eighths (6/8) of Lot No. 2587 while the late spouses Inocencio Bascon and Basilisa Maneja (Spouses Bascon) own two-eights (2/8) thereof. On the other hand, Lot No. 2592 is owned in common by respondent and the heirs of one Nicolas Maneja. However, the proportion of their undivided shares was not determined a quo. Prior to the institution of the present action, petitioners Tining Resuena, Alejandra Garay, Lorna Resuena, Eleuterio Resuena, and Unisima Resuena
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resided in the upper portion of Lot No. 2587, allegedly under the acquiescence of the Spouses Bascon and their heir, Andres Bascon. On the other hand, petitioner Eutiquia Rosario occupied a portion of Lot No. 2592, allegedly with the permission of the heirs of Nicolas Maneja, one of the original co-owners of Lot No. 2587. Respondent claims that all petitioners have occupied portions of the subject property by virtue of his own liberality. Respondent developed portions of Lots Nos. 2587 and 2592 occupied by him into a resort known as the Borromeo Beach Resort. In his desire to expand and extend the facilities of the resort that he established on the subject properties, respondent demanded that petitioners vacate the property. Petitioners, however, refused to vacate their homes. On 16 February 1994, respondent filed a Complaint5 for ejectment with the MTC against the petitioners. After a summary proceeding, the MTC, in a Decision6 dated 10 October 1994, found that Lots Nos. 2587 and 2592 were owned in common by respondent with other persons. The MTC ruled that respondent did not have a preferential right of possession over the portions occupied by petitioners, since Lots Nos. 2587 and 2592 were not yet partitioned nor the disputed portions assigned to respondent as his determinate share. Thus, the MTC held that respondent had no right to evict petitioners therefrom. Consequently, respondents Complaint was dismissed. Notably, the MTC held that respondent and the spouses Bascon were the owners in common of Lot No. 2587 and their respective shares had not yet been determined by partition as proven by a testimony given by respondent in Civil Case No. R-14600, viz: Q. And the participation there of Inocencio Bascon is 2/8 of the said parcel of land? A. Yes sir. Q. And until the present that parcel of land is undivided? A.

It is not yet partitioned, but during the time of Basilisa Maneja we had already made some indications of the portions that we came to occupy. Q. That is the parcel of land where you have your beach resort? A. Yes, sir; and that was our agreement, verbally, that with respect to the portion of the land towards the sea-shore it will be my share and that portion of the land towards the upper part will be theirs.7 On appeal, the RTC reversed the Decision of the MTC. It held that Article 487 of the Civil Code, which allows any one of the co-owners to bring an action in ejectment, may successfully be invoked by the respondent because, in a sense, a co-owner is the owner and possessor of the whole, and that the suit for ejectment is deemed to be instituted for the benefit of all co-owners.8 The RTC also ruled that assuming petitioners were authorized to occupy a portion of the co-owned property, they could resume this occupation when the properties shall have been partitioned and allocated to the ones who gave them permission to reside therein. It thus held: WHEREFORE, judgment of the lower court is hereby reversed and the defendants are hereby directed to vacate the premises in question without prejudice to their going back to the land after partition shall have been effected by the coheirs and/or co-owners among themselves but to the specific portion or portions adjudicated to the person or persons who allegedly authorized them to occupy their portions by tolerance.9 The Court of Appeals affirmed the Decision of the RTC; hence, this petition which involves the following assignment of errors:10 1. That with grave abuse of discretion, amounting to excess of jurisdiction, the honorable eleventh division of the court of appeals erred in NOT APPLYING and/or in NOT DECLARING private respondent Juanito Borromeo estopped in filing this ejectment case against the herein six (6) petitioners. 2. that with grave abuse of discretion, the honorable eleventh division of the court of appeals erred in incorrectly applying the statute of frauds, considering that the verbal agreement entered into by and between spouses Inocencio Bascon and Basilisa Maneja on the one hand and Juanito Borromeo on the
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other more than twenty (20) years ago today, was already an EXECUTED CONTRACT. 3. that with grave abuse of discretion, amounting to excess of jurisdiction, the honorable eleventh division of the court of appeals erred in ignoring outright article 493 of the new civil code of the Philippines, considering that the six (6) petitioners are only assignees, pure and simple, of co-owners spouses Ignacio Bascon and Basilisa Maneja and/or Andres Bascon, the adopted son of the said spouses. 4. That granting arguendo that the herein six (6) petitioners have to be ejected, the eleventh division of the court of appeals erred in NOT remanding this case to the court of origin for the reception of evidence for damages, pursuant to and in accordance with Art. 546, New Civil Code. The petition cannot prosper. At the outset it must be stated that petitioners ground their petition on respondents testimony in Civil Case No. R-14600 that he had agreed with coowner, Basilisa Maneja, on the portions they each were to occupy in Lot No. 2587 prior to the partition of the property. However, respondents testimony and, consequently, the agreement alluded to therein pertains solely to Lot No. 2587which, admittedly, all of petitioners occupy, save for Eutiquia Rosario who occupies Lot No. 2592. No argument was presented in this petition as regards the latters claim. Having no basis to review Eutiquia Rosarios claim to be allowed to continue in her occupation of Lot No. 2592, this Court maintains the holding of the RTC on this matter, as affirmed by the Court of Appeals, that respondent has the right to eject petitioner Eutiquia Rosario from Lot No. 2592. With regard to the other five (5) petitioners, the Court notes that their first three assignments of errors are interrelated and built on each other. Petitioners allege that respondents testimony in Civil Case No. R-14600, expressing that the upper two-eighths (2/8) portion of Lot No. 2587 would be occupied by Basilisa Maneja, constituting as it does a waiver of said portion, has estopped respondent from claiming the portion. Basilisa Maneja and her husband allegedly relied on this agreement when the spouses assigned the upper portion of Lot No. 2587 to petitioners. Moreover, petitioners claim that their occupation of the upper portion of Lot No. 2587 had consummated the verbal agreement between respondent and Basilisa Maneja and brought agreement beyond the purview of the Statute of Frauds.

A careful perusal of the foregoing issues reveals that petitioners assumed the following as proven facts: (1) respondent had indicated to Basilisa Maneja the portions they were to occupy in Lot No. 2587; and (2) the Spouses Bascon assigned to petitioners their portions of Lot No. 2587. By claiming these as the bases for their assignment of errors, petitioners in essence are raising questions of fact.11 The issues raised by petitioners on the application of estoppel, statute of frauds, and the assignment of properties owned in common in their favor, while ostensibly raising questions of law, invite this Court to rule on questions of fact. This runs counter to the settled rule that only questions of law may be raised in a petition for review before the Court and the same must be distinctly set forth.12 It is not the function of this Court to weigh anew the evidence already passed upon by the Court of Appeals for such evidence is deemed final and conclusive and may not be reviewed on appeal. A departure from the general rule may be warranted, among others, where the findings of fact of the Court of Appeals are contrary to the findings and conclusions of the trial court, or when the same is unsupported by the evidence on record.13 In the instant case, the RTC and the Court of Appeals rendered judgment merely on questions of law as applied to the facts as determined by the MTC. Consequently this Court must proceed on the same set of facts without assuming, as petitioners have done, the veracity of claims which have been considered, but not accepted as facts, by the courts below. Guided by the foregoing, this Court finds in this case that filtered of the muddle from petitioners assignment of errors, it is unmistakable that respondent has a right to eject thepetitioners from Lot No. 2587. Article 487 of the Civil Code, which provides simply that [a]ny one of the coowners may bring an action in ejectment, is a categorical and an unqualified authority in favor of respondent to evict petitioners from the portions of Lot. No. 2587. This provision is a departure from Palarca v. Baguisi,14 which held that an action for ejectment must be brought by all the co-owners. Thus, a co-owner may bring an action to exercise and protect the rights of all. When the action is brought by one co-owner for the benefit of all, a favorable decision will benefit them; but an adverse decision cannot prejudice their rights.15
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Respondents action for ejectment against petitioners is deemed to be instituted for the benefit of all co-owners of the property16 since petitioners were not able to prove that they are authorized to occupy the same. Petitioners lack of authority to occupy the properties, coupled with respondents right under Article 487, clearly settles respondents prerogative to eject petitioners from Lot No. 2587. Time and again, this Court has ruled that persons 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 they will vacate the same upon demand, failing in which a summary action for ejectment is the proper remedy against them.17 Petitioners pose the strange claim that respondent had estopped himself from filing an ejectment case against petitioners by his aforequoted testimony in Civil Case No. R-14600. Such testimony is irrelevant to the case at bar, as it does nothing to strengthen the claim of petitioners that they had a right to occupy the properties. This testimony merely indicates that there might have been an agreement between the Spouses Bascon and Borromeo as to which of them would occupy what portion of Lot No. 2587. Yet this averment hardly establishes a definitive partition, or moreover, any right of petitioners to dwell in any portion of Lot No. 2587. Besides, [e]stoppel is effective only as between the parties thereto or their successors in interest; thus, only the spouses Bascon or their successors in interest may invoke such estoppel. A stranger to a transaction is neither bound by, nor in a position to take advantage of, an estoppel arising there-from.18 For the same reason, it is of no moment whether indeed, as petitioners claim, there was a verbal contract between Basilisa Maneja and Borromeo when the latter indicated the portions they each were to occupy in Lot No. 2587. Such verbal contract, assuming there was one, does not detract from the fact that the common ownership over Lot No. 2587 remained inchoate and undivided, thus casting doubt and rendering purely speculative any claim that the Spouses Bascon somehow had the capacity to assign or transmit determinate portions of the property to petitioners. Thus, in order that the petition may acquire any whiff of merit, petitioners are obliged to establish a legal basis for their continued occupancy of the properties. The mere tolerance of one of the co-owners, assuming that there was such, does not suffice to establish such right. Tolerance in itself does not bear any legal fruit, and it can easily be supplanted by a sudden change of heart on the part of the owner. Petitioners have not adduced any convincing

evidence that they have somehow become successors-in-interest of the Spouses Bascon, or any of the owners of Lot No. 2587. Indeed, there is no writing presented to evidence any claim of ownership or right to occupancy to the subject properties. There is no lease contract that would vest on petitioners the right to stay on the property. As discussed by the Court of Appeals,19 Article 1358 of the Civil Code provides that acts which have for their object the creation, transmission, modification or extinguishment of real rights over immovable property must appear in a public instrument. How then can this Court accept the claim of petitioners that they have a right to stay on the subject properties, absent any document which indubitably establishes such right? Assuming that there was any verbal agreement between petitioners and any of the owners of the subject lots, Article 1358 grants a coercive power to the parties by which they can reciprocally compel the documentation of the agreement.20 Thus, the appellate court correctly appreciated the absence of any document or any occupancy right of petitioners as a negation of their claim that they were allowed by the Spouses Bascon to construct their houses thereon and to stay thereon until further notice. On this note, this Court will no longer belabor petitioners allegation that their occupation of Lot No. 2587 is justified pursuant to the alleged but unproven permission of the Spouses Bascon. All six (6) petitioners claim the right to be reimbursed necessary expenses for the cost of constructing their houses in accordance with Article 546 of the Civil Code.21 It is wellsettled that while the Article 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. Verily, persons whose occupation of a realty is by sheer tolerance of its owners are not possessors in good faith.22 The lower courts have made a common factual finding that petitioners are occupying portions of Lots No. 2587 and 2592 by mere tolerance. Thus, petitioners have no right to get reimbursed for the expenses they incurred in erecting their houses thereon. WHEREFORE, premises considered, the Petition is DENIED and the Decision of the Court of Appeals AFFIRMED. Costs against petitioners. SO ORDERED.

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Puno (Chairman), Austria-Martinez, Callejo, Sr. and Chico-Nazario, JJ., concur. Petition denied, judgment affirmed. Note.Persons who occupy the land of another at the latters tolerance or permission cannot be considered possessors nor builders in good faith. (PadaKilario vs. Court of Appeals, 322 SCRA 481 [2000]) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Resuena vs. Court of Appeals, 454 SCRA 42(2005)]

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G.R. No. 157767. September 9, 2004.* REYNALDO BALOLOY and ADELINA BALOLOY-HIJE, petitioners, vs. ALFREDO HULAR, respondent.
Remedial Law; Parties; Absence of an indispensable party in a case renders ineffective all the proceedings subsequent to the filing of the complaint including the judgment.Under Section 7, Rule 3 of the Rules of Court, the respondent was mandated to implead his siblings, being coowners of the property, as parties. The respondent failed to comply with the rule. It must, likewise, be stressed that the Republic of the Philippines is also an indispensable party as defendant because the respondent sought the nullification of OCT No. P-16540 which was issued based on Free Patent No. 384019. Unless the State is impleaded as party-defendant, any decision of the Court would not be binding on it. It has been held that the absence of an indispensable party in a case renders ineffective all the proceedings subsequent to the filing of the complaint including the judgment. The absence of the respondents siblings, as parties, rendered all proceedings subsequent to the filing thereof, including the judgment of the court, ineffective for want of authority to act, not only as to the absent parties but even as to those present. Land Titles; Torrens System; A Torrens Certificate is evidence of an indefeasible title of property in favor of the person in whose name appears thereinsuch holder is entitled to the possession of the property until his title is nullified.The burden of proof is on the plaintiff to establish his case by the requisite quantum of evidence. If he claims a right granted as created by law or under a contract of sale, he must prove his claim by competent evidence. He must rely on the strength of his own evidence and not on the weakness or absence of the evidence of that of his opponent. He who claims a better right to real estate property must prove not only his ownership of the same but also the identity thereof. In Huy v. Huy, we held that where a property subject of controversy is duly registered under the Torrens system, the presumptive conclusiveness of such title should be given weight and in the absence of strong and compelling evidence to the contrary, the holder thereof should be considered as the owner of the property until his title is nullified or modified in an appropriate ordinary action. A Torrens Certificate is evidence of an indefeasible title to property in favor of the person in whose name appears therein. Such holder is entitled to the possession of the property until his title is nullified.

Before us is a petition for review on certiorari under Rule 45 of the Revised Rules of Court, as amended, of the Decision of the Court of Appeals in CAG.R. CV No. 51081, which affirmed the Decision2 of the Regional Trial Court of Sorsogon, Branch 51, in Civil Case No. 93-5871. The antecedents are as follows: On May 11, 1993, respondent Alfredo Hular filed a complaint for quieting of title of real property with damages against the children and heirs of Iluminado Baloloy, namely, Anacorita, Antonio, and petitioners Reynaldo and Adelina, all surnamed Baloloy. The respondent alleged, inter alia, in his complaint that his father, Astrologo Hular, was the owner of a parcel of residential land located in Sitio Page, Biriran, Juban, Sorsogon, with an area of 287 square meters, and that such lot was part of Lot No. 3347 of the Juban Cadastre. The respondent alleged that Iluminado Baloloy, the petitioners predecessor-in-interest, was able to secure a Free Patent over the property through fraud on March 1, 1968, on the basis of which the Register of Deeds issued Original Certificate of Title (OCT) No. P-16540 in his name. The respondent later discovered that in the cadastral survey of lands in Juban, the property of his father, which actually consisted of 1,405 square meters was made to form part of Lot No. 3353, the property of Iluminado Baloloy. According to the respondent, even if the residential land was made to form part of Lot No. 3353 registered under the name of Iluminado Baloloy, he had acquired ownership of the property by acquisitive prescription, as he and his predecessors had been in continuous, uninterrupted and open possession of the property in the concept of owners for more than 60 years. The respondent prayed for alternative reliefs that, after due hearing, judgment be rendered in his favor, thus: a) Declaring the plaintiff as the absolute owner of the land in question; b) Ordering the defendants to perpetually refrain from disturbing plaintiff in his peaceful possession in the land in question; c) Ordering the defendants to remove their houses in the land in question, and to declare OCT No. P-16540, and whatever paper, form, document or proceeding the defendants may have, as null and void and without any effect whatsoever as far as the land in question is concerned as they cast cloud upon the title of the plaintiff;
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PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court. Napoleon Uy Galit and Associates Law Offices for petitioners. Henry D. Diesta for respondent. CALLEJO, SR., J.:

d)In the alternative, defendants be ordered to reconvey the title in favor of the plaintiff as far as the land in question is concerned; e) Ordering the defendants to jointly and severally pay the plaintiff the amount of P50,000.00 as moral damages; P5,000.00 as attorneys fee plus P500.00 for every appearance or hearing of his lawyer in court; P1,500.00 as consultation fee; P5,000.00 as incidental litigation expenses; P20,000.00 as exemplary damages; and to pay the costs. Plaintiff further prays for such other relief [as are] just and equitable in the premises.3 The Evidence of the Respondent The respondent adduced evidence that the Spouses Lino and Victoriana Estopin were the original owners of a parcel of land located in Barangay Biriran, Juban, Sorsogon, designated as Lot No. 3347 of the Juban Cadastre. A major portion of the property, where a house of strong materials was constructed, was agricultural, while the rest was residential. The respondent also averred that the Spouses Estopin declared the property in their names under Tax Declaration No. 4790. On the north of the agricultural portion of the property was the road leading to Biriran, while north of the residential portion was a creek (canal) and the property of Iluminado. When Lino Estopin died intestate, his widow, Victoriana Lagata, executed a Deed of Absolute Sale4 on November 11, 1961 over the agricultural portion of Lot No. 3347, which had an area of 15,906 square meters, more or less, in favor of Astrologo Hular, married to Lorenza Hular. Shortly thereafter, on November 25, 1961, Lagata executed a Deed of Absolute Sale5 over the residential portion of the property with an area of 287 square meters, including the house constructed thereon, in favor of Hular. Hular and his family, including his son, the respondent, then resided in the property. In 1961 or thereabouts, Iluminado asked Hulars permission to construct a house on a portion of Lot No. 3347 near the road, and the latter agreed. In l977, Lorenza Hular, wife of Astrologo, declared the residential land in the latters name under Tax Declaration No. 6841.6 Earlier, or on August 14, 1945, Irene Griarte had executed a Deed of Absolute Sale over a coconut land located in Barangay Biriran, Juban, with an area of 6,666 square meters in favor of Martiniano Balbedina, with the following boundaries: North, Alejandro Gruta; South, Lino Estopin; East, River Page; West, Pedro Grepal and Esteban Grepal. 7 Subsequently, after a cadastral

survey was conducted on lands in Juban, the property of Balbedina was designated as Lot No. 3353, with the following boundaries: North: Lot No. 3353 (portion), Alejandro Gruta; South: Lino Estopin; West: Lot No. 3349; East: creek. A trail was then established between Lot No. 3353 and Lot No. 3347 resulting in the decrease of Lot No. 3353 owned by Balbedina to 4,651 square meters. He declared the property under his name under Tax Declaration No. 191 with the following boundaries: North: Lot No. 3353 (portion) Alejandro Gruta; South: trail; East: creek; West: Lot No. 3349.8 On June 4, 1951, Balbedina executed a Deed of Absolute Sale over Lot No. 3353 with an area of only 4,651 square meters in favor of Iluminado.9 The latter declared the property in his name under Tax Declaration No. 5359.10 Iluminado filed an application with the Bureau of Lands for a free patent over the entirety of Lot No. 3353 on January 5, 1960.11 He indicated in his application that the property was not occupied by any person and was disposable or alienable public land. In support thereof, he executed an affidavit wherein he declared that he purchased about one-half portion of the property in 1951 based on a deed of absolute sale attached to said affidavit; that in 1957, he purchased the other one-half portion, but for economic reasons, no deed of sale was executed by the parties. He also alleged that the improvements on the land consisted of coconut trees.12 The Bureau of Lands processed the application in due course. In the meantime, Iluminado constructed his house on a portion of Lot No. 3353 near the trail (road) leading to Biriran. He and his family, including his children, forthwith resided in said house. On March 1, 1968, the Secretary of Agriculture and Natural Resources approved Iluminados application and issued Free Patent No. 384019 covering Lot No. 3353 with an area of 9,302 square meters, on the basis of which OCT No. P-16540 was thereafter issued by the Register of Deeds on March 1, 1968.13 On August 2, 1975, Alejandro Gruta had executed a deed of absolute sale over a portion of Lot No. 3353 with an area of 4,651 square meters in favor of Estelito Hije, the husband of petitioner Adelina Baloloy, one of Iluminados children.14 Before he left for employment in Saudi Arabia in 1979, respondent Hular had his house constructed near the trail (road) on Lot No. 3347, which, however, occupied a big portion of Lot No. 3353.15
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Iluminado died intestate on November 29, 1985. His widow and their children continued residing in the property, while petitioner Reynaldo Baloloy, one of Iluminados children, later constructed his house near that of his deceased father. When Astrologo died intestate on December 25, 1989, he was survived by his children, Jose, Romeo, Anacleto, Elena, Leo, Teresita, and the respondent, among others,16 who continued to reside in their house.17 Sometime in l991, the respondents house helper was cleaning the backyard, but was prevented from doing so by petitioner Adelina Baloloy who claimed that their father Ilumi-nado owned the land where the respondents house was located. To determine the veracity of the claim, the respondent had Lot No. 3353 surveyed by Geodetic Engineer Rodolfo Cunanan on February 16, 1993, in the presence of Balbedina, Antonio Baloloy and petitioner Reynaldo Baloloy. Cunanan prepared a Special Sketch Plan of Lot No. 335318 showing that the house of Iluminado was constructed on Lot No. 335319 near the road behind the houses owned by Astrologo and Alfredo.20 The engineer discovered that the residential area deeded by Lagata to Hular had an area of 1,405 square me-ters, instead of 287 square meters only.21 In their Answer to the complaint, the heirs of Iluminado Baloloy averred that Iluminados house was built in 1962 on a portion of Lot No. 3353, which the latter purchased from Balbedina, and not on a portion of Lot No. 3347 which Hular purchased from Lagata. They alleged that Hular constructed his house on a portion of Lot No. 3353 after securing the permission of their father Iluminado, and that the respondent had no cause of action for the nullification of Free Patent No. 384019 and OCT No. P-16540 because only the State, through the Office of the Solicitor General, may file a direct action to annul the said patent and title; and even if the respondent was the real party in interest to file the action, such actions had long since prescribed. The heirs of Baloloy prayed that judgment be rendered in their favor, thus: WHEREFORE, it is most respectfully prayed of the Honorable Court to DISMISS this case pursuant to paragraph 15, et seq., hereof, and/or DECIDE it in favor of the defendants by UPHOLDING the sanctity of OCT No. P-16540 and ordering plaintiff to: 1. RESPECT defendants proprietary rights and interests on the property in question covered by OCT No. P-16540; 2. VACATE it at his sole and exclusive expense, and never to set foot on it ever again;

3. PAY defendants: a) MORAL DAMAGES at P50,000.00 EACH; b) ACTUAL DAMAGES and UNREALIZED PROFITS at P1,000.00/MONTH COMPUTED UP TO THE TIME OF PAYMENT PLUS LEGAL RATE OF INTEREST; c) EXEMPLARY DAMAGES of P50,000.00 d) ATTYS FEES and LITIGATION EXPENSES of P100,000.00; and e) THE COSTS OF THIS SUIT. DEFENDANTS pray for all other reliefs and remedies consistent with law and equity.22 The Evidence for the Petitioners Sometime in 1982, Hular asked permission from Iluminado to construct his house on Lot No. 3353 near the road leading to Biriran. Iluminado agreed, in the presence of his daughter, petitioner Adelina Baloloy. As per the plan of Lot No. 3353 certified by a Director of the Bureau of Lands on November 6, 1961, Lot No. 3353 had an area of 9,302 square meters.23 As gleaned from the Sketch Plan of Lot Nos. 3347 and 3353 prepared on February 7, 1991 by Geodetic Engineer Salvador Balilo, the houses of the Baloloy siblings and those of Astrologo and Alfredo were located in Lot No. 3353.24 In the said sketch plan, Lot No. 3353 had an area of 9,302 square meters, while Lot No. 3347 had an area of 15,905 square meters. When apprised of Hulars claim over the property, the petitioners and their co-heirs filed a complaint for unlawful de-tainer with the Municipal Trial Court of Juban, docketed as Civil Case No. 331. The case was, however, dismissed for lack of jurisdiction. On December 4, 1995, the trial court rendered judgment in favor of the respondent. The fallo of the decision reads: a) Declaring plaintiff the absolute owner of the land in question, consisting of 1,405 square meters, more or less, and entitled to the peaceful possession thereof;

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b) Ordering the defendants to reconvey the title to the plaintiff as far as the land in question is concerned within fifteen (15) days counted from the finality of the decision, failing in which, the Clerk of Court is hereby ordered to execute the necessary document of reconveyance of the title in favor of the plaintiff after an approved survey plan is made; c) Ordering defendants to remove their houses from the land in question at their own expense within fifteen (15) days after the decision has become final; d) Ordering the defendants to pay jointly and severally plaintiff the amount of P5,000.00 as attorneys fees. P5,000.00 as incidental litigation expenses; e) To pay the costs. SO ORDERED.25 The trial court ruled that the property subject of the complaint, with an area of 1,405 square meters, was part of Lot No. 3347 which the Spouses Estopin owned, and which they later sold to Astrologo Hular. The trial court also held that Iluminado committed fraud in securing the free patent and the title for the property in question, and that when Victoriana Lagata executed the deed of absolute sale on the residential portion of Lot No. 3347, she did not know that it formed part of Lot No. 3353. It further held that the action of the plaintiff to nullify the title and patent was imprescriptible. The petitioners filed on December 8, 1995 a motion to reopen the case to admit Tax Declaration Nos. 6957 and 4790 covering Lot No. 3347, under the names of Astrologo Hular and Victoriana Lagata, respectively, in which it was declared that Lot No. 3347 was coconut land. The trial court ruled that the motion had been mooted by its decision. On appeal, the Court of Appeals rendered judgment affirming the decision of the trial court, and thereafter denied the motion for reconsideration thereof. The Present Petition The petitioners, who are still residing on the subject property, filed their petition for review on certiorari for the reversal of the decision and resolution of the Court of Appeals. The issues for resolution are: (1) whether all the indispensable parties had been impleaded by the respondent in the trial court;

(2) whether the said respondent had a cause of action against the petitioners for the nullification of Free Patent No. 384019 and OCT No. P-16540; for reconveyance and for possession of the subject property; and for damages; and (3) whether the respondent had acquired ownership over the property through acquisitive prescription. The first issue, while not raised by the parties in the trial court and in the Court of Appeals, is so interwoven with the other issues raised therein and is even decisive of the outcome of this case; hence, such issue must be delved into and resolved by this Court.26 We note that the action of the respondent in the trial court is for: (a) reivindicatoria, to declare the respondent the absolute owner of the subject property and its reconveyance to him as a consequence of the nullification of Free Patent No. 384019 and OCT No. P-16540; (b) publiciana, to order the petitioners and the other heirs of Iluminado Baloloy to vacate the property and deliver possession thereof to him; and (c) damages and attorneys fees. It is the contention of the respondent that the subject property was sold by Lagata to his father, Astrologo Hular, in 1961. He adduced evidence that when his parents died intestate, they were survived by their children, the respondent and his siblings Elena, Jose, Romeo, Anacleto, Leo, and Teresita. Article 1078 of the Civil Code provides that where there are two or more heirs, the whole estate of the decedent is, before partition, owned in common by such heirs, subject to the payment of the debts of the deceased. Until a division is made, the respective share of each cannot be determined and every co-owner exercises, together with his co-participants, joint ownership over the pro indiviso property, in addition to the use and enjoyment of the same. Under Article 487 of the New Civil Code, any of the co-owners may bring an action in ejectment. This article covers all kinds of actions for the recovery of possession, including an accion publiciana and a reivindicatory action. A coowner may bring such an action without the necessity of joining all the other co-owners as co-plaintiffs because the suit is deemed to be instituted for the benefit of all.27 Any judgment of the court in favor of the co-owner will benefit the others but if such judgment is adverse, the same cannot prejudice the rights of the unimpleaded co-owners. If the action is for the benefit of the plaintiff alone who claims to be the sole owner and entitled to the possession thereof, the action will not prosper unless he impleads the other co-owners who are indispensable parties.
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In this case, the respondent alone filed the complaint, claiming sole ownership over the subject property and praying that he be declared the sole owner thereof. There is no proof that the other co-owners had waived their rights over the subject property or conveyed the same to the respondent or such coowners were aware of the case in the trial court. The trial court rendered judgment declaring the respondent as the sole owner of the property and entitled to its possession, to the prejudice of the latters siblings. Patently then, the decision of the trial court is erroneous. Under Section 7, Rule 3 of the Rules of Court, the respondent was mandated to implead his siblings, being co-owners of the property, as parties. The respondent failed to comply with the rule. It must, likewise, be stressed that the Republic of the Philippines is also an indispensable party as defendant because the respondent sought the nullification of OCT No. P-16540 which was issued based on Free Patent No. 384019. Unless the State is impleaded as party-defendant, any decision of the Court would not be binding on it. It has been held that the absence of an indispensable party in a case renders ineffective all the proceedings subsequent to the filing of the complaint including the judgment.28 The absence of the respondents siblings, as parties, rendered all proceedings subsequent to the filing thereof, including the judgment of the court, ineffective for want of authority to act, not only as to the absent parties but even as to those present.29 Even if we glossed over the procedural lapses of the respondent, we rule that he failed to prove the material allegations of his complaint against the petitioners; and that he is not entitled to the reliefs prayed for. The burden of proof is on the plaintiff to establish his case by the requisite quantum of evidence. If he claims a right granted as created by law or under a contract of sale, he must prove his claim by competent evidence. He must rely on the strength of his own evidence and not on the weakness or absence of the evidence of that of his opponent.30 He who claims a better right to real estate property must prove not only his ownership of the same but also the identity thereof.31 In Huy v. Huy,32 we held that where a property subject of controversy is duly registered under the Torrens system, the presumptive conclusiveness of such title should be given weight and in the absence of strong and compelling evidence to the contrary, the holder thereof should be considered as the owner of the property until his title is nullified or modified in an appropriate ordinary action. A Torrens Certificate is evidence of an indefeasible title to property in favor of the person in whose name appears

therein.33 Such holder is entitled to the possession of the property until his title is nullified. The petitioners aver that Lot No. 3347 owned by the Spouses Estopin was coconut, and not residential, land. The petitioners contend that, under the deed of absolute sale, Victoriana Lagata executed on November 25, 1961 in favor of Astrologo Hular, she sold the residential portion of Lot No. 3347; however, the latter constructed his house on a portion of Lot No. 3353 which Iluminado had purchased from Balbedina, now covered by OCT No. P-16540. The petitioners assert that along with their mother Anacorita and their brother Antonio Baloloy, they constructed their houses on a part of Lot No. 3353, titled in the name of their father Iluminado; hence, they could not be dispossessed of the said property. The petitioners posit that, whether the house of Hular was constructed on a portion of Lot No. 3353 of the property of Balbedina or Gruta is irrelevant because both properties are now covered by OCT No. P-16540 under the name of Iluminado, their predecessor-in-interest. The Court of Appeals ruled that Victoriana Lagata owned the subject property, which turned out to be 1,405 square meters, and sold the same to Hular. In contrast, the RTC declared in its decision that while under the deed of absolute sale executed by Irene Griarte in favor of Balbedina, Lot No. 3353 had an area of 6,666 square meters, Griarte actually owned only 4,651 square meters; a portion of the lot was actually owned by Lino Estopin. Hence, Balbedina sold only 4,651 square meters to Iluminado34 because he was aware that he owned only 4,651 square meters of the land. It also held that, unknown to Lagata, a portion of Lot No. 3347 was declared as part of Lot No. 3353 when the lands in Juban were surveyed. The trial court concluded that Lagata erroneously declared, under the deed of absolute sale executed on November 25, 1961 in favor of Hular, that the property was part of Lot No. 3347. The trial and appellate courts erred in their decisions. The evidence on record shows that Irene Griarte owned a parcel of land with an area of 6,666 square meters, more or less.35 When she sold the property to Martiniano Balbedina on August 14, 1945, it was bounded on the south by the property of Lino Estopin. There was no trail yet between the property of Griarte on the south and of Lino Estopin on the north. In the meantime, however, a road (trail) leading to Biriran was established between the property of Balbedina on the south and that of Lino Estopin on the north. Thereafter, a cadastral survey of the lands in Juban was conducted by the Bureau of Lands. The property of Balbedina was designated as a portion of Lot No. 3353, while
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that of Estopin was designated as Lot No. 3347. The other portion of Lot No. 3353, with an area of 4,561 square meters, belonged to Alejandro Gruta. Because of the construction of the road, the property of Balbedina, which was a part of Lot No. 3353, was reduced to 4,651 square meters. Balbedina declared, under Tax Declaration No. 391, that Lot No. 3353 had an area of 4,651 square meters and was coconut land36 and that his property was bounded on the south by a trail (road). Lino Estopin declared Lot No. 3347 under his name for taxation purposes, in which he stated that his property was bounded on the north by the trail going to Biriran.37 Clearly, then, Lot No. 3353 and Lot No. 3347 had a common boundarythe trail (road) going to Biriran. Balbedina sold his property, which was a portion of Lot No. 3353, with an area of 4,651 square meters to Iluminado Baloloy on June 4, 1951.38 Under the deed of absolute sale, the property was bounded on the south by the trail (road) owned by Lino Estopin.39 The English translation of the deed of sale attached as page 85 to the RTC Records, which both the trial court and the appellate court relied upon, is incorrect. The original deed of absolute sale, which is in Spanish, states that the boundary of the property on the south is con camino, Lino Estopin, while the English version of the deed, indicates that the property is bounded on the south by Lino Estopin. Being an earlier document, the deed in Spanish signed by the parties therefore should prevail. Conformably to such deed, Iluminado Baloloy declared in Tax Declaration No. 5359 under his name that the property is bounded on the south by a trail,40 and not by Lot No. 3347 owned by Lino Estopin. The respondent failed to adduce any documentary evidence to prove how the Spouses Estopin acquired the disputed property. The respondents reliance on the testimonies of Melissa Estopin, the daughter of the Spouses Estopin, and on Porfirio Guamos as well as the May 8, 1993 Affidavit of Martiniano Balbedina, and the deed of sale executed by Victoriana Lagata on November 27, 1961 in favor of Astrologo Hular to corroborate his claim over the lot in question, is misplaced. First. Per the testimony of Porfirio Guamos, the witness of the respondent, Lino Estopin purchased the disputed property in 1941 from Irene Griarte and insisted that there was a deed of sale evidencing the sale: Atty. Dealca: Q

The area of the land in question is 1,405 sq. m., you claim that way back in 1944 the owner of the land was Lino Estopin; 41 to 44? A 1941. Q And you said that Lino Estopin was able to acquire the land by purchase? A That was very long time when Lino Estopin sold the property. Q My question is whether you know because you testified earlier that Lino Estopin was able to acquire the land by purchase; do you confirm that? A Yes, Sir. Q From whom? A From Irene Griarte. Q Were you present when that sale was consummated? A I was not there. Q So you do not know how much was it bought by Lino Estopin from Irene Griarte? A
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No, Sir. Q You do not know whether a document to that effect was actually drafted and executed? A There was. Q

How was it used when you did not see that document? A When the deed of sale was executed I did not see the document, but I insist there was a document. Q Thats why, how were you able to say before the court that there was a document when you contend that you did not see any? A

Have you seen the document? A I did not see but there was a document. Q You maintain there was a document but you did not see a document, is that it? A In my belief there was a document. Q In your belief, how did you organize that belief when you did not see a document? A Already answered. I insist there was a document. Witness: Q A That is why, why are you insisting when you did not see a document? I did not see. A Atty. Dealca: Well, during the sale that document was used. Q Q
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There was basis in the sale . . . the sale was based on a document. You cannot sell a property without document? (sic) Q Is that your belief? A Yes, Sir. Q But you did not see any document? Atty. Diesta:

You said that that document was used when the property was sold by Lino Estopin to Alfredo Hular. . . A In 1961. Yes.41 However, the respondent failed to adduce in evidence the said deed or even an authentic copy thereof. The respondent did not offer any justification for his failure to adduce the same in evidence. As against the respondents verbal claim that his father acquired the property from Lagata, the Torrens title of Iluminado Baloloy must prevail.42 Second. The respondent even failed to adduce in evidence any tax declarations over the disputed property under the name of Irene Griarte and/or Lino Estopin, or realty tax payment receipts in their names from 1941 to November 1961. The documents are circumstantial evidence to prove that Irene Griarte claimed ownership over the disputed property and that Lino Estopin acquired the same from her. After all, such tax declarations and tax receipts can be strong evidence of ownership of land when accompanied by possession for a period sufficient for acquisitive prescription.43 Third. The respondent even failed to adduce in evidence Tax Declaration No. 4790 covering the two parcels of land under the name of Lino Estopin to prove his claim that Lot No. 3347 consisted of agricultural and residential lands. We note that the petitioners appended a certified true copy of Tax Declaration No. 4790 under the name of Victoriana Lagata over Lot No. 3347 to their Motion to Reopen the Case. In the said declaration, Lot No. 3347 was described as coconut land; this is contrary to the respondents claim that the said lot was then residential, and that the boundary of the property on the north was the road to Biriran which, in turn, is consistent with the petitioners claim.44 Unfortunately, the trial court denied the said motion on the ground that it was mooted by its decision. Fourth. During the cadastral survey of lands in Juban, the lot of Gruta and that of Balbedina, inclusive of the subject property, were designated as Lot No. 3353 with a total area of 9,302 square meters under their names, while that of Lino Estopin was designated as Lot No. 3347 with an area of 15,906 square meters. Iluminado Baloloy applied for a free patent over Lot No. 3353, including the disputed property, under his name. The respondent failed to adduce any evidence that the Spouses Estopin and/or Astrologo Hular opposed Balbedina and/or Iluminados claim of ownership of Lot No. 3353 during the survey and

after the filing of the application. Apropos is our ruling in Urquiaga v. Court of Appeals: 45 As succinctly observed by respondent Court of Appeals in assessing the totality of the evidence We do not agree with defendants that they are also the occupants and possessors of the subject lot just because it is adjacent to their titled property. Precisely, the boundaries of defendants titled property were determined, delineated and surveyed during the cadastral survey of Dipolog and thereafter indicated in their certificate of title in order that the extent of their property will be known and fixed. Since the subject lot was already found to be outside their titled property, defendants have no basis in claiming it or other adjacent lots for that matter. Otherwise, the very purpose of the cadastral survey as a process of determining the exact boundaries of adjoining properties will be defeated. Defendants own title, O.C.T. No. 0-357 (in the names of Jose Aguirre and Cristina Gonzales), in fact belies their claim of occupation and possession over the adjacent subject lot. Examining said title, we note that: (1) the cadastral survey of Dipolog was conducted from January, 1923 to November 1925; (2) defendants titled property was one of those lots surveyed and this was designated as Lot No. 2623; (3) during the survey, it was already determined and known that Lot No. 2623 is bounded on the northeast, southeast, southwest and west by Lot No. 4443 (as we have seen in our narration of facts, the subject lot is a subdivision lot of Lot No. 6552 which was originally identified as Lot No. 4443-B-1, Dipolog Cadastre 85 Ext.: hence, the subject lot is a portion of Lot No. 4443); and (4) O.C.T. No. 0357 was issued on October 11, 1965 on the strength of the judgment rendered on July 31 (sic), 1941 by the then Court of First Instance of Zamboanga del Norte in Cadastral Case No. 6, LRC Cadastral Record No. 756. From the foregoing facts, we find that as early as January, 1923 when the cadastral survey was started, the boundaries of Lot Nos. 2623 and 4443 were already determined and delineated. Since the subject lot was surveyed to be part of Lot No. 4443, it means that during that time defendants predecessorsin-interest never claimed ownership or possession over the subject lot. Otherwise, they would have complained so that the subject lot could be excluded from Lot No. 4443 and included in Lot No. 2623, they being adjacent lots. It is obvious then that defendants predecessors only claimed Lot No. 2623 and they pursued their claim in Cadastral Case No. 6, LRC Cadastral Record No. 756 until O.C.T. No. 0-357 was issued to them. The contention of
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defendants that they and their predecessors-in-interest occupied and possessed the subject lot since time immemorial therefore is not true.46 Fifth. Under the deed of absolute sale dated November 25, 1961, Lagata sold to Astrologo Hular Lot No. 3347, and not Lot No. 3353. In Veterans Federation of the Philippines v. Court of Appeals,47 we ruled that: Petitioner VFP maintains that the deed of sale was valid and enforceable and that it was perfected at the very moment that the parties agreed upon the thing which was the object of the sale and upon the price. The parties herein had agreed on the parcel of land that petitioner would purchase from respondent PNR, and the same was described therein; thus, petitioner VFP cannot conveniently set aside the technical description in this agreement and insist that it is the legal owner of the property erroneously described in the certificate of title. Petitioner can only claim right of ownership over the parcel of land that was the object of the deed of sale and nothing else.48 Sixth. Under the said deed of sale dated November 11, 1961, Victoriana Lagata sold Lot No. 3347 which had an area of 15,906 square meters and covered by Tax Declaration No. 4790. The deed does not state that what was sold was only a portion of Lot No. 3347, excluding therefrom the disputed property. This is understandable, since the subject property is a portion of Lot No. 3353 owned by Alejandro Gruta and Iluminado Baloloy, and not of Lino Estopin and/or Victoriana Lagata. Lagata could not have sold a portion of Lot No. 3353 which she does not own. As the Latin adage goes: NEMO DAT QUOD NON HABET. Seventh. The Balbedinas Affidavit dated May 8, 1993 offered by the respondent to prove the contents thereof is inadmissible in evidence against the petitioners. Balbedina did not testify; as such, the petitioners were deprived of their right to cross-examine him. The said affidavit is thus hearsay and barren of probative weight. The affidavit varies the contents of the deed of absolute sale which he (Balbedina) executed in favor of Iluminado more than forty years earlier. In the said affidavit, it was made to appear that Balbedina sold to Iluminado on June 4, 1951 only a portion of Lot 3353 with an area of 3,333 square meters, when under the said deed of absolute sale, the property that was sold consisted of 4,651 square meters. The affidavit is proscribed by Section 9, Rule 130 of the Rules of Court, which provides: Section 9. Evidence of written agreements.When the terms of an agreement have been reduced to writing, it is considered as containing all the terms agreed upon and there can be, between the parties and their successors in

interest, no evidence of such terms other than the contents of the written agreement. ... It bears stressing that the deed of absolute sale executed by Balbedina in favor of Baloloy was notarized by the Justice of the Peace who was an Ex-Officio Notary Public; hence, entitled to full probative weight. Eighth. The Special Sketch Plan of Lot No. 3353 prepared by Geodetic Engineer Rodolfo P. Cunanan49 cannot prevail over OCT No. P-16540. In fact, the plan even buttressed the case for the petitioners because it shows that the subject property is a portion of Lot No. 3353, and not of Lot No. 3347, covered by OCT No. P-16540 under the name of Iluminado Baloloy, the deceased father of the petitioners. Ninth. The conclusion of the RTC that Lagata in fact sold a portion of Lot No. 3347 under the deed of absolute sale dated November 25, 1961, unaware that the property was a part of Lot No. 3353, is based on mere speculations and surmises. Iluminado Baloloy included in his application for a free patent the property of Alejandro Gruta, and was able to secure a free patent over said property in addition to his own. As such, Gruta, not the respondent, is the proper party to assail such free patent, as well as OCT No. P-16540 which was issued based thereon. IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The decisions of the Regional Trial Court and the Court of Appeals are REVERSED and SET ASIDE. The complaint of the respondent is DISMISSED. No costs. SO ORDERED. Puno (Chairman), Tinga and Chico-Nazario, JJ., concur. Austria-Martinez, J., On Official Leave. Petition granted, judgments of the Regional Trial Court and the Court of Appeals reversed and set aside. Complaint dismissed. Notes.The absence of indispensable parties renders all subsequent actuations of the court null and void. (Metropolitan Bank and Trust Company vs. Alejo, 364 SCRA 812 [2001])
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The general rule is that a person dealing with registered land has a right to rely on the Torrens certificate of title and to dispense with the need of making further inquiries. (Samonte vs. Court of Appeals, 361 SCRA 173 [2001]) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Baloloy vs. Hular, 438 SCRA 80(2004)]

410 | P r o p e r t y

G.R. No. 161916. January 20, 2006.* ARNELITO ADLAWAN, petitioner, vs. EMETERIO M. ADLAWAN and NARCISA M. ADLAWAN, respondents.
Wills and Succession; Illegitimate Children; The death of the father of an allegedly acknowledged illegitimate son did not make said son the absolute owner of a parcel of land owned by the decedent and his legal wife, and the subsequent death of the latter did not make said illegitimate son the absolute owner of the lot because the share of the deceased wife passed to her relatives by consanguinity and not her husbands illegitimate child with whom she had no blood relations.Petitioner averred that he is an acknowledged illegitimate son and the sole heir of Dominador. He in fact executed an affidavit adjudicating to himself the controverted property. In ruling for the petitioner, the RTC held that the questioned January 31, 1962 deed of sale validly transferred title to Dominador and that petitioner is his acknowledged illegitimate son who inherited ownership of the questioned lot. The Court notes, however, that the RTC lost sight of the fact that the theory of succession invoked by petitioner would end up proving that he is not the sole owner of Lot 7226. This is so because Dominador was survived not only by petitioner but also by his legal wife, Graciana, who died 10 years after the demise of Dominador on May 28, 1987. By intestate succession, Graciana and petitioner became co-owners of Lot 7226. The death of Graciana on May 6, 1997, did not make petitioner the absolute owner of Lot 7226 because the share of Graciana passed to her relatives by consanguinity and not to petitioner with whom she had no blood relations. The Court of Appeals thus correctly held that petitioner has no authority to institute the instant action as the sole owner of Lot 7226. Actions; Parties; Ejectment; Co-Ownership; A co-owner may bring such actions for recovery of possession without the necessity of joining all of the other co-owners as co-plaintiffs because the suit is presumed to have been filed for the benefit of his co-owners; However, if the suit is for the benefit of the plaintiff alone who claims to be the sole owner and entitled to the possession of the litigated property, the action should be dismissed.Petitioner contends that even granting that he has co-owners over Lot 7226, he can on his own file the instant case pursuant to Article 487 of the Civil Code which provides: ART. 487. Any one of the co-owners may bring an action in ejectment. This article covers all kinds of actions for the recovery of possession. Article 487 includes forcible entry and unlawful detainer (accion interdictal), recovery of possession (accion publiciana), and recovery of ownership (accion de reivindicacion). A co-owner may bring such an action without the necessity of joining all the other coowners as co-plaintiffs because the suit is presumed to have been filed to benefit his co-owners. It should be stressed, however, that where the suit is for the benefit of the plaintiff alone who claims to be the sole owner and entitled to the possession of the litigated property, the action should be dismissed. The renowned civilist, Professor Arturo M. Tolentino, explained. . . A co-owner may bring such an action, without the necessity of joining all the other co-owners as coplaintiffs, because the suit is deemed to be instituted for the benefit of all. If the action is for the benefit of the plaintiff alone, such that he claims possession for himself and not for the coownership, the action will not prosper.

Wills and Succession; Intestate Succession; Escheat; In default of the heirs of the decedent, the State will inherit the decedents share and will thus be a co-petitioner entitled to possession and enjoyment of the property.In the same vein, there is no merit in petitioners claim that he has the legal personality to file the present unlawful detainer suit because the ejectment of respondents would benefit not only him but also his alleged co-owners. However, petitioner forgets that he filed the instant case to acquire possession of the property and to recover damages. If granted, he alone will gain possession of the lot and benefit from the proceeds of the award of damages to the exclusion of the heirs of Graciana. Hence, petitioner cannot successfully capitalize on the alleged benefit to his co-owners. Incidentally, it should be pointed out that in default of the said heirs of Graciana, whom petitioner labeled as fictitious heirs, the State will inherit her share and will thus be petitioners co-owner entitled to possession and enjoyment of the property.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court. Florante L. Abad for petitioner. Alo & Velasquez Law Offices for respondents. YNARES-SANTIAGO, J.:

Assailed in this petition for review is the September 23, 2003 Decision1 of the Court of Appeals in CA-G.R. SP No. 74921 which set aside the September 13, 2002 Decision2 of the Regional Trial Court (RTC) of Cebu City, Branch 7, in Civil Case No. CEB-27806, and reinstated the February 12, 2002 Judgment3 of the Municipal Trial Court (MTC) of Minglanilla, Metro Cebu, in Civil Case No. 392, dismissing petitioner Arnelito Adlawans unlawful detainer suit against respondents Emeterio and Narcisa Adlawan. Likewise questioned is the January 8, 2004 Resolution4 of the Court of Appeals which denied petitioners motion for reconsideration. The instant ejectment suit stemmed from the parties dispute over Lot 7226 and the house built thereon, covered by Transfer Certificate of Title No. 8842,5 registered in the name of the late Dominador Adlawan and located at Barrio Lipata, Municipality of Minglanilla, Cebu. In his complaint, petitioner claimed that he is an acknowledged illegitimate child6 of Dominador who died on May 28, 1987 without any other issue. Claiming to be the sole heir of Dominador, he
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executed an affidavit adjudicating to himself Lot 7226 and the house built thereon.7 Out of respect and generosity to respondents who are the siblings of his father, he granted their plea to occupy the subject property provided they would vacate the same should his need for the property arise. Sometime in January 1999, he verbally requested respondents to vacate the house and lot, but they refused and filed instead an action for quieting of title8 with the RTC. Finally, upon respondents refusal to heed the last demand letter to vacate dated August 2, 2000, petitioner filed the instant case on August 9, 2000.9 On the other hand, respondents Narcisa and Emeterio, 70 and 59 years of age, respectively,10 denied that they begged petitioner to allow them to stay on the questioned property and stressed that they have been occupying Lot 7226 and the house standing thereon since birth. They alleged that Lot 7226 was originally registered in the name of their deceased father, Ramon Adlawan11 and the ancestral house standing thereon was owned by Ramon and their mother, Oligia Maacap Adlawan. The spouses had nine12 children including the late Dominador and herein surviving respondents Emeterio and Narcisa. During the lifetime of their parents and deceased siblings, all of them lived on the said property. Domi-nador and his wife, Graciana Ramas Adlawan, who died without issue, also occupied the same.13 Petitioner, on the other hand, is a stranger who never had possession of Lot 7226. Sometime in 1961, spouses Ramon and Oligia needed money to finance the renovation of their house. Since they were not qualified to obtain a loan, they transferred ownership of Lot 7226 in the name of their son Dominador who was the only one in the family who had a college education. By virtue of a January 31, 1962 simulated deed of sale,14 a title was issued to Dominador which enabled him to secure a loan with Lot 7226 as collateral. Notwithstanding the execution of the simulated deed, Dominador, then single, never disputed his parents ownership of the lot. He and his wife, Graciana, did not disturb respondents possession of the property until they died on May 28, 1987 and May 6, 1997, respectively. Respondents also contended that Dominadors signature at the back of petitioners birth certificate was forged, hence, the latter is not an heir of Dominador and has no right to claim ownership of Lot 7226.15 They argued that even if petitioner is indeed Dominadors acknowledged illegitimate son, his right to succeed is doubtful because Dominador was survived by his wife, Graciana.16

On February 12, 2002, the MTC dismissed the complaint holding that the establishment of petitioners filiation and the settlement of the estate of Dominador are conditions precedent to the accrual of petitioners action for ejectment. It added that since Dominador was survived by his wife, Graciana, who died 10 years thereafter, her legal heirs are also entitled to their share in Lot 7226. The dispositive portion thereof, reads: In view of the foregoing, for failure to prove by preponderance of evidence, the plaintiffs cause of action, the above-entitled case is hereby Ordered DISMISSED. SO ORDERED.17 On appeal by petitioner, the RTC reversed the decision of the MTC holding that the title of Dominador over Lot 7226 cannot be collaterally attacked. It thus ordered respondents to turn over possession of the controverted lot to petitioner and to pay compensation for the use and occupation of the premises. The decretal portion thereof, provides: Wherefore, the Judgment, dated February 12, 2002, of the Municipal Trial Court of Minglanilla, Cebu, in Civil Case No. 392, is reversed. Defendantsappellees are directed to restore to plaintiff-appellant possession of Lot 7226 and the house thereon, and to pay plaintiff-appellant, beginning in August 2000, compensation for their use and occupation of the property in the amount of P500.00 a month. So ordered.18 Meanwhile, the RTC granted petitioners motion for execution pending appeal19 which was opposed by the alleged nephew and nieces of Graciana in their motion for leave to intervene and to file an answer in intervention.20 They contended that as heirs of Graciana, they have a share in Lot 7226 and that intervention is necessary to protect their right over the property. In addition, they declared that as co-owners of the property, they are allowing respondents to stay in Lot 7226 until a formal partition of the property is made. The RTC denied the motion for leave to intervene.21 It, however, recalled the order granting the execution pending appeal having lost jurisdiction over the case in view of the petition filed by respondents with the Court of Appeals.22 On September 23, 2003, the Court of Appeals set aside the decision of the RTC and reinstated the judgment of the MTC. It ratiocinated that petitioner and
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the heirs of Graciana are co-owners of Lot 7226. As such, petitioner cannot eject respondents from the property via an unlawful detainer suit filed in his own name and as the sole owner of the property. Thus WHEEFORE, premises considered, the appealed Decision dated September 13, 2002 of the Regional Trial Court of Cebu City, Branch 7, in Civil Case No. CEB-27806 is REVERSED and SET ASIDE, and the Judgment dated February 12, 2002 of the Municipal Trial Court of Minglanilla, Metro Cebu, in Civil Case No. 392 is REINSTATED. Costs against the respondent. SO ORDERED.23 Petitioners motion for reconsideration was denied. Hence, the instant petition. The decisive issue to be resolved is whether or not petitioner can validly maintain the instant case for ejectment. Petitioner averred that he is an acknowledged illegitimate son and the sole heir of Dominador. He in fact executed an affidavit adjudicating to himself the controverted property. In ruling for the petitioner, the RTC held that the questioned January 31, 1962 deed of sale validly transferred title to Dominador and that petitioner is his acknowledged illegitimate son who inherited ownership of the questioned lot. The Court notes, however, that the RTC lost sight of the fact that the theory of succession invoked by petitioner would end up proving that he is not the sole owner of Lot 7226. This is so because Dominador was survived not only by petitioner but also by his legal wife, Graciana, who died 10 years after the demise of Dominador on May 28, 1987.24 By intestate succession, Graciana and petitioner became co-owners of Lot 7226.25 The death of Graciana on May 6, 1997, did not make petitioner the absolute owner of Lot 7226 because the share of Graciana passed to her relatives by consanguinity and not to petitioner with whom she had no blood relations. The Court of Appeals thus correctly held that petitioner has no authority to institute the instant action as the sole owner of Lot 7226. Petitioner contends that even granting that he has co-owners over Lot 7226, he can on his own file the instant case pursuant to Article 487 of the Civil Code which provides: ART. 487. Any one of the co-owners may bring an action in ejectment. This article covers all kinds of actions for the recovery of possession. Article 487 includes forcible entry and unlawful detainer (accion interdictal), recovery

of possession (accion publiciana), and recovery of ownership (accion de reivindicacion).26 A co-owner may bring such an action without the necessity of joining all the other co-owners as co-plaintiffs because the suit is presumed to have been filed to benefit his coowners. It should be stressed, however, that where the suit is for the benefit of the plaintiff alone who claims to be the sole owner and entitled to the possession of the litigated property, the action should be dismissed.27 The renowned civilist, Professor Arturo M. Tolentino, explained . . . A co-owner may bring such an action, without the necessity of joining all the other co-owners as co-plaintiffs, because the suit is deemed to be instituted for the benefit of all. If the action is for the benefit of the plaintiff alone, such that he claims possession for himself and not for the co-ownership, the action will not prosper. (Emphasis added)28 In Baloloy v. Hular,29 respondent filed a complaint for quieting of title claiming exclusive ownership of the property, but the evidence showed that respondent has co-owners over the property. In dismissing the complaint for want of respondents authority to file the case, the Court held that Under Article 487 of the New Civil Code, any of the co-owners may bring an action in ejectment. This article covers all kinds of actions for the recovery of possession, including an accion publiciana and a reinvidicatory action. A co-owner may bring such an action without the necessity of joining all the other co-owners as co-plaintiffs because the suit is deemed to be instituted for the benefit of all. Any judgment of the court in favor of the co-owner will benefit the others but if such judgment is adverse, the same cannot prejudice the rights of the unimpleaded coowners. If the action is for the benefit of the plaintiff alone who claims to be the sole owner and entitled to the possession thereof, the action will not prosper unless he impleads the other co-owners who are indispensable parties. In this case, the respondent alone filed the complaint, claiming sole ownership over the subject property and praying that he be declared the sole owner thereof. There is no proof that the other co-owners had waived their rights over the subject property or conveyed the same to the respondent or such coowners were aware of the case in the trial court. The trial court rendered judgment declaring the respondent as the sole owner of the property and entitled to its possession, to the prejudice of the latters siblings. Patently then, the decision of the trial court is erroneous. Under Section 7, Rule 3 of the Rules of Court, the respondent was mandated to implead his siblings, being coowners of the property, as parties. The respondent failed to comply with the
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rule. It must, likewise, be stressed that the Republic of the Philippines is also an indispensable party as defendant because the respondent sought the nullification of OCT No. P-16540 which was issued based on Free Patent No. 384019. Unless the State is impleaded as party-defendant, any decision of the Court would not be binding on it. It has been held that the absence of an indispensable party in a case renders ineffective all the proceedings subsequent to the filing of the complaint including the judgment. The absence of the respondents siblings, as parties, rendered all proceedings subsequent to the filing thereof, including the judgment of the court, ineffective for want of authority to act, not only as to the absent parties but even as to those present.30 In the instant case, it is not disputed that petitioner brought the suit for unlawful detainer in his name alone and for his own benefit to the exclusion of the heirs of Graciana as he even executed an affidavit of self-adjudication over the disputed property. It is clear therefore that petitioner cannot validly maintain the instant action considering that he does not recognize the co-ownership that necessarily flows from his theory of succession to the property of his father, Dominador. In the same vein, there is no merit in petitioners claim that he has the legal personality to file the present unlawful detainer suit because the ejectment of respondents would benefit not only him but also his alleged co-owners. However, petitioner forgets that he filed the instant case to acquire possession of the property and to recover damages. If granted, he alone will gain possession of the lot and benefit from the proceeds of the award of damages to the exclusion of the heirs of Graciana. Hence, petitioner cannot successfully capitalize on the alleged benefit to his co-owners. Incidentally, it should be pointed out that in default of the said heirs of Graciana, whom petitioner labeled as fictitious heirs, the State will inherit her share31 and will thus be petitioners co-owner entitled to possession and enjoyment of the property. The present controversy should be differentiated from the cases where the Court upheld the right of a co-owner to file a suit pursuant to Article 487 of the Civil Code. In Resuena v. Court of Appeals,32 and Sering v. Plazo,33 the coowners who filed the ejectment case did not represent themselves as the exclusive owner of the property. In Celino v. Heirs of Alejo and Teresa Santiago,34 the complaint for quieting of title was brought in behalf of the coowners precisely to recover lots owned in common.35 Similarly in Vencilao v. Camarenta, et al.,36 the amended complaint specified that the plaintiff is one of the heirs who co-owns the controverted properties.

In the foregoing cases, the plaintiff never disputed the existence of a coownership nor claimed to be the sole or exclusive owner of the litigated lot. A favorable decision therein would of course inure to the benefit not only of the plaintiff but to his co-owners as well. The instant case, however, presents an entirely different backdrop as petitioner vigorously asserted absolute and sole ownership of the questioned lot. In his complaint, petitioner made the following allegations, to wit: 3. The plaintiff was the only son (illegitimate) and sole heir of the late DOMINADOR ADLAWAN who died intestate on 28 May 1987 without any other descendant nor ascendant x x x. xxxx 5. Being the only child/descendant and, therefore, sole heir of the deceased Dominador Adlawan, the plaintiff became the absolute owner, and automatically took POSSESSION, of the aforementioned house and lot x x x. (Emphasis added)37 Clearly, the said cases find no application here because petitioners action operates as a complete repudiation of the existence of co-ownership and not in representation or recognition thereof. Dismissal of the complaint is therefore proper. As noted by Former Supreme Court Associate Justice Edgardo L. Paras [i]t is understood, of course, that the action [under Article 487 of the Civil Code] is being instituted for all. Hence, if the co-owner expressly states that he is bringing the case only for himself, the action should not be allowed to prosper.38 Indeed, respondents not less than four decade actual physical possession of the questioned ancestral house and lot deserves to be respected especially so that petitioner failed to show that he has the requisite personality and authority as co-owner to file the instant case. Justice dictates that respondents who are now in the twilight years of their life be granted possession of their ancestral property where their parents and siblings lived during their lifetime, and where they, will probably spend the remaining days of their life. WHEREFORE, the petition is DENIED. The September 23, 2003 Decision of the Court of Appeals in CA-G.R. SP No. 74921 which reinstated the February 12, 2002 Judgment of the Municipal Trial Court of Minglanilla, Metro Cebu, dismissing petitioners complaint in Civil Case No. 392, and its January 8, 2004 Resolution, are AFFIRMED.
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SO ORDERED. Panganiban (C.J., Chairperson), Austria-Martinez, Callejo, Sr. and ChicoNazario, JJ., concur. Petition denied, judgment and resolution affirmed. Notes.A will is essentially ambulatoryat any time prior to the testators death, it may be changed or revoked, and until admitted to probate, it has no effect whatever and no right can be claimed thereunder. An owners intention to confer title in the future to persons possessing property by his tolerance is not inconsistent with the formers taking back possession in the meantime for any reason deemed sufficient. (Caiza vs. Court of Appeals, 268 SCRA 640 [1997]) The possibility of a false document being adjudged as the will of the testator cannot be eliminated, which is why if the holographic will is contested, the law requires three witnesses to declare that the will was in the handwriting of the deceased. (Codoy vs. Calugay, 312 SCRA 333 [1999]) o0o

288

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Adlawan vs. Adlawan, 479 SCRA 275(2006)]

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G.R. No. 168943. October 27, 2006.* IGLESIA NI CRISTO, petitioner, vs. HON. THELMA A. PONFERRADA, in her capacity as Presiding Judge, Regional Trial Court, Br. 104, Quezon City, and HEIRS OF ENRIQUE G. SANTOS, respondents. Actions; Pleadings and Practice; Verification; The purpose of verification is simply to secure an assurance that the allegations of the petition (or complaint) have been made in good faith, or are true and correct, and not merely speculative; Verification is only a formal, not a jurisdictional requirement. The purpose of verification is simply to secure an assurance that the allegations of the petition (or complaint) have been made in good faith; or are true and correct, not merely speculative. This requirement is simply a condition affecting the form of pleadings, and noncompliance therewith does not necessarily render it fatally defective. Indeed, verification is only a formal, not a jurisdictional requirement. Same; Same; Same; The verification requirement is deemed substantially complied with when only one of the heirs-plaintiffs, who has sufficient knowledge and belief to swear to the truth of the allegations in the petition (complaint), signed the verification attached to it.The issue in the present case is not the lack of verification but the sufficiency of one executed by only one of plaintiffs. This Court held in Ateneo de Naga University v. Manalo, 458 SCRA 325 (2005), that the verification requirement is deemed substantially complied with when, as in the present case, only one of the heirsplaintiffs, who has sufficient knowledge and belief to swear to the truth of the allegations in the petition (complaint), signed the verification attached to it. Such verification is deemed sufficient assurance that the matters alleged in the petition have been made in good faith or are true and correct, not merely speculative. Same; Same; Same; Certification Against Forum Shopping; The same liberality obtaining in the case of verifications should likewise be applied to the certification against forum shopping.The same liberality should likewise be applied to the certification against forum shopping. The general rule is that the certification must be signed by all plaintiffs in a case and the signature of only one of them is insufficient. However, the Court has also stressed in a number of cases that the rules on forum shopping were designed to promote and facilitate the orderly administration of justice and thus should not be interpreted with such absolute literalness as to subvert its own ultimate and legitimate objective. The rule of substantial compliance may be availed of with respect to the contents of the certification. This is because the requirement of strict compliance with the provisions merely underscores its mandatory nature in that the certification cannot be altogether dispensed with or its requirements completely disregarded.

Same; Same; Same; Same; Co-Ownership; Since heirs are considered co-owners pro indiviso of the whole property, the signature of one of them in the verification and certification is sufficient for the trial court to take cognizance of the case.It is noteworthy that in all of the above cases, the Court applied the rule on substantial compliance because of the commonality of interest of all the parties with respect to the subject of the controversy. Applying the doctrines laid down in the above cases, we find and so hold that the CA did not err in affirming the application of the rule on substantial compliance. In the instant case, the property involved is a 936-squaremeter real property. Both parties have their respective TCTs over the property. Respondents herein who are plaintiffs in the case below have a common interest over the property being the heirs of the late Enrique Santos, the alleged registered owner of the subject property as shown in one of the TCTs. As such heirs, they are considered co-owners pro indiviso of the whole property since no specific portion yet has been adjudicated to any of the heirs. Consequently, as one of the heirs and principal party, the lone signature of Enrique G. Santos in the verification and certification is sufficient for the RTC to take cognizance of the case. The commonality of their interest gave Enrique G. Santos the authority to inform the RTC on behalf of the other plaintiffs therein that they have not commenced any action or claim involving the same issues in another court or tribunal, and that there is no other pending action or claim in another court or tribunal involving the same issues. Hence, the RTC correctly denied the motion to dismiss filed by petitioner. Same; Same; Same; Same; Same; Procedural Rules and Technicalities; The ends of justice are better served when cases are determined on the meritsafter all the parties are given full opportunity to ventilate their causes and defenserather than on technicality or some procedural imperfections. Considering that at stake in the present case is the ownership and possession over a prime property in Quezon City, the apparent merit of the substantive aspects of the case should be deemed as a special circumstance or compelling reason to allow the relaxation of the rule. Time and again, this Court has held that rules of procedure are established to secure substantial justice. Being instruments for the speedy and efficient administration of justice, they may be used to achieve such end, not to derail it. In particular, when a strict and literal application of the rules on non-forum shopping and verification will result in a patent denial of substantial justice, these may be liberally construed. The ends of justice are better served when cases are determined on the meritsafter all parties are given full opportunity to ventilate their causes and defensesrather than on technicality or some procedural imperfections. Same; Same; Same; Same; Same; Same; As co-owners, each of the heirs may properly bring an action for ejectment, forcible entry and detainer, or any kind of action for the
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recovery of possession.Anent the issue of the authority of Enrique G. Santos to represent his co-heirs/co-plaintiffs, we find no necessity to show such authority. Respondents herein are co-owners of the subject property. As such co-owners, each of the heirs may properly bring an action for ejectment, forcible entry and detainer, or any kind of action for the recovery of possession of the subject properties. Thus, a coowner may bring such an action, even without joining all the other co-owners as coplaintiffs, because the suit is deemed to be instituted for the benefit of all. Same; Same; Quieting of Title; The nature of an action is determined by the material allegations of the complaint and the character of the relief sought by the plaintiff, and the law in effect when the action was filed irrespective of whether he is entitled to all or only some of such relief; A cloud is said to be a semblance of a title, either legal or equitable, or a cloud of an interest in land appearing in some legal form but which is, in fact, unfounded, or which it would be inequitable to enforce.The nature of an action is determined by the material allegations of the complaint and the character of the relief sought by plaintiff, and the law in effect when the action was filed irrespective of whether he is entitled to all or only some of such relief. As gleaned from the averments of the complaint, the action of respondents was one for quieting of title under Rule 64 of the Rules of Court, in relation to Article 476 of the New Civil Code. The latter provision reads: 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. A cloud is said to be a semblance of a title, either legal or equitable, or a cloud of an interest in land appearing in some legal form but which is, in fact, unfounded, or which it would be inequitable to enforce. An action for quieting of title is imprescriptible until the claimant is ousted of his possession. Same; Same; Same; The owner of a real property, as plaintiff, is entitled to the relief of quieting of title even if, at the time of the commencement of his action, he was not in actual possession of real property.The owner of a real property, as plaintiff, is entitled to the relief of quieting of title even if, at the time of the commencement of his action, he was not in actual possession of real property. After all, under Article 477 of the New Civil Code, the owner need not be in possession of the propery. If on the face of TCT No. 321744 under the name of plaintiff, its invalidity does not appear but rests partly in pais, an action for quieting of title is proper. Same; Same; Same; An accion reinvindicatoria is a remedy seeking the recovery of ownership and includes jus possidendi, jus utendi, and jus fruendi as wellit is an

action whereby a party claims ownership over a parcel of land and seeks recovery of its full possession.Admittedly, respondents interposed the alternative reinvindicatory action against petitioner. An accion reinvindicatoria does not necessarily presuppose that the actual and material possession of the property is on defendant and that plaintiff seeks the recovery of such possession from defendant. It bears stressing that an accion reinvindicatoria is a remedy seeking the recovery of ownership and includes jus possidendi, jus utendi, and jus fruendi as well. It is an action whereby a party claims ownership over a parcel of land and seeks recovery of its full possession. Thus, the owner of real property in actual and material possession thereof may file an accion reinvindicatoria against another seeking ownership over a parcel of land including jus vindicandi, or the right to exclude defendants from the possession thereof. In this case, respondents filed an alternative reinvindicatory action claiming ownership over the property and the cancellation of TCT No. 321744 under the name of petitioner. In fine, they sought to enforce their jus utendi and jus vindicandi when petitioner claimed ownership and prevented them from fencing the property. Same; Same; Same; Prescription; The prescriptive period for the reinvidicatory action has not yet commenced to run where the plaintiff was in actual or physical possession of the property when he filed his complaint. Since respondents were in actual or physical possession of the property when they filed their complaint against petitioner on October 24, 2001, the prescriptive period for the reinvindicatory action had not even commenced to run, even if petitioner was able to secure TCT No. 321744 over the property in 1984. The reason for this is that x x x one who is in actual possession of a piece of land claiming to be the owner thereof may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right, the reason for the rule being, that his undisturbed possession gives him a continuing right to seek the aid of a court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on his own title, which right can be claimed only by one who is in possession. PETITION for review on certiorari of the decision and resolution of the Court of Appeals. The facts are stated in the opinion of the Court. Lazaro, Tuazon, Santos & Associates Law Offices for petitioner. Lenito T. Serrano for respondents. CALLEJO, SR., J.:

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This is a Petition for Review on Certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 72686 and its Resolution2 denying the motion for reconsideration of the said decision. On October 24, 2001, Alicia, Alfredo, Roberto, Enrique and Susan, all surnamed Santos, and Sonia Santos-Wallin, represented by Enrique G. Santos, filed a complaint3 for Quieting of Title and/or Accion Reinvindicatoria before the Regional Trial Court (RTC) of Quezon City against the Iglesia Ni Cristo (INC), defendant therein. Plaintiffs alleged therein that, during his lifetime, Enrique Santos was the owner of a 936-square-meter parcel of land located in Tandang Sora, Quezon City covered by Transfer Certificate of Title (TCT) No. 57272 issued by the Register of Deeds on July 27, 1961 which cancelled TCT No. 57193-289. He had been in possession of the owners duplicate of said title and had been in continuous, open, adverse and peaceful possession of the property. He died on February 9, 1970 and was survived by his wife, Alicia Santos, and other plaintiffs, who were their children. Thereafter, plaintiffs took peaceful and adverse possession of the property, and of the owners duplicate of said title. When the Office of the Register of Deeds of Quezon City was burned on June 11, 1988, the original copy of said title was burned as well. The Register of Deeds had the title reconstituted as TCT No. RT-110323, based on the owners duplicate of TCT No. 57272. Sometime in February 1996, plaintiffs learned that defendant was claiming ownership over the property based on TCT No. 321744 issued on September 18, 1984 which, on its face, cancelled TCT No. 320898, under the name of the Philippine National Bank, which allegedly cancelled TCT No. 252070 in the names of the spouses Marcos and Romana dela Cruz. They insisted that TCT Nos. 321744, 320898 and 252070 were not among the titles issued by the Register of Deeds of Quezon City and even if the Register of Deeds issued said titles, it was contrary to law. Enrique Santos, during his lifetime, and his heirs, after his death, never encumbered or disposed the property. In 1996, plaintiffs had the property fenced but defendant deprived them of the final use and enjoyment of their property. Plaintiffs prayed that, after due proceedings, judgment be rendered in their favor, thus: WHEREFORE, it is respectfully prayed that, after due hearing, judgment be rendered quieting the title of plaintiffs over and/or recover possession of their said property in the name of deceased Enrique Santos, covered by said TCT No. RT-110323(57272) of the Register of Deeds at Quezon City and that:

1. The title of defendant, TCT No. 321744 be ordered cancelled by the Register of Deeds of Quezon City; 2. The defendant be ordered to pay plaintiffs claims for actual damages in the sum of P100,000.00; 3. The defendant be ordered to pay plaintiffs claims for compensatory damages in the sum of at least P1,000,000.00; 4. The defendant be ordered to pay plaintiffs claims for reimbursement of the lawyers professional fees consisting of the aforesaid P50,000.00 acceptance fee and reimbursement of the said success fee in par. 10 above; and lawyers expenses of P2,000.00 for each hearing in this case; 5. The defendant be ordered to pay expenses and costs of litigation in the sum of at least P200,000.00. Other reliefs that are just and equitable in the premises are, likewise, prayed for.4 As gleaned from the caption of the complaint, plaintiffs appear to be the heirs of Enrique Santos, represented by Enrique G. Santos. The latter signed the Verification and Certificate of Non-Forum Shopping which reads: I, ENRIQUE G. SANTOS, of legal age, under oath, state that I am one of the children of the late Enrique Santos and I represent the heirs of said Enrique Santos who are my co-plaintiffs in the above-captioned case and that I directed the preparation of the instant complaint, the contents of which are true and correct to the best of my knowledge and the attachments are faithful reproductions of the official copies in my possession. I hereby certify that I have not commenced any other action or proceeding involving the same issues in the Supreme Court, the Court of Appeals, or different Divisions thereof, or any other tribunal or agency, and to the best of my knowledge, no such action or proceeding is pending in the Supreme Court, the Court of Appeals, or different Divisions thereof, or any other tribunal or agency, and that I shall notify this Commission within three days from notice that a similar action or proceeding has been filed or is pending thereat. IN WITNESS WHEREOF, I hereby affix my signature this 23rd day of October 2001 at Pasig City, Metro Manila. (Sgd.)
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ENRIQUE G. SANTOS SUBSCRIBED AND SWORN to before me this 23rd day of October 2001 at Pasig City, affiant exhibiting to me his CTC No. 07303074 issued at Sta. Cruz, Laguna on April 16, 2001. (Sgd.) PETER FRANCIS G. ZAGALA Notary Public Until December 31, 2002 PTR No. 0287069 Issued on 1-10-01 At Pasig City5 Defendant moved to dismiss plaintiffs complaint on the following grounds: (1) plaintiffs failed to faithfully comply with the procedural requirements set forth in Section 5, Rule 7 of the 1997 Rules of Civil Procedure; (2) the action (either Quieting of Title or Accion Reinvindicatoria) had prescribed, the same having been filed only on October 24, 2001 beyond the statutory ten-year period therefor; and (3) that the complaint is defective in many respects.6 Defendant asserted that the case involved more than one plaintiff but the verification and certification against forum shopping incorporated in the complaint was signed only by Enrique Santos. Although the complaint alleges that plaintiffs are represented by Enrique Santos, there is no showing that he was, indeed, authorized to so represent the other plaintiffs to file the complaint and to sign the verification and certification of non-forum shopping.7 Thus, plaintiffs failed to comply with Section 5, Rule 7 of the Rules of Court. Defendant cited the ruling of this Court in Loquias v. Office of the Ombudsman.8 Defendant maintained that the complaint is defective in that, although there is an allegation that Enrique Santos represents the other heirs, there is nothing in the pleading to show the latters authority to that effect; the complaint fails to aver with particularity the facts showing the capacity of defendant corporation to sue and be sued; and the pleading does not state the address of plaintiffs. Defendant likewise averred that the complaint should be dismissed on the

ground of prescription. It argued that plaintiffs anchor their claim on quieting of title and considering that they are not in possession of the land in question, their cause of action prescribed after ten years. On the other hand, if the supposed right of plaintiffs is based on accion reinvindicatoria, prescription would set in after 10 years from dispossession. In both cases, defendant asserts, the reckoning point is 1984 when defendant acquired TCT No. 321744 and possession of the land in question. In their Comment9 on the motion, plaintiffs averred that the relationship of a coowner to the other co-owners is fiduciary in character; thus, anyone of them could effectively act for another for the benefit of the property without need for an authorization. Consequently, Enrique Santos had the authority to represent the other heirs as plaintiffs and to sign the verification and certification against forum shopping.10 On the issue of prescription, plaintiffs argued that the prescriptive period for the actions should be reckoned from 1996, when defendant claimed ownership over the property and barred plaintiffs from fencing their property, not in 1984 when TCT No. 321744 was issued by the Register of Deeds in the name of defendant as owner. In its reply, defendant averred that absent any authority from his co-heirs, Enrique Santos must implead them as plaintiffs as they are indispensable parties. In response, plaintiffs aver that a co-owner of a property can execute an action for quieting of title without impleading the other co-owners. The trial court issued an Order11 denying defendants motion to dismiss. It declared that since Enrique Santos was one of the heirs, his signature in the verification and certification constitutes substantial compliance with the Rules. The court cited the ruling of this Court in Dar v. Alonzo-Legasto.12 The court, likewise, held that prescription had not set in and that failure to state the address of plaintiffs in the complaint does not warrant the dismissal of the complaint. Defendant filed a motion for reconsideration, which the court likewise denied in an Order13 dated July 10, 2002. Unsatisfied, defendant, as petitioner, filed a Petition for Certiorari and Prohibition with Prayer for the Issuance of a Temporary Restraining Order and/or Preliminary Injunction14 before the CA, raising the following issues: I.

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WHETHER OR NOT RESPONDENT JUDGE GRAVELY ERRED AND ABUSED HER DISCRETION WHEN SHE HELD THAT THE CERTIFICATION OF NON-FORUM SHOPPING SIGNED BY ENRIQUE G. SANTOS ALONE IS A SUBSTANTIAL COMPLIANCE WITH SECTION 5, RULE 7 OF THE 1997 RULES OF CIVIL PROCEDURE, IN CLEAR CONTRAVENTION OF THE RULES OF COURT, AND THE RULING IN LOQUIAS V. OFFICE OF THE OMBUDSMAN, G.R. NO. 1399396 (SIC), AUGUST 16, 2000, 338 SCRA 62, AND ORTIZ V. COURT OF APPEALS, G.R. NO. 127393, 299 SCRA 708 (DECEMBER 4, 1998). II. WHETHER OR NOT RESPONDENT JUDGE GRAVELY ERRED AND ABUSED HER DISCRETION IN APPLYING THE RULING IN DAR, ET AL. V. HON. ROSE MARIE ALONZO-LEGASTO, ET AL., G.R. NO. 143016, AUGUST 30, 2000 TO THE INSTANT CASE. III.

verification and certification for and in behalf of his co-plaintiffs is not a matter of evidence. The defect is fatal to the complaint of respondents and cannot be cured by an amendment of the complaint. The trial court erred in applying the ruling of this Court in Dar v. Alonzo-Legasto.16 Petitioner maintained that the action of respondents, whether it be one for quieting of title or an accion reinvindicatoria, had prescribed when the complaint was filed on October 24, 2001. Petitioner asserts that this is because when respondents filed their complaint, they were not in actual or physical possession of the property, as it (petitioner) has been in actual possession of the property since 1984 when TCT No. 321744 was issued to it by the Register of Deeds. This is evident from the nature of a reinvindicatory action itself which is an action whereby plaintiff alleges ownership over the subject parcel of land and seeks recovery of its full possession. By their action, respondents thereby admitted that petitioner was in actual possession of the property, and as such, respondents action for quieting of title or accion reinvindicatoria may prescribe in ten (10) years from 1984 or in 1994, it appearing that it acted in good faith when it acquired the property from the registered owner, conformably with Article 555(4) of the New Civil Code. On April 7, 2005, the CA rendered the assailed decision17 dismissing the petition, holding that the RTC did not commit grave abuse of its discretion amounting to lack or excess of jurisdiction in denying petitioners motion to dismiss. As the Court held in DAR v. Alonzo-Legasto18 and in Gudoy v. Guadalquiver,19 the certification signed by one with respect to a property over which he shares a common interest with the rest of the plaintiffs (respondents herein) substantially complied with the Rules. As to the issue of prescription, the appellate court held that the prescriptive period should be reckoned from 1996, when petitioner claimed ownership and barred respondents from fencing the property. Petitioner is now before this Court on petition for review on certiorari, raising the following issues: I. WHETHER OR NOT THE COURT OF APPEALS ERRED IN RULING THAT THE CERTIFICATION OF NON-FORUM SHOPPING SIGNED BY RESPONDENT ENRIQUE G. SANTOS ALONE IS A SUBSTANTIAL COMPLIANCE WITH SECTION 5, RULE 7 OF THE 1997 RULES OF CIVIL PROCEDURE AND IN APPLYING THE CASE OF GUDOY V.
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WHETHER OR NOT RESPONDENT JUDGE GRAVELY ERRED AND ABUSED HER DISCRETION WHEN SHE HELD THAT THE AUTHORITY OF ENRIQUE G. SANTOS TO REPRESENT HIS CO-HEIRS IN THE FILING OF THE COMPLAINT AGAINST THE INC IS A MATTER OF EVIDENCE. IV. WHETHER OR NOT RESPONDENT JUDGE GRAVELY ERRED AND ABUSED HER DISCRETION WHEN SHE HELD THAT THE ACTION FOR QUIETING OF TITLE AND/OR ACCION REINVINDICATORIA (CIVIL CASE NO. Q-01-45415) HAS NOT YET PRESCRIBED.15 Petitioner averred that, of the plaintiffs below, only plaintiff Enrique Santos signed the verification and certification of non-forum shopping. Under Section 5, Rule 7 of the 1997 Rules of Civil Procedure, all the plaintiffs must sign, unless one of them is authorized by a special power of attorney to sign for and in behalf of the others. Petitioner argues that the bare claim of Enrique Santos that he signed the verification and certification in his behalf and of the other plaintiffs who are his co-heirs/co-owners of the property does not even constitute substantial compliance of the rule. Contrary to the ruling of the trial court, the absence or existence of an authority of Enrique Santos to sign the

GUADALQUIVER, 429 SCRA 723, WITHOUT REGARD TO MORE RECENT JURISPRUDENCE. II. WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT HELD THAT THE AUTHORITY OF RESPONDENT ENRIQUE G. SANTOS TO REPRESENT HIS CO-HEIRS IN THE FILING OF THE COMPLAINT AGAINST THE PETITIONER IS A MATTER OF EVIDENCE. III. WHETHER OR NOT THE COURT OF APPEALS ERRED IN HOLDING THAT THE ACTION FOR QUIETING OF TITLE AND/OR ACCION REINVINDICATORIA (CIVIL CASE NO. Q-01-45415) HAS NOT YET PRESCRIBED.20 Petitioner reiterated its arguments in support of its petition in the CA as its arguments in support of its petition in the present case. Sections 4 and 5, Rule 7 of the Revised Rules of Court on verification and certification against forum shopping read: Sec. 4. Verification.Except when otherwise specifically required by law or rule, pleadings need not be under oath, verified or accompanied by affidavit. A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations therein are true and correct of his personal knowledge or based on authentic records. A pleading required to be verified which contains a verification based on information and belief or upon knowledge, information and belief, or lacks a proper verification, shall be treated as an unsigned pleading. Sec. 5. Certification against forum shopping.The plaintiff or principal party shall certify under oath in the complaint or other initiatory pleading asserting a claim for relief, or in a sworn certification annexed thereto and simultaneously filed therewith: (a) that he has not theretofore commenced any action or filed any claim involving the same issues in any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such other action or claim is pending therein; (b) if there is such other pending action or claim, a complete statement of the present status thereof; and (c) if he should thereafter learn that the same or similar action or claim has been filed or is pending, he shall

report that fact within five (5) days therefrom to the court wherein his aforesaid complaint or initiatory pleading has been filed. Failure to comply with the foregoing requirements shall not be curable by mere amendment of the complaint or other initiatory pleading but shall be cause for the dismissal of the case without prejudice, unless otherwise provided, upon motion and after hearing. The submission of a false certification or noncompliance with any of the undertakings therein shall constitute indirect contempt of court, without prejudice to the corresponding administrative and criminal actions. If the acts of the party or his counsel clearly constitute willful and deliberate forum shopping, the same shall be ground for summary dismissal with prejudice and shall constitute direct contempt, as well as a cause for administrative sanctions. The purpose of verification is simply to secure an assurance that the allegations of the petition (or complaint) have been made in good faith; or are true and correct, not merely speculative. This requirement is simply a condition affecting the form of pleadings, and noncompliance therewith does not necessarily render it fatally defective. Indeed, verification is only a formal, not a jurisdictional requirement.21 The issue in the present case is not the lack of verification but the sufficiency of one executed by only one of plaintiffs. This Court held in Ateneo de Naga University v. Manalo,22 that the verification requirement is deemed substantially complied with when, as in the present case, only one of the heirsplaintiffs, who has sufficient knowledge and belief to swear to the truth of the allegations in the petition (complaint), signed the verification attached to it. Such verification is deemed sufficient assurance that the matters alleged in the petition have been made in good faith or are true and correct, not merely speculative. The same liberality should likewise be applied to the certification against forum shopping. The general rule is that the certification must be signed by all plaintiffs in a case and the signature of only one of them is insufficient. However, the Court has also stressed in a number of cases that the rules on forum shopping were designed to promote and facilitate the orderly administration of justice and thus should not Rbe interpreted with such absolute literalness as to subvert its own ultimate and legitimate objective. The rule of substantial compliance may be availed of with respect to the contents of the certification. This is because the requirement of strict compliance with the provisions merely underscores its mandatory nature in that the certification
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cannot be altogether dispensed with or its requirements completely disregarded.23 The substantial compliance rule has been applied by this Court in a number of cases: Cavile v. Heirs of Cavile,24 where the Court sustained the validity of the certification signed by only one of petitioners because he is a relative of the other petitioners and co-owner of the properties in dispute; Heirs of Agapito T. Olarte v. Office of the President of the Philippines,25 where the Court allowed a certification signed by only two petitioners because the case involved a family home in which all the petitioners shared a common interest; Gudoy v. Guadalquiver,26 where the Court considered as valid the certification signed by only four of the nine petitioners because all petitioners filed as co-owners pro indiviso a complaint against respondents for quieting of title and damages, as such, they all have joint interest in the undivided whole; and Dar v. AlonzoLegasto,27 where the Court sustained the certification signed by only one of the spouses as they were sued jointly involving a property in which they had a common interest. It is noteworthy that in all of the above cases, the Court applied the rule on substantial compliance because of the commonality of interest of all the parties with respect to the subject of the controversy. Applying the doctrines laid down in the above cases, we find and so hold that the CA did not err in affirming the application of the rule on substantial compliance. In the instant case, the property involved is a 936-square-meter real property. Both parties have their respective TCTs over the property. Respondents herein who are plaintiffs in the case below have a common interest over the property being the heirs of the late Enrique Santos, the alleged registered owner of the subject property as shown in one of the TCTs. As such heirs, they are considered co-owners pro indiviso of the whole property since no specific portion yet has been adjudicated to any of the heirs. Consequently, as one of the heirs and principal party, the lone signature of Enrique G. Santos in the verification and certification is sufficient for the RTC to take cognizance of the case. The commonality of their interest gave Enrique G. Santos the authority to inform the RTC on behalf of the other plaintiffs therein that they have not commenced any action or claim involving the same issues in another court or tribunal, and that there is no other pending action or claim in another court or tribunal involving the same issues. Hence, the RTC correctly denied the motion to dismiss filed by petitioner.

Considering that at stake in the present case is the ownership and possession over a prime property in Quezon City, the apparent merit of the substantive aspects of the case should be deemed as a special circumstance or compelling reason to allow the relaxation of the rule. Time and again, this Court has held that rules of procedure are established to secure substantial justice. Being instruments for the speedy and efficient administration of justice, they may be used to achieve such end, not to derail it. In particular, when a strict and literal application of the rules on non-forum shopping and verification will result in a patent denial of substantial justice, these may be liberally construed.28 The ends of justice are better served when cases are determined on the meritsafter all parties are given full opportunity to ventilate their causes and defensesrather than on technicality or some procedural imperfections.29 Indeed, this Court strictly applied the rules on verification and certification against forum shopping as in the cases of Loquias v. Office of the Ombudsman30 and Tolentino v. Rivera.31 However, in both cases, the commonality of interest between or among the parties is wanting. In Loquias, the co-parties were being sued in their individual capacities as mayor, vice mayor and members of the municipal board. In Tolentino, the lone signature of Tolentino was held insufficient because he had no authority to sign in behalf of the Francisco spouses. In such case, the Court concluded that Tolentino merely used the spouses names for whatever mileage he thought he could gain. It is thus clear from these cases that the commonality of interest is material in the relaxation of the Rules. Anent the issue of the authority of Enrique G. Santos to represent his coheirs/co-plaintiffs, we find no necessity to show such authority. Respondents herein are co-owners of the subject property. As such co-owners, each of the heirs may properly bring an action for ejectment, forcible entry and detainer, or any kind of action for the recovery of possession of the subject properties. Thus, a co-owner may bring such an action, even without joining all the other co-owners as co-plaintiffs, because the suit is deemed to be instituted for the benefit of all.32 We uphold the validity of the complaint because of the following circumstances: (1) the caption of the instant case is Heirs of Enrique Santos v. Iglesia ni Cristo;33 (2) the opening statement of the complaint states that plaintiffs are the heirs of Enrique Santos and likewise names the particular heirs of the latter who instituted the complaint below;34 (3) the case involves a property owned
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by the predecessor-in-interest of plaintiffs therein;35 and (4) the verification signed by Enrique G. Santos clearly states that he is one of the children of the late Enrique Santos and that he represents the heirs of said Enrique Santos.36 On the issue of prescription of action, petitioner avers that the action of respondents is one to quiet title and/or accion reinvindicatoria, and that respondents asserted ownership over the property and sought the recovery of possession of the subject parcel of land. It insists that the very nature of the action presupposes that respondents had not been in actual and material possession of the property, and that it was petitioner which had been in possession of the property since 1984 when it acquired title thereon. The action of respondent prescribed in ten years from 1984 when petitioner allegedly dispossessed respondents, in accordance with Article 555(4) of the New Civil Code. The contention of petitioner has no merit. The nature of an action is determined by the material allegations of the complaint and the character of the relief sought by plaintiff, and the law in effect when the action was filed irrespective of whether he is entitled to all or only some of such relief.37 As gleaned from the averments of the complaint, the action of respondents was one for quieting of title under Rule 64 of the Rules of Court, in relation to Article 476 of the New Civil Code. The latter provision reads: 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. A cloud is said to be a semblance of a title, either legal or equitable, or a cloud of an interest in land appearing in some legal form but which is, in fact, unfounded, or which it would be inequitable to enforce.38 An action for quieting of title is imprescriptible until the claimant is ousted of his possession.39 The owner of a real property, as plaintiff, is entitled to the relief of quieting of title even if, at the time of the commencement of his action, he was not in actual possession of real property. After all, under Article 477 of the New Civil Code, the owner need not be in possession of the propery. If on the face of

TCT No. 321744 under the name of plaintiff, its invalidity does not appear but rests partly in pais, an action for quieting of title is proper.40 In the present case, respondents herein, as plaintiffs below, alleged in their complaint, that their father, Enrique Santos, was the owner of the property based on TCT No. 57272 issued on July 27, 1961; and that, after his death on February 9, 1970, they inherited the property; Enrique Santos, during his lifetime, and respondents, after the death of the former, had been in actual, continuous and peaceful possession of the property until 1994 when petitioner claimed ownership based on TCT No. 321744 issued on September 18, 1984 and barred respondents from fencing their property. Petitioners claim that it had been in actual or material possession of the property since 1984 when TCT No. 321744 was issued in its favor is belied by the allegations in the complaint that respondents had been in actual and material possession of the property since 1961 up to the time they filed their complaint on October 24, 2001. Admittedly, respondents interposed the alternative reinvindicatory action against petitioner. An accion reinvindicatoria does not necessarily presuppose that the actual and material possession of the property is on defendant and that plaintiff seeks the recovery of such possession from defendant. It bears stressing that an accion reinvindicatoria is a remedy seeking the recovery of ownership and includes jus possidendi, jus utendi, and jus fruendi as well. It is an action whereby a party claims ownership over a parcel of land and seeks recovery of its full possession.41 Thus, the owner of real property in actual and material possession thereof may file an accion reinvindicatoria against another seeking ownership over a parcel of land including jus vindicandi, or the right to exclude defendants from the possession thereof. In this case, respondents filed an alternative reinvindicatory action claiming ownership over the property and the cancellation of TCT No. 321744 under the name of petitioner. In fine, they sought to enforce their jus utendi and jus vindicandi when petitioner claimed ownership and prevented them from fencing the property. Since respondents were in actual or physical possession of the property when they filed their complaint against petitioner on October 24, 2001, the prescriptive period for the reinvindicatory action had not even commenced to run, even if petitioner was able to secure TCT No. 321744 over the property in 1984. The reason for this is that x x x one who is in actual possession of a piece of land claiming to be the owner thereof may wait until his possession is disturbed or his title is attacked
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before taking steps to vindicate his right, the reason for the rule being, that his undisturbed possession gives him a continuing right to seek the aid of a court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on his own title, which right can be claimed only by one who is in possession.42 IN LIGHT OF ALL THE FOREGOING, the petition is DENIED. The decision of the Court of Appeals in CA-G.R. SP No. 72686 is AFFIRMED. Costs against petitioner. SO ORDERED. Panganiban (C.J., Chairperson), Ynares-Santiago, Austria-Martinez and Chico-Nazario, JJ., concur. Petition denied, judgment affirmed. Notes.The requirement regarding verification of a pleading is formal, not jurisdictionalverification is simply intended to secure an assurance that the allegations in the pleadings are true and correct and not the product of the imagination or a matter of speculation, and that the pleading is filed in good faith. (Uy vs. Land Bank of the Philippines, 336 SCRA 419 [2000]) An attorney appearing for a party is presumed to be properly authorized for that purpose. Where there are several complainants, it is sufficient that only some of them sign the verification where it is therein manifested that those who signed were not only signing in their behalf but also in behalf of the other complainants. (Food Terminal, Inc. vs. National Labor Relations Commission, 357 SCRA 416 [2001]) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Iglesia ni Cristo vs. Ponferrada, 505 SCRA 828(2006)]

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[No. L-10423. January 21, 1958] AMADO P. JALANDONI and PAZ RAMOS, plaintiffs and appellants vs. ANGELA MARTIR-GUANZON, in her own behalf and as Judicial Administratrix of the Testate Estate of the late spouses Hilarion and Ligoria Martir, and ANTONIO GUANZON, defendants and appelees.
1.DAMAGES; RECOVERY OF MORAL AND CORRECTIVE DAMAGES UNDER THE OLD CIVIL CODE.Except as concomitant to physical injuries, moral and corrective damages were not recoverable under the Civil Code of 1889. Recovery of such damages was established for the first time in 1950 by the new Civil Code, and can not be made to apply retroactively to acts that occurred under the prior law in view of the punitive or deterrent character of these damages. 2.PLEADING AND PRACTICE; JUDGMENT ON THE MERITS, EFFECT OF. Between the same parties, with the same subject matter and cause of action, a final judgment on the merits is conclusive not only on the questions actually contested and determined, but upon all matters that might have been litigated and decided in the former suit, i.e., all matters properly belonging to the subject of the controversy and within the scope of the issue. Hence,, the rejection of the claim for damages in a former judgment which had become final and executory, bars a subsequent claim for damages springing from the same cause of action that was pleaded in the former case. APPEAL from an order of the Court of First Instance of Occidental Negros. Makasiar, J.

during the agricultural years from 19411942 to 1946-1947. By decision of February 22, 1955, the Court of First Instance of Negros Occidental held for plaintiffs and ordered the partition of the lands involved, but denied their claim for damages because of failure to "prove the exact and actual damages suffered by them." The decision having become final because none of the parties appealed therefrom, the plaintiffs instituted the present action (No. 3586 of the same Court of First Instance) on August 26, 1955, seeking recovery from the defendants of the following amounts: (1) P20,000 as moral and exemplary damages due to suffering, anguish and anxiety occasioned by the defendants' refusal to partition the properties involved in the preceding case; (2) P55,258.20 as share of the products of the property from 1947 (when the preceding case No. 573 was filed) until 1955 when judgment was rendered therein (3) P4,689.54 as land taxes due and unpaid on the properties involved; and (4) P2,500 for attorneys' fees. Upon motion of defendants, the court a quo dismissed the second complaint for failure to state a cause of action; and after their motion to reconsider was denied, plaintiffs appealed to this Court on points of law. We find the dismissal to have been correctly entered. Except as concomitant to physical injuries, moral and corrective damages (allegedly due to suffering, anguish and anxiety caused by the refusal of defendants in 1941 to partition the common property) were not recoverable under the Civil Code of 1899 which was the governing law at the time. Recovery of such damages was established for the first time in 1950 by the new Civil Code, and can not be made to apply retroactively to acts that occurred under the prior law in view of the punitive or deterrent character of these damages. The rule is expressly laid down by paragraph 1 of Article 2257 of the new Code: "ART. 2257. Provisions of this Code which attach a civil sanction or penalty or a deprivation of rights to acts or omissions which were not penalized by the former laws, are not applicable to those who, when said laws were in force may have executed the act or incurred in the omission forbidden or condemned by this Code. * * * * * * *

The facts are stated in the opinion of the Court. Marcos S. Gmez, Ildefonso S. Villanueva & Jos Ur. Carbonell for appellants. Villanueva & Villanueva for appellees.

REYES, J. B. L., J.: Appeal by the spouses Amado P. Jalandoni and Paz Ramos from an order of the Court of First Instance of Occidental Negros dismissing their complaint in Civil Case No. 3586 of said court. It appears that on January 9, 1947, the appellant spouses began a suit (Case No. 573) against the appellees Antonio Guanzon, et al., for partition of lots Nos. 130-A, 130-B and 130-F of the Murcia Cadastre, as well as lots Nos. 1288 and 1376 of the Bogo Cadastre, and for recovery of damages caused by the defendants' unwarranted ref usal to recognize plaintiffs' right and partition said lots, as well as to account for and deliver plaintiffs' share in the crops obtained

As to the value of the plaintiffs' share in the products of the land during the time that the former action was pending (which are the damages claimed under the second cause of action), their recovery is now barred by the previous
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judgment. These damages are but the result of the original cause of action, viz., the continuing ref usal by defendants in 1941 to recognize the plaintiffs' right to an interest in the property. In the same way that plaintiffs claimed for their share of the produce from 1941 to 1947, these later damages could have been claimed in the first action, either in the original complaint (for their existence could be anticipated when the first complaint was filed) or else by supplemental pleading. To allow them to be recovered by subsequent suit would be a violation of the rule against multiplicity of suits, and specifically of sections 3 and 4 of Rules 2 of the Rules of Court, against the splitting of causes of action, since these damages spring from the same cause of action that was pleading in the former case No. 573 between the same parties (Blossom & Co. vs. Manila Gas Corporation, 55 Phil. 226; Santos vs. Moir, 36 Phil. 350; Pascua vs. Sideco, 24 Phil 26; Bachrach Motor Co. vs. Icarangal, 68 Phil. 287). That the former judgment did not touch upon these damages is not material to its conclusive effect: between. the same parties, with the same subject matter and cause of action, a final judgment on the merits is conclusive not only on the questions actually contested and determined, but upon all matters that might have been litigated and decided in the former suit, i.e., all matters properly belonging to the subject of the controversy and within the scope of the issue (Pealosa vs. Tuason, 22 Phil. 312; National Bank vs. Barretto, 52 Phil. 824; Namarco vs. Macadaeg, 98 Phil. 185; 52 Off. Gaz., 182; Miranda vs. Tiangco, 96 Phil., 526, 51 Off. Gaz., [3] 1366). Hence, the rejection of plaintiffs' claim for damages in Case No. 573 imports denial of those now claimed, since these are a mere continuation of the former. Anent the land taxes allegedly overdue and unpaid, it is readily apparent that, taxes being due to the government, plaintiffs have no right to compel payment thereof to themselves. The case could be otherwise if plaintiffs had paid the taxes to stave off forfeiture of the common property for tax delinguency; in that event, they could compel contribution. But the complaint does not aver any such tax payment. Little need be said concerning the claim for attorneys' fees under the fourth cause of action. If they be fees for the lawyer's services in the former case, they are barred from recovery for the reasons already given; if for services in the present case, there is no justification therefor, since no case is made out for the plaintiffs.

The order of dismissal appealed from is affirmed. Costs against plaintiffsappellants. So ordered.

Pars, C. J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo, Labrador, Concepcin, Endencia, and Felix, JJ., concur. Order affirmed. ________________

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Jalandoni and Ramos vs. Martir-Guanzon, 102 Phil. 859(1958)]

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Sanchez vs. Court of Appeals G.R. No. 152766. June 20, 2003.* LILIA SANCHEZ, petitioner, vs. COURT OF APPEALS, HON. VICTORINO S. ALVARO as Presiding Judge, RTC-Br. 120, Caloocan City, and VIRGINIA TERIA, respondents.
Civil Procedure; Actions; Pleadings and Practice; Certiorari; Grounds; Where the issuance of the extraordinary writ is also within the competence of the Court of Appeals or the Regional Trial Court, it is either of these courts that the specific action for the procurement of the writ must be presented.Where the issuance of the extraordinary writ is also within the competence of the Court of Appeals or the Regional Trial Court, it is either of these courts that the specific action for the procurement of the writ must be presented. However, this Court must be convinced thoroughly that two (2) grounds exist before it gives due course to a certiorari petition under Rule 65: (a) The tribunal, board or officer exercising judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction; and (b) There is no appeal nor any plain, speedy and adequate remedy in the ordinary course of law. Same; Same; Same; Same; Rules of Procedure; Liberal Construction; Litigations should, as much as possible, be decided on their merits and not on mere technicalities.The rules of procedure should be viewed as mere tools designed to aid the courts in the speedy, just and inexpensive determination of the cases before them. Liberal construction of the rules and the pleadings is the controlling principle to effect substantial justice. Litigations should, as much as possible, be decided on their merits and not on mere technicalities. Same; Same; Same; Same; Same; Same; Rules must not be applied rigidly so as not to override substantial justice.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. Same; Same; Same; Same; Same; Same; Aside from matters of life, liberty, honor or property which would warrant the suspension of the Rules of the most mandatory character, other elements should be considered. Aside from matters of life, liberty, honor or property which would warrant the suspension of the Rules of the most mandatory character and an examination and review by the appellate court of the lower courts findings of fact, the other elements that should be considered are the following: (a) the existence of special or compelling circumstances, (b) the merits of the case, (c) a cause not entirely attributable to the fault or negligence of the party favored by the suspension of the rules, (d) a lack of any showing that the review sought is merely frivolous and dilatory, and (e) the other party will not be unjustly prejudiced thereby. Attorneys; Duties; Negligence; There should be no dispute regarding the doctrine that normally notice to counsel is notice to parties. There should be no dispute regarding the doctrine that normally notice to counsel is notice to parties, and that such doctrine has beneficent effects upon the prompt dispensation of justice. Its application to a given case, however, should be looked

into and adopted, according to the surrounding circumstances; otherwise, in the courts desire to make a short-cut of the proceedings, it might foster, wittingly or unwittingly, dangerous collusions to the detriment of justice. It would then be easy for one lawyer to sell ones rights down the river, by just alleging that he just forgot every process of the court affecting his clients, because he was so busy. Under this circumstance, one should not insist that a notice to such irresponsible lawyer is also a notice to his clients. Civil Law; Co-ownership; Definition.Sanchez Roman defines co-ownership as the right of common dominion which two or more persons have in a spiritual part of a thing, not materially or physically divided. Manresa defines it as the manifestation of the private right of ownership, which instead of being exercised by the owner in an exclusive manner over the things subject to it, is exercised by two or more owners and the undivided thing or right to which it refers is one and the same. Same; Same; Characteristics; Co-ownership has the following characteristics.The characteristics of co-ownership are: (a) plurality of subjects, who are the co-owners, (b) unity of or material indivision, which means that there is a single object which is not materially divided, and which is the element which binds the subjects, and, (c) the recognition of ideal shares, which determines the rights and obligations of the co-owners. Same; Same; Nature; In co-ownership, the relationship of such co-owner to the other co-owners is fiduciary in character and attribute.In co-ownership, the relationship of such co-owner to the other co-owners is fiduciary in character and attribute. Whether established by law or by agreement of the co-owners, the property or thing held pro-indiviso is impressed with a fiducial nature so that each co-owner becomes a trustee for the benefit of his co-owners and he may not do any act prejudicial to the interest of his co-owners. Thus, the legal effect of an agreement to preserve the properties in co-ownership is to create an express trust among the heirs as coowners of the properties. Co-ownership is a form of trust and every co-owner is a trustee for the others. Same; Same; Co-owners; Rights; He may validly lease his undivided interest to a third party independently of the other co-owners.Article 493 of the Civil Code gives the owner of an undivided interest in the property the right to freely sell and dispose of it, i.e., his undivided interest. He may validly lease his undivided interest to a third party independently of the other co-owners. But he has no right to sell or alienate a concrete, specific or determinate part of the thing owned in common because his right over the thing is represented by a quota or ideal portion without any physical adjudication.

SPECIAL CIVIL ACTION in the Supreme Court. Certiorari.

The facts are stated in the opinion of the Court. Noel S. Sorreda for petitioner.
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Felizardo M. Mercado for respondents. BELLOSILLO, J.:

On 28 April 1999 private respondent started demolishing petitioners house without any special permit of demolition from the court. Due to the demolition of her house which continued until 24 May 1999 petitioner was forced to inhabit the portion of the premises that used to serve as the houses toilet and laundry area. On 29 October 1999 petitioner filed her Petition for Relief from Judgment with the RTC on the ground that she was not bound by the inaction of her counsel who failed to submit petitioners appeal memorandum. However the RTC denied the Petition and the subsequent Motion for Reconsideration. On 14 June 2000 petitioner filed her Petition for Certiorari with the Court of Appeals alleging grave abuse of discretion on the part of the court a quo. On 23 May 2001 the appellate court dismissed the petition for lack of merit. On 18 June 2001 petitioner filed a Motion for Reconsideration but the Court of Appeals denied the motion in its Resolution of 8 January 2002. The only issue in this case is whether the Court of Appeals committed grave abuse of discretion in dismissing the challenged case before it. As a matter of policy, the original jurisdiction of this Court to issue the so-called extraordinary writs should generally be exercised relative to actions or proceedings before the Court of Appeals or before constitutional or other tribunals or agencies the acts of which for some reason or other are not controllable by the Court of Appeals. Where the issuance of the extraordinary writ is also within the competence of the Court of Appeals or the Regional Trial Court, it is either of these courts that the specific action for the procurement of the writ must be presented. However, this Court must be convinced thoroughly that two (2) grounds exist before it gives due course to a certiorari petition under Rule 65: (a) The tribunal, board or officer exercising judicial or quasijudicial functions has acted without or in excess of its or his jurisdiction; and (b) There is no appeal nor any plain, speedy and adequate remedy in the ordinary course of law. Despite the procedural lapses present in this case, we are giving due course to this petition as there are matters that require immediate resolution on the merits to effect substantial justice.

This is a Special Civil Action for Certiorari under Rule 65 of the Rules of Court to annul and set aside the Decision of the Court of Appeals dated 23 May 2001 as well as its Resolution dated 8 January 2002 in CA-G.R. SP No. 59182. Lilia Sanchez, petitioner, constructed a house on a 76-square meter lot owned by her parents-in-law. The lot was registered under TCT No. 263624 with the following co-owners: Eliseo Sanchez married to Celia Sanchez, Marilyn Sanchez married to Nicanor Montalban, Lilian Sanchez, widow, Nenita Sanchez, single, Susana Sanchez married to Fernando Ramos, and Felipe Sanchez.1 On 20 February 1995, the lot was registered under TCT No. 289216 in the name of private respondent Virginia Teria by virtue of a Deed of Absolute Sale supposed to have been executed on 23 June 19952 by all six (6) coowners in her favor.3 Petitioner claimed that she did not affix her signature on the document and subsequently refused to vacate the lot, thus prompting private respondent Virginia Teria to file an action for recovery of possession of the aforesaid lot with the Metropolitan Trial Court (MeTC) of Caloocan City sometime in September 1995, subsequently raffled to Br. 49 of that court. On 12 February 1998, the MeTC-Br. 49 of Caloocan City ruled in favor of private respondent declaring that the sale was valid only to the extent of 5/6 of the lot and the other 1/6 remaining as the property of petitioner, on account of her signature in the Deed of Absolute Sale having been established as a forgery. Petitioner then elevated her appeal to the Regional Trial Court of Caloocan City, subsequently assigned to Br. 120, which ordered the parties to file their respective memoranda of appeal. Counsel for petitioner did not comply with this order, nor even inform her of the developments in her case. Petitioner not having filed any pleading with the RTC of Caloocan City, the trial court affirmed the 27 July 1998 decision of the MeTC. On 4 November 1998, the MeTC issued an order for the issuance of a writ of execution in favor of private respondent Virginia Teria, buyer of the property. On 4 November 1999 or a year later, a Notice to Vacate was served by the sheriff upon petitioner who however refused to heed the Notice.

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The Rules of Court should be liberally construed in order to promote their object of securing a just, speedy and inexpensive disposition of every action or proceeding.4 The rules of procedure should be viewed as mere tools designed to aid the courts in the speedy, just and inexpensive determination of the cases before them. Liberal construction of the rules and the pleadings is the controlling principle to effect substantial justice.5 Litigations should, as much as possible, be decided on their merits and not on mere technicalities.6 Verily, the negligence of petitioners counsel cannot be deemed as negligence of petitioner herself in the case at bar. A notice to a lawyer who appears to have been unconscionably irresponsible cannot be considered as notice to his client.7 Under the peculiar circumstances of this case, it appears from the records that counsel was negligent in not adequately protecting his clients interest, which necessarily calls for a liberal construction of the Rules. The rationale for this approach is explained in Ginete v. Court of Appeals8 This Court may suspend its own rules or exempt a particular case from its operation where the appellate court failed to obtain jurisdiction over the case owing to appellants failure to perfect an appeal. Hence, with more reason would this Court suspend its own rules in cases where the appellate court has already obtained jurisdiction over the appealed case. This prerogative to relax procedural rules of the most mandatory character in terms of compliance, such as the period to appeal has been invoked and granted in a considerable number of cases x x x x 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, as we are now constrained to do in the instant case x x x x 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.

Aside from matters of life, liberty, honor or property which would warrant the suspension of the Rules of the most mandatory character and an examination and review by the appellate court of the lower courts findings of fact, the other elements that should be considered are the following: (a) the existence of special or compelling circumstances, (b) the merits of the case, (c) a cause not entirely attributable to the fault or negligence of the party favored by the suspension of the rules, (d) a lack of any showing that the review sought is merely frivolous and dilatory, and (e) the other party will not be unjustly prejudiced thereby.9 The suspension of the Rules is warranted in this case since the procedural infirmity was not entirely attributable to the fault or negligence of petitioner. Besides, substantial justice requires that we go into the merits of the case to resolve the present controversy that was brought about by the absence of any partition agreement among the parties who were co-owners of the subject lot in question. Hence, giving due course to the instant petition shall put an end to the dispute on the property held in common. In Peoples Homesite and Housing Corporation v. Tiongco10 we held: There should be no dispute regarding the doctrine that normally notice to counsel is notice to parties, and that such doctrine has beneficent effects upon the prompt dispensation of justice. Its application to a given case, however, should be looked into and adopted, according to the surrounding circumstances; otherwise, in the courts desire to make a shortcut of the proceedings, it might foster, wittingly or unwittingly, dangerous collusions to the detriment of justice. It would then be easy for one lawyer to sell ones rights down the river, by just alleging that he just forgot every process of the court affecting his clients, because he was so busy. Under this circumstance, one should not insist that a notice to such irresponsible lawyer is also a notice to his clients. Thus, we now look into the merits of the petition. This case overlooks a basic yet significant principle of civil law: co-ownership. Throughout the proceedings from the MeTC to the Court of Appeals, the notion of co-ownership11 was not sufficiently dealt with. We attempt to address this controversy in the interest of substantial justice. Certiorari should therefore be granted to cure this grave abuse of discretion. Sanchez Roman defines co-ownership as the right of common dominion which two or more persons have in a spiritual part of a thing, not materially or
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physically divided.12 Manresa defines it as the manifestation of the private right of ownership, which instead of being exercised by the owner in an exclusive manner over the things subject to it, is exercised by two or more owners and the undivided thing or right to which it refers is one and the same.13 The characteristics of co-ownership are: (a) plurality of subjects, who are the co-owners, (b) unity of or material indivision, which means that there is a single object which is not materially divided, and which is the element which binds the subjects, and, (c) the recognition of ideal shares, which determines the rights and obligations of the co-owners.14 In co-ownership, the relationship of such co-owner to the other co-owners is fiduciary in character and attribute. Whether established by law or by agreement of the co-owners, the property or thing held pro-indiviso is impressed with a fiducial nature so that each co-owner becomes a trustee for the benefit of his co-owners and he may not do any act prejudicial to the interest of his co-owners.15 Thus, the legal effect of an agreement to preserve the properties in coownership is to create an express trust among the heirs as co-owners of the properties. Co-ownership is a form of trust and every co-owner is a trustee for the others.16 Before the partition of a land or thing held in common, no individual or coowner can claim title to any definite portion thereof. All that the co-owner has is an ideal or abstract quota or proportionate share in the entire land or thing.17 Article 493 of the Civil Code gives the owner of an undivided interest in the property the right to freely sell and dispose of it, i.e., his undivided interest. He may validly lease his undivided interest to a third party independently of the other co-owners.18 But he has no right to sell or alienate a concrete, specific or determinate part of the thing owned in common because his right over the thing is represented by a quota or ideal portion without any physical adjudication.19 Although assigned an aliquot but abstract part of the property, the metes and bounds of petitioners lot has not been designated. As she was not a party to the Deed of Absolute Sale voluntarily entered into by the other co-owners, her right to 1/6 of the property must be respected. Partition needs to be effected to protect her right to her definite share and determine the boundaries of her property. Such partition must be done without prejudice to the rights of private respondent Virginia Teria as buyer of the 5/6 portion of the lot under dispute.

WHEREFORE, the Petition is GRANTED. The Decision of the Court of Appeals dated 23 May 2001 as well as its Resolution dated 8 January 2002 in CA-G.R. SP No. 59182 is ANNULLED and SET ASIDE. A survey of the questioned lot with TCT No. 289216 (formerly TCT No. 263624) by a duly licensed geodetic engineer and the PARTITION of the aforesaid lot are ORDERED. Let the records of this case be REMANDED to MeTC-Br. 49, Caloocan City to effect the aforementioned survey and partition, as well as segregate the 1/6 portion appertaining to petitioner Lilia Sanchez. The Deed of Absolute Sale by the other co-owners to Virginia Teria shall be RESPECTED insofar as the other undivided 5/6 portion of the property is concerned. SO ORDERED. Davide, Jr. (C.J.), Puno, Vitug, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio, Corona, Carpio-Morales, Callejo, Sr. and Azcuna, JJ., concur. Austria-Martinez, J., On official leave. Petition granted, judgment annulled and set aside. Partition ordered. Note.A co-owner has full ownership of his pro indiviso share and has the right to alienate, assign or mortgage it, and substitute another person in its enjoyment. (Del Campo vs. Court of Appeals, 351 SCRA 1 [2001]) o0o [Sanchez vs. Court of Appeals, 404 SCRA 540(2003)]

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Vagilidad vs. Vagilidad, Jr. G.R. No. 161136. November 16, 2006.* WILFREDO T. VAGILIDAD and LOLITA A. VAGILIDAD, petitioners, vs.
GABINO VAGILIDAD, JR. and DOROTHY VAGILIDAD, respondents. Co-Ownership; Words and Phrases; Co-ownership is the right of common dominion which two or more persons have in a spiritual part of a thing, not materially or physically dividedbefore the partition of the property held in common, no individual or co-owner can claim title to any definite portion thereof; The right of a co-owner to transfer in whole or in part his undivided interest in a co-owned property is absolute, in accordance with the well-settled doctrine that a co-owner has full ownership of his pro indiviso share and has the right to alienate, assign or mortgage it, and substitute another person for its enjoyment.Co-ownership is the right of common dominion which two or more persons have in a spiritual part of a thing, not materially or physically divided. Before the partition of the property held in common, no individual or coowner can claim title to any definite portion thereof. All that the co-owner has is an ideal or abstract quota or proportionate share in the entire property. LORETO sold the subject property to GABINO, JR. on May 12, 1986 as a co-owner. LORETO had a right, even before the partition of the property on January 19, 1987, to transfer in whole or in part his undivided interest in the lot even without the consent of his co-heirs. This right is absolute in accordance with the wellsettled doctrine that a co-owner has full ownership of his pro indiviso share and has the right to alienate, assign or mortgage it, and substitute another person for its enjoyment. Thus, what GABINO, JR. obtained by virtue of the sale on May 12, 1986 were the same rights as the vendor LORETO had as co-owner, in an ideal share equivalent to the consideration given under their transaction. Same; Sales; The fact that an agreement purported to sell a concrete portion of a co-owned property does not render the sale void, for it is well-established that the binding force of a contract must be recognized as far as it is legally possible to do so.The mere fact that LORETO sold a definite portion of the co-owned lot by metes and bounds before partition does not, per se, render the sale a nullity. We held in Lopez v. Vda. de Cuaycong, 74 Phil. 601 (1944), that the fact that an agreement purported to sell a concrete portion of a co-owned property does not render the sale void, for it is well-established that the binding force of a contract must be recognized as far as it is legally possible to do so. Same; Same; Actions; Reconveyance; Trusts; Prescription; An action for reconveyance based on an implied or constructive trust prescribes in ten years from the issuance of the Torrens title over the property.On the issue of prescription, petitioners contend that the appellate court failed to apply the rule that an action for reconveyance based on fraud prescribes after the lapse of four years. They cite Article 1391 of the Civil Code and the case of Gerona v. De Guzman, 11 SCRA 153 (1964). We disagree. This Court explained in Salvatierra v. Court of Appeals, 261 SCRA 45 (1996), viz.: An action for reconveyance based on an implied or constructive trust must perforce prescribe in ten years and not otherwise. A long line of decisions of this Court, and of very recent vintage at that, illustrates this rule. Undoubtedly, it is now well-settled that an action for

reconveyance based on an implied or constructive trust prescribes in ten years from the issuance of the Torrens title over the property. The only discordant note, it seems, is Balbin v. Medalla, which states that the prescriptive period for a reconveyance action is four years. However, this variance can be explained by the erroneous reliance on Gerona v. de Guzman. But in Gerona, the fraud was discovered on June 25, 1948, hence Section 43(3) of Act No. 190 was applied, the New Civil Code not coming into effect until August 30, 1950 x x x. It must be stressed, at this juncture, that Article 1144 and Article 1456 are new provisions. They have no counterparts in the old Civil Code or in the old Code of Civil Procedure, the latter being then resorted to as legal basis of the four-year prescriptive period for an action for reconveyance of title of real property acquired under false pretenses.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court. Paulino L. Salmon, Jr. for petitioners. Ramon M. Salvani, Jr. for respondents. PUNO, J.:

This is a Petition for Review on Certiorari of the Decision1 and Resolution2 of the Court of Appeals in CA-G.R. No. CV68318 dated March 19, 2003 and November 13, 2003, respectively, reversing and setting aside the decision of the Regional Trial Court of Antique, Sixth Judicial Region, Branch II, in Civil Case No. 2825 dated January 26, 1999. The facts are stated in the assailed Decision3 of the appellate court, viz.: A parcel of land, Lot No. 1253, situated in Atabay, San Jose, Antique, measuring 4,280 square meters, was owned by Zoilo [Labiao] (hereafter ZOILO) as per Original Certificate of Title No. RO-2301 issued on March 3, 1931. Sometime in 1931, ZOILO died. Subsequently, on May 12, 1986, Loreto Labiao (hereafter LORETO), son of ZOILO, sold to Gabino Vagilidad Jr. (hereafter GABINO JR.) a portion of Lot No. 1253 (hereafter Lot 1253-B), measuring 1,604 square meters as evidenced by the Deed of Absolute Sale executed by LORETO.

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In view of the death of ZOILO, his children, LORETO, Efren Labiao (hereafter EFREN) and Priscilla Espanueva (hereafter PRISCILLA) executed an Extrajudicial x x x Settlement of Estate dated January 20, 1987, adjudicating the entire Lot No. 1253, covering 4,280 square meters, to LORETO. On January 29, 1987, Transfer Certificate of Title (TCT) No. T-16693 was issued in favor of LORETO, EFREN and PRISCILLA, but on even date, TCT No. T16693 was cancelled and TCT No. T-16694, covering the said property, was issued in the name of LORETO alone. On July 31, 1987, GABINO, JR., as petitioner, filed a Petition for the Surrender of TCT No. T-16694, covering Lot No. 1253, with the Regional Trial Court of San Jose City, Sixth Judicial Region, against LORETO, docketed as Cadastral Case No. 87-731-A. The plaintiff alleged that, being the owner of x x x Lot No. 1253-B, under TCT No. T-16694, by virtue of the sale that took place on May 12, 1986, he is entitled to ask for the surrender of the owners copy of TCT No. T-16694 to the Register of Deeds of Antique in order to effect the transfer of title to the name of the petitioner. However, as per motion of both counsels[,] since the parties seemed to have already reached an amicable settlement without the knowledge of their counsels, the trial court issued an Order dated March 21, 1994 sending the case to the archives. On September 21, 1988, [GABINO JR.] paid real estate taxes on the land he bought from LORETO as per Tax Declaration No. 1038 where the property was specified as Lot No. 1253-B. GABINO JR. thereafter sold the same lot to Wilfredo Vagilidad (hereafter WILFREDO) as per Deed of Absolute Sale dated December 7, 1989. On even date, Deed of Absolute Sale of a Portion of Land involving the opt-described property was also executed by LORETO in favor of WILFREDO. The aforementioned deeds, which were both executed on December 7, 1989 [and] notarized by Atty. Warloo Cardenal[,] [appear] to have been given the same entry number in his notarial books as both contained the designation Document No. 236, Page No. 49, Book No. XI, Series of 1989[.] Corollarily, on February 14, 1990, the sale of Lot No. 1253-B to WILFREDO was registered with the Registry of Deeds of the Province of Antique under Entry No. 180425. Consequently, TCT No. T18023, cancelling TCT No. 16694, was issued in favor of WILFREDO pursuant to the Deed of Absolute Sale dated December 7, 1989. On October 24, 1991, spouses WILFREDO and LOLITA obtained a loan from the Philippine National Bank (PNB for brevity) in the amount of P150,000.00 and mortgaged Lot No. 1253-B as collateral of the said loan and the

transaction was inscribed at the back of TCT No. 18023 as Entry No. 186876. Subsequently, the xxx real estate mortgage was cancelled under Entry No. 191053 as per inscription dated November 17, 1992 in x x x TCT No. 18023. Subsequently, WILFREDO obtained another loan from Development Bank of the Philippines (DBP for brevity) in the amount of P200,000.00 and mortgaged Lot No. 1253-B as collateral of the x x x loan and the transaction was inscribed at the back of TCT No. 18023 as Entry No. 196268. The said loan was paid and, consequently, the mortgage was cancelled as Entry No. 202500. On September 29, 1995, spouses GABINO and Ma. Dorothy Vagilidad (hereafter DOROTHY), as plaintiffs, filed a Complaint for Annulment of Document, Reconveyance and Damages, with the Regional Trial Court of Antique, Sixth Judicial Region, Branch 11, against spouses WILFREDO and Lolita Vagilidad (hereafter LOLITA), docketed as Civil Case No. 2825. The plaintiffs claimed that they are the lawful owners of Lot No. 1253-B which was sold to him by LORETO in 1986. They alleged that [GABINO JR.] is a nephew of defendant WILFREDO. They likewise raised that when GABINO SR. died, defendant WILFREDO requested GABINO JR. to transfer the ownership of Lot No. 1253-B in defendant WILFREDOs name for loaning purposes with the agreement that the land will be returned when the plaintiffs need the same. They added that, pursuant to the mentioned agreement, plaintiff GABINO JR., without the knowledge and consent of his spouse, DOROTHY, executed the Deed of Sale dated December 7, 1989 in favor of defendant WILFREDO receiving nothing as payment therefor. They pointed out that after defendant WILFREDO was able to mortgage the property, plaintiffs demanded the return of the property but the defendants refused to return the same. The plaintiffs claimed that the same document is null and void for want of consideration and the same does not bind the non-consenting spouse. They likewise prayed that the defendant be ordered to pay the plaintiffs not less than P100,000.00 as actual and moral damages, P10,000.00 as attorneys fees and P5,000.00 as litigation expenses. For their part, the defendants, on January 15, 1996, filed their Answer, denying the material allegations of the plaintiffs. Defendants claimed that they are the lawful owners of Lot No. 1253-B. They alleged that LORETO, with conformity of his wife, sold to them Lot No. 1253 on December 7, 1989 for P5,000.00 and the transaction was registered with the Register of Deeds of the Province of Antique under Entry No. 180425. They added that, subsequently, TCT No. T18023, covering Lot No. 1253-B, was issued in favor of the defendants. Hence, they claimed that the plaintiffs be directed to pay the defendants
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P200,000.00 as moral damages, P50,000.00 as exemplary damages, P20,000.00 as attorneys fees and P30,000.00 for litigation expenses.4 The trial court ruled in favor of petitioners WILFREDO and LOLITA and held that LORETO did not validly convey Lot No. 1253-B to GABINO, JR. on May 12, 1986 since at that time, the heirs of ZOILO had not partitioned Lot No. 1253.5 It ruled that LORETO could only sell at that time his aliquot share in the inheritance. He could not have sold a divided part thereof designated by metes and bounds. Thus, it held that LORETO remained the owner of the subject lot when he sold it to WILFREDO on December 7, 1989. It further found that there was no proof that WILFREDO knew of the sale that took place between LORETO and GABINO, JR. on May 12, 1986. The dispositive portion of the decision states: WHEREFORE, in view of the foregoing pronouncements preponderance of evidence, judgment is hereby rendered: and a

and DOROTHY; and (3) ordering the defendants-appellees to pay the plaintiffsappellants P100,000.00 as moral damages, P10,000.00 as attorneys fees and P5,000.00 as litigation expenses.7 The appellate court ruled that the sale made by LORETO in favor of GABINO, JR. on May 12, 1986 is valid. The rights of LORETO to succession are transmitted from the moment of ZOILOs death in 1931. Thus, when LORETO sold the 1,604square meter portion of Lot No. 1253 to GABINO, JR., he already had the right as co-owner to his share to Lot No. 1253, even if at that time the property had not yet been partitioned. Consequently, the sale made by LORETO in favor of WILFREDO on December 7, 1989 is void because LORETO and FRANCISCA were no longer the owners of Lot No. 1253B as of that time. The appellate court also held WILFREDO and LOLITA liable for moral damages for falsifying the fictitious deeds of sale on December 7, 1989. WILFREDO and LOLITA moved for reconsideration but the motion was denied in the questioned Resolution dated November 13, 2003. Hence, this petition for review on certiorari raising the following errors: I

1. FINDING the defendants WILFREDO VAGILIDAD and LOLITA VAGILIDAD to have duly acquired ownership of Lot No. 1253-B containing an area of 1,604 square meters, more or less, situated in San Jose, Antique; 2. SUSTAINING the validity of Transfer Certificate of Title No. T-18023 covering the subject Lot No. 1253-B and issued in the name of the defendant WILFREDO VAGILIDAD, married to the defendant LOLITA VAGILIDAD; 3. DISMISSING the complaint of the plaintiffs GABINO VAGILIDAD, JR. and MA. DOROTHY VAGILIDAD, as well as the counterclaims of the defendants WILFREDO VAGILIDAD and LOLITA VAGILIDAD and of the defendants LORETO LABIAO and FRANCISCA LABIAO; and 4. PRONOUNCING no cost.6 GABINO, JR. and DOROTHY filed an appeal with the Court of Appeals. The appellate court reversed and set aside the decision of the court a quo, viz.: WHEREFORE, premises considered, the Decision dated January 26, 1999 of the Regional Trial Court of Antique, Sixth Judicial Region, Branch 11, in Civil Case No. 2825, is hereby REVERSED and SET ASIDE and a new one is entered: (1) declaring the Deed of Absolute Sale [of Portion of Land] dated December 7, 1989 executed by appellee LORETO in favor of appellee WILFREDO null and void; (2) ordering the defendants-appellees WILFREDO and LOLITA to reconvey Lot No. 1253-B to plaintiffs-appellants GABINO, JR.

THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING ARTICLE 1349 AND ARTICLE 1460 OF THE NEW CIVIL CODE IN THE CASE AT BAR. II

THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING THE PROVISION OF ARTICLE 1544 OF THE NEW CIVIL CODE AND THE DOCTRINE OF DOUBLE SALE THAT THE BUYER WHO IS IN POSSESSION OF THE TORRENS TITLE AND HAD THE DEED OF SALE REGISTERED MUST PREVAIL. III

THE HONORABLE COURT OF APPEALS ERRED IN NOT APPLYING ARTICLE 1391 OF THE NEW CIVIL CODE AND THE DOCTRINE THAT IN
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CASE OF FRAUD, ACTION FOR RECONVEYANCE MUST BE BROUGHT WITHIN FOUR (4) YEARS FROM THE DISCOVERY OF THE FRAUD. IV

The requisite that a thing be determinate is satisfied if at the time the contract is entered into, the thing is capable of being made determinate without the necessity of a new or further agreement between the parties. Petitioners err. The evidence on record shows that Lot No. 1253-B, the subject parcel, and the lot described as Lot No. 1253 in the Deed of Absolute Sale of May 12, 1986 between LORETO and GABINO, JR., are the same. In the Deed of Absolute Sale, Lot No. 1253 is described, viz.: A parcel of land (Lot No. 1253 of the Cadastral Survey of San Jose), with the improvements thereon. Bounded on the North [by] 1254 and 1255; on the South by road; on the East by 1253 and road on the West by 1240-Angel Salazar; containing an area of 1,604 square meters more or less declared under Tax Declaration No. 4159.11 In the Deed of Absolute Sale of Portion of Land of December 7, 1989 between LORETO and WILFREDO, the subject parcel is described, viz.: A parcel of land (Lot No. 1253. Ap-06-00271) of the Cadastral Survey of San Jose, LRC Cad. Rec. No. 936), situated at Atabay, San Jose, Antique. Bounded on the N. and E. along lines 1-2-3 by lot 1255; San Jose Cadastre; on the S. along line 3-4 by Road; on the W. along line 4-5 by Lot 1240; San Jose Cadastre; and on the N. along line 5-1 by Lot 1254, San Jose Cadastre containing an area of [Four] Thousand Two Hundred Eighty (4,280) square meters, more or less. of which a portion of land subject of this sale is hereinbelow (sic) particularly described as follows, to wit: A portion of Lot No. 1253-B of the Cadastral Survey of San Jose, situated at Atabay, San Jose, Antique. Bounded on the North by Lot No. 1254; South by Road; West by Lot 1253-A; and on the East by Lot No. 1253-C; containing an area of 1,604 square meters, more or less.12 The description of Lot No. 1253, the object of the Deed of Absolute Sale, as not registered under Act No. 196[,] otherwise known as the Land Registration Act, nor under the Spanish Mortgage Law13 is a stray description of the subject parcel. It is uncorroborated by any evidence in the records. This description solely appears on the Deed of Absolute Sale and the discrepancy was not explained by LORETO who signed the Deed of Absolute Sale as vendor. LORETO does not, in fact, deny the existence of the Deed of Absolute Sale. He merely counters that the Deed of Absolute Sale was purportedly a
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THE HONORABLE COURT OF APPEALS ERRED IN AWARDING PRIVATE RESPONDENT MORAL DAMAGES, ATTORNEYS FEES AND LITIGATION EXPENSES.8 We deny the petition. I First, petitioners contend that the Deed of Absolute Sale between LORETO and GABINO, JR. does not have a determinate object. They anchor their claim on the following discrepancies: (1) the object of the Deed of Absolute Sale between LORETO and GABINO, JR. is Lot No. 1253 with an area of 1,604 square meters; (2) the object of the Deed of Absolute Sale of Portion of Land between LORETO and WILFREDO is a portion of Lot No. 1253, known as Lot No. 1253-B, also with an area of 1,604 square meters;9 (3) the Deed of Absolute Sale between LORETO and GABINO, JR. shows that its object, Lot No. 1253, is not registered under the Land Registration Act nor under the Spanish Mortgage Law; and (4) the property subject of this action, Lot No. 1253-B, was taken from Lot No. 1253 containing an area of 4,280 square meters previously registered in the name of ZOILO under Original Certificate of Title (OCT) No. RO-2301.10 With these discrepancies, petitioners contend that either the Deed of Absolute Sale between LORETO and GABINO, JR. does not have a determinate object or that Lot No. 1253-B, the subject parcel, is not the object thereof. Hence, absent a determinate object, the contract is void. They rely on Articles 1349 and 1460 of the Civil Code, viz.: Art. 1349. The object of every contract must be determinate, as to its kind. The fact that the quantity is not determinate shall not be an obstacle to the existence of the contract, provided it is possible to determine the same, without the need of a new contract between the parties. Art. 1460. A thing is determinate when it is particularly designated or physically segregated from all others of the same class.

mortgage. However, LORETOs claim that it was one of mortgage is clearly negated by a Certification14 issued by the Bureau of Internal Revenue dated May 12, 1986. It certified that LORETO was not required to pay the capital gains tax on the transfer of Lot No. 1253 to GABINO, JR. because the property was classified as an ordinary asset. To be sure, petitioners could have easily shown that LORETO owned properties other than Lot No. 1253 to bolster their claim that the object of the Deed of Absolute Sale was different from Lot No. 1253-B which is the object described in the Deed of Absolute Sale of Portion of Land. They did not proffer any evidence. The trial court itself comprehensively traced the origin of Lot No. 1253-B. It clearly demonstrated that the subject parcel was originally part of the registered lot of ZOILO. It also showed how the subject parcel was eventually bounded by Lot No. 1253-A on the West and by Lot No. 1253-C on the East, as the lot would be later described in the Deed of Absolute Sale of Portion of Land. The trial court found that ZOILO previously owned Lot No. 1253 under OCT No. RO-2301 issued on March 3, 1931. On November 14, 1986, Entry No. 167922 was inscribed in the certificate of title, per Order dated March 30, 1978 of Judge Noli Ma. Cortes of the then Court of First Instance of Antique, stating that it was a reconstituted certificate of title.15 Lot No. 1253 was subdivided by virtue of a subdivision plan dated June 19, 1987. On January 20, 1987, an Extrajudicial Settlement of Estate executed by LORETO, EFREN and PRISCILLA was entered as Entry No. 170722. The OCT of ZOILO was cancelled by TCT No. T-16693 in the names of LORETO, EFREN and PRISCILLA on January 29, 1987. TCT No. T-16693 was cancelled on the same day by TCT No. T16694 in the name of LORETO alone. The TCT was partially cancelled by the issuance of TCTs covering Lot Nos. 1253-A, 1253-C and 1253-D. The TCT of Lot No. 1253-B was issued in the name of WILFREDO married to LOLITA on February 15, 1990. WILFREDOs TCT No. T-18023 appears to be a transfer from LORETOs TCT No. T-16694. II Next, petitioners contend that the appellate court should have upheld the title of WILFREDO under Article 1544 of the Civil Code and the doctrine of double sale where the buyer who is in possession of the Torrens Title must prevail.16 First, petitioners title was issued pursuant to the purported Deed of Absolute Sale of Portion of Land dated December 7, 1989. Second, WILFREDO did not

see any encumbrance at the back of the title of the subject lot when he purchased it from LORETO on December 7, 1989. Thus, since he is not bound to go beyond the certificate of title, he has acquired the subject property in due course and in good faith. We disagree. Article 1544 of the Civil Code states, viz.: Art. 1544. If the same thing should have been sold to different vendees, the ownership shall be transferred to the person who may have first taken possession thereof in good faith, if it should be movable property. Should it be immovable property, the ownership shall belong to the person acquiring it who in good faith recorded it in the Registry of Property. Should there be no inscription, the ownership shall pertain to the person who in good faith was first in the possession; and, in the absence thereof, to the person who presents the oldest title, provided there is good faith. Petitioners reliance on Article 1544 is misplaced. While title to the property was issued in WILFREDOs name on February 15, 1990, the following circumstances show that he registered the subject parcel with evident bad faith. First, the Deed of Absolute Sale of Portion of Land dated December 7, 1989 between LORETO and WILFREDO is tainted with blatant irregularities. It is a fact that the Deed of Absolute Sale of Portion of Land and the Deed of Absolute Sale between GABINO, JR. and WILFREDO are of even date. Both Deeds had the same objectLot No. 1253-B. Both deeds were notarized by Atty. Warloo Cardenal and bear the same entry in his notarial register: Document No. 236, Page No. 49, Book No. XI, Series of 1989. Second, the testimony of a disinterested witness, Febe Mabuhay, established the irregularity. Mabuhay used to work as secretary for Atty. Cardenal and cosigned as witness in both Deeds. She stated that Atty. Cardenal instructed her to prepare the two documents in the last week of November 1989. She was present when GABINO, JR. signed the Deed of Absolute Sale. She testified that after GABINO, JR. left, LORETO and his wife FRANCISCA arrived and signed the Deed of Absolute Sale of Portion of Land.17 The Decision of the court a quo further states, viz.: [Mabuhay testified that when she prepared the two documents, she] noticed the similarity of Lot No. 1253 as technically described in both documents but
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she did not call the attention of Atty. Warlo[o] Cardenal. [She likewise stated that Atty. Cardenal] specifically instructed her to assign the same document number to the two documents notarized on December 7, 1989.18 Third, the testimony of Atty. Ernesto Estoya, then Clerk of Court of the Regional Trial Court of Antique, supports the claim that there was bad faith in the execution of the Deed of Absolute Sale of Portion of Land. Atty. Estoya brought the notarial record of Atty. Cardenal for the year 1989 pursuant to a subpoena. He stated that he had not brought both Deeds as required in the subpoena because Doc. No. 236; Page No. 49; Book No. XI; Series of 1989 as entered in the notarial register of Atty. Cardenal could not be found in the files. He further explained that the last document on page 48 of the notarial register of Atty. Cardenal is Document No. 235, while the first document on page 49 is Document No. 239, leaving three unexplained gaps for document numbers 236, 237 and 238. Atty. Estoya stated that he was not the one who received the 1989 notarial register of Atty. Cardenal when the latter surrendered it since he assumed office only in 1994.19 Fourth, we give credence to the testimony of GABINO, JR. that LORETO and WILFREDO had employed the scheme to deprive him and his wife of their lawful title to the subject property. The facts speak for themselves. WILFREDO knew that he could not use the Deed of Absolute Sale executed in his favor by GABINO, JR. because the latter had no title to transfer. Without a title, WILFREDO could not use the subject property as collateral for a bank loan. Hence, LORETO, who had refused to surrender the title to GABINO, JR. and in whose name the land remained registered, had to execute the Deed of Absolute Sale of Portion of Land in favor of WILFREDO. Hence, it was convenient for WILFREDO to deny the existence of the Deed of Absolute Sale of December 7, 1989 between him and GABINO, JR. But the evidence on record shows that after he was able to register the subject property in his name on February 15, 1990, WILFREDO used the title as collateral in the loans that he contracted with the Philippine National Bank on October 24, 1991 and the Development Bank of the Philippines on December 1, 1993. This supports the claim of GABINO, JR. that WILFREDO needed the lot for loaning purposes. With these corroborating circumstances and the following irrefragable documents on record, the evidence preponderates in favor of GABINO, JR. One, he acquired Lot No. 1253-B from LORETO on May 12, 198620 by virtue of the Deed of Absolute Sale. Two, the Bureau of Internal Revenue issued a Certification, also on May 12, 1986, for the exemption from the payment of capital gains tax when LORETO sold to him the subject parcel. Three,

GABINO, JR. paid the real estate tax on the subject parcel in 1987. Four, he filed a Petition for the Surrender of LORETOs title on July 31, 1987 so he could transfer the title of the property in his name. Petitioners likewise err in their argument that the contract of sale between LORETO and GABINO, JR. is void on the ground that at the time of the sale on May 12, 1986, LORETO had a right to dispose only an aliquot part of the yet undivided property of ZOILO. The subject parcel, being an inherited property, is subject to the rules of co-ownership under the Civil Code. Co-ownership is the right of common dominion which two or more persons have in a spiritual part of a thing, not materially or physically divided.21 Before the partition of the property held in common, no individual or co-owner can claim title to any definite portion thereof. All that the co-owner has is an ideal or abstract quota or proportionate share in the entire property.22 LORETO sold the subject property to GABINO, JR. on May 12, 1986 as a coowner. LORETO had a right, even before the partition of the property on January 19, 1987,23 to transfer in whole or in part his undivided interest in the lot even without the consent of his co-heirs. This right is absolute in accordance with the well-settled doctrine that a co-owner has full ownership of his pro indiviso share and has the right to alienate, assign or mortgage it, and substitute another person for its enjoyment.24 Thus, what GABINO, JR. obtained by virtue of the sale on May 12, 1986 were the same rights as the vendor LORETO had as co-owner, in an ideal share equivalent to the consideration given under their transaction.25 LORETO sold some 1,604 square meters of Lot No. 1253 to GABINO, JR. Consequently, when LORETO purportedly sold to WILFREDO on December 7, 1989 the same portion of the lot, he was no longer the owner of Lot No. 1253B. Based on the principle that no one can give what he does not have,26 LORETO could not have validly sold to WILFREDO on December 7, 1989 what he no longer had. As correctly pointed out by the appellate court, the sale made by LORETO in favor of WILFREDO is void as LORETO did not have the right to transfer the ownership of the subject property at the time of sale. III Petitioners contend that since the subdivision plan of Lot No. 1253 was only approved on January 19, 1987, the appellate court can not presume that the aliquot part of LORETO was the parcel designated as Lot 1253-B.27
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Petitioners err. The mere fact that LORETO sold a definite portion of the coowned lot by metes and bounds before partition does not, per se, render the sale a nullity. We held in Lopez v. Vda. De Cuaycong 28 that the fact that an agreement purported to sell a concrete portion of a co-owned property does not render the sale void, for it is well-established that the binding force of a contract must be recognized as far as it is legally possible to do so.29 In the case at bar, the contract of sale between LORETO and GABINO, JR. on May 12, 1986 could be legally recognized. At the time of sale, LORETO had an aliquot share of one-third of the 4,280-square meter property or some 1,42630 square meters but sold some 1,604 square meters to GABINO, JR. We have ruled that if a co-owner sells more than his aliquot share in the property, the sale will affect only his share but not those of the other co-owners who did not consent to the sale.31 Be that as it may, the co-heirs of LORETO waived all their rights and interests over Lot No. 1253 in favor of LORETO in an Extrajudicial Settlement of Estate dated January 20, 1987. They declared that they have previously received their respective shares from the other estate of their parents ZOILO and PURIFICACION.32 The rights of GABINO, JR. as owner over Lot No. 1253-B are thus preserved. These rights were not effectively transferred by LORETO to WILFREDO in the Deed of Absolute Sale of Portion of Land. Nor were these rights alienated from GABINO, JR. upon the issuance of the title to the subject property in the name of WILFREDO. Registration of property is not a means of acquiring ownership.33 Its alleged incontrovertibility cannot be successfully invoked by WILFREDO because certificates of title cannot be used to protect a usurper from the true owner or be used as a shield for the commission of fraud.34 IV On the issue of prescription, petitioners contend that the appellate court failed to apply the rule that an action for reconveyance based on fraud prescribes after the lapse of four years.35 They cite Article 139136 of the Civil Code and the case of Gerona v. De Guzman.37 We disagree. This Court explained in Salvatierra v. Court of Appeals,38 viz.: An action for reconveyance based on an implied or constructive trust must perforce prescribe in ten years and not otherwise. A long line of decisions of this Court, and of very recent vintage at that, illustrates this rule. Undoubtedly, it is now well-settled that an action for reconveyance based on an implied or constructive trust prescribes in ten years from the issuance of the Torrens title

over the property. The only discordant note, it seems, is Balbin v. Medalla, which states that the prescriptive period for a reconveyance action is four years. However, this variance can be explained by the erroneous reliance on Gerona v. de Guzman. But in Gerona, the fraud was discovered on June 25, 1948, hence Section 43(3) of Act No. 190 was applied, the New Civil Code not coming into effect until August 30, 1950 x x x. It must be stressed, at this juncture, that Article 1144 and Article 1456 are new provisions. They have no counterparts in the old Civil Code or in the old Code of Civil Procedure, the latter being then resorted to as legal basis of the four-year prescriptive period for an action for reconveyance of title of real property acquired under false pretenses.39 [Thus,] under the present Civil Code, x x x just as an implied or constructive trust is an offspring of x x x Art. 1456, x x x so is the corresponding obligation to reconvey the property and the title thereto in favor of the true owner. In this context, and vis--vis prescription, Article 1144 of the Civil Code is applicable[, viz.:] Art. 1144. The following actions must be brought within ten years from the time the right of action accrues: 1) Upon a written contract; 2) Upon an obligation created by law; 3) Upon a judgment.40 (emphases supplied) Thus, in the case at bar, although the TCT of WILFREDO became indefeasible after the lapse of one year from the date of registration, the attendance of fraud in its issuance created an implied trust in favor of GABINO, JR. under Article 145641 of the Civil Code. Being an implied trust, the action for reconveyance of the subject property therefore prescribes within a period of ten years from February 15, 1990. Thus, when respondents filed the instant case with the court a quo on September 26, 1995, it was well within the prescriptive period. V On the issue of damages, petitioners contend that the grant is erroneous and the alleged connivance between Atty. Cardenal and WILFREDO lacks basis. We disagree. The evidence on record is clear that petitioners committed bad faith in the execution of the purported Deed of Absolute Sale of Portion of Land
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dated December 7, 1989 between LORETO and WILFREDO. As stated by the appellate court, viz.: x x x x From the series of events, it can be reasonably inferred that appellees WILFREDO, LORETO and Atty. Cardenal connived in attempting to deprive appellants of Lot No. 1253-B, hence, the appellants entitlement to moral damages. Further, it is a wellsettled rule that attorneys fees are allowed to be awarded if the claimant is compelled to litigate with third persons or to incur expenses to protect his interest by reason of an unjustified act or omission of the party for whom it is sought. x x x x To protect themselves, the appellants engaged the services of counsel and incurred expenses in the course of litigation. Hence, we deem it equitable to award attorneys fees to the appellant x x x.42 IN VIEW WHEREOF, the petition is DENIED. The assailed Decision and Resolution of the Court of Appeals in CAG.R. No. CV-68318 dated March 19, 2003 and November 13, 2003, respectively, are AFFIRMED in toto. Costs against petitioners. SO ORDERED. Sandoval-Gutierrez, Corona, Azcuna and Garcia, JJ., concur. Petition denied, assailed decision and resolution affirmed in toto. Notes.Where there are two or more heirs, the whole estate of the decedent is, before partition, owned in common by such heirs, subject to the payment of the debts of the deceased, and each co-owner exercises his rights over the whole property and may use and enjoy the same with no other limitation than that he shall not injure the interest of his coowners. (Alejandrino vs. Court of Appeals, 295 SCRA 536 [1998]) A note or memorandum is not necessary for the enforceability of a contract of partition. (Tan vs. Lim, 296 SCRA 455 [1998]) o0o [Vagilidad vs. Vagilidad, Jr., 507 SCRA 94(2006)]

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SPS. VIRGILIO F. SANTOS & ESPERANZA LATI SANTOS, SPS. VICTORINO F. SANTOS, & LAGRIMAS SANTOS, ERNESTO F. SANTOS, and TADEO F. SANTOS, petitioners, vs. SPS. JOSE LUMBAO and PROSERFINA LUMBAO, respondents.
Appeals; In the exercise of the Supreme Courts power of review, the court is not a trier of facts and does not normally undertake the re-examination of the evidence presented by the contending parties during the trial of the case considering that the findings of fact of the Court of Appeals are conclusive and binding on the Court; Exceptions.It is well-settled that in the exercise of the Supreme Courts power of review, the court is not a trier of facts and does not normally undertake the re-examination of the evidence presented by the contending parties during the trial of the case considering that the findings of fact of the Court of Appeals are conclusive and binding on the Court. But, the rule is not without exceptions. There are several recognized exceptions in which factual issues may be resolved by this Court. One of these exceptions is when the findings of the appellate court are contrary to those of the trial court. This exception is present in the case at bar. Actions; Jurisdictions; Katarungang Pambarangay Law; Barangay Conciliation; While noncompliance with the condition that there must first be proper recourse to barangay conciliation before filing of complaint in court or any government offices could affect the sufficiency of the plaintiffs cause of action and make his complaint vulnerable to dismissal on ground of lack of cause of action or prematurity, the same would not prevent a court of competent jurisdiction from exercising its power of adjudication over the case before it, where the defendants failed to object to such exercise of jurisdiction.Section 408 of the aforesaid law and Administrative Circular No. 14-93 provide that all disputes between parties actually residing in the same city or municipality are subject to barangay conciliation. A prior recourse thereto is a pre-condition before filing a complaint in court or any government offices. Non-compliance with the said condition precedent could affect the sufficiency of the plaintiffs cause of action and make his complaint vulnerable to dismissal on ground of lack of cause of action or prematurity; but the same would not prevent a court of competent jurisdiction from exercising its power of adjudication over the case before it, where the defendants failed to object to such exercise of jurisdiction. While it is true that the present case should first be referred to the Barangay Lupon for conciliation because the parties involved herein actually reside in the same city (Pasig City) and the dispute between them involves a real property, hence, the said dispute should have been brought in the city in which the real property, subject matter of the controversy, is located, which happens to be the same city where the contending parties reside. In the event that respondents Spouses Lumbao failed to comply with the said condition precedent, their Complaint for Reconveyance with Damages can be dismissed. In this case, however, respondents Spouses Lumbaos non-compliance with the aforesaid condition precedent cannot be considered fatal. Although petitioners alleged in their answer that the Complaint for Reconveyance with Damages filed by respondents spouses Lumbao should be dismissed for their failure to comply with the condition precedent, which in effect, made the complaint prematurely instituted and the trial court acquired no jurisdiction to hear the case, yet, they did not file a Motion to Dismiss the said complaint.

Same; Same; Same; Non-referral of a case for barangay conciliation when so required under the law is not jurisdictional in nature and may therefore be deemed waived if not raised seasonably in a motion to dismiss.Emphasis must be given to the fact that the petitioners could have prevented the trial court from exercising jurisdiction over the case had they filed a Motion to Dismiss. However, instead of doing so, they invoked the very same jurisdiction by filing an answer seeking an affirmative relief from it. Worse, petitioners actively participated in the trial of the case by presenting their own witness and by cross-examining the witnesses presented by the respondents Spouses Lumbao. It is elementary that the active participation of a party in a case pending against him before a court is tantamount to recognition of that courts jurisdiction and a willingness to abide by the resolution of the case which will bar said party from later on impugning the courts jurisdiction. It is also well-settled that the non-referral of a case for barangay conciliation when so required under the law is not jurisdictional in nature and may therefore be deemed waived if not raised seasonably in a motion to dismiss. Hence, herein petitioners can no longer raise the defense of non-compliance with the barangay conciliation proceedings to seek the dismissal of the complaint filed by the respondents Spouses Lumbao, because they already waived the said defense when they failed to file a Motion to Dismiss. Same; Pleadings and Practice; An answer is a mere statement of fact which the party filing it expects to prove, but it is not evidence; In spite of the presence of judicial admissions in a partys pleading, the trial court is still given leeway to consider other evidence presented. Facts alleged in a partys pleading are deemed admissions of that party and are binding upon him, but this is not an absolute and inflexible rule. An answer is a mere statement of fact which the party filing it expects to prove, but it is not evidence. And in spite of the presence of judicial admissions in a partys pleading, the trial court is still given leeway to consider other evidence presented. However, in the case at bar, as the Court of Appeals mentioned in its Decision, [herein petitioners] had not adduced any other evidence to override the admission made in their [A]nswer that [petitioners Virgilio and Tadeo] actually signed the [Bilihan ng Lupa dated 17 August 1979] except that they were just misled as to the purpose of the document, x x x. Virgilios answers were unsure and quibbled. Hence, the general rule that the admissions made by a party in a pleading are binding and conclusive upon him applies in this case. Sales; Notarial Law; A document acknowledged before a notary public is a public document that enjoys the presumption of regularityit is a prima facie evidence of the truth of the facts stated therein and a conclusive presumption of its existence and due execution; One who denies the due execution of a deed where ones signature appears has the burden of proving that contrary to the recital in the jurat, one never appeared before the notary public and acknowledged the deed to be a voluntary act.Both Bilihan ng Lupa documents dated 17 August 1979 and 9 January 1981 were duly notarized before a notary public. It is well-settled that a document acknowledged before a notary public is a public document that enjoys the presumption of regularity. It is a prima facie evidence of the truth of the facts stated therein and a conclusive presumption of its existence and due execution. To overcome this presumption, there must be presented evidence that is clear and convincing. Absent such evidence, the presumption must be upheld. In addition, one who denies the due execution of a deed where ones signature appears has the burden of proving that contrary to the recital in the jurat, one never appeared before the notary public and acknowledged the deed to be a voluntary act. Nonetheless, in the present case petitioners
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denials without clear and convincing evidence to support their claim of fraud and falsity were not sufficient to overthrow the above-mentioned presumption; hence, the authenticity, due execution and the truth of the facts stated in the aforesaid Bilihan ng Lupa are upheld. Same; Co-Ownership; Even while an estate remains undivided, co-owners have each full ownership of their respective aliquots or undivided shares and may therefore alienate, assign or mortgage them, and, in any case, the mere fact that the deed purports to transfer a concrete portion does not per se render the sale void.It is noteworthy that at the time of the execution of the documents denominated as Bilihan ng Lupa, the entire property owned by Maria, the mother of Rita, was not yet divided among her and her co-heirs and so the description of the entire estate is the only description that can be placed in the Bilihan ng Lupa, dated 17 August 1979 and 9 January 1981 because the exact metes and bounds of the subject property sold to respondents Spouses Lumbao could not be possibly determined at that time. Nevertheless, that does not make the contract of sale between Rita and respondents Spouses Lumbao invalid because both the law and jurisprudence have categorically held that even while an estate remains undivided, co-owners have each full ownership of their respective aliquots or undivided shares and may therefore alienate, assign or mortgage them. The co-owner, however, has no right to sell or alienate a specific or determinate part of the thing owned in common, because such right over the thing is represented by an aliquot or ideal portion without any physical division. In any case, the mere fact that the deed purports to transfer a concrete portion does not per se render the sale void. The sale is valid, but only with respect to the aliquot share of the selling co-owner. Furthermore, the sale is subject to the results of the partition upon the termination of the co-ownership. Same; Actions; Reconveyance; Prescription; Land Titles; When the plaintiff is in possession of the land to be reconveyed, prescription cannot set in.The defense of prescription of action and laches is likewise unjustifiable. In an action for reconveyance, the decree of registration is respected as incontrovertible. What is sought instead is the transfer of the property or its title which has been wrongfully or erroneously registered in another persons name to its rightful or legal owner, or to the one with a better right. It is, indeed, true that the right to seek reconveyance of registered property is not absolute because it is subject to extinctive prescription. However, when the plaintiff is in possession of the land to be reconveyed, prescription cannot set in. Such an exception is based on the theory that registration proceedings could not be used as a shield for fraud or for enriching a person at the expense of another. Same; Land Titles; Registration is not a requirement for validity of the contract as between the parties, for the effect of registration serves chiefly to bind third persons.This Court holds that the Bilihan ng Lupa documents dated 17 August 1979 and 9 January 1981 are valid and enforceable and can be made the basis of the respondents Spouses Lumbaos action for reconveyance. The failure of respondents Spouses Lumbao to have the said documents registered does not affect its validity and enforceability. It must be remembered that registration is not a requirement for validity of the contract as between the parties, for the effect of registration serves chiefly to bind third persons. The principal purpose of registration is merely to notify other persons not parties to a contract that a transaction involving the property had been entered into. Where the party has knowledge of a prior existing interest which is unregistered at

the time he acquired a right to the same land, his knowledge of that prior unregistered interest has the effect of registration as to him. Hence, the Bilihan ng Lupa documents dated 17 August 1979 and 9 January 1981, being valid and enforceable, herein petitioners are bound to comply with their provisions. In short, such documents are absolutely valid between and among the parties thereto. Succession; Heirs are bound by contracts entered into by their predecessors-in-interest whatever rights and obligations of the decedent have over a property are transmitted to the heirs by way of succession, a mode of acquiring the property, rights and obligations of the decedent to the extent of the value of the inheritance of the heirs.The general rule that heirs are bound by contracts entered into by their predecessors-in-interest applies in the present case. Article 1311 of the NCC is the basis of this rule. It is clear from the said provision that whatever rights and obligations the decedent have over the property were transmitted to the heirs by way of succession, a mode of acquiring the property, rights and obligations of the decedent to the extent of the value of the inheritance of the heirs. Thus, the heirs cannot escape the legal consequence of a transaction entered into by their predecessor-in-interest because they have inherited the property subject to the liability affecting their common ancestor. Being heirs, there is privity of interest between them and their deceased mother. They only succeed to what rights their mother had and what is valid and binding against her is also valid and binding as against them. The death of a party does not excuse nonperformance of a contract which involves a property right and the rights and obligations thereunder pass to the personal representatives of the deceased. Similarly, nonperformance is not excused by the death of the party when the other party has a property interest in the subject matter of the contract.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals. The facts are stated in the opinion of the Court. Porfirio Gabiola, Jr. for petitioners. Domingo E. Chiu, Sr. for respondents. 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 annul and set aside the Decision1 and Resolution2 of the Court of Appeals in CA-G.R. CV No. 60450 entitled, Spouses Jose Lumbao and Proserfina Lumbao v. Spouses Virgilio F. Santos and Esperanza Lati, Spouses Victorino F. Santos and Lagrimas F. Santos, Ernesto F. Santos and Tadeo F. Santos, dated 8 June 2005 and 29 July 2005, respectively, which granted the appeal filed by herein respondents Spouses Jose Lumbao and Proserfina Lumbao (Spouses Lumbao) and
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ordered herein petitioners Spouses Virgilio F. Santos and Esperanza Lati, Spouses Victorino F. Santos and Lagrimas F. Santos, Ernesto F. Santos and Tadeo F. Santos to reconvey to respondents Spouses Lumbao the subject property and to pay the latter attorneys fees and litigation expenses, thus, reversing the Decision3 of the Regional Trial Court (RTC) of Pasig City, dated 17 June 1998 which dismissed the Complaint for Reconveyance with Damages filed by respondents Spouses Lumbao for lack of merit. Herein petitioners Virgilio, Victorino, Ernesto and Tadeo, all surnamed Santos, are the legitimate and surviving heirs of the late Rita Catoc Santos (Rita), who died on 20 October 1985. The other petitioners Esperanza Lati and Lagrimas Santos are the daughters-in-law of Rita. Herein respondents Spouses Jose Lumbao and Proserfina Lumbao are the alleged owners of the 107-square meter lot (subject property), which they purportedly bought from Rita during her lifetime. The facts of the present case are as follows: On two separate occasions during her lifetime, Rita sold to respondents Spouses Lumbao the subject property which is a part of her share in the estate of her deceased mother, Maria Catoc (Maria), who died intestate on 19 September 1978. On the first occasion, Rita sold 100 square meters of her inchoate share in her mothers estate through a document denominated as Bilihan ng Lupa, dated 17 August 1979.4 Respondents Spouses Lumbao claimed the execution of the aforesaid document was witnessed by petitioners Virgilio and Tadeo, as shown by their signatures affixed therein. On the second occasion, an additional seven square meters was added to the land as evidenced by a document also denominated as Bilihan ng Lupa, dated 9 January 1981.5 After acquiring the subject property, respondents Spouses Lumbao took actual possession thereof and erected thereon a house which they have been occupying as exclusive owners up to the present. As the exclusive owners of the subject property, respondents Spouses Lumbao made several verbal demands upon Rita, during her lifetime, and thereafter upon herein petitioners, for them to execute the necessary documents to effect the issuance of a separate title in favor of respondents Spouses Lumbao insofar as the subject property is concerned. Respondents Spouses Lumbao alleged that prior to her death, Rita informed respondent Proserfina Lumbao she could not deliver the title to the subject property because the entire property inherited by her and her co-heirs from Maria had not yet been partitioned.

On 2 May 1986, the Spouses Lumbao claimed that petitioners, acting fraudulently and in conspiracy with one another, executed a Deed of Extrajudicial Settlement,6 adjudicating and partitioning among themselves and the other heirs, the estate left by Maria, which included the subject property already sold to respondents Spouses Lumbao and now covered by TCT No. 817297 of the Registry of Deeds of Pasig City. On 15 June 1992, respondents Spouses Lumbao, through counsel, sent a formal demand letter8 to petitioners but despite receipt of such demand letter, petitioners still failed and refused to reconvey the subject property to the respondents Spouses Lumbao. Consequently, the latter filed a Complaint for Reconveyance with Damages9 before the RTC of Pasig City. Petitioners filed their Answer denying the allegations that the subject property had been sold to the respondents Spouses Lumbao. They likewise denied that the Deed of Extrajudicial Settlement had been fraudulently executed because the same was duly published as required by law. On the contrary, they prayed for the dismissal of the Complaint for lack of cause of action because respondents Spouses Lumbao failed to comply with the Revised Katarungang Pambarangay Law under Republic Act No. 7160, otherwise known as the Local Government Code of 1991, which repealed Presidential Decree No. 150810 requiring first resort to barangay conciliation. Respondents Spouses Lumbao, with leave of court, amended their Complaint because they discovered that on 16 February 1990, without their knowledge, petitioners executed a Deed of Real Estate Mortgage in favor of Julieta S. Esplana for the sum of P30,000.00. The said Deed of Real Estate Mortgage was annotated at the back of TCT No. PT-81729 on 26 April 1991. Also, in answer to the allegation of the petitioners that they failed to comply with the mandate of the Revised Katarungang Pambarangay Law, respondents Spouses Lumbao said that the Complaint was filed directly in court in order that prescription or the Statute of Limitations may not set in. During the trial, respondents Spouses Lumbao presented Proserfina Lumbao and Carolina Morales as their witnesses, while the petitioners presented only the testimony of petitioner Virgilio. The trial court rendered a Decision on 17 June 1998, the dispositive portion of which reads as follows: Premises considered, the instant complaint is hereby denied for lack of merit.
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Considering that [petitioners] have incurred expenses in order to protect their interest, [respondents spouses Lumbao] are hereby directed to pay [petitioners], to wit: 1) the amount of P30,000.00 as attorneys fees and litigation expenses, and 2) costs of the suit.11 Aggrieved, respondents Spouses Lumbao appealed to the Court of Appeals. On 8 June 2005, the appellate court rendered a Decision, thus: WHEREFORE, premises considered, the present appeal is hereby GRANTED. The appealed Decision dated June 17, 1998 of the Regional Trial Court of Pasig City, Branch 69 in Civil Case No. 62175 is hereby REVERSED and SET ASIDE. A new judgment is hereby entered ordering [petitioners] to reconvey 107 square meters of the subject [property] covered by TCT No. PT81729 of the Registry of Deeds of Pasig City, Metro Manila, and to pay to [respondents spouses Lumbao] the sum of P30,000.00 for attorneys fees and litigation expenses. No pronouncement as to costs.12 Dissatisfied, petitioners filed a Motion for Reconsideration of the aforesaid Decision but it was denied in the Resolution of the appellate court dated 29 July 2005 for lack of merit. Hence, this Petition. The grounds relied upon by the petitioners are the following: I. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN REVERSING THE DECISION OF THE TRIAL COURT, THEREBY CREATING A VARIANCE ON THE FINDINGS OF FACTS OF TWO COURTS. II. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN ORDERING THE PETITIONERS TO RECONVEY THE SUBJECT [PROPERTY] TO THE RESPONDENTS [SPOUSES LUMBAO] AND IN NOT RULING THAT THEY ARE GUILTY OF LACHES, HENCE THEY CANNOT RECOVER THE LOT ALLEGEDLY SOLD TO THEM. III. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN NOT FINDING HEREIN PETITIONER[S] TO BE IN GOOD FAITH IN EXECUTING THE DEED OF EXTRAJUDICIAL SETTLEMENT DATED [2 MAY 1986]. IV. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN NOT FINDING THAT PETITIONERS ARE NOT LEGALLY BOUND TO COMPLY

WITH THE SUPPOSED BILIHAN NG LUPA DATED [17 AUGUST 1979] AND [9 JANUARY 1981] THAT WERE SUPPOSEDLY EXECUTED BY THE LATE RITA CATOC. V. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN NOT FINDING THAT RESPONDENTS [SPOUSES LUMBAOS] ACTION FOR RECONVEYANCE WITH DAMAGES CANNOT BE SUPPORTED WITH UNENFORCEABLE DOCUMENTS, SUCH AS THE BILIHAN NG LUPA DATED [17 AUGUST 1979] AND [9 JANUARY 1981]. VI. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN NOT FINDING THAT RESPONDENTS [SPOUSES LUMBAOS] COMPLAINT FOR RECONVEYANCE IS DISMISSABLE (SIC) FOR NON COMPLIANCE OF THE MANDATE OF [P.D. NO.] 1508, AS AMENDED BY Republic Act No. 7160. VII. THE APPELLATE COURT COMMITTED A REVERSIBLE ERROR IN NOT FINDING THAT RESPONDENTS [SPOUSES LUMBAO] SHOULD BE HELD LIABLE FOR PETITIONERS CLAIM FOR DAMAGES AND ATTORNEY[]S FEES. Petitioners ask this Court to scrutinize the evidence presented in this case, because they claim that the factual findings of the trial court and the appellate court are conflicting. They allege that the findings of fact by the trial court revealed that petitioners Virgilio and Tadeo did not witness the execution of the documents known as Bilihan ng Lupa; hence, this finding runs counter to the conclusion made by the appellate court. And even assuming that they were witnesses to the aforesaid documents, still, respondents Spouses Lumbao were not entitled to the reconveyance of the subject property because they were guilty of laches for their failure to assert their rights for an unreasonable length of time. Since respondents Spouses Lumbao had slept on their rights for a period of more than 12 years reckoned from the date of execution of the second Bilihan ng Lupa, it would be unjust and unfair to the petitioners if the respondents will be allowed to recover the subject property. Petitioners allege they are in good faith in executing the Deed of Extrajudicial Settlement because even respondents Spouses Lumbaos witness, Carolina Morales, testified that neither petitioner Virgilio nor petitioner Tadeo was present during the execution of the Bilihan ng Lupa, dated 17 August 1979 and 9 January 1981. Petitioners affirm that the Deed of Extrajudicial Settlement was published in a newspaper of general circulation to give notice to all creditors of the estate subject of partition to contest the same within the period prescribed by law. Since no claimant appeared to interpose a claim within the
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period allowed by law, a title to the subject property was then issued in favor of the petitioners; hence, they are considered as holders in good faith and therefore cannot be barred from entering into any subsequent transactions involving the subject property. Petitioners also contend that they are not bound by the documents denominated as Bilihan ng Lupa because the same were null and void for the following reasons: 1) for being falsified documents because one of those documents made it appear that petitioners Virgilio and Tadeo were witnesses to its execution and that they appeared personally before the notary public, when in truth and in fact they did not; 2) the identities of the properties in the Bilihan ng Lupa, dated 17 August 1979 and 9 January 1981 in relation to the subject property in litigation were not established by the evidence presented by the respondents Spouses Lumbao; 3) the right of the respondents Spouses Lumbao to lay their claim over the subject property had already been barred through estoppel by laches; and 4) the respondents Spouses Lumbaos claim over the subject property had already prescribed. Finally, petitioners claim that the Complaint for Reconveyance with Damages filed by respondents Spouses Lumbao was dismissible because they failed to comply with the mandate of Presidential Decree No. 1508, as amended by Republic Act No. 7160, particularly Section 412 of Republic Act No. 7160. Given the foregoing, the issues presented by the petitioners may be restated as follows: I. Whether or not the Complaint for Reconveyance with Damages filed by respondents spouses Lumbao is dismissible for their failure to comply with the mandate of the Revised Katarungang Pambarangay Law under R.A. No. 7160. II. Whether or not the documents known as Bilihan ng Lupa are valid and enforceable, thus, they can be the bases of the respondents spouses Lumbaos action for reconveyance with damages. III. Whether or not herein petitioners are legally bound to comply with the Bilihan ng Lupa dated 17 August 1979 and 9 January 1981 and consequently, reconvey the subject property to herein respondents spouses Lumbao. It is well-settled that in the exercise of the Supreme Courts power of review, the court is not a trier of facts and does not normally undertake the reexamination of the evidence presented by the contending parties during the

trial of the case considering that the findings of fact of the Court of Appeals are conclusive and binding on the Court.13 But, the rule is not without exceptions. There are several recognized exceptions14 in which factual issues may be resolved by this Court. One of these exceptions is when the findings of the appellate court are contrary to those of the trial court. This exception is present in the case at bar. Going to the first issue presented in this case, it is the argument of the petitioners that the Complaint for Reconveyance with Damages filed by respondents Spouses Lumbao should be dismissed for failure to comply with the barangay conciliation proceedings as mandated by the Revised Katarungang Pambarangay Law under Republic Act No. 7160. This argument cannot be sustained. Section 408 of the aforesaid law and Administrative Circular No. 14-9315 provide that all disputes between parties actually residing in the same city or municipality are subject to barangay conciliation. A prior recourse thereto is a precondition before filing a complaint in court or any government offices. Noncompliance with the said condition precedent could affect the sufficiency of the plaintiffs cause of action and make his complaint vulnerable to dismissal on ground of lack of cause of action or prematurity; but the same would not prevent a court of competent jurisdiction from exercising its power of adjudication over the case before it, where the defendants failed to object to such exercise of jurisdiction.16 While it is true that the present case should first be referred to the Barangay Lupon for conciliation because the parties involved herein actually reside in the same city (Pasig City) and the dispute between them involves a real property, hence, the said dispute should have been brought in the city in which the real property, subject matter of the controversy, is located, which happens to be the same city where the contending parties reside. In the event that respondents Spouses Lumbao failed to comply with the said condition precedent, their Complaint for Reconveyance with Damages can be dismissed. In this case, however, respondents Spouses Lumbaos non-compliance with the aforesaid condition precedent cannot be considered fatal. Although petitioners alleged in their answer that the Complaint for Reconveyance with Damages filed by respondents spouses Lumbao should be dismissed for their failure to comply with the condition precedent, which in effect, made the complaint prematurely instituted and the trial court acquired no jurisdiction to hear the case, yet, they did not file a Motion to Dismiss the said complaint.

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Emphasis must be given to the fact that the petitioners could have prevented the trial court from exercising jurisdiction over the case had they filed a Motion to Dismiss. However, instead of doing so, they invoked the very same jurisdiction by filing an answer seeking an affirmative relief from it. Worse, petitioners actively participated in the trial of the case by presenting their own witness and by cross-examining the witnesses presented by the respondents Spouses Lumbao. It is elementary that the active participation of a party in a case pending against him before a court is tantamount to recognition of that courts jurisdiction and a willingness to abide by the resolution of the case which will bar said party from later on impugning the courts jurisdiction.17 It is also well-settled that the non-referral of a case for barangay conciliation when so required under the law is not jurisdictional in nature and may therefore be deemed waived if not raised seasonably in a motion to dismiss.18 Hence, herein petitioners can no longer raise the defense of non-compliance with the barangay conciliation proceedings to seek the dismissal of the complaint filed by the respondents Spouses Lumbao, because they already waived the said defense when they failed to file a Motion to Dismiss. As regards the second issue, petitioners maintain that the Bilihan ng Lupa, dated 17 August 1979 and 9 January 1981 are null and void for being falsified documents as it is made to appear that petitioners Virgilio and Tadeo were present in the execution of the said documents and that the identities of the properties in those documents in relation to the subject property has not been established by the evidence of the respondents Spouses Lumbao. Petitioners also claim that the enforceability of those documents is barred by prescription of action and laches. It is the petitioners incessant barking that the Bilihan ng Lupa documents dated 17 August 1979 and 9 January 1981 were falsified because it was made to appear that petitioners Virgilio and Tadeo were present in the executions thereof, and their allegation that even respondents Spouses Lumbaos witness Carolina Morales proved that said petitioners were not present during the execution of the aforementioned documents. This is specious. Upon examination of the aforesaid documents, this Court finds that in the Bilihan ng Lupa, dated 17 August 1979, the signatures of petitioners Virgilio and Tadeo appeared thereon. Moreover, in petitioners Answer and Amended Answer to the Complaint for Reconveyance with Damages, both petitioners Virgilio and Tadeo made an admission that indeed they acted as witnesses in the execution of the Bilihan ng Lupa, dated 17 August 1979.19 However, in order to avoid their obligations in the said Bilihan ng Lupa, petitioner Virgilio,

in his cross-examination, denied having knowledge of the sale transaction and claimed that he could not remember the same as well as his appearance before the notary public due to the length of time that had passed. Noticeably, petitioner Virgilio did not categorically deny having signed the Bilihan ng Lupa, dated 17 August 1979 and in support thereof, his testimony in the crossexamination propounded by the counsel of the respondents Spouses Lumbao is quoted hereunder: ATTY. CHIU: Q. Now, you said, Mr. Witness . . . Virgilio Santos, that you dont know about this document which was marked as Exhibit A for the [respondents spouses Lumbao]? ATTY. BUGARING:

The question is misleading, your Honor. Counsel premised the question that he does not have any knowledge but not that he does not know. ATTY. CHIU: Q. Being. . . you are one of the witnesses of this document? [I]s it not? WITNESS: A. No, sir. Q. I am showing to you this document, there is a signature at the left hand margin of this document Virgilio Santos, will you please go over the same and tell the court whose signature is this? A. I dont remember, sir, because of the length of time that had passed.
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Q. But that is your signature? A. I dont have eyeglasses . . . My signature is different. Q. You never appeared before this notary public Apolinario Mangahas? A. I dont remember.20 As a general rule, facts alleged in a partys pleading are deemed admissions of that party and are binding upon him, but this is not an absolute and inflexible rule. An answer is a mere statement of fact which the party filing it expects to prove, but it is not evidence.21 And in spite of the presence of judicial admissions in a partys pleading, the trial court is still given leeway to consider other evidence presented.22 However, in the case at bar, as the Court of Appeals mentioned in its Decision, [herein petitioners] had not adduced any other evidence to override the admission made in their [A]nswer that [petitioners Virgilio and Tadeo] actually signed the [Bilihan ng Lupa dated 17 August 1979] except that they were just misled as to the purpose of the document, x x x.23 Virgilios answers were unsure and quibbled. Hence, the general rule that the admissions made by a party in a pleading are binding and conclusive upon him applies in this case. On the testimony of respondents Spouses Lumbaos witness Carolina Morales, this Court adopts the findings made by the appellate court. Thus [T]he trial court gave singular focus on her reply to a question during crossexamination if the [petitioners Virgilio and Tadeo] were not with her and the vendor [Rita] during the transaction. It must be pointed out that earlier in the direct examination of said witness, she confirmed that [respondents spouses Lumbao] actually bought the lot from [Rita] (nagkabilihan). Said witness positively identified and confirmed the two (2) documents evidencing the sale in favor of [respondents spouses Lumbao]. Thus, her subsequent statement that the [petitioners Virgilio and Tadeo] were not with them during the transaction does not automatically imply that [petitioners Virgilio and Tadeo] did not at any time sign as witnesses as to the deed of sale attesting to their mothers

voluntary act of selling a portion of her share in her deceased mothers property. The rule is that testimony of a witness must be considered and calibrated in its entirety and not by truncated portions thereof or isolated passages therein.24 Furthermore, both Bilihan ng Lupa documents dated 17 August 1979 and 9 January 1981 were duly notarized before a notary public. It is well-settled that a document acknowledged before a notary public is a public document25 that enjoys the presumption of regularity. It is a prima facie evidence of the truth of the facts stated therein and a conclusive presumption of its existence and due execution.26 To overcome this presumption, there must be presented evidence that is clear and convincing. Absent such evidence, the presumption must be upheld.27 In addition, one who denies the due execution of a deed where ones signature appears has the burden of proving that contrary to the recital in the jurat, one never appeared before the notary public and acknowledged the deed to be a voluntary act. Nonetheless, in the present case petitioners denials without clear and convincing evidence to support their claim of fraud and falsity were not sufficient to overthrow the above-mentioned presumption; hence, the authenticity, due execution and the truth of the facts stated in the aforesaid Bilihan ng Lupa are upheld. The defense of petitioners that the identities of the properties described in the Bilihan ng Lupa, dated 17 August 1979 and 9 January 1981 in relation to the subject property were not established by respondents Spouses Lumbaos evidence is likewise not acceptable. It is noteworthy that at the time of the execution of the documents denominated as Bilihan ng Lupa, the entire property owned by Maria, the mother of Rita, was not yet divided among her and her co-heirs and so the description of the entire estate is the only description that can be placed in the Bilihan ng Lupa, dated 17 August 1979 and 9 January 1981 because the exact metes and bounds of the subject property sold to respondents Spouses Lumbao could not be possibly determined at that time. Nevertheless, that does not make the contract of sale between Rita and respondents Spouses Lumbao invalid because both the law and jurisprudence have categorically held that even while an estate remains undivided, co-owners have each full ownership of their respective aliquots or undivided shares and may therefore alienate, assign or mortgage them.28 The co-owner, however, has no right to sell or alienate a specific or determinate part of the thing owned in common, because such right over the thing is represented by an aliquot or ideal portion without any physical division. In any case, the mere fact that the deed purports to transfer a
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concrete portion does not per se render the sale void. The sale is valid, but only with respect to the aliquot share of the selling co-owner. Furthermore, the sale is subject to the results of the partition upon the termination of the coownership.29 In the case at bar, when the estate left by Maria had been partitioned on 2 May 1986 by virtue of a Deed of Extrajudicial Settlement, the 107-square meter lot sold by the mother of the petitioners to respondents Spouses Lumbao should be deducted from the total lot, inherited by them in representation of their deceased mother, which in this case measures 467 square meters. The 107square meter lot already sold to respondents Spouses Lumbao can no longer be inherited by the petitioners because the same was no longer part of their inheritance as it was already sold during the lifetime of their mother. Likewise, the fact that the property mentioned in the two Bilihan ng Lupa documents was described as a portion of a parcel of land covered in Tax Declarations No. A-018-01674, while the subject matter of the Deed of Extrajudicial Settlement was the property described in Transfer Certificate of Title (TCT) No. 3216 of the Registry of Deeds of the Province of Rizal in the name of Maria is of no moment because in the Bilihan ng Lupa, dated 17 August 1979 and 9 January 1981, it is clear that there was only one estate left by Maria upon her death. And this fact was not refuted by the petitioners. Besides, the property described in Tax Declaration No. A-018-01674 and the property mentioned in TCT No. 3216 are both located in Barrio Rosario, Municipality of Pasig, Province of Rizal, and almost have the same boundaries. It is, thus, safe to state that the property mentioned in Tax Declaration No. A018-01674 and in TCT No. 3216 are one and the same. The defense of prescription of action and laches is likewise unjustifiable. In an action for reconveyance, the decree of registration is respected as incontrovertible. What is sought instead is the transfer of the property or its title which has been wrongfully or erroneously registered in another persons name to its rightful or legal owner, or to the one with a better right. It is, indeed, true that the right to seek reconveyance of registered property is not absolute because it is subject to extinctive prescription. However, when the plaintiff is in possession of the land to be reconveyed, prescription cannot set in. Such an exception is based on the theory that registration proceedings could not be used as a shield for fraud or for enriching a person at the expense of another.30

In the case at bar, the right of the respondents Spouses Lumbao to seek reconveyance does not prescribe because the latter have been and are still in actual possession and occupation as owners of the property sought to be reconveyed, which fact has not been refuted nor denied by the petitioners. Furthermore, respondents Spouses Lumbao cannot be held guilty of laches because from the very start that they bought the 107-square meter lot from the mother of the petitioners, they have constantly asked for the transfer of the certificate of title into their names but Rita, during her lifetime, and the petitioners, after the death of Rita, failed to do so on the flimsy excuse that the lot had not been partitioned yet. Inexplicably, after the partition of the entire estate of Maria, petitioners still included the 107-square meter lot in their inheritance which they divided among themselves despite their knowledge of the contracts of sale between their mother and the respondents Spouses Lumbao. Under the above premises, this Court holds that the Bilihan ng Lupa documents dated 17 August 1979 and 9 January 1981 are valid and enforceable and can be made the basis of the respondents Spouses Lumbaos action for reconveyance. The failure of respondents Spouses Lumbao to have the said documents registered does not affect its validity and enforceability. It must be remembered that registration is not a requirement for validity of the contract as between the parties, for the effect of registration serves chiefly to bind third persons. The principal purpose of registration is merely to notify other persons not parties to a contract that a transaction involving the property had been entered into. Where the party has knowledge of a prior existing interest which is unregistered at the time he acquired a right to the same land, his knowledge of that prior unregistered interest has the effect of registration as to him.31 Hence, the Bilihan ng Lupa documents dated 17 August 1979 and 9 January 1981, being valid and enforceable, herein petitioners are bound to comply with their provisions. In short, such documents are absolutely valid between and among the parties thereto. Finally, the general rule that heirs are bound by contracts entered into by their predecessors-in-interest applies in the present case. Article 131132 of the NCC is the basis of this rule. It is clear from the said provision that whatever rights and obligations the decedent have over the property were transmitted to the heirs by way of succession, a mode of acquiring the property, rights and obligations of the decedent to the extent of the value of the inheritance of the heirs.33 Thus, the heirs cannot escape the legal consequence of a transaction entered into by their predecessor-in-interest because they have inherited the property subject to the liability affecting their common ancestor. Being heirs,
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there is privity of interest between them and their deceased mother. They only succeed to what rights their mother had and what is valid and binding against her is also valid and binding as against them. The death of a party does not excuse nonperformance of a contract which involves a property right and the rights and obligations thereunder pass to the personal representatives of the deceased. Similarly, nonperformance is not excused by the death of the party when the other party has a property interest in the subject matter of the contract.34 In the end, despite the death of the petitioners mother, they are still bound to comply with the provisions of the Bilihan ng Lupa, dated 17 August 1979 and 9 January 1981. Consequently, they must reconvey to herein respondents Spouses Lumbao the 107-square meter lot which they bought from Rita, petitioners mother. And as correctly ruled by the appellate court, petitioners must pay respondents Spouses Lumbao attorneys fees and litigation expenses for having been compelled to litigate and incur expenses to protect their interest.35 On this matter, we do not find reasons to reverse the said findings. WHEREFORE, premises considered, the instant Petition is hereby DENIED. The Decision and Resolution of the Court of Appeals dated 8 June 2005 and 29 July 2005, respectively, are hereby AFFIRMED. Herein petitioners are ordered to reconvey to respondents Spouses Lumbao the subject property and to pay the latter attorneys fees and litigation expenses. Costs against petitioners. SO ORDERED. Ynares-Santiago (Chairperson), Austria-Martinez, Callejo, Sr. and Nachura, JJ., concur. Petition denied, judgment and resolution affirmed. Notes.Failure of a party to specifically allege the fact that there was no compliance with the barangay conciliation procedure constitutes a waiver of that defense. (Diu vs. Court of Appeals, 251 SCRA 472 [1995]) An allegation in the complaint that the petitioners had initiated a proceeding against the respondent for unlawful detainer in the Katarungang Pambarangay, in compliance with P.D. No. 1508, as well as the certification to file action by the barangay chairman, is sufficient compliance with Article 151 of the Family Code. (Martinez vs. Martinez, 461 SCRA 562 [2005])

o0o [Santos vs. Lumbao, 519 SCRA 408(2007)]

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JULITA GO ONG, FOR HERSELF AND AS JUDICIAL GUARDIAN OF STEVEN GO ONG, petitioners, vs. THE HON. COURT OF APPEALS, ALLIED BANKING CORPORATION and THE CITY SHERIFF OF QUEZON CITY, respondents.
Remedial Law; Civil Procedure; Judgments; Rule that the findings of fact of the trial court are entitled to great respectThe wellsettled rule that the findings of fact of the trial court are entitled to great respect, even more weight when affirmed by the Court of Appeals as in the case at bar. Same; Special Proceedings; Mortgages; Where the real estate mortgage was constituted in petitioner's personal capacity and not in her capacity as administratrix of the estate of her husband, Sec. 7 of Rule 89 of the Rules of Court requiring judicial approval of the mortgage is not applicable,Thus, in confirming the findings of the lower court, as supported by law and the evidence, the Court of Appeals aptly ruled that Section 7 of Rule 89 of the Rules of Court is not applicable, since the mortgage was constituted in her personal capacity and not in her capacity as administratrix of the estate of her husband. Same; Same; Same; Fact alone that in the settlement proceedings of the estate of the deceased spouse the entire conjugal partnership property of the marriage is under administration is not sufficient to invalidate the whole mortgage; Art 493 of the Civil Code applies where the heirs as co-owners shall each have the full ownership of his part and he may alienate, assign or mortgage it; Effect of alienation or mortgage with respect to the co-owners.Nevertheless, petitioner, citing the cases of Picardal, et al. vs. Lladas (21 SCRA 1483) and Fernandez, et al. vs. Maravilla (10 SCRA 589), further argues that in the settlement proceedings of the estate of the deceased spouse, the entire conjugal partnership property of the marriage is under administration, While such may be in a sense true, that fact alone is not sufficient to invalidate the whole mortgage, willingly and voluntarily entered into by the petitioner. An opposite view would result in an injustice. Under similar circumstances, this Court applied the provisions of Article 493 of the Civil Code, where the heirs as co-owners shall each have the full ownership of his part and the fruits and benefits pertaining thereto, and he may therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal rights are involved. But the effect of the alienation or mortgage, with respect to the co-owners, shall be limited to the portion which may be allotted to him in the division upon the termination of the coownership (Philippine National Bank vs. Court of Appeals, 98 SCRA 207 [1980]). Same; Same; Same; The mortgage constituted on the property under administration, by authority of the petitioner, is valid, notwithstanding lack of judicial approval with respect to her conjugal share and to her hereditary rights; Fact that what had been mortgaged was in custodia legis is immaterial as she was the absolute owner thereof.Consequently, in the case at bar, the trial court and the Court of Appeals cannot be faulted in ruling that the questioned mortgage constituted on the property under administration, by authority of the petitioner, is valid, notwithstanding the lack of judicial approval, with respect to her conjugal share and to her hereditary rights. The fact that what had been mortgaged was in custodia legis is immaterial insofar as her conjugal share and hereditary share in the property is concerned, for after all, she

was the ABSOLUTE OWNER thereof. This ownership by hers is not disputed, nor is there any claim that the rights of the government (with reference to taxes) nor the rights of any heir or anybody else " have been prejudiced or impaired Same: Same: Same; Reference to judicial approval in Sec. 7, Rule 89 of the Rules of Court, cannot adversely affect the substantive rights of petitioner to dispose of her ideal share in the coheirship and/or co-ownership between her and the other heirs/co-owners.The reference to judicial approval in Sec. 7, Rule 89 of the Rules of Court cannot adversely affect the substantive rights of private respondent to dispose of her ideal [not inchoate, for the conjugal partnership ended with her husband's death, and her hereditary rights accrued from the moment of the death of the decedent (Art. 777, Civil Code)] share in the co-heirship and/or co-ownership formed between her and the other heirs/co-owners (See Art. 493, Civil Code, supra.). Sec. 7, Art. 89 of the Civil Code applies in a case where judicial approval has to be sought in connection with, for instance, the sale or mortgage of property under administration for the payment, say of a conjugal debt, and even here, the conjugal and hereditary shares of the wife are excluded from the requisite judicial approval for the reason already adverted to hereinabove, provided of course no prejudice is caused others, including the Government. Same; Same; Same; Estoppel, concept of; Petitioner already estopped from questioning the mortgage; Reason.Moreover, petitioner is already estopped from questioning the mortgage. An estoppel may arise from the making of a promise even though without consideration, if it was intended that the promise should be relied upon and in fact it was relied upon, and if a refusal to enforce it would be virtually to sanction the perpetration of fraud or would result in other injustice (Gonzalo Sy Trading vs. Central Bank, 70 SCRA 570).

PETITION for certiorari to review the decision of the Court of Appeals.

The facts are stated in the opinion of the Court. PARAS, J.:

This is a petition for review on certiorari of the March 21, 1986 Decision** of the Court of Appeals in AC-G.R. CV No. 02635, "Julita Ong etc. vs. Allied Banking Corp. et al." affirming, with modification, the January 5, 1984 Decision of the Regional Trial Court of Quezon City in Civil Case No. Q-35230. The uncontroverted facts of this case, as found by the Court of Appeals, are as follows: "x x x: Two (2) parcels of land in Quezon City identified as Lot

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No. 12, Block 407, Psd 37326 with an area of 1960.6 sq. m. and Lot No. 1, Psd 15021, with an area of 3,660.8 sq. m., are covered by Transfer Certificate of Title No. 188705 in the name of ' Alfredo Ong Bio Hong married to Julita Go Ong' (Exh. D). Alfredo Ong Bio Hong died on January 18, 1975 and Julita Go Ong was appointed administratrix of her husband's estate in Civil Case No. 107089. The letters of administration was registered on TCT No. 188705 on October 23,1979. Thereafter, Julita Go Ong sold Lot No. 12 to Lim Che Boon, and TCT No. 188705 was partially cancelled and TCT No. 262852 was issued in favor of Lim Che Boon covering Lot No. 12 (Exh. D-4). On June 8, 1981 Julita Go Ong through her attorney-infact Jovita K. Yeo (Exh. 1) mortgaged Lot No. 1 to the Allied Banking Corporation to secure a loan of P900,000.00 obtained by JK Exports, Inc. The mortgage was registered on TCT No. 188705 on the same date with the following notation: 'x x x mortgagee's consent necessary in case of subsequent alienation or encumbrance of the property other conditions set forth in Doc. No. 340, Page No. 69, Book No, XIX, of the Not. Public of Felixberto Abad'. On the loan there was due the sum of P828,000.00 and Allied Banking Corporation tried to collect it from Julita Go Ong, (Exh. E). Hence, the complaint alleging nullity of the contract for lack of judicial approval which the bank had allegedly promised to secure from the court. In response thereto, the bank averred that it was plaintiff Julita Go Ong who promised to secure the court's approval, adding that Julita Go Ong informed the defendant that she was promised the sum of P300,000.00 by the JK Exports, Inc. which will also take charge of the interest of the loan. "Concluding, the trial court ruled; ' Absent (of) any evidence that the property in question is the capital of the deceased husband brought into the marriage, said property should be presumed as acquired during the marriage and, therefore, conjugal property, 'After the dissolution of the marriage with the death of plaintiff s husband, the plaintiff acquired, by law, her conjugal share, together with the hereditary rights thereon. (Margate vs. Rabacal, L-14302, April 30, 1963). Consequently, the mortgage constituted on said property, upon express authority of plaintiff, notwithstanding the lack of judicial approval, is valid, with respect to her conjugal share thereon, together with her hereditary rights.' " On appeal by petitioner, respondent Court of Appeals affirmed, with modification, the appealed decision (Record, pp. 19-22). The dispositive portion of the appellate court's decision reads:

"WHEREFORE, with the modification that the extrajudicial foreclosure proceedings instituted by defendant against plaintiff shall be held in abeyance to await the final result of Civil Case No. 107089 of the Court of First Instance of Manila, 6th Judicial District Branch XXXII, entitled "IN THE MATTER OF THE INTESTATE ESTATE OF THE LATE ALFREDO ONG BIO: JULITA GO ONG, ADMINISTRATRIX'. In pursuance with which the restraining order of the lower court in this case restraining the sale of the properties levied upon is hereby ordered to continue in full force and effect coterminous with the final result of Civil Case No. 107089, the decision appealed from is hereby affirmed. Costs against plaintiffappellant. "SO ORDERED." On April 8,1986, petitioner moved for the reconsideration of the said decision (Ibid., pp. 24-29), but in a Resolution dated September 11, 1986, respondent court denied the motion for lack of merit (Ibid., p. 23). Hence, the instant petition (Ibid., pp. 6-17). The Second Division of this Court, in a Resolution dated November 19,1986 (Rollo, p. 30), without giving due course to the petition, resolved to require private respondent to comment thereon and it did on February 19,1987 (Ibid., pp. 37-42). Thereafter, in a Resolution dated April 6, 1987, the petition was given due course and the parties were required to file their respective memoranda (Ibid., p. 43). Petitioner filed her Memorandum on May 13, 1987 (Ibid, pp. 45-56). while private respondent filed its Memorandum on May 20,1987 (Ibid, pp. 62-68). The sole issue in this case is WHETHER OR NOT THE MORTGAGE CONSTITUTED OVER THE PARCEL OF LAND UNDER PETITIONER'S ADMINISTRATION IS NULL AND VOID FOR WANT OF JUDICIAL APPROVAL. The instant petition is devoid of merit. The well-settled rule that the findings of fact of the trial court are entitled to great respect, carries even more weight when af firmed by the Court of Appeals as in the case at bar. In brief, the lower court found: (1) that the property under the administration of petitionerthe wife of the deceased, is a community property and not the separate property of the latter; (2) that the mortgage was constituted in the
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wife's personal capacity and not in her capacity as administratrix; and (3) that the mortgage affects the wife's share in the community property and her inheritance in the estate of her husband, Petitioner, asserting that the mortgage is void for want of judicial approval, quoted Section 7 of Rule 89 of the Rules of Court and cited several cases wherein this Court ruled that the regulations provided in the said section are mandatory. While petitioner's assertion may have merit insofar as the rest of the estate of her husband is concerned, the same is not true as regards her conjugal share and her hereditary rights in the estate. The records show that petitioner willingly and voluntarily mortgaged the property in question because she was promised by JK Exports, Inc. the sum of P300,000.00 from the proceeds of the loan; and that at the time she executed the real estate mortgage, there was no court order authorizing the mortgage, so she took it upon herself, to secure an order. Thus, in confirming the findings of the lower court, as supported by law and the evidence, the Court of Appeals aptly ruled that Section 7 of Rule 89 of the Rules of Court is not applicable, since the mortgage was constituted in her personal capacity and not in her capacity as administratrix of the estate of her husband. Nevertheless, petitioner, citing the cases of Picardal, et al. vs. Lladas (21 SCRA 1483) and Fernandez, et al. vs. Maravilla (10 SCRA 589), further argues that in the settlement proceedings of the estate of the deceased spouse, the entire conjugal partnership property of the marriage is under administration. While such may be in a sense true, that fact alone is not sufficient to invalidate the whole mortgage, willingly and voluntarily entered into by the petitioner. An opposite view would result in an injustice. Under similar circumstances, this Court applied the provisions of Article 493 of the Civil Code, where the heirs as co-owners shall each have the full ownership of his part and the fruits and benefits pertaining thereto, and he may therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal rights are involved. But the effect of the alienation or mortgage, with respect to the co-owners, shall be limited to the portion which may be allotted to him in the division upon the termination of the co-ownership (Philippine National Bank vs. Court of Appeals, 98 SCRA 207 [1980]). Consequently, in the case at bar, the trial court and the Court of Appeals cannot be faulted in ruling that the questioned mortgage constituted on the

property under administration, by authority of the petitioner, is valid, notwithstanding the lack of judicial approval, with respect to her conjugal share and to her hereditary rights. The fact that what had been mortgaged was in custodia legis is immaterial, insofar as her conjugal share and hereditary share in the property is concerned, for after all, she was the ABSOLUTE OWNER thereof. This ownership by hers is not disputed, nor is there any claim that the rights of the government (with reference to taxes) nor the rights of any heir or anybody else have been prejudiced for impaired. As stated by Associate Justice (later Chief Justice) Manuel Moran in Jakosalem vs. Rafols, et al., 73 Phil. 618 "The land in question, described in the appealed decision, originally belonged to Juan Melgar. The latter died and the judicial administration of his estate was commenced in 1915 and came to a close on December 2,1924, only. During the pendency of the said administration, that is, on July 5, 1917, Susana Melgar, daughter of the deceased Juan Melgar, sold the land with the right of repurchase to Pedro Cui, subject to the stipulation that during the period for the repurchase she would continue in possession of the land as lessee of the purchase. On December 12, 1920, the partition of the estate left by the deceased Juan Melgar was made, and the land in question was adjudicated to Susana Melgar. In 1921, she conveyed, in payment of professional fees, onehalf of the land in favor of the defendantappellee Nicolas Rafols, who entered upon the portion thus conveyed and has been in possession thereof up to the present. On July 23, 1921, Pedro Cui brought an action to recover said half of the land from Nicolas Rafols and the other half from the other defendants, and while that case was pending, or about August 4, 1925, Pedro Cui donated the whole land in question to Generosa Teves, the herein plaintiff-appellant, after trial, the lower court rendered a decision absolving Nicolas Rafols as to the one-half of the land conveyed to him by Susana Melgar, and declaring the plaintiff owner of the other half by express acknowledgment of the other defendants. The plaintiff appealed from that part of the judgment which is favorable to Nicolas Rafols. "The lower court absolved Nicolas Rafols upon the theory that Susana Melgar could not have sold anything to Pedro Cui because the land was then in custodia legis, that is, under judicial administration. This is error. That the land could not ordinarily be levied upon while in custodia legis, does not mean that one of the heirs may not sell the right, interest or participation which he has or might have in the lands under administration. The ordinary execution of property in custodia legis is prohibited in order to avoid interference with the possession by the court. But the sale made by an heir of his share in an
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inheritance, subject to the result of the pending administration, in no wise stands in the way of such administration.'' The reference to judicial approval in Sec. 7, Rule 89 of the Rules of Court cannot adversely affect the substantive rights of private respondent to dispose of her ideal [not inchoate, for the conjugal partnership ended with her husband's death, and her hereditary rights accrued from the moment of the death of the decedent (Art. 777, Civil Code)] share in the co-heirship and/or coownership formed between her and the other heirs/co-owners (See Art. 493, Civil Code, supra.). Sec. 7, Art. 89 of the Civil Code applies in a case where judicial approval has to be sought in connection with, for instance, the sale or mortgage of property under administration for the payment, say of a conjugal debt, and even here, the conjugal and hereditary shares of the wife are excluded from the requisite judicial approval for the reason already adverted to hereinabove, provided of course no prejudice is caused others, including the government. Moreover, petitioner is already estopped from questioning the mortgage. An estoppel may arise from the making of a promise even though without consideration, if it was intended that the promise should be relied upon and in fact it- was relied upon, and if a refusal to enforce it would be virtually to sanction the perpetration of fraud or would result in other injustice (Gonzalo Sy Trading vs. Central Bank, 70 SCRA 570). PREMISES CONSIDERED, the instant petition is hereby DENIED and the assailed decision of the Court of Appeals is hereby AFFIRMED. SO ORDERED. Yap (Chairman), Melencio-Herrera, Padilla and Sarmiento, JJ., concur. Petition denied and decision affirmed. Notes.Findings of fact of Court of Appeals generally final and conclusive upon the Supreme Court. (Leonardo vs. Court of Appeals, 120 SCRA 890.) Findings of facts of trial judge are generally accorded highest degree of respect. (People vs. Bernat, 120 SCRA 918.) oOo [Go Ong vs. Court of Appeals, 154 SCRA 270(1987)]

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RAMON MERCADO,BASILIAMERCADO joined by her husband, FRANCISCO RONQUILLO,plaintiffs-appellants, vs. PIO D. LIWANAG,defendant-appellee.
Co-ownership; Sale of an undivided aliquot share; To what portion the share is limited.What a co-owner may dispose of under Article 493 of the Civil Code is only his undivided aliquot share, which shall be limited to the portion which may be allotted to him upon the termination of the coownership. He has no right to divide the property into parts and then convey one part by metes and bounds. (Lopez vs. Ilustre, 5 Phil. 567; Gonzales, et al. vs. Ichon, et al., 47 O.G. 6290; Manresa, Vol. 3, 7th ed., p. 630). Same; Same; Same; Question of validity of deed of sale to be resolved in relation to the title. The title is the final and conclusive repository of the rights of the new co-owners, and any question regarding the validity of the deed of sale should be considered in conjunction with the title issued pursuant thereto.

total amount of P15,372.00, of a parcel of land situated at Kangkong, Quezon City, covered Transfer Certificate of Title No. 20805 of the Register of Deeds for the province of Rizal, now Quezon City. "3. That the said T.C.T. No. 20805 containing an area of 4,392 square meters, is issued in the name of the plaintiffs Ramon Mercado and Basilia Mercado as co-owners PRO-INDIVISO, and the sale was without the knowledge and consent of plaintiff Basilia Mercado. "4. That out of the total area of 4,392 square meters, an area consisting of 391 square meters was expropriated by the National Power Corporation sometime in December, 1953 at a price of P10.00 per square meter, Civil Case No. Q829 (Eminent Domain) of the Court of First Instance of Rizal, Quezon City Branch, entitled 'National Power Corporation, plaintiff, versus Brigido Almodoban, et al., defendants,' but this fact of expropriation came to the knowledge of the defendant Pio D. Liwanag upon the registration of the Deed of Sale Annex "A". "5. That pursuant to the Deed of Sale Annex "A", T.C.T. No. 32757 was issued in the name of Pio Liwanag and Basilia Mercado, photostat copy of which is hereto attached and marked as Annex "B". "6. That defendant submits the receipt signed by plaintiff Ramon Mercado dated July 14, 1956 photostat copy of which is attached hereto and marked as Annex "C" and promissory note of the same date for P10,000.00, photostat copy of which is attached hereto and marked as Annex "D" which are both selfexplanatory, but plaintiff Ramon Mercado disclaims payment and receipt of such check and promissory note, the check being uncashed and is still in the possession of Atty. Eugenio de Garcia. "7.That plaintiffs and defendant respectfully submit for resolution of this Honorable Court the issue of whether or not the Deed of Sale Annex "A" could be annulled based in the foregoing facts in relation to Article 493 of the Civil Code, setting aside all other issues in the pleadings." Upon the issue thus presented the trial court held that under Article 493 of the Civil Code the sale in question was valid and so dismissed the complaint, without costs. This ruling is now assailed as erroneous. Article 493 provides:
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APPEAL from a decision of the Court of First Instance of Rizal.

The facts are stated in the opinion of the Court. Patricio D. Senador and Ricardo D. Galano for plaintiffs-appellants. D. B. Melliza and D.M. Gangoso for defendant-appellee. MAKALINTAL, J.:

The present appeal, taken by the plaintiff from the decision of the Court of First Instance of Rizal (Quezon City), is before us on a certification by the Court of Appeals, the questions involved being purely legal. The case was submitted to the trial court upon the following stipulation of facts: "1. That the complaint filed by the plaintiffs against the defendant seeks to annul a Deed of Sale on the ground of fraud and on the provisions of Article 493 of the Civil Code. "2. That on July 14, 1956, in the City of Manila, Philippines, the plaintiff Ramon Mercado and the defendant Pio D. Liwanag executed a Deed of Sale, photostat copy of which is attached hereto marked as Annex "A" and forming an integral part hereof, covering a divided half and described in meters and bounds, or an area of 2,196 square meters at P7.00 per square meter or for a

"Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and he may therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal rights are involved. But the effect of the alienation or the mortgage, with respect to the co-owners, shall be limited to the portion which may be alloted to him in the division upon the termination of the co-ownership." Appellants except to the application of this provision in this case for the reason that in the deed of sale sought to be annulled the vendor disposed of a divided and determinate half of the land under co-ownership. The argument, as far as it goes, seems to be tenable. What a co-owner may dispose of under Article 493 is only his undivided aliquot share, which shall be limited to the portion which may be allotted to him upon, the termination of the co-owner-ship. He has no right to divide the property into parts and then convey one part by metes and bounds. Lopez vs. Ilustre, 5 Phil. 567; Gonzales, et al. vs, Itchon, et al., 47 O.G. 6290; Manresa, Vol. 3, 7th ed. p. 630. The pertinent recitals in the disputed deed of sale read: "I hereby sell, transfer and convey absolutely and irrevocably unto said Pio D. Liwanag, his heirs, successors, and assigns my rights, title and interest on my chosen portion of the above-described property which consist of one-half of aforesaid ownership bounded on the West by Pacifico Gahudo, on the North by Hacienda de Piedad and on the South by Circumferential Road, consisting of 50 meters more or less frontal length along Circumferential Road, and with a total area of 2,196 square meters as indicated in Co-owners Transfer Certificate of Title No. 20805." Nevertheless, upon registration of the sale and cancellation of transfer certificate of title No. 20805 in the names of the previous co-owners, the new transfer certificate that was issued (No. 32757) did not reproduce the description in the instrument but carried the names of appellee Pio D. Liwanag and Basilia Mercado as "co-owners pro-indiviso." There is no suggestion by any of the parties that this new certificate of title is invalid, irregular or inaccurate. There is no prayer that it be cancelled. As far as Basilia Mercado is concerned she retains in all their integrity her rights as co-owner which she had before the sale, and consequently, she has no cause to complain. Much less has Ramon Mercado, for it was he who was responsible for whatever indicia there may be in the deed of sale that a determinate portion of the property was being sold, as shown by the second paragraph thereof, quoted without contradiction in appellee's brief as follows:

"That the aforesaid Transfer Certificate of Title was originally in my name, but was split into two equal parts by virtue of my desire to donate to my sister-inlaw Juana Gregorio an equal half thereof with the understanding that I as donor would have the absolute power to choose from the property owned in common that part which I would like to segregate for myself or my heirs and assigns." And of course appellee himself not only does not challenge the new certificate of title, wherein he appears as co-owner of an undivided one-half share, but precisely relies upon it for his defense in this action. The title is the final and conclusive repository of the rights of the new coowners. The question of whether or not the deed of sale should be annulled must be considered in conjunction with the title issued pursuant thereto. Since, according to this title, what appellee acquired by virtue of the sale is only an undivided half-share of the property, which under the law the vendor Ramon Mercado had the absolute right to dispose of, the trial court committed no error in dismissing the action. The end-result of the transaction is in accordance with Article 493 of the Civil Code. The other point raised by appellants refers to the statement in the dispositive portion of the decision appealed from that "the stipulation with regards to the deed of sale based on the ground of fraud is insufficient for all purposes and besides, no proof showing the allegation of such fraud exists in the record." It is contended that the trial court erred in making such statement, the same being contrary to the stipulation in which the parties expressly eliminated the issue of fraud. From the entire context of the decision, however, it can be gathered that the case was not decided on the basis of the said issue. In any event, even if the court did err in considering the question of fraud in spite of the stipulation, the error is not a prejudicial one. As far as the dismissal of the action is concerned, it makes no difference whether fraud has not been proven or fraud has been abandoned as an issue by express agreement. WHEREFORE, the decision appealed from is affirmed, with costs against appellants in this instance. Bautista Angelo, Labrador, Concepcion, Barrera, Paredes, Dizon and Regala, JJ., concur. Bengzon, C.J. and Reyes, J.B.L., J., took no part. Decision affirmed.

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Note.See Taningco vs. Register of Deeds, L-15242, June 29, 1962, ante. ____________ [Mercado vs. Liwanag, 5 SCRA 472(1962)]

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LEONARDO ACABAL and RAMON NICOLAS, petitioners, vs. VILLANER ACABAL, EDUARDO ACABAL, SOLOMON ACABAL, GRACE ACABAL, MELBA ACABAL, EVELYN ACABAL, ARMIN ACABAL, RAMIL ACABAL, and BYRON ACABAL, respondents.
Actions; Pleadings and Practice; Evidence; The failure to deny the genuineness and due execution of an actionable document does not preclude a party from arguing against it by evidence of fraud, mistake, compromise, payment, statute of limitations, estoppel, and want of consideration.Procedurally, petitioners contend that the Court of Appeals erred when it failed to apply Section 8, Rule 8 of the Rules of Court, respondent Villaner having failed to deny under oath the genuineness and due execution of the April 19, 1990 Deed of Absolute Sale. Petitioners contention does not persuade. The failure to deny the genuineness and due execution of an actionable document does not preclude a party from arguing against it by evidence of fraud, mistake, compromise, payment, statute of limitations, estoppel, and want of consideration. Same; Same; Same; It is a basic rule in evidence that the burden of proof lies on the party who makes the allegationsei incumbit probatio, qui dicit, non qui negat; cum per rerum natruam factum negantis probatio nulla sit (the proof lies upon him who affirms, not upon him who denies; since by the nature of things, he who denies a fact cannot produce any proof); Facts not conjectures decide cases.It is a basic rule in evidence that the burden of proof lies on the party who makes the allegationsei incumbit probatio, qui dicit, non qui negat; cum per rerum naturam factum negantis probatio nulla sit. If he claims a right granted by law, he must prove it by competent evidence, relying on the strength of his own evidence and not upon the weakness of that of his opponent. More specifically, allegations of a defect in or lack of valid consent to a contract by reason of fraud or undue influence are never presumed but must be established not by mere preponderance of evidence but by clear and convincing evidence. For the circumstances evidencing fraud and misrepresentation are as varied as the people who perpetrate it in each case, assuming different shapes and forms and may be committed in as many different ways. In the case at bar, it was incumbent on the plaintiff-herein respondent Villaner to prove that he was deceived into executing the Deed of Absolute Sale. Except for his bare allegation that the transaction was one of lease, he failed to adduce evidence in support thereof. His conjecture that perhaps those copies of the deed of sale were placed by Mr. Cadalin under the documents which I signed the contract of lease, must fail, for facts not conjectures decide cases. Sales; Absent any evidence of the fair market value of a land as of the time of its sale, it cannot be concluded that the price at which it was sold was inadequate.It bears noting, however, that Villaner failed to present evidence on the fair market value of the property as of April 19, 1990, the date of execution of the disputed deed. Absent any evidence of the fair market value of a land as of the time of its sale, it cannot be concluded that the price at which it was sold was inadequate. Inadequacy of price must be proven because mere speculation or conjecture has no place in our judicial system. Same; Mere inadequacy of the price per se will not rule out the transaction as one of salethe price must be grossly inadequate or shocking to the conscience.Even, however, on the assumption that the price of P10,000.00 was below the fair market value of the property in 1990,

mere inadequacy of the price per se will not rule out the transaction as one of sale. For the price must be grossly inadequate or shocking to the conscience such that the mind revolts at it and such that a reasonable man would neither directly nor indirectly be likely to consent to it. Sales; Pari Delicto; A party in pari delicto is not entitled to affirmative reliefone who seeks equity and justice must come to court with clean hands.Even assuming that the disposition of the property by Villaner was contrary to law, he would still have no remedy under the law as he and Leonardo were in pari delicto, hence, he is not entitled to affirmative reliefone who seeks equity and justice must come to court with clean hands. In pari delicto potior est conditio defendentis. The proposition is universal that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific performance, or to recover the property agreed to be sold or delivered, or the money agreed to be paid, or damages for its violation. The rule has sometimes been laid down as though it were equally universal, that where the parties are in pari delicto, no affirmative relief of any kind will be given to one against the other. Same; Same; The principle of pari delicto is grounded on two premisesfirst, that courts should not lend their good offices to mediating disputes among wrongdoers, and second, that denying relief to an admitted wrongdoer is an effective means of deterring illegality; This principle of ancient vintage is not a principle of justice but one of policy.The principle of pari delicto is grounded on two premises: first, that courts should not lend their good offices to mediating disputes among wrongdoers; and second, that denying judicial relief to an admitted wrongdoer is an effective means of deterring illegality. This doctrine of ancient vintage is not a principle of justice but one of policy as articulated in 1775 by Lord Mansfield in Holman v. Johnson: The objection, that a contract is immoral or illegal as between the plaintiff and defendant, sounds at all times very ill in the mouth of the defendant. It is not for his sake, however, that the objection is ever allowed; but it is founded in general principles of policy, which the defendant has the advantage of, contrary to the real justice, as between him and the plaintiff, by accident, if I may so say. The principle of public policy is this; ex dolo malo non oritur actio. No court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act. If, from the plaintiffs own stating or otherwise, the cause of action appears to arise ex turpi causa, or the transgression of a positive law of this country, there the court says he has no right to be assisted. It is upon that ground the court goes; not for the sake of the defendant, but because they will not lend their aid to such a plaintiff. So if the plaintiff and the defendant were to change sides, and the defendant was to bring his action against the plaintiff, the latter would then have the advantage of it; for where both are equally in fault potior est conditio defendentis. Thus, to serve as both a sanction and as a deterrent, the law will not aid either party to an illegal agreement and will leave them where it finds them. Same; Same; An exception to the principle of pari delicto is that provided for in Article 1416 of the Civil Code; Requisites.The principle of pari delicto, however, is not absolute, admitting an exception under Article 1416 of the Civil Code. ART. 1416. When the agreement is not illegal per se but is merely prohibited, and the prohibition by the law is designed for the protection of the plaintiff, he may, if public policy is thereby enhanced, recover what he has paid or delivered. Under this article, recovery for what has been paid or delivered pursuant to an inexistent
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contract is allowed only when the following requisites are met: (1) the contract is not illegal per se but merely prohibited; (2) the prohibition is for the protection of the plaintiffs; and (3) if public policy is enhanced thereby. The exception is unavailing in the instant case, however, since the prohibition is clearly not for the protection of the plaintiff-landowner but for the beneficiary farmers. Same; Co-Ownership; Every co-owner has absolute ownership of his undivided interest in the co-owned property and is free to alienate, assign or mortgage his interest except as to purely personal rights.While Villaner owns five-ninths (5/9) of the disputed property, he could not claim title to any definite portion of the community property until its actual partition by agreement or judicial decree. Prior to partition, all that he has is an ideal or abstract quota or proportionate share in the property. Villaner, however, as a co-owner of the property has the right to sell his undivided share thereof. The Civil Code provides so: ART. 493. Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and he may therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal rights are involved. But the effect of the alienation or the mortgage, with respect to the co-owners, shall be limited to the portion which may be allotted to him in the division upon the termination of the co-ownership. Thus, every co-owner has absolute ownership of his undivided interest in the co-owned property and is free to alienate, assign or mortgage his interest except as to purely personal rights. While a co-owner has the right to freely sell and dispose of his undivided interest, nevertheless, as a co-owner, he cannot alienate the shares of his other co-ownersnemo dat qui non habet. Same; Same; Following the well-established principle that the binding force of a contract must be recognized as far as it is legally possible to do so, the disposition by a co-owner affects only his share pro indiviso, and the transferee gets only what corresponds to his grantors share in the partition of the property owned in common. Villaner, however, sold the entire property without obtaining the consent of the other co-owners. Following the well-established principle that the binding force of a contract must be recognized as far as it is legally possible to do so quando res non valet ut ago, valeat quantum valere potestthe disposition affects only Villaners share pro indiviso, and the transferee gets only what corresponds to his grantors share in the partition of the property owned in common. Same; Same; Land Registration; The issue of good faith or bad faith of a buyer is relevant only where the subject of the sale is a registered land but not where the property is an unregistered land. This Court is not unmindful of its ruling in Cruz v. Leis where it held: It is conceded that, as a rule, a co-owner such as Gertrudes could only dispose of her share in the property owned in common. Article 493 of the Civil Code provides: x x x Unfortunately for private respondents, however, the property was registered in TCT No. 43100 solely in the name of Gertrudes Isidro, widow. Where a parcel of land, forming part of the undistributed properties of the dissolved conjugal partnership of gains, is sold by a widow to a purchaser who merely relied on the face of the certificate of title thereto, issued solely in the name of the widow, the purchaser acquires a valid title to the land even as against the heirs of the deceased spouse. The rationale for this rule is that a person dealing with registered land is not required to go behind the register to determine the condition of the property. He is only charged with notice of the burdens on the

property which are noted on the face of the register or the certificate of title. To require him to do more is to defeat one of the primary objects of the Torrens system. (Citation omitted) Cruz, however, is not applicable for the simple reason that in the case at bar the property in dispute is unregistered. The issue of good faith or bad faith of a buyer is relevant only where the subject of the sale is a registered land but not where the property is an unregistered land. One who purchases an unregistered land does so at his peril. Nicolas claim of having bought the land in good faith is thus irrelevant.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court. Edlaw Office for petitioners. Leo Diocos for respondents. CARPIO-MORALES, J.:

Before this Court is a Petition for Review on Certiorari of the February 15, 2001 Decision1 of the Court of Appeals reversing that of the Regional Trial Court (RTC) of Dumaguete City, Branch 35.2 In dispute is the exact nature of the document3 which respondent Villaner Acabal (Villaner) executed in favor of his godson-nephew-petitioner Leonardo Acabal (Leonardo) on April 19, 1990. Villaners parents, Alejandro Acabal and Felicidad Balasabas, owned a parcel of land situated in Barrio Tanglad, Manjuyod, Negros Oriental, containing an area of 18.15 hectares more or less, described in Tax Declaration No. 15856.4 By a Deed of Absolute Sale dated July 6, 1971,5 his parents transferred for P2,000.00 ownership of the said land to him, who was then married to Justiniana Lipajan.6 Sometime after the foregoing transfer, it appears that Villaner became a widower. Subsequently, he executed on April 19, 1990 a deed7 conveying the same property8 in favor of Leonardo.

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Villaner was later to claim that while the April 19, 1990 document he executed now appears to be a Deed of Absolute Sale purportedly witnessed by a Bais City trial court clerk Carmelo Cadalin and his wife Lacorte, what he signed was a document captioned Lease Contract9 (modeled after a July 1976 lease agreement10 he had previously executed with previous lessee, Maria Luisa Montenegro11) wherein he leased for 3 years the property to Leonardo at P1,000.00 per hectare12 and which was witnessed by two women employees of one Judge Villegas of Bais City. Villaner thus filed on October 11, 1993 a complaint13 before the Dumaguete RTC against Leonardo and Ramon Nicolas to whom Leonardo in turn conveyed the property, for annulment of the deeds of sale. At the witness stand, Villaner declared:

I do not know why I signed that, that is why I am puzzled. Q: Why, did you not read the contents of this document? A: I have not read that. I only happened to read the title of the Lease Contract. Q: And do you recall who were the witnesses of the document which you signed in favor of Leonardo Acabal? A:

Q: Employees of Judge Villegas of Bais City. It appears, Mr. Acabal, that you have signed a document of sale with the defendant Leonardo Acabal on April 19, 1990, please tell the court whether you have really agreed to sell this property to the defendant on or before April 19, 1990? A: We had some agreement but not about the selling of this property. Q: What was your agreement with the defendant Leonardo Acabal? A: Our agreement [was] that he will just rent.14 A: These are not the signatures of the two women. xxx Q: Q: Now, please tell the court how were you able to sign this document on April 19, 1990? A:
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Q: Did you see them sign that document? A: Yes, sir. Q: These signatures appearing in this document marked as Exhibit C for the plaintiff and Exhibit 1 for the defendant, please examine over (sic) these signatures if these were the signatures of these witnesses who signed this document?

And after signing this document on April 19, 1990, did you appear before a notary public to have this notarized? A:

No, I went home to San Carlos.15

Mellie Cadalin is also working in the sala of Judge Villegas. Q:

xxx Q: According to this document, you sell (sic) this property at P10,000.00, did you sell this property to Leonardo Acabal? A: No, sir. Q: How about after April 19, 1990, did you receive this amount from Leonardo Acabal? A: No, sir.16

Who requested Mellie Cadalin to prepare this document? A: Maybe it was Leonardo Acabal. Q: By the way, when for the first time did you talk to Leonardo Acabal regarding your agreement to lease this property to him? A: March 14, 1990, in San Carlos. Q: And what document did you give to him in order that that document will be prepared? A:

xxx Q: Now you said that on May 25, 1990, Leonardo Acabal did not pay the amount that he promised to you, what did you do of (sic) his refusal to pay that amount? A: I went to Mr. [Carmelo] Mellie Cadalin because he was the one who prepared the papers and to ask Leonardo Acabal why he will not comply with our agreement. Q: By the way, who is this Mellie Cadalin? A:

I have given (sic) some papers and contract of lease that I have signed to (sic) Mrs. Montenegro.17 (Emphasis and italics supplied)

xxx Q: Now, Carmelo Cadalin [Mellie] also testified before this court that in fact he identified the document marked as Exhibit C for the plaintiff that what you executed on April 19, 1990 was a deed of sale and not a contract of lease, what can you say to that statement? A: That is a lie. Q:
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And whats the truth then? A: What really (sic) I have signed was the document of lease contract. Q: Now, can you explain to the Honorable Court why it so happened that on April 19, you were able to sign a deed of sale? A: What I can see now is that perhaps those copies of the deed of sale were placed by Mr. Cadalin under the documents which I signed the lease contract. But why is it that it has already a deed of sale when what I have signed was only the lease of contract or the contract of lease. Q:

paid,19 and as he had become the absolute owner of the property, he validly transferred it to Ramon Nicolas on May 19, 1990.20 Carmelo Cadalin who admittedly prepared the deed of absolute sale and who appears as a witness, along with his wife, to the execution of the document corroborated Leonardos claim: Q: Mr. Cadalin, do you know the plaintiff Villaner Acabal? A: Yes, I know.21

xxx Q: Now, Mr. Cadalin also stated before this court that he handed over to you this Deed of Sale marked as Exhibit C and according to him you read this document, what can you say to this statement? A: Yes, there was a document that he gave me to read it (sic) but it was a contract of lease. Q: How sure are you that what you signed on April 19, 1990 was really a contract of lease and not a contract of sale? A: Because when I signed the contract of lease the witnesses that witnessed my signing the document were the employees of Judge Villegas and then I am now surprised why in the deed of sale which I purportedly signed are witnessed by Carmelo Cadalin and his wife Lacorte.18 (Emphasis and italics supplied) On the other hand, Leonardo asserts that what Villaner executed was a Deed of Absolute Sale for a consideration of P10,000.00 which he had already And I would like to ask you Mr. witness why do you know Villaner Acabal? A: At the time that he went to our house together with Leonardo Acabal he requested me to prepare a deed of sale as regards to a sale of the property.22

xxx Q: And after they requested you to prepare a document of sale, what did you do? A: At first I refused to [do] it because I have so many works to do, but then they insisted so I prepared the deed. Q: After you prepared the document, what did you do?

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A: After I prepared it I gave it to him so that he could read the same. Q: When you say him, whom do you refer to? A: Villaner Acabal. Q: And did Villaner Acabal read the document you prepared? A: Yes, he read it. Q: And after reading it what did Villaner Acabal do? A: He signed the document. Q: Showing to you a document which is marked Exhibit C for the plaintiff and Exhibit 1 for the defendants, please tell the Honorable Court what relation this document has to the document which you described earlier? COURT INTERPRETER:

xxx Q: Also stated in the document is the phrase Signed in the presence of and there is a number and then two signatures, could you please examine the document and say whether these signatures are familiar to you? A: Yes, number one is my signature and number 2 is the signature of my wife as witness.24

xxx Q: After Villaner Acabal signed the document, what did Villaner Acabal do? A: He was given the payment by Leonardo Acabal.25

xxx Q: Aside from the document, deed of absolute sale, that you mentioned earlier that you prepared for Villaner Acabal and Leonardo Acabal, what other documents, if any, did you prepare for them? A:

Witness is confronted with the said document earlier marked as Exhibit C for the prosecution and Exhibit 1 for the defense. A: Yes, this is the one.23

Affidavit of non-tenancy and aggregate area.26 (Emphasis and italics supplied) The complaint was later amended27 to implead Villaners eight children as party plaintiffs, they being heirs of his deceased wife. By Decision of August 8, 1996, the trial court found for the therein defendantsherein petitioners Leonardo and Ramon Nicolas and accordingly dismissed the complaint.
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Villaner, et al. thereupon brought the case on appeal to the Court of Appeals which reversed the trial court, it holding that the Deed of Absolute Sale executed by Villaner in favor of Leonardo was simulated and fictitious.28 Hence, Leonardo and Ramon Nicolas present petition for review on certiorari,29 anchored on the following assignments of error: I.

NICOLAS AS A BUYER IN GOOD FAITH AS THE LATTER TOOKTHE NECESSARY STEPS AN ORDINARY AND PRUDENT MANWOULD HAVE TAKEN BEFORE BUYING THE QUESTIONEDPROPERTY. V.

THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR WHEN IT RULED THAT RESPONDENT VILLANER ACABAL WAS DECEIVED INTO SIGNING THE DEED OF ABSOLUTE SALE WHEN THE LATTER KNOWINGLY, FREELY AND VOLUNTARILY EXECUTED THE SAME IN FAVOR OF PETITIONER LEONARDO ACABAL. II.

THE COURT OF APPEALS ERRED IN RULING IN FAVOR OF RESPONDENT VILLANER ACABAL WHEN THE LATTER DID NOT PRESENT A SINGLE WITNESS TO TESTIFY ON THE ALLEGED CONTRACT OF LEASE WHICH HE ALLEGEDLY SIGNED AND WITNESSED BY THE EMPLOYEES OF JUDGE VILLEGAS. VI.

THE COURT OF APPEALS ERRED WHEN IT RULED THAT THE CONSIDERATION OF THE DEED OF ABSOLUTE SALE IN THE AMOUNT OF TEN THOUSAND PESOS (P10,0000.00) WAS UNUSUALLY LOW AND INADEQUATE, ESPECIALLY TAKING INTO ACCOUNT THE LOCATION OF THE SUBJECT PROPERTY. III.

THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN LAW WHEN IT RULED THAT RULE 8, SECTION 8 OF THE 1987 (sic) RULE (sic) OF CIVIL PROCEDURE IS NOT APPLICABLE IN THE CASE AT BAR, CONTRARY TO THE RULING OF THE LOWER COURT. VII.

THE COURT OF APPEALS ERRED WHEN IT ORDERED PETITIONERS TO PAY RESPONDENTS JOINTLY AND SEVERALLY BY WAY OF RENTAL THE SUM OF P10,000.00 PER YEAR FROM 1990 UP TO THE TIME THEY VACATE THE PREMISES.30 Procedurally, petitioners contend that the Court of Appeals erred when it failed to apply Section 8, Rule 8 of the Rules of Court, respondent Villaner having failed to deny under oath the genuineness and due execution of the April 19, 1990 Deed of Absolute Sale. Petitioners contention does not persuade. The failure to deny the genuineness and due execution of an actionable document does not preclude a party from arguing against it by evidence of fraud, mistake, compromise, payment, statute of limitations, estoppel, and want of consideration.31 On the merits, this Court rules in petitioners favor.
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THE COURT OF APPEALS ERRED WHEN IT FAILED TO CONSIDER WHY RESPONDENT VILLANER ACABAL ONLY QUESTIONED THE POSSESSION AND OWNERSHIP OF PETITIONER RAMON NICOLAS IN COURT AFTER THE LATTER WAS IN OPEN, CONTINUOUS AND PEACEFUL POSSESSION OF THE SUBJECT PROPERTY FOR ALMOST THREE (3) YEARS. IV.

THE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR IN LAW WHEN IT FAILED TO DECLARE PETITIONER RAMON

It is a basic rule in evidence that the burden of proof lies on the party who makes the allegations32ei incumbit probatio, qui dicit, non qui negat; cum per rerum naturam factum negantis probatio nulla sit.33 If he claims a right granted by law, he must prove it by competent evidence, relying on the strength of his own evidence and not upon the weakness of that of his opponent. More specifically, allegations of a defect in or lack of valid consent to a contract by reason of fraud or undue influence are never presumed but must be established not by mere preponderance of evidence but by clear and convincing evidence.34 For the circumstances evidencing fraud and misrepresentation are as varied as the people who perpetrate it in each case, assuming different shapes and forms and may be committed in as many different ways.35 In the case at bar, it was incumbent on the plaintiff-herein respondent Villaner to prove that he was deceived into executing the Deed of Absolute Sale. Except for his bare allegation that the transaction was one of lease, he failed to adduce evidence in support thereof. His conjecture that perhaps those copies of the deed of sale were placed by Mr. Cadalin under the documents which I signed the contract of lease,36 must fail, for facts not conjectures decide cases. Attempting to seek corroboration of his account, Villaner presented Atty. Vicente Real who notarized the document. While on direct examination, Atty. Real virtually corroborated Villaners claim that he did not bring the document to him for notarization,37 on cross-examination, Atty. Real conceded that it was impossible to remember every person who would ask him to notarize documents: Q: And in the course of your notarization, can you remember each and every face that come (sic) to you for notarization? A: No, it is impossible. Q: In the case of Villaner Acabal which you have his document notarized (sic) in 1990, can you remember his face when he came to you?

A: No. Q: And can you also say, if a person who came to you having a document to be notarized and if he will appear again after a month, can you remember whether he was the one who came to you? A: Not so much because everyday there are many people who appear with documents to be notarized. Q: So, it is safe to say that if Villaner Acabal came to you on April 25 or rather April 16, 1990 andhave (sic) his document notarized if he comes back in, say May 25, can you still remember if he was the one who came to you? A: I cannot be sure but at least, there are times I can remember persons because he seems to be close to me already. Q: Is this Villaner close to you? A: Because he has been frequenting the house/asking for a copy of the document. Q: So, he became close to you after you notarized the document? A: Yes.38 (Emphasis and italics supplied) On Villaners claim that two women employees of Judge Villegas signed as witnesses to the deed39 but that the signatures appearing thereon are not
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those of said witnesses,40 the same must be discredited in light of his unexplained failure to present such alleged women employee-witnesses. In another vein, Villaner zeroes in on the purchase price of the property P10,000.00which to him was unusually low if the transaction were one of sale. To substantiate his claim, Villaner presented Tax Declarations covering the property for the years 1971,41 1974,42 1977,43 1980,44 1983,45 1985,46 as well as a Declaration of Real Property executed in 1994.47 It bears noting, however, that Villaner failed to present evidence on the fair market value of the property as of April 19, 1990, the date of execution of the disputed deed. Absent any evidence of the fair market value of a land as of the time of its sale, it cannot be concluded that the price at which it was sold was inadequate.48 Inadequacy of price must be proven because mere speculation or conjecture has no place in our judicial system.49 Victor Ragay, who was appointed by the trial court to conduct an ocular inspection50 of the property and to investigate matters relative to the case,51 gave an instructive report dated December 3, 1994,52 the pertinent portions of which are hereby reproduced verbatim: a) Only three (3) to four (4) hectares of the eighteen (18) were planted to sugar cane, the rest was never cultivated; b) the soil is reddish and somewhat sandy in composition; c) the soil contains so much limestones (rocks consisting mainly of calcium carbonate); d) no part of the land in question is plain or flat, contrary to claim of the plaintiff that almost 10 hectares of the land in question is plain or flat; e) some areas, eastward of and adjacent of the land in question (mistakenly to be owned by the defendant Nicolas) were planted to sugar cane by the ownersKadusales; f) the road going to the land in question (as claimed to be the road) is no longer passable because it has been abandoned and not maintained by anyone, thus it makes everything impossible for anybody to get and haul the sugar cane from the area;

g) the Commissioner has discovered some stockpiles of abandoned harvested sugar canes left to rot, along the side of the road, undelivered to the milling site because of the difficulty in bringing up trucks to the scene of the harvest; h) the sugarcanes presently planted on the land in question at the time of the ocular inspection were three (3) feet in height and their structural built was thin or lean; i) Most of the part of the 18 hectares is not planted or cultivated because the same is too rocky and not suitable for planting to sugarcane.53 Additionally, Ragay reported that one Anatolio Cabusog recently purchased a 6-hectare property adjoining that of the subject property for only P1,600.0054 or P266.67 per hectare. Given that, had the 18-hectare subject property been sold at about the same time, it would have fetched the amount of P4,800.00,55 hence, the P10,000.00 purchase price appearing in the questioned April 19, 1990 document is more than reasonable. Even, however, on the assumption that the price of P10,000.00 was below the fair market value of the property in 1990, mere inadequacy of the price per se will not rule out the transaction as one of sale. For the price must be grossly inadequate or shocking to the conscience such that the mind revolts at it and such that a reasonable man would neither directly nor indirectly be likely to consent to it.56 Still in another vein, Villaner submits that Leonardos transfer of the property to Nicolas in a span of one month for a profit of P30,000.00 conclusively reflects Leonardos fraudulent intent. This submission is a non sequitur. As for Villaners argument that the sale of the property to Leonardo and the subsequent sale thereof to Nicolas are void for being violative of the retention limits imposed by Republic Act No. 6657, otherwise known as the Comprehensive Agrarian Reform Law, the same fails. The pertinent provisions of said law read: SECTION 6. Retention Limits.Except as otherwise provided in this Act, no person may retain, directly or indirectly, any public or agricultural land, the size of which may vary according to factors governing a viable family-sized farm, such as commodity produced, terrain, infrastructure, and soil fertility as determined by the Presidential Agrarian Reform Council (PARC) created hereunder, but in no case shall retention by the landowner exceed five (5) hectares. Three (3) hectares may be awarded to each child of the landowner, subject to
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the following qualifications: (1) that he is at least fifteen (15) years of age; and (2) that he is tilling the land or directly managing the farm: Provided, That landowners whose lands have been covered by Presidential Decree No. 27 shall be allowed to keep the areas originally retained by them thereunder:57 Provided further, That original homestead grantees or direct compulsory heirs who still own the original homestead at the time of the approval of this Act shall retain the same areas as long as they continue to cultivate said homestead. xxx Upon the effectivity of this Act, any sale, disposition, lease, management, contract or transfer of possession of private lands executed by the original landowner in violation of this Act shall be null and void: Provided, however, that those executed prior to this Act shall be valid only when registered with the Register of Deeds within a period of three (3) months after the effectivity of this Act. Thereafter, all Registers of Deeds shall inform the DAR within thirty (30) days of any transaction involving agricultural lands in excess of five (5) hectares. xxx SECTION 70. Disposition of Private Agricultural Lands.The sale or disposition of agricultural lands retained by a land owner as a consequence of Section 6 hereof shall be valid as long as the total landholdings that shall be owned by the transferee thereof inclusive of the land to be acquired shall not exceed the landholding ceilings provided for in this Act. Any sale or disposition of agricultural lands after the effectivity of this Act found to be contrary to the provisions hereof shall be null and void. Transferees of agricultural lands shall furnish the appropriate Register of Deeds and the BARC an affidavit attesting that his total landholdings as a result of the said acquisition do not exceed the landholding ceiling. The Register of Deeds shall not register the transfer of any agricultural land without the submission of his sworn statement together with proof of service of a copy thereof to the BARC. (Emphasis and italics supplied) As the above-quoted provisions of the Comprehensive Agrarian Reform Law show, only those private lands devoted to or suitable for agriculture are covered by it.58 As priorly related, Victor Ragay, who was appointed by the trial court to conduct an ocular inspection of the property, observed in his report that only three (3) to four (4) hectares were planted with sugarcane while the

rest of the property was not suitable for planting as the soil was full of limestone.59 He also remarked that the sugarcanes were only 3 feet in height and very lean,60 whereas sugarcanes usually grow to a height of 3 to 6 meters (about 8 to 20 feet) and have stems 2 to 5 centimeters (1-2 inches) thick.61 It is thus gathered that the property was not suitable for agricultural purposes. In any event, since the area devoted to the planting of sugarcane, hence, suitable for agricultural purposes, comprises only 4 hectares at the most, it is less than the maximum retention limit prescribed by law. There was then no violation of the Comprehensive Agrarian Reform Law. Even assuming that the disposition of the property by Villaner was contrary to law, he would still have no remedy under the law as he and Leonardo were in pari delicto, hence, he is not entitled to affirmative reliefone who seeks equity and justice must come to court with clean hands. In pari delicto potior est conditio defendentis.62 The proposition is universal that no action arises, in equity or at law, from an illegal contract; no suit can be maintained for its specific performance, or to recover the property agreed to be sold or delivered, or the money agreed to be paid, or damages for its violation. The rule has sometimes been laid down as though it were equally universal, that where the parties are in pari delicto, no affirmative relief of any kind will be given to one against the other.63 (Emphasis and italics supplied) The principle of pari delicto is grounded on two premises: first, that courts should not lend their good offices to mediating disputes among wrongdoers;64 and second, that denying judicial relief to an admitted wrongdoer is an effective means of deterring illegality.65 This doctrine of ancient vintage is not a principle of justice but one of policy as articulated in 1775 by Lord Mansfield in Holman v. Johnson:66 The objection, that a contract is immoral or illegal as between the plaintiff and defendant, sounds at all times very ill in the mouth of the defendant. It is not for his sake, however, that the objection is ever allowed; but it is founded in general principles of policy, which the defendant has the advantage of, contrary to the real justice, as between him and the plaintiff, by accident, if I may so say. The principle of public policy is this; ex dolo malo non oritur actio.67 No court will lend its aid to a man who founds his cause of action upon an immoral or an illegal act. If, from the plaintiffs own stating or otherwise, the cause of action appears to arise ex turpi causa,68 or the transgression of a positive law of this country, there the court says he has no right to be assisted. It is upon that
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ground the court goes; not for the sake of the defendant, but because they will not lend their aid to such a plaintiff. So if the plaintiff and the defendant were to change sides, and the defendant was to bring his action against the plaintiff, the latter would then have the advantage of it; for where both are equally in fault potior est conditio defendentis.69 Thus, to serve as both a sanction and as a deterrent, the law will not aid either party to an illegal agreement and will leave them where it finds them. The principle of pari delicto, however, is not absolute, admitting an exception under Article 1416 of the Civil Code. ART. 1416. When the agreement is not illegal per se but is merely prohibited, and the prohibition by the law is designed for the protection of the plaintiff, he may, if public policy is thereby enhanced, recover what he has paid or delivered. Under this article, recovery for what has been paid or delivered pursuant to an inexistent contract is allowed only when the following requisites are met: (1) the contract is not illegal per se but merely prohibited; (2) the prohibition is for the protection of the plaintiffs; and (3) if public policy is enhanced thereby.70 The exception is unavailing in the instant case, however, since the prohibition is clearly not for the protection of the plaintiff-landowner but for the beneficiary farmers.71 In fine, Villaner is estopped from assailing and annulling his own deliberate acts.72 More. Villaner cannot feign ignorance of the law, nor claim that he acted in good faith, let alone assert that he is less guilty than Leonardo. Under Article 3 of the Civil Code, ignorance of the law excuses no one from compliance therewith. And now, Villaners co-heirs claim that as co-owners of the property, the Deed of Absolute Sale executed by Villaner in favor of Leonardo does not bind them as they did not consent to such an undertaking. There is no question that the property is conjugal. Article 160 of the Civil Code73 provides: ART. 160. All property of the marriage is presumed to belong to the conjugal partnership, unless it be proved that it pertains exclusively to the husband or to the wife.74

The presumption, this Court has held, applies to all properties acquired during marriage. For the presumption to be invoked, therefore, the property must be shown to have been acquired during the marriage.75 In the case at bar, the property was acquired on July 6, 1971 during Villaners marriage with Justiniana Lipajan. It cannot be seriously contended that simply because the tax declarations covering the property was solely in the name of Villaner it is his personal and exclusive property. In Bucoy v. Paulino76 and Mendoza v. Reyes77 which both apply by analogy, this Court held that registration alone of the properties in the name of the husband does not destroy the conjugal nature of the properties.78 What is material is the time when the land was acquired by Villaner, and that was during the lawful existence of his marriage to Justiniana. Since the property was acquired during the existence of the marriage of Villaner and Justiniana, the presumption under Article 160 of the Civil Code is that it is the couples conjugal property. The burden is on petitioners then to prove that it is not. This they failed to do. The property being conjugal, upon the death of Justiniana Lipajan, the conjugal partnership was terminated.79 With the dissolution of the conjugal partnership, Villaners interest in the conjugal partnership became actual and vested with respect to an undivided one-half portion.80 Justiniana's rights to the other half, in turn, vested upon her death to her heirs81 including Villaner who is entitled to the same share as that of each of their eight legitimate children.82 As a result then of the death of Justiniana, a regime of co-ownership arose between Villaner and his co-heirs in relation to the property.83 With respect to Justinianas one-half share in the conjugal partnership which her heirs inherited, applying the provisions on the law of succession, her eight children and Villaner each receives one-ninth (1/9) thereof. Having inherited one-ninth (1/9) of his wifes share in the conjugal partnership or one eighteenth (1/18)84 of the entire conjugal partnership and is himself already the owner of one half (1/2) or nine-eighteenths (9/18), Villaners total interest amounts to ten-eighteenths (10/18) or five-ninths (5/9). While Villaner owns five-ninths (5/9) of the disputed property, he could not claim title to any definite portion of the community property until its actual partition by agreement or judicial decree. Prior to partition, all that he has is an ideal or abstract quota or proportionate share in the property.85 Villaner,
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however, as a co-owner of the property has the right to sell his undivided share thereof. The Civil Code provides so: ART. 493. Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and he may therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal rights are involved. But the effect of the alienation or the mortgage, with respect to the co-owners, shall be limited to the portion which may be allotted to him in the division upon the termination of the co-ownership. Thus, every co-owner has absolute ownership of his undivided interest in the co-owned property and is free to alienate, assign or mortgage his interest except as to purely personal rights. While a co-owner has the right to freely sell and dispose of his undivided interest, nevertheless, as a co-owner, he cannot alienate the shares of his other co-ownersnemo dat qui non habet.86 Villaner, however, sold the entire property without obtaining the consent of the other co-owners. Following the well-established principle that the binding force of a contract must be recognized as far as it is legally possible to do so quando res non valet ut ago, valeat quantum valere potest87the disposition affects only Villaners share pro indiviso, and the transferee gets only what corresponds to his grantors share in the partition of the property owned in common.88 As early as 1923, this Court has ruled that even if a co-owner sells the whole property as his, the sale will affect only his own share but not those of the other co-owners who did not consent to the sale. This is because under the aforementioned codal provision, the sale or other disposition affects only his undivided share and the transferee gets only what would correspond to this grantor in the partition of the thing owned in common. Consequently, by virtue of the sales made by Rosalia and Gaudencio Bailon which are valid with respect to their proportionate shares, and the subsequent transfers which culminated in the sale to private respondent Celestino Afable, the said Afable thereby became a co-owner of the disputed parcel of land as correctly held by the lower court since the sales produced the effect of substituting the buyers in the enjoyment thereof. From the foregoing, it may be deduced that since a co-owner is entitled to sell his undivided share, a sale of the entire property by one co-owner without the consent of the other co-owners is not null and void. However, only the rights of the co-owner-seller are transferred, thereby making the buyer a co-owner of the property.

The proper action in cases like this is not for the nullification of the sale or the recovery of possession of the thing owned in common from the third person who substituted the co-owner or co-owners who alienated their shares, but the DIVISION of the common property as if it continued to remain in the possession of the co-owners who possessed and administered it.89 Thus, it is now settled that the appropriate recourse of coowners in cases where their consent were not secured in a sale of the entire property as well as in a sale merely of the undivided shares of some of the co-owners is an action for PARTITION under Rule 69 of the Revised Rules of Court. Neither recovery of possession nor restitution can be granted since the defendant buyers are legitimate proprietors and possessors in joint ownership of the common property claimed.90 (Italics in the original; citations omitted; italics supplied) This Court is not unmindful of its ruling in Cruz v. Leis91 where it held: It is conceded that, as a rule, a co-owner such as Gertrudes could only dispose of her share in the property owned in common. Article 493 of the Civil Code provides: xxx Unfortunately for private respondents, however, the property was registered in TCT No. 43100 solely in the name of Gertrudes Isidro, widow. Where a parcel of land, forming part of the undistributed properties of the dissolved conjugal partnership of gains, is sold by a widow to a purchaser who merely relied on the face of the certificate of title thereto, issued solely in the name of the widow, the purchaser acquires a valid title to the land even as against the heirs of the deceased spouse. The rationale for this rule is that a person dealing with registered land is not required to go behind the register to determine the condition of the property. He is only charged with notice of the burdens on the property which are noted on the face of the register or the certificate of title. To require him to do more is to defeat one of the primary objects of the Torrens system.92 (Citation omitted) Cruz, however, is not applicable for the simple reason that in the case at bar the property in dispute is unregistered. The issue of good faith or bad faith of a buyer is relevant only where the subject of the sale is a registered land but not where the property is an unregistered land.93 One who purchases an unregistered land does so at his peril.94 Nicolas claim of having bought the land in good faith is thus irrelevant.95
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WHEREFORE, the petition is GRANTED. The Court of Appeals February 15, 2001 Decision in CA-G.R. CV No. 56148 is REVERSED and SET ASIDE and another is rendered declaring the sale in favor of petitioner Leonardo Acabal and the subsequent sale in favor of petitioner Ramon Nicolas valid but only insofar as five-ninths (5/9) of the subject property is concerned. No pronouncement as to costs. SO ORDERED. Panganiban (Chairman), Sandoval-Gutierrez, Corona and Garcia, JJ., concur. Petition granted, judgment reversed and set aside. Notes.Where both parties are equally guilty, neither is entitled to complain against the otherhaving entered into the transaction with open eyes, and having benefit from it, said parties should be held in estoppel to assail and annul their own deliberate acts. (San Agustin vs. Court of Appeals, 371 SCRA 348 [2001]) Pari delicto may not be invoked in a case of the waiver of rights under P.D. No. 27 since it runs counter to an avowed fundamental policy of the State. (Siacor vs. Gigantana, 380 SCRA 306 [2002]) o0o [Acabal vs. Acabal, 454 SCRA 555(2005)]

274

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Cuizon vs. Remoto G.R. No. 143027. October 11, 2005.* ENCARNACION L. CUIZON and SALVADOR CUIZON, petitioners, vs. MERCEDES C. REMOTO, LEONIDA R. MEYNARD, CELERINA R. ROSALES and REMEDIOS C. REMOTO, respondents.
Civil Procedure; Appeals; As a rule, the Supreme Court cannot review the factual findings of the trial court and the Court of Appeals in a petition for review on certiorari under Rule 45 of the Rules of Court. It should be stressed that a review by certiorari under Rule 45 is a matter of discretion.As a rule, the Court cannot review the factual findings of the trial court and the CA in a petition for review on certiorari under Rule 45 of the Rules of Court. It should be stressed that a review by certiorari under Rule 45 is a matter of discretion. Under this mode of review, the jurisdiction of the Court is limited to reviewing only errors of law, not of fact. When supported by substantial evidence, findings of fact of the trial court as affirmed by the CA are conclusive and binding on the parties. This Court will not review unless there are exceptional circumstances, viz.: (a) where the conclusion is a finding grounded entirely on speculation, surmise and conjectures; (b) where the information made is manifestly mistaken; (c) where there is grave abuse of discretion; (d) where the judgment is based on a misapplication of facts, and the findings of facts of the trial court and the appellate court are contradicted by the evidence on record; and (e) when certain material facts and circumstances had been overlooked by the trial court which, if taken into account, would alter the result of the case. There exists no exceptional circumstance in this case that would warrant a departure from the factual findings of both the trial court and the CA. Civil Law; Sales; Where the party has knowledge of a prior existing interest which is unregistered at the time he acquired interest has the effect of registration as to him.Where the party has knowledge of a prior existing interest which is unregistered at the time he acquired a right to the same land, his knowledge of that prior unregistered interest has the effect of registration as to him. As was found by the trial court, before petitioners bought the property in 1983, they went to the Remotos residence in 1982 and were shown a copy of the 1968 Deed of Sale. While petitioners dispute the year, saying that it was in 1983 and not 1982 when they went to the Remotos residence, the Court abides by the trial courts finding considering that it was in the best position to assess the respective testimonies of the contending claimants. Same; Same; No one can give what one does not have.No one can give what one does not havenemo dat quod non habet. Accordingly, one can sell only what one owns or is authorized to sell, and the buyer can acquire no more than what the seller can transfer legally. Such being the case, the heirs of Placida did not acquire any right to adjudicate the property unto them and sell it to Encarnacion. Same; Same; Torrens System; The defense of indefeasibility of the Torrens title does not extend to a transferee who takes the certificate of title with notice of a flaw in his titlethe principle of indefeasibility of title is unavailing where there was fraud that attended the issuance of the free

patents and titles.The defense of indefeasibility of the Torrens title does not extend to a transferee who takes the certificate of title with notice of a flaw in his title. The principle of indefeasibility of title is unavailing where there was fraud that attended the issuance of the free patents and titles. As previously noted, petitioners knew of the existence of the 1968 Deed of Sale as the Remotos showed it to them in 1982, a year before the execution of the 1983 Extra-Judicial Settlement with Sale. Thus, it cannot be said that petitioners are transferees in good faith and therefore, the defense of indefeasibility of the Torrens title is not applicable to them. Same; Same; Reconveyance; If a person claiming to be the owner thereof is in actual possession of the property, the right to seek reconveyance, which in effect seeks to quiet title to the property, does not prescribe.If a person claiming to be the owner thereof is in actual possession of the property, the right to seek reconveyance, which in effect seeks to quiet title to the property, does not prescribe. The reason for this is that one who is in actual possession of a piece of land claiming to be the owner thereof may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right, the reason for the rule being, that his undisturbed possession gives him a continuing right to seek the aid of a court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on his own title, which right can be claimed only by one who is in possession.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court. Rodolfo C. Acido for petitioners. Wenceslao B. Rosales for respondents. AUSTRIA-MARTINEZ, J.:

The parties in this case are vying for ownership of a 4,300 square meter-land located in Barangay Basilisa, Remedios T. Romualdez, Agusan del Norte. Petitioners-spouses Encarnacion L. Cuizon and Salvador Cuizon rely on Transfer Certificate of Title (TCT) No. RT-3121 in the name of Encarnacion L. Cuizon, married to Salvador Cuizon, issued by the Registry of Deeds of Agusan del Norte on March 15, 1984,1 pursuant to a notarized Extra-Judicial Settlement with Sale dated August 3, 1983 (1983 Extra-Judicial Settlement with Sale) executed by the heirs of Placida Tabada-Lambo (Placida), wherein they adjudicated unto themselves the one-fourth share of Placida, and, at the same time, sold said portion to their co-heir, Encarnacion L. Cuizon.2 TCT No.
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RT-3121 is a transfer from TCT No. RT-183 which originally covers 16 hectares in the name of Placida (married to Gervacio Lambo), Eugenio Tabada, Raymunda Tabada and Patrecia Tabada, each being one-fourth share-owner.3 On the other hand, respondents have in their favor a notarized Deed of Sale of Real Property dated September 19, 1968, (1968 Deed of Sale) involving a portion of the same property covered by TCT No. RT-183, measuring 4,300 square meters, executed by Placida in favor of Angel Remoto (Angel), husband of respondent Mercedes C. Remoto, and father of the other respondents, Leonida R. Meynard, Celerina R. Rosales and Remedios C. Remoto.4 In a Decision dated March 9, 1990 rendered by the Regional Trial Court of Butuan City (Branch 3) in Civil Case No. 2846, which is an action for reconveyance filed by respondents against petitioners on August 13, 1984, the trial court ruled in favor of respondents and ordered that the property be reconveyed to them. The dispositive portion of the decision reads: Wherefore, judgment is rendered in favor of herein plaintiffs Mercedes Remoto and children Celerino R. Rosales, Leonida R. Meynard, Candelaria and Remedios both surnamed Remoto, and against defendant-spouses Salvador and Encarnacion Cuizon ordering the latter: 1) To immediately reconvey the lot in question to herein plaintiffs; 2) To pay the sum of Two Thousand (P2,000.00) Pesos as litigation expenses; 3) To pay the sum of Five Thousand (P5,000.00) Pesos as attorneys fees; and 4) To pay the costs (sic) of suit. Done in Chambers this 9th day of March, 1990, at Butuan City, Philippines.5 In awarding the property to respondents, the trial court made the following findings and conclusion, which the Court quotes with approval, viz.: . . . a careful examination of the evidence on record shows that the evidence of the plaintiffs is strong, substantial convincing and worthy of belief than that of the defendants. The plaintiffs can legally claim possession and ownership of the lot in dispute covered by the onepaged duly notarized but unregistered Deed of Sale of Real Property (Exh. A, Rollo, p. 45 or 89). A perusal of this document discloses that it was duly notarized and signed by vendor Placida Tabada, together with [h]usband Gervacio Lambo, and vendee Angel Remoto.

Incidentally, the defendants-spouses utterly failed to prove any defect and irregularity in the exec[u]tion of this Exh. A. It is the posture of the defendants-spouses that this state (sic) and unregistered deed of sale (Exh. A) has lost its due execution and genuineness and the fact of its being a public document; that it cannot defeat the duly registered Deed of Extrajudicial Settlement with Absolute Sale (Exh. 1-B); and that the issuance of TCT No. RT-3121 in favor of defendantsspouses (Exh. 3) conferred the latter a better right to the litigated lot under the Torrens system. This Court is not in accord to (sic) these posturings of defendants-spouses. Exhibit A, which is duly notarized, is a public document. Although it is not registered, it is still enforceable and binding not only between the parties but also their successors-in-interest. l It is likewise [the] stance of defendants-spouses that they are purchasers in good faith and for value of the lot in question. This fact is vividly rebutted by the straightforward and credible testimonies of plaintiffs Mercedes O. Remoto and Candelaria Remoto. Both testified that it was in September, 1982, not in 1983 as defendant Salvador Cuizon wants this court to believe, when defendantsspouses went to the residence of the Remotos and learned of the existence of Exhibit A; that it was on this occasion that defendants-spouses were actually shown the document, and that they read and examined the same (Vide, tsn. December 28, 1984, 284-289; tsn. April 24, 1986, 32, 34-37). Besides, defendants-spouses could not feign ignorance of the unrebutted fact that the plaintiffs had enjoyed continuous, open, adverse and public possession of the litigated lot in the concept of an owner for a duration of fourteen years or more, i.e., from September 19, 1968, the date of execution of Exhibit A, to the present (tsn. December 28, 1984, 283-284) or until September, 1982 when they became aware of the existence of Exhibit A. Nor could the defendants-spouses deny the unrebutted fact that they never had taken possession of the litigated lot (tsn. Id., 274-275). Despite their knowledge of the existence of the Exhibit A and of the continuous public and adverse possession for fourteen years of the lot by the plaintiffs, defendants-spouses had caused the execution of the Deed of Extrajudicial Settlement with Sale on August 3, 1983 by the Heirs of Placida Tabada-Lambo in their favor (Exh. 1-B), and the consequent issuance of TCT RT-3121 in the name of defendant Encarnacion-Cuizon (Exh. 3). Hence, defendants-spouses were buyers in bad faith. They could not pretend a lack of
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knowledge of plaintiffs claim and interest in the land. They also acted in bad faith in the registration of the Deed of Extrajudicial Settlement with Sale (Exh. 1-B) and in their acquisition of TCT RT-3121 (Exh. 3). ... Since defendants-spouses knew of the existence of the first deed of sale, Exhibit A, this first unregistered deed of sale prevails over the registered second deed of sale, Exhibit 1-B. ... It is also stressed herein that the claim of defendants-spouses that they bought the disputed lot in 1964 on installment basis from Placida Tabada and Gervacio Lambo cannot be given credence. This claim of theirs is self-serving and an afterthought in their last attempts to bolster their defense. In the absence of a written document embodying the supposed deed of sale, the latter is unenforceable contract. This conclusion is in pursuance to subparagraph (e), paragraph 2 of Art. 1403 of the Civil Code. l Furthermore, it is the submission of the defendants-spouses that Exhibit A is a simulated contract because the questioned lot was intended for donation as a barrio site. This submission of their (sic) cannot be sustained in the absence of a written deed of donation. l In fine, this Court finds and so holds that the Deed of Sale of Real Property of September 1968 (Exh. A) can be the legal basis not only of the possession and ownership of the lot in litigation, but also for the reconveyance of the same in favor of the plaintiffs.6 On appeal by petitioners, docketed as CA-G.R. CV No. 31587, the Court of Appeals (CA) affirmed the findings and conclusion of the trial court in its Decision7 dated December 16, 1999, the dispositive portion of which reads: WHEREFORE, foregoing premises considered, the instant appeal being devoid of any merit in fact and in law, is hereby ordered DISMISSED; and the decision appealed from hereby AFFIRMED IN TOTO. With cost to Defendants-appellants. SO ORDERED.8

Petitioners filed a motion for reconsideration but the CA denied it per Resolution dated March 31, 2000.9 In the present petition for review, petitioners insist that they are the rightful owners of the property based on TCT No. RT-3121, and that the 1968 Deed of Sale is void, fictitious, unenforceable and has no legal effect. Petitioners also argue that: (1) the property is covered by TCT No. RT-183 issued on June 21, 1930, and every person dealing with registered land may safely rely on the correctness of the title; (2) at the time the 1968 Deed of Sale was executed, no written notice was given to all possible co-redemptioners, co-heirs, and coowners, as provided for under Articles 1620 and 1623 of the Civil Code; (3) respondents possession is ineffectual against a torrens title; and (4) respondents action is barred by prescription and laches.10 The issue in this case is: who has a better right to the property in dispute? As a rule, the Court cannot review the factual findings of the trial court and the CA in a petition for review on certiorari under Rule 45 of the Rules of Court.11 It should be stressed that a review by certiorari under Rule 45 is a matter of discretion. Under this mode of review, the jurisdiction of the Court is limited to reviewing only errors of law, not of fact. When supported by substantial evidence, findings of fact of the trial court as affirmed by the CA are conclusive and binding on the parties.12 This Court will not review unless there are exceptional circumstances, viz.: (a) where the conclusion is a finding grounded entirely on speculation, surmise and conjectures; (b) where the information made is manifestly mistaken; (c) where there is grave abuse of discretion; (d) where the judgment is based on a misapplication of facts, and the findings of facts of the trial court and the appellate court are contradicted by the evidence on record; and (e) when certain material facts and circumstances had been overlooked by the trial court which, if taken into account, would alter the result of the case.13 There exists no exceptional circumstance in this case that would warrant a departure from the factual findings of both the trial court and the CA. As correctly ruled by both the trial court and the CA, the 1968 Deed of Sale executed by Placida in favor of Angel should prevail over the 1983 ExtraJudicial Settlement with Sale made by the heirs of Placida in favor of petitioners-spouses Cuizon. Prior tempore, potior jure. It simply means, He who is first in time is preferred in right. The only essential requisite of this rule is priority in time, and the only one who can invoke this is the first vendee.14 Records bear the fact that when Placida sold her one-fourth portion of the property covered by TCT No. RT-183 in 1968, the 1983 Extra-Judicial
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Settlement with Sale was still inexistent, and more importantly, said portion was yet to be transferred by succession to Placidas heirs. The records also show that after Placida sold her portion to Angel, the latter immediately took possession of the same. Applying the principle of priority in time, it is clear that Angel, and consequently his heirs, the respondents herein, have a superior right to the property. It must be noted that the sale by Placida to Angel is evidenced by a duly notarized deed of sale. Documents acknowledged before notaries public are public documents and public documents are admissible in evidence without necessity of preliminary proof as to their authenticity and due execution. They have in their favor the presumption of regularity, and to contradict the same, there must be evidence that is clear, convincing and more than merely preponderant.15 Petitioners failed to present any clear and convincing evidence to prove that the deed of sale is void, fictitious, unenforceable and has no legal effect. Petitioners harp on the fact that the 1968 Deed of Sale dated September 19, 1968, while notarized, was not registered or annotated on TCT No. RT-183. Petitioners must be reminded that registration is not a requirement for validity of the contract as between the parties, for the effect of registration serves chiefly to bind third persons.16 Petitioners are not third persons within the contemplation of the registration rule. The conveyance shall not be valid against any person unless registered, except (1) the grantor, (2) his heirs and devisees, and (3) third persons having actual notice or knowledge thereof. Petitioners are both related to the original owner of the property, Placida. Petitioner Encarnacion Lambo-Cuizon is an heir of Placida, while Salvador Cuizon is Encarnacions husband. Hence, registration is not required to bind petitioners. Furthermore, where the party has knowledge of a prior existing interest which is unregistered at the time he acquired a right to the same land, his knowledge of that prior unregistered interest has the effect of registration as to him.17 As was found by the trial court, before petitioners bought the property in 1983, they went to the Remotos residence in 1982 and were shown a copy of the 1968 Deed of Sale. While petitioners dispute the year, saying that it was in 1983 and not 1982 when they went to the Remotos residence, the Court abides by the trial courts finding considering that it was in the best position to assess the respective testimonies of the contending claimants.18

Petitioners rely heavily on TCT No. RT-3121 issued in their names. In the first place, the issuance of the title was made pursuant to the 1983 Extra-Judicial Settlement with Sale. At the time this document was entered into by the heirs of Placida, the latter was no longer the owner of the property, having earlier sold the same to Angel. No one can give what one does not havenemo dat quod non habet. Accordingly, one can sell only what one owns or is authorized to sell, and the buyer can acquire no more than what the seller can transfer legally.19 Such being the case, the heirs of Placida did not acquire any right to adjudicate the property unto them and sell it to Encarnacion. Whats more, the defense of indefeasibility of the Torrens title does not extend to a transferee who takes the certificate of title with notice of a flaw in his title. The principle of indefeasibility of title is unavailing where there was fraud that attended the issuance of the free patents and titles.20 As previously noted, petitioners knew of the existence of the 1968 Deed of Sale as the Remotos showed it to them in 1982, a year before the execution of the 1983 ExtraJudicial Settlement with Sale. Thus, it cannot be said that petitioners are transferees in good faith and therefore, the defense of indefeasibility of the Torrens title is not applicable to them. Likewise, petitioners cannot complain that no written notice was given to all possible redemptioners or heirs at the time of the execution of the 1968 Deed of Sale. Under the provisions of the Civil Code on Legal Redemption, it is stated: Article 1620. A co-owner of a thing may exercise the right of redemption in case the shares of all the other co-owners or of any of them, are sold to a third person. If the price of the alienation is grossly excessive, the redemptioner shall pay only a reasonable one. Should two or more co-owners desire to exercise the right of redemption, they may only do so in proportion to the share they may respectively have in the thing owned in common. Art. 1623. The right of legal pre-emption or redemption shall not be exercised except within thirty days from the notice in writing by the prospective vendor, or by the vendor, as the case may be. The deed of sale shall not be recorded in the Registry of Property, unless accompanied by an affidavit of the vendor that he has given written notice thereof to all possible redemptioners. The right of redemption of co-owners excludes that of adjoining owners.
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Corollary to these, Article 1088 of the Civil Code, provides: Art. 1088. Should any of the heirs sell his hereditary rights to a stranger before the partition, any or all of the co-heirs may be subrogated to the rights of the purchaser by reimbursing him for the price of the sale, provided they do so within the period of one month from the time they were notified in writing of the sale by the vendor. The right of legal redemption pertains to Placidas original co-owners, namely, Eugenio Tabada, Raymunda Tabada and Patrecia Tabada, and their respective heirs,21 not to petitioners who are the heirs of Placida. Also, the written notification should come from the vendor or prospective vendor, Placida in this case, and not from any other person.22 This is so because the vendor is in the best position to know who are his co-owners that under the law must be notified of the sale. Also, the notice by the seller removes all doubts as to fact of the sale, its perfection; and its validity, the notice being a reaffirmation thereof, so that the party notified need not entertain doubt that the seller may still contest the alienation. This assurance would not exist if the buyer should give the notice.23 Even if the property has not yet been formally subdivided, still, records show that the particular portions belonging to the co-owners have already been allocated and Placidas co-owners have already been exercising proprietary rights over their respective allotments. Thus, inscribed on TCT No. RT-183 are several deeds of mortgages executed by Placidas co-owner Eugenio C. Tabada in favor of the Butuan City Rural Bank with respect to his one-fourth share, and a Deed of Sale with Right of Repurchase dated May 13, 1968 executed by the spouses Eugenio G. Tabada and Trinidad Ontong in favor of one Hernando R. Sanchez, also covering Eugenios one-fourth portion of the property.24 The Court notes, however, that the property originally co-owned by Placida, Eugenio Tabada, Raymunda Tabada and Patrecia Tabada, covered by TCT No. RT-183, measures 16 hectares, while the 1968 Deed of Sale covers 4,300 square meters. The right of Placida to sell her one-fourth portion of the property covered by TCT No. RT-183 is sanctioned under Article 493 of the Civil Code, to wit: Art. 493. Each co-owner shall have the full ownership of his part and the fruits and benefits pertaining thereto, and he may therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when

personal rights are involved. But the effect of the alienation or the mortgage, with respect to the co-owners, shall be limited to the portion which may be allotted to him in the division upon the termination of the co-ownership. The sale to Angel affects only Placidas pro indiviso share in the property, and Angel gets only what corresponds to Placidas share in the partition of the property owned in common. Since a co-owner is entitled to sell his undivided share, a sale of the entire property by one co-owner without the consent of the other co-owners is not null and void; only the rights of the co-owner/seller are transferred, thereby making the buyer a co-owner of the property.25 Given the foregoing, the portion sold by Placida and bought by Angel under the 1968 Deed of Sale should only pertain to one-fourth of Placidas share in the 16-hectare property, or 4,000 square meters. Lastly, prescription and laches do not apply in this case. To begin with, respondents have been in actual and continuous possession of the property since Angel first bought it in 1968. If a person claiming to be the owner thereof is in actual possession of the property, the right to seek reconveyance, which in effect seeks to quiet title to the property, does not prescribe. The reason for this is that one who is in actual possession of a piece of land claiming to be the owner thereof may wait until his possession is disturbed or his title is attacked before taking steps to vindicate his right, the reason for the rule being, that his undisturbed possession gives him a continuing right to seek the aid of a court of equity to ascertain and determine the nature of the adverse claim of a third party and its effect on his own title, which right can be claimed only by one who is in possession.26 Neither can respondents be held guilty of laches. On the contrary, it was respondents vigilance in protecting their right over the property that gave rise to the present case. Their action for reconveyance was filed only after one year and ten days from the execution of the 1983 Extra-Judicial Settlement with Sale, one year and three days after its registration, and four months and twenty-eight days after the issuance of TCT No. RT-3121. Obviously, laches has not yet set in. WHEREFORE, the petition is DISMISSED. The Court of Appeals Decision dated December 16, 1999 together with its Resolution dated March 31, 2000 in CA-G.R. CV No. 31587 is AFFIRMED. SO ORDERED.
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Puno (Chairman), Tinga and Chico-Nazario, JJ., concur. Callejo, Sr., J., On Leave. Petition dismissed, judgment and resolution affirmed. Notes.Factual findings of the trial court, especially when affirmed by the appellate court, are binding upon the Supreme Court and entitled to utmost respect. (ADR Shipping Services, Inc. vs. Gallardo, 389 SCRA 82 [2002]) Where the land sold is in the possession of a person other than the vendor, the purchaser must go beyond the certificates of title and make inquiries concerning the rights of the actual possessor. (Heirs of Trinidad De Leon Vda. de Roxas vs. Court of Appeals, 422 SCRA 101 [2004]) An action for reconveyance based on the nullity of the Deed of Sale is imprescriptible. (Aznar Brothers Realty Company vs. Heirs of Aniceto Augusto, 430 SCRA 156 [2004]) o0o [Cuizon vs. Remoto, 472 SCRA 274(2005)]

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Pamplona vs. Moreto No. L-33187. March 31, 1980.* CORNELIO PAMPLONA alias GEMINIANO PAMPLONA and APOLONIA ONTE, petitioners, vs. VIVENCIO MORETO, VICTOR MORETO, ELIGIO MORETO, MARCELO MORETO, PAULINA MORETO, ROSARIO MORETO, MARTA MORETO, SEVERINA MENDOZA, PABLO MENDOZA, LAZARO MENDOZA, VICTORIA TUIZA, JOSEFINA MORETO, LEANDRO MORETO and LORENZO MENDOZA, respondents.
Property; Sale; Equity; Laches; Estoppel; The petitioners are estopped from assailing the reality of the sale of conjugal estate made by their widowed father where for years they and the vendees have been neighbors each believing that the area occupied by the private respondents-vendees was the one so sold and petitioners had not questioned the sale made by their father of the area in question.Again, there is no dispute that the houses of the spouses Cornelio Pamplona and Apolonia Ante as well as that of their son Rafael Pamplona, including the concrete piggery coral adjacent thereto, stood on the land from 1952 up to the filing of the complaint by the private respondents on July 25, 1961, or a period of over nine (9) years. And during said period, the private respondents who are the heirs of Monica Maniega as well as of Flaviano Moreto who also died intestate on August 12, 1956, lived as neighbors to the petitioners-vendees, yet lifted no finger to question the occupation, possession and ownership of the land purchased by the Pamplonas, so that We are persuaded and convinced to rule that private respondents are in estoppel by laches to claim half of the property in dispute as null and void. Estoppel by laches is a rule of equity which bars a claimant from presenting his claim when, by reason of abandonment and negligence, he allowed a long time to elapse without presenting the same. (International Banking Corporation vs. Yared, 59 Phil. 92). Same; Same; A co-owner has the right to sell his portion of the co-owned property. The sale of a particular lot thus co-owned by one co-owner where within his right pro-indiviso is valid in its en-tirety.We reject respondent Courts ruling that the sale was valid as to one-half and invalid as to the other half for the very simple reason that Flaviano Moreto, the vendor, had the legal right to more than 781 sq. meters of the communal estate, a title which he could dispose, alienate in favor of the vendees-petitioners. The title may be pro-indiviso or inchoate but the moment the co-owner as vendor pointed out its location and even indicated the boundaries over which the fences were to be erected without objection, protest or complaint by the other co-owners, on the contrary they acquiesced and tolerated such alienation, occupation and possession, We rule that a factual partition or termination of the co-ownership, although partial, was created, and barred not only the vendor, Flaviano Moreto, but also his heirs, the private respondents herein from asserting as against the vendees-petitioners any right or title in derogation of the deed of sale executed by said vendor Flaviano Moreto.

Same; Same; Succession; Heirs are obliged to deliver land sold by their parents to the vendee thereof.Under Article 776, New Civil Code, the inheritance which private respondents received from their deceased parents and/or predecessors-in-interest included all the property rights and obligations which were not extinguished by their parents death. And under Art. 1311, paragraph 1, New Civil Code, the contract of sale executed by the deceased Flaviano Moreto took effect between the parties, their assigns and heirs, who are the private respondents herein. Accordingly, to the private respondents is transmitted the obligation to deliver in full ownership the whole area of 781 sq. meters to the petitioners (which was the original obligation of their predecessor Flaviano Moreto) and not only onehalf thereof. Private respondents must comply with said obligation. The records reveal that the area of 781 sq. meters sold to and occupied by petitioners for more than 9 years already as of the filing of the complaint in 1961 had been resurveyed by private land surveyor Daniel Aranas. Petitioners are entitled to a segregation of the area from Transfer Certificate of Title No. T-9843 covering Lot 1496 and they are also entitled to the issuance of a new Transfer Certificate of Title in their name based on the relocation survey.

APPEAL from the decision of the Court of Appeals. The facts are stated in the opinion of the Court. E.P. Caguioa for petitioners. Benjamin C. Yatco for respondents. GUERRERO, J.:

This is a petition for certiorari by way of appeal from the decision of the Court of Appeals1 in CA-G.R. No. 35962-R, entitled Vivencio Moreto, et al., PlaintiffAppellees vs. Cornelio Pamplona, et al., Defendants-Appellants, affirming the decision of the Court of First Instance of Laguna, Branch I at Bian. The facts, as stated in the decision appealed from, show that: Flaviano Moreto and Monica Maniega were husband and wife. During their marriage, they acquired adjacent lots Nos. 1495, 4545, and 1496 of the Calamba Friar Land Estate, situated in Calamba, Laguna, containing 781-544 and 1,021 square meters respectively, and covered by certificates of title issued in the name of Flaviano Moreto, married to Monica Maniega. The spouses Flaviano Moreto and Monica Maniega begot during their marriage six (6) children, namely, Ursulo, Marta, La Paz, Alipio, Pablo, and Leandro, all surnamed Moreto.
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Ursulo Moreto died intestate on May 24, 1959 leaving as his heirs herein plaintiffs Vivencio, Marcelo, Rosario, Victor, Paulina, Marta and Eligio, all surnamed Moreto. Marta Moreto died also intestate on April 30, 1938 leaving as her heir plaintiff Victoria Tuiza. La Paz Moreto died intestate on July 17, 1954 leaving the following heirs, namely, herein plaintiffs Pablo, Severina, Lazaro, and Lorenzo, all surnamed Mendoza. Alipio Moreto died intestate on June 30, 1943 leaving as his heir herein plaintiff Josefina Moreto. Pablo Moreto died intestate on April 25, 1942 leaving no issue and as his heirs his brother plaintiff Leandro Moreto and the other plaintiffs herein. On May 6, 1946, Monica Maniega died intestate in Calamba, Laguna. On July 30, 1952, or more than six (6) years after the death of his wife Monica Maniega, Flaviano Moreto, without the consent of the heirs of his said deceased wife Monica, and before any liquidation of the conjugal partnership of Monica and Flaviano could be effected, executed in favor of Geminiano Pamplona, married to defendant Apolonia Onte, the deed of absolute sale (Exh. 1) covering lot No. 1495 for P900.00. The deed of sale (Exh. 1) contained a description of lot No. 1495 as having an area of 781 square meters and covered by transfer certificate of title No. 14570 issued in the name of Flaviano Moreto, married to Monica Maniega, although the lot was acquired during their marriage. As a result of the sale, the said certificate of title was cancelled and a new transfer certificate of title No. T-5671 was issued in the name of Geminiano Pamplona married to Apolonia Onte (Exh. A). After the execution of the above-mentioned deed of sale (Exh. 1), the spouses Geminiano Pamplona and Apolonia Onte constructed their house on the eastern part of lot 1496 as Flaviano Moreto, at the time of the sale, pointed to it as the land which he sold to Geminiano Pamplona. Shortly thereafter, Rafael Pamplona, son of the spouses Geminiano Pamplona and Apolonia Onte, also built his house within lot 1496 about one meter from its boundary with the adjoining lot. The vendor Flaviano Moreto and the vendee Geminiano Pamplona thought all the time that the portion of 781 square meters which was the subject matter of their sale transaction was No. 1495 and so lot No. 1495 appears to be the subject matter in the deed of sale (Exh. 1) although the fact

is that the said portion sold thought of by the parties to be lot No. 1495 is a part of lot No. 1496. From 1956 to 1960, the spouses Geminiano Pamplona and Apolonio Onte enlarged their house and they even constructed a piggery corral at the back of their said honse about one and one-half meters from the eastern boundary of lot 1496. On August 12, 1956, Flaviano Moreto died intestate. In 1961, the plaintiffs demanded on the defendants to vacate the premises where they had their house and piggery on the ground that Flaviano Moreto had no right to sell the lot which he sold to Geminiano Pamplona as the same belongs to the conjugal partnership of Flaviano and his deceased wife and the latter was already dead when the sale was executed without the consent of the plaintiffs who are the heirs of Monica. The spouses Geminiano Pamplona and Apolonia Onte refused to vacate the premises occupied by them and hence, this suit was instituted by the heirs of Monica Maniega seeking for the declaration of the nullity of the deed of sale of July 30, 1952 above-mentioned as regards onehalf of the property subject matter of said deed; to declare the plaintiffs as the rightful owners of the other half of said lot; to allow the plaintiffs to redeem the one-half portion thereof sold to the defendants After payment of the other half of the purchase price; to order the defendants to vacate the portions occupied by them; to order the defendants to pay actual and moral damages and attorneys fees to the plaintiffs; to order the defendants to pay plaintiffs P120.00 a year from August 1958 until they have vacated the premises occupied by them for the use and occupancy of the same. The defendants claim that the sale made by Flaviano Moreto in their favor is valid as the lot sold is registered in the name of Flaviano Moreto and they are purchasers believing in good faith that the vendor was the sole owner of the lot sold. After a relocation of lots 1495, 1496 and 4545 made by agreement of the parties, it was found out that there was mutual error between Flaviano Moreto and the defendants in the execution of the deed of sale because while the said deed recited that the lot sold is lot No. 1495, the real intention of the parties is that it was a portion consisting of 781 square meters of lot No. 1496 which was the subject matter of their sale transaction. After trial, the lower court rendered judgment, the dispositive part thereof being as follows:
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WHEREFORE, judgment is hereby rendered for the plaintiffs declaring the deed of absolute sale dated July 30, 1952 pertaining to the eastern portion of Lot 1496 covering an area of 781 square meters null and void as regards the 390.5 square meters of which plaintiffs are hereby declared the rightful owners and entitled to its possession. The sale is ordered valid with respect to the eastern one-half (1/2) of 1781 square meters of Lot 1496 measuring 390.5 square meters of which defendants are declared lawful owners and entitled to its possession. After proper survey segregating the eastern one-half portion with an area of 390.5 square meters of Lot 1496, the defendants shall be entitled to a certificate of title covering said portion and Transfer Certificate of Title No. 9843 of the office of the Register of Deeds of Laguna shall be cancelled accordingly and new titles issued to the plaintiffs and to the defendants covering their respective portions. Transfer Certificate of Title No. 5671 of the office of the Register of Deeds of Laguna covering Lot No. 1495 and registered in the name of Cornelio Pamplona, married to Apolonia Onte, is by virtue of this decision ordered cancelled. The defendants are ordered to surrender to the office of the Register of Deeds of Laguna the owners duplicate of Transfer Certificate of Title No. 5671 within thirty (30) days after this decision shall have become final for cancellation in accordance with this decision. Let copy of this decision be furnished the Register of Deeds for the province of Laguna for his information and guidance. With costs against the defendants.2 The defendants-appellants, not being satisfied with said judgment, appealed to the Court of Appeals, which affirmed the judgment, hence they now come to this Court. The fundamental and crucial issue in the case at bar is whether under the facts and circumstances duly established by the evidence, petitioners are entitled to the full ownership of the property in litigation, or only one-half of the same. There is no question that when the petitioners purchased the property on July 30, 1952 from Flaviano Moreto for the price of P900.00, his wife Monica Maniega had already been dead six years before, Monica having died on May 6, 1946. Hence, the conjugal partnership of the spouses Flaviano Moreto and

Monica Maniega had already been dissolved. (Article 175, (1) New Civil Code; Article 1417, Old Civil Code). The records show that the conjugal estate had not been inventoried, liquidated, settled and divided by the heirs thereto in accordance with law. The necessary proceedings for the liquidation of the conjugal partnership were not instituted by the heirs either in the testate or intestate proceedings of the deceased spouse pursuant to Act 3176 amending Section 685 of Act 190. Neither was there an extra-judicial partition between the surviving spouse and the heirs of the deceased spouse nor was an ordinary action for partition brought for the purpose. Accordingly, the estate became the property of a community between the surviving husband, Flaviano Moreto, and his children with the deceased Monica Maniega in the concept of a co-ownership. The community property of the marriage, at the dissolution of this bond by the death of one of the spouses, ceases to belong to the legal partnership and becomes the property of a community, by operation of law, between the surviving spouse and the heirs of the deceased spouse, or the exclusive property of the widower or the widow, if he or she be the heir of the deceased spouse. Every co-owner shall have full ownership of his part and in the fruits and benefits derived therefrom, and he therefore may alienate, assign or mortgage it, and even substitute another person in its enjoyment, unless personal rights are in question. (Marigsa vs. Macabuntoc, 17 Phil. 107) In Borja vs. Addision, 44 Phil. 895, 906, the Supreme Court said that (t)here is no reason in law why the heirs of the deceased wife may not form a partnership with the surviving husband for the management and control of the community property of the marriage and conceivably such a partnership, or rather community of property, between the heirs and the surviving husband might be formed without a written agree-ment. In Prades vs. Tecson, 49 Phil. 230, the Supreme Court held that (a)lthough, when the wife dies, the surviving husband, as administrator of the community property, has authority to sell the property without the concurrence of the children of the marriage, nevertheless this power can be waived in favor of the children, with the result of bringing about a conventional ownership in common between the father and children as to such property; and any one purchasing with knowledge of the changed status of the property will acquire only the undivided interest of those members of the family who join in the act of conveyance. It is also not disputed that immediately after the execution of the sale in 1952, the vendees constructed their house on the eastern part of Lot 1496 which the vendor pointed out to them as the area sold, and two weeks thereafter, Rafael
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who is a son of the vendees, also built his house within Lot 1496. Subsequently, a cemented piggery coral was constructed by the vendees at the back of their house about one and one-half meters from the eastern boundary of Lot 1496. Both vendor and vendees believed all the time that the area of 781 sq. meters subject of the sale was Lot No. 1495 which according to its title (T.C.T. No. 14570) contains an area of 781 sq. meters so that the deed of sale between the parties identified and described the land sold as Lot 1495. But actually, as verified later by a surveyor upon agreement of the parties during the proceedings of the case below, the area sold was within Lot 1496. Again, there is no dispute that the houses of the spouses Cornelio Pamplona and Apolonia Onte as well as that of their son Rafael Pamplona, including the concrete piggery coral adjacent thereto, stood on the land from 1952 up to the filing of the complaint by the private respondents on July 25, 1961, or a period of over nine (9) years. And during said period, the private respondents who are the heirs of Monica Maniega as well as of Flaviano Moreto who also died intestate on August 12, 1956, lived as neighbors to the petitioners-vendees, yet lifted no finger to question the occupation, possession and ownership of the land purchased by the Pamplonas, so that We are persuaded and convinced to rule that private respondents are in estoppel by laches to claim half of the property in dispute as null and void. Estoppel by laches is a rule of equity which bars a claimant from presenting his claim when, by reason of abandonment and negligence, he allowed a long time to elapse without presenting the same. (International Banking Corporation vs. Yared, 59 Phil. 92) We have ruled that at the time of the sale in 1952, the conjugal partnership was already dissolved six years before and therefore, the estate became a coownership between Flaviano Moreto, the surviving husband, and the heirs of his deceased wife, Monica Maniega. Article 493 of the New Civil Code is applicable and it provides as follows: Art. 493. Each co-owner shall have the full ownership of his part and of the fruits and benefits pertaining thereto, and he may therefore alienate, assign or mortgage it, and even substitute another person in its enjoyment, except when personal rights are involved. But the effect of the alienation or the mortgage, with respect to the co-owners, shall be limited to the portion which may be allotted to him in the division upon the termination of the co-ownership. We agree with the petitioner that there was a partial partition of the coownership when at the time of the sale Flaviano Moreto pointed out the area and location of the 781 sq. meters sold by him to the petitioners-vendees on

which the latter built their house and also that whereon Rafael, the son of petitioners likewise erected his house and an adjacent coral for piggery. Petitioners point to the fact that spouses Flaviano Moreto and Monica Maniega owned three parcels of land denominated as Lot 1495 having an area of 781 sq. meters, Lot 1496 with an area of 1,021 sq. meters, and Lot 4545 with an area of 544 sq. meters. The three lots have a total area of 2,346 sq. meters. These three parcels of lots are contiguous with one another as each is bounded on one side by the other, thus: Lot 4545 is bounded on the northeast by Lot 1495 and on the southeast by Lot 1496. Lot 1495 is bounded on the west by Lot 4545. Lot 1496 is bounded on the west by Lot 4545. It is therefore, clear that the three lots constitute one big land. They are not separate properties located in different places but they abut each other. This is not disputed by private respondents. Hence, at the time of the sale, the coownership constituted or covered these three lots adjacent to each other. And since Flaviano Moreto was entitled to one-half proindiviso of the entire land area or 1,173 sq. meters as his share, he had a perfect legal and lawful right to dispose of 781 sq. meters of his share to the Pamplona spouses. Indeed, there was still a remainder of some 392 sq. meters belonging to him at the time of the sale. We reject respondent Courts ruling that the sale was valid as to one-half and invalid as to the other half for the very simple reason that Flaviano Moreto, the vendor, had the legal right to more than 781 sq. meters of the communal estate, a title which he could dispose, alienate in favor of the vendeespetitioners. The title may be pro-indiviso or inchoate but the moment the coowner as vendor pointed out its location and even indicated the boundaries over which the fences were to be erected without objection, protest or complaint by the other co-owners, on the contrary they acquiesced and tolerated such alienation, occupation and possession, We rule that a factual partition or termination of the co-ownership, although partial was created, and barred not only the vendor, Flaviano Moreto, but also his heirs, the private respondents herein from asserting as against the vendees-petitioners any right or title in derogation of the deed oaf sale executed by said vendor Flaviano Moreto. Equity commands that the private respondents, the successors of both the deceased spouses, Flaviano Moreto and Monica Maniega be not allowed to impugn the sale executed by Flaviano Moreto who indisputably received the consideration of P900.00 and which he, including his children, benefitted from the same. Moreover, as the heirs of both Monica Maniega and Flaviano
477 | P r o p e r t y

Moreto, private respondents are duty-bound to comply with the provisions of Articles 1458 and 1495, Civil Code, which is the obligation of the vendor of the property of delivering and transfering the ownership of the whole property sold, which is transmitted on his death to his heirs, the herein private respondents. The articles cited provide, thus: Art. 1458. By the contract of sale one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other party to pay therefor a price certain in money or its equivalent. A contract of sale may be absolute or conditional. Art. 1495. The vendor is bound to transfer the ownership of and deliver, as well as warrant the thing which is the object of the sale. Under Article 776, New Civil Code, the inheritance which private respondents received from their deceased parents and/or predecessors-in-interest included all the property rights and obligations which were not extinguished by their parents death. And under Art. 1311, paragraph 1, New Civil Code, the contract of sale executed by the deceased Flaviano Moreto took effect between the parties, their assigns and heirs, who are the private respondents herein. Accordingly, to the private respondents is transmitted the obligation to deliver in full ownership the whole area of 781 sq. meters to the petitioners (which was the original obligation of their predecessor Flaviano Moreto) and not only onehalf thereof. Private respondents must comply with said obligation. The records reveal that the area of 781 sq. meters sold to and occupied by petitioners for more than 9 years already as of the filing of the complaint in 1961 had been re-surveyed by private land surveyor Daniel Aranas. Petitioners are entitled to a segregation of the area from Transfer Certificate of Title No. T9843 covering Lot 1496 and they are also entitled to the issuance of a new Transfer Certificate of Title in their name based on the relocation survey. WHEREFORE, IN VIEW OF THE FOREGOING, the judgment appealed from is hereby AFFIRMED with modification in the sense that the sale made and executed by Flaviano Moreto in favor of the petitioners-vendees is hereby declared legal and valid in its entirely. Petitioners are hereby declared owners in full ownership of the 781 sq. meters at the eastern portion of Lot 1496 now occupied by said petitioners and whereon their houses and piggery coral stand.

The Register of Deeds of Laguna is hereby ordered to segregate the area of 781 sq. meters from Certificate of Title No. 9843 and to issue a new Transfer Certificate of Title to the petitioners covering the segregated area of 781 sq. meters. No costs. SO ORDERED. Teehankee (Chairman), Makasiar, Fernandez, De Castro and MelencioHerrera, JJ. concur. Decision affirmed with modification. Notes.The passage of title by delivery may be made although the price of the subject of the sale is not yet fully paid. (Philippine Suburden Development Corp. vs. Auditor General, 63 SCRA 397). A sale of a parcel of land by the husband is deemed fraudulent if made about seven months after a judgment was rendered against the vendor for support of his wife and the vendor has not paid any part of the judgment. (Cabalan vs. Sadorra, 64 SCRA 310). The sale of land acquired under a free patent is subject to redemption within five years from the execution of the deed of sale. (Uy Lee vs. Court of Appeals, 68 SCRA 196). Where the surviving spouse sold under a pacto de retro a conjugal lot, what she validly disposed of under the said sale was only her conjugal share in the lot plus her successional right as heir. (Yturralde vs. Court of Appeals, 43 SCRA 313). There is a presumption that property is conjugal if acquired during marriage. (Laluan vs. Malpaya, 65 SCRA 494). The decisive factor in the determination of whether a parcel of land acquired by way of homestead is conjugal property of the first or second marriage, is not necessarily the time of the issuance of the homestead patent but the fulfillment of the requirements of the Public Land Law for the acquisition of such right to the patent. (Vda. de Delizo vs. Delizo, 69 SCRA 216). Where a parcel of Friar Land was acquired during coverture by installment payments were completed by husband after the death of his wife, equitable
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and legal title being vested in the purchaser in the date of the purchase, such property is conjugal it having been acquired during coverture. (Balicudiong vs. Balicudiong, 39 SCRA 386). A friar land bought during marriage is conjugal property although registered only in the name of the widow. (Pugeda vs. Trias, 5 SCRA 617). o0o [Pamplona vs. Moreto, 96 SCRA 775(1980)]

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Caro vs. Court of Appeals No. L-46001. March 25, 1982.* LUZ CARO, petitioner, vs. HONORABLE COURT OF APPEALS and BASILIA LAHORRA VDA. DE BENITO, AS ADMINISTRATRIX OF THE
INTESTATE ESTATE OF MARIO BENITO, respondents. Property; Sale; Co-ownership of real property becomes terminated after the two co-owners and the administrator of the estate of the third co-owner agreed to subdivide the property owned in common.However, the fact is that as early as 1960, co-ownership of the parcels of land covered by Transfer Certificates of Title Nos. T-609 and T-610 was terminated when Alfredo Benito, Luz Caro and the Intestate Estate of Mario Benito, represented by administrators Saturnino Benito, as trustee and representative of the heirs of Mario Benito, agreed to subdivide the property. Same; Same; Co-ownership is terminated where the co-owners drew up a subdivision plan and actually occupied their respective portions in the plan, a title issued accordingly.A petition for subdivision was then filed for the purpose. This was accompanied by the affidavits of Alfredo Benito and Saturnino Benito, both dated September 15, 1960 to the effect that they agree to the segregation of the land formerly owned in common by Mario Benito, Alfredo Benito and Benjamin Benito. A subdivision plan was made and by common agreement, Lot I-C thereof, with an area of 163 hectates, more or less, was ceded to petitioner. Thereafter, the co-owners took actual and exclusive possession of the specific portions respectively assigned to them. A subdivision title was subsequently issued on the lot assigned to petitioner, to wit, Transfer Certificate of Title No. T-4978. Same; Same; Redemption; Where co-owned property had been subdivided already, right of legal redemption by a co-owner does not arise even though conveyance took place before the partition agreement and approval by the intestate court thereof as to portion under intestate proceedings.Although the foregoing pronouncement has reference to the sale made after partition, this Court therein saw no difference with respect to a conveyance which took place before the partition agreement and approval by the court. Thus, it held: Nevertheless, the result is the same, because We held in Saturnino vs. Paulino, 97 Phil. 50, that the right of redemption under Article 1067 may be exercised only before partition. In this case the right was asserted not only after partition but after the property inherited had actually been subdivided into several parcels which were assigned by lot to the several heirs. Same; Same; Same; Land Registration; A subdivision title issued to buyer of a portion of coowned estate becomes incontrovertible after one year from its issuance.As aforesaid, a subdivision title has been issued in the name of petitioner on the lot ceded to her. Upon the expiration of the term of one year from the date of the entry of the subdivision title, the Certificate of Title shall be incontrovertible (Section 38, Act 496). Since the title of petitioner is now indefeasible, private respondent cannot, by means of the present action, indirectly attack the validity thereof.

Same; Same; Same; Intestate Succession; Administrator of an intestate estate cannot exercise right of legal redemption over portion of property owned in common sold by one of the other coowners.Even on the assumption that there still is co-ownership here and that therefore, the right of legal redemption exists, private respondent as administratrix, has no personality to exercise said right for and in behalf of the intestate estate of Mario Benito. She is on the same footing as co-administrator Saturnino Benito. Hence, if Saturninos consent to the sale of the one-third portion to petitioner cannot bind the intestate estate of Mario Benito on the ground that the right of redemption was not within the powers of administration, in the same manner, the private respondent as co-administrator has no power to exercise the right of redemptionthe very power which the Court of Appeals ruled to be not within the powers of administration. Actions; Intestate Succession; Where action for legal redemption of co-owner, the said action cannot be deemed brought by her as co-owner or in behalf of heirs of said deceased.Private respondent cannot be considered to have brought this action in her behalf and in behalf of the heirs of Mario Benito because the jurisdictional allegations of the complaint specifically stated that she brought the action in her capacity as administratrix of the intestate estate of Mario Benito. Property; Sale; Redemption; Redemption of property owned in common should tender redemption money within 30 days from written notice of the sale by the co-owner.One of these is that the redemptioner should tender payment of the redemption money within thirty (30) days from written notice of the sale by the co-owner. Same; Same; Same.It has been held that this thirty-day period is peremptory because the policy of the law is not to leave the purchasers title in uncertainty beyond the established 30-day period. (Butte vs. Manuel Uy and Sons, Inc., 4 SCRA 526). It is not a prescriptive period but is more a requisite or condition precedent to the exercise of the right of legal redemption.

Plana, J.:

I concur in the result. PETITION for certiorari to review the decision of the Court of Appeals. The facts are stated in the opinion of the Court. GUERRERO, J.:

This is a petition for certiorari under Rule 45 of the Revised Rules of Court seeking a review of the decision of the Court of Appeals,1 promulgated on February 11, 1977, in CA-G.R. No. 52570-R entitled Basilia Lahorra Vda. de Benito, as Administratrix of the Intestate Estate of Mario Benito vs. Luz Caro,
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as well as the resolution of the respondent Court, dated May 13, 1977, denying petitioners Motion for Reconsideration. The facts of the case are as follows: Alfredo Benito, Mario Benito and Benjamin Benito were the original co-owners of two parcels of land covered by Transfer Certificates of Title Nos. T-609 and T-610 of the Registry of Deeds of Sorsogon. Mario died sometime in January, 1957. His surviving wife, Basilia Lahorra and his father, Saturnino Benito, were subsequently appointed in Special Proceeding No. 508 of the Court of First Instance of Sorsogon as joint administrators of Marios estate. On August 26, 1959, one of the co-owners, Benjamin Benito, executed a deed of absolute sale of his one-third undivided portion over said parcels of land in favor of herein petitioner, Luz Caro, for the sum of P10,000.00. This was registered on September 29, 1959. Subsequently, with the consent of Saturnino Benito and Alfredo Benito as shown in their affidavits both dated September 15, 1960, Exhibits G and F respectively, a subdivision title was issued to petitioner Luz Caro over Lot I-C, under T.C.T. No. T-4978. Sometime in the month of May, 1966, private respondent Basilia Lahorra Vda. de Benito learned from an allegation in a pleading presented by petitioner in Special Proceeding No. 508 that the latter acquired by purchase from Benjamin Benito the aforesaid one-third undivided share in each of the two parcels of land. After further verification, she sent to petitioner thru her counsel, a written offer to redeem the said one-third undivided share dated August 25, 1966. Inasmuch as petitioner ignored said offer, private respondent sought to intervene in Civil Case No. 2105 entitled Rosa Amador Vda. de Benito vs. Luz Caro for annulment of sale and mortgage and cancellation of the annotation of the sale and mortgage involving the same parcels of land, but did not succeed as the principal case was dismissed on a technicality, that is, for failure to prosecute and the proposed intervenor failed to pay the docketing fees. Private respondent, thus, filed the present case as an independent one and in the trial sought to prove that as a joint administrator of the estate of Mario Benito, she had not been notified of the sale as required by Article 1620 in connection with Article 1623 of the New Civil Code. On the other hand, petitioner presented during the hearing of the case secondary evidence of the service of written notice of the intended sale to possible redemptioners in as much as the best evidence thereof, the written notices itself sent to Alfredo and Saturnino Benito, could not be presented for the reason that said notices were sent to persons who were already dead when

the complaint for legal redemption was brought. Instead, the affidavit of Benjamin Benito, executed ante litem motam, attesting to the fact that the possible redemptioners were formally notified in writing of his intention to sell his undivided share, was presented in evidence. The deposition of Saturninos widow was likewise taken and introduced in evidence, wherein she testified that she received and gave to her husband the written notice of the intended sale but that the latter expressed disinterest in buying the property. After hearing the evidence, the trial judge dismissed the complaint on the grounds that: (a) private respondent, as administratrix of the intestate estate of Mario Benito, does not have the power to exercise the right of legal redemption, and (b) Benjamin Benito substantially complied with his obligation of furnishing written notice of the sale of his one-third undivided portion to possible redemptioners. Private respondents Motion for Reconsideration of the trial courts decision having been denied, she appealed to the respondent Court of Appeals contending that the trial Judge erred in I. . . not inhibiting himself from trying and deciding the case because his son is an associate or member of the law office of Atty. Rodolfo A. Madrid, the attorney of record of defendant-appellee in the instant case; II. . contending that Benjamin Benito complied with the provisions of Article 1623 of the Revised Civil Code that before a co-owner could sell his share of the property owned in common with the other co-heirs, he must first give written notice of his desire to his co-heirs; (p. 49, R.A.) III. concluding that the fact that one of the administrators who was actively managing the estate was furnished a written notice by the co-owner of his desire to sell his share was enough compliance of the provisions of Article 1623 of the Civil Code for the reason that the intention of the law is only to give a chance to the new co-owner to buy the share intended to be sold if he desires to buy the same; (p. 50, R.A.) IV. . refusing to allow plaintiff to redeem the subject property upon authority of Butte vs. Manuel Uy & Sons, L-15499, Feb. 28, 1962 (p. 51, R.A.) and in consequently dismissing the complaint (p. 52, R.A.). In disposing of the aforesaid errors, the Court of Appeals finding for plaintiff (herein private respondent) held:

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1. That it is not clear that Atty. Arcangel, son of the trial Judge, was legally associated as practitioner with counsel for Luz Caro; that it is not shown at any rate that plaintiff had asked for Judge Arcangels disqualification and that at any rate also, in such factual situation, an optional ground for disqualification is addressed to his sound discretion with which it would not be correct for appellate court to interfere or overrule. 2. That since the right of the co-owner to redeem in case his share be sold to a stranger arose after the death of Mario Benito, such right did not form part of the hereditary estate of Mario but instead was the personal right of the heirs, one of whom is Marios widow. Thus, it behooved either the vendor, Benjamin, or his vendee, Luz Caro, to have made a written notice of the intended or consummated sale under Article 1620 of the Civil Code. 3. That the recital in the deed of sale that the vendor notified his co-owners of his desire to dispose of his share, who all declined to buy, was but a unilateral statement and could not be proof of the notice required by the law. 4. That the registration of the deed of sale did not erase that right. 5. That the affidavit of notice executed on January 20, 1960 of Benjamin Benito declaring that written notices of the sale as required by law were duly sent to Alfredo Benito and Saturnino Benito, the latter in his capacity as administrator of the estate of Mario Benito, as well as the sworn statement of Saturnino Benitos widow dated November 18, 1968 confirming that her husband received the written notice of the sale referred to in Benjamin Benitos affidavit of notice would not satisfy that there was clear notice in writing of the specific term of the intended sale. Worse, Saturnino was only a co-administrator and hence, his unilateral act could not bind the principal because there was no less than a renunciation of a right pertaining to the heirs, under Article 1818, NCC, apart from the fact that the right of redemption is not within their administration. 6. That the further claim of defendant that offer to redeem was filed out of time and that there was no actual tender loses all importance, there being no date from which to count the 30-day period to redeem because there was no notice given. The dispositive part of the decision of the Court of Appeals reads as follows: IN VIEW THEREOF, this Court is constrained to reverse, as it now reverses, judgment appealed from, upon payment by plaintiff or deposit in Court, within 30 days after this judgment should have become final, of the sum of

P10,000.00, defendant is ordered to execute a deed of redemption over the one-third share of BENJAMIN BENITO in favor of plaintiff for herself and as representative of the children of Mario Benito and therefrom, to deliver said one-third share of BENJAMIN BENITO, costs against defendant-appellee. SO ORDERED. Upon denial of the motion for reconsideration, petitioner brought this petition for review raising the following errors: 1. Respondent Court erred in allowing the exercise of the right of legal redemption with respect to the lots in question. 2. Respondent Court erred when it made the finding that there was no notice in law from which to count the tolling of the period of redemption and that the sale was not made known at all to private respondent. The alleged first error of respondent Court is premised on the fact that the lot in question sought to be redeemed is no longer owned in common. Petitioner contends that the right sought to be exercised by private respondent in the case assumes that the land in question is under co-ownership, the action being based on Article 1620 of the New Civil Code which provides. A co-owner of a thing may exercise the right of redemption in case the shares of all the other co-owners or any of them, are sold to a third person. If the price of alienation is grossly excessive, the petitioner shall pay only a reasonable price. Should two or more co-owners desire to exercise the right of redemption, they may only do so in proportion to the share they may respectively have in the thing owned in common. However, the fact is that as early as 1960, co-ownership of the parcels of land covered by Transfer Certificates of Title Nos. T-609 and T-610 was terminated when Alfredo Benito, Luz Caro and the Intestate Estate of Mario Benito, represented by administrators Saturnino Benito, as trustee and representative of the heirs of Mario Benito, agreed to subdivide the property. An agreement of partition, though oral, is valid and consequently binding upon the parties. (Hernandez vs. Andal, et al., 78 Phil. 196) A petition for subdivision was then filed for the purpose. This was accompanied by the affidavits of Alfredo Benito and Saturnino Benito, both dated September
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15, 1960 to the effect that they agree to the segregation of the land formerly owned in common by Mario Benito, Alfredo Benito and Benjamin Benito. A subdivision plan was made and by common agreement Lot I-C thereof, with an area of 163 hectares, more or less, was ceded to petitioner. Thereafter, the coowners took actual and exclusive possession of the specific portions respectively assigned to them. A subdivision title was subsequently issued on the lot assigned to petitioner, to wit, Transfer Certificate of Title No. T-4978. In Caram, et al. vs. Court of Appeals, et al., 101 Phil. 315, a case squarely in point, this Court held: Inasmuch as the purpose of the law in establishing the right of legal redemption between co-owners is to reduce the number of participants until the community is done away with (Viola vs. Tecson, 49 Phil. 808), once the property is subdivided and distributed among the co-owners, the community has terminated and there is no reason to sustain any right of legal redemption. Although the foregoing pronouncement has reference to the sale made after partition, this Court therein saw no difference with respect to a conveyance which took place before the partition agreement and approval by the court. Thus, it held: Nevertheless, the result is the same, because We held in Saturnino vs. Paulino, 97 Phil. 50, that the right of redemption under Article 1067 may be exercised only before partition. In this case the right was asserted not only after partition but after the property inherited had actually been subdivided into several parcels which were assigned by lot to the several heirs. In refutation, private respondent argues that petitioner Luz Caro acted in bad faith and in fraud of the rights of the heirs of the deceased Mario Benito in obtaining a subdivision title over the one-third portion of the land in question which she brought from Benjamin Benito, and for this reason, she is deemed to hold said property in trust for said heirs. The rule, however, is that fraud in securing the registration of titles to the land should be supported by clear and convincing evidence. (Jaramil vs. Court of Appeals, 78 SCRA 420). As private respondent has not shown and proved the circumstances constituting fraud, it cannot be held to exist in this case. As aforesaid, a subdivision title has been issued in the name of petitioner on the lot ceded to her. Upon the expiration of the term of one year from the date of the entry of the subdivision title, the Certificate of Title shall be incontrovertible (Section 38, Act 496). Since the title of petitioner is now

indefeasible, private respondent cannot, by means of the present action, indirectly attack the validity thereof. Even on the assumption that there still is co-ownership here and that therefore, the right of legal redemption exists, private respondent as administratrix, has no personality to exercise said right for and in behalf of the intestate estate of Mario Benito. She is on the same footing as co-administrator Saturnino Benito. Hence, if Saturninos consent to the sale of the one-third portion to petitioner cannot bind the intestate estate of Mario Benito on the ground that the right of redemption was not within the powers of administration, in the same manner, the private respondent as co-administrator has no power to exercise the right of redemptionthe very power which the Court of Appeals ruled to be not within the powers of administration. While under Sec. 3, Rule 85, Rules of Court, the administrator has the right to the possession of the real and personal estate of the deceased, so far as needed for the payment of the expenses of administration, and the administrator may bring and defend action for the recovery or protection of the property or right of the deceased (Sec. 2, Rule 88), such right of possession and administration do not include the right of legal redemption of the undivided share sold to a stranger by one of the co-owners after the death of another, because in such case, the right of legal redemption only came into existence when the sale to the stranger was perfected and formed no part of the estate of the deceased co-owner; hence, that right cannot be transmitted to the heir of the deceased co-owner. (Butte vs. Manuel Uy and Sons, Inc., 4 SCRA 526). Private respondent cannot be considered to have brought this action in her behalf and in behalf of the heirs of Mario Benito because the jurisdictional allegations of the complaint specifically stated that she brought the action in her capacity as administratrix of the intestate estate of Mario Benito. It is petitioners contention that, assuming that private respondent may exercise the right of redemption, there was no compliance with the conditions precedent for the valid exercise thereof. In Conejero, et al. vs. Court of Appeals, et al., 16 SCRA 775, this Court explained the nature of the right of redemption in this wise: While the co-owners right of legal redemption is a substantive right, it is exceptional in nature, limited in its duration and subject to strict compliance with the legal requirements. One of these is that the redemptioner should
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tender payment of the redemption money within thirty (30) days from written notice of the sale by the co-owner. It has been held that this thirty-day period is peremptory because the policy of the law is not to leave the purchasers title in uncertainty beyond the established 30-day period. (Butte vs. Manuel Uy and Sons, Inc., 4 SCRA 526). It is not a prescriptive period but is more a requisite or condition precedent to the exercise of the right of legal redemption. In the case at bar, private respondent alleged in her complaint that she learned of the sale sometime in May, 1966 upon receipt of a pleading in Special Proceeding No. 508 of the Court of First Instance of Sorsogon. She likewise alleged that she gave a letter informing petitioner of her desire to redeem the land on August 25, 1966. Clearly, three months have elapsed since the notice of the sale. Hence, petitioner claims that the thirty-day period of redemption has already expired. In addition, petitioner makes capital of the admission of private respondent that she already knew of the said transaction even before receipt of the said pleading (t.s.n., p. 16) as well as of the evidence presented that Saturnino Benito, the admittedly active administrator until 1966, duly received a written notice of the intended sale of Benjamin Benitos share. Said evidence consists of the affidavit of the vendor stating that the required notice had been duly given to possible redemptioners, the statement in the deed of sale itself and the deposition of Saturnino Benitos widow with respect to her receipt of the written notice. Finally, petitioner points to the records which disclose that private respondent knew of the subdivision (t.s.n., p. 25) and hence, rationalized that private respondent should have known also of the previous sale. Since We have ruled that the right of legal redemption does not exist nor apply in this case because admittedly a subdivision title (T.C.T. No. T-4978) has already been issued in the name of the petitioner on Lot I-C sold to her, it becomes moot and academic, if not unnecessary to decide whether private respondent complied with the notice requirements for the exercise of the right of legal redemption under Article 1623 of the New Civil Code. WHEREFORE, IN VIEW OF THE FOREGOING, the decision of the Court of Appeals is hereby REVERSED and SET ASIDE, and judgment is hereby rendered DISMISSING the complaint. SO ORDERED. Makasiar, Fernandez and Melencio-Herrera, JJ., concur.

Teehankee, J., took no part. Plana, J., in the result. Decision reversed and set aside. Notes.Registration on instrument of extra-judicial partition is a constructive notice of repudiation by interested party of fiduciary or trust relationship. (De la Cerna vs. De la Cerna, 72 SCRA 514.) An order directing submission to the court of a deed of partition of properties for the courts approval could not be final. (Arcenas vs. Cinco, 74 SCRA 113.) A court order approving the project of partition could still be appealable where the terms thereof are not entirely clear and there is room for interpretation thereof. (Arcenas vs. Cinco,74 SCRA 113.) In actions for partition where it is practicable to make a division of the property, the generally accepted equitable rule is to allot to party that portion on which he has made permanent and valuable improvements. (Arcenas vs. Cinco, 74 SCRA 113.) Appeal will not lie until partition proceedings are terminated appellant is claiming exclusive ownership of the whole property and denies the adverse partys right to any partition. (Cease vs. Court of Appeals, 93 SCRA 483.) Oral or verbal partition becomes improbable when lot is registered; any transaction affecting registered land should evidenced by a registerable deed. (Duque vs. Domingo, 80 SCRA 654.) o0o [Caro vs. Court of Appeals, 113 SCRA 10(1982)]

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Salvador vs. Court of Appeals G.R. No. 109910. April 5, 1995.* REMEDIOS G. SALVADOR and MA. GRACIA G. SALVADOR, petitioners,vs. COURT OF APPEALS, ALBERTO and ELPIA YABO, FRANCISCA YABO, et al., respondents.
Civil Law; Property; Conjugal Partnership; All property of the marriage is presumed to belong to the conjugal partnership, unless it be proved that it pertains exclusively to the husband or to the wife.Article 160 of the Civil Code provides that all property of the marriage is presumed to belong to the conjugal partnership, unless it be proved that it pertains exclusively to the husband or to the wife. Since the shares of Jose, Victoriano, Lope, Baseliza, Procopio, and Francisca in Lot No. 6180 and Lot No. 6080 had been purchased by Pastor during his marriage with Maria, and there is no proof that these were acquired with his exclusive money, the same are deemed conjugal properties. Same; Same; Co-ownership; Partition; Each co-owner may demand at any time the partition of the common property implies that an action to demand partition is imprescriptible or cannot be barred by laches.It has been said that Article 494 of the Civil Code which provides that each co-owner may demand at any time the partition of the common property implies that an action to demand partition is imprescriptible or cannot be barred by laches. The imprescriptibility of the action cannot, however, be invoked when one of the co-owners has possessed the property as exclusive owner and for a period sufficient to acquire it by prescription. Same; Same; Same; Same; Possession of a co-owner is like that of a trustee and shall not be regarded as adverse to the other co-owners but in fact as beneficial to all of them.This Court has held that the possession of a co-owner is like that of a trustee and shall not be regarded as adverse to the other co-owners but in fact as beneficial to all of them. Acts which may be considered adverse to strangers may not be considered adverse insofar as co-owners are concerned. A mere silent possession by a co-owner, his receipt of rents, fruits or profits from the property, the erection of buildings and fences and the planting of trees thereon, and the payment of land taxes, cannot serve as proof of exclusive ownership, if it is not borne out by clear and convincing evidence that he exercised acts of possession which unequivocably constituted an ouster or deprivation of the rights of the other co-owners. Same; Same; Same; Same; Elements in order that a co-owners possession may be deemed adverse to the cestui que trust or the other co-owners.Thus, in order that a co-owners possession may be deemed adverse to the cestui que trust or the other co-owners, the following elements must concur: (1) that he has performed unequivocal acts of repudiation amounting to an ouster of the cestui que trust or the other co-owners; (2) that such positive acts of repudiation have been made known to the cestui que trust or the other co-owners; and (3) that the evidence thereon must be clear and convincing. Remedial Law; Appeal; When the findings of facts of the appellate court vary with those of the trial court, the Court has to review the evidence in order to arrive at the correct findings.The

issue presented by the petitioners in their third assigned error involves a question of fact. This Court is not ordinarily a trier of facts, its jurisdiction being limited to errors of law. Thus, the findings of facts of the Court of Appeals are as a rule deemed conclusive. However, when the findings of facts of the appellate court vary with those of the trial court, this Court has to review the evidence in order to arrive at the correct findings.

PETITION for review of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court. Constancio G. Jaraula for petitioners. Marvi Manuel B. Roa for private respondents. DAVIDE, JR.,J.:

Assailed in this petition is the legal determination made by the Court of Appeals on the issues of which portion of Lot No. 6080 and Lot No. 6180 formed part of the conjugal assets of the spouses Pastor Makibalo and Maria Yabo, and of whether or not the rights of Pastors co-heirs in the estate of Maria Yabo were extinguished through prescription or laches. Alipio Yabo was the owner of Lot No. 6080 and Lot No. 6180 situated in Barrio Bulua, Cagayan de Oro City, containing an area of 1,267 and 3,816 square meters, respectively. Title thereto devolved upon his nine children, namely, Victoriano, Procopio, Lope, Jose, Pelagia, Baseliza, Francisca, Maria, and Gaudencia, upon his death sometime before or during the second world war. On 28 April 1976, Pastor Makibalo, who is the husband of Maria Yabo, one of Alipios children, filed with the then Court of First Instance of Misamis Oriental a complaint, docketed as Civil Case No. 5000, against the spouses Alberto and Elpia Yabo for Quieting of Title, Annulment of Documents, and Damages. In the complaint, he alleged that he owned a total of eight shares of the subject lots, having purchased the shares of seven of Alipios children and inherited the share of his wife, Maria, and that except for the portion corresponding to Gaudencias share which he did not buy, he occupied, cultivated, and possessed continuously, openly, peacefully, and exclusively the two parcels of land. He then prayed that he be declared the absolute owner of 8/9 of the lots in question.1
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On 8 October 1976, the grandchildren and great-grandchildren of the late Alipio Yabo2 lodged with the same court a complaint for partition and quieting of title with damages,3 docketed as Civil Case No. 5174, against Pastor Makibalo, Enecia Cristal, and the spouses Eulogio and Remedios Salvador. They alleged that Lot No. 6080 and Lot No. 6180 are the common property of the heirs of Alipio Yabo, namely, the plaintiffs, defendant Enecia Cristal, Maria Yabo, and Jose Yabo, whose share had been sold to Alberto Yabo; that after Alipios death, the spouses Pastor and Maria Makibalo, Enecia Cristal, and Jose Yabo became the de facto administrators of the said properties; and that much to their surprise, they discovered that the Salvador spouses, who were strangers to the family, have been harvesting coconuts from the lots, which act cast a cloud on the plaintiffs title over the lots. The plaintiffs then prayed that (a) they, as well as defendant Pastor Makibalo, in representation of his wife, and Enecia Cristal, in representation of Gaudencia, be declared as the owners of the lots; (b) the Salvador spouses be declared as having no rights thereto except as possible assignees of their codefendants, Pastor Makibalo and Enecia Cristal; (c) the lots be partitioned according to law among the aforementioned co-owners; and (d) the defendants be made to pay for the value of the fruits they harvested from the lots and for moral and exemplary damages, attorneys fees, expenses of the litigation, and costs of the suit. The two cases were consolidated and jointly heard by Branch 5 of the Court of First Instance of Cagayan de Oro City. By evidence, Pastor Makibalo sought to prove the following allegations: He was married to Maria Yabo who died on 17 March 1962.4 In August 1949, Jose and Victoriano, both surnamed Yabo, sold their respective shares in the disputed lots to one Pedro Ebarat, and in 1952 the latter sold both shares to Pastor Makibalo.5 Ebarat formalized this conveyance by executing an Affidavit of Waiver and Quitclaim dated 30 May 1969 in favor of Pastor.6 On 16 January 1951, the heirs of the late Lope Yabo sold Lopes shares in the litigated properties to one Dominador Canomon,7 who, in turn, sold the same to Pastor.8 Canomon afterwards executed an Affidavit of Waiver and Quitclaim in favor of the latter.9 Pastor Makibalo likewise purchased the shares of Baseliza in the two lots in 1942, of Procopio in 1957, of Francisca in 1958, and of Pelagia in 1967. The

only share he did not buy was that of Gaudencia. After every purchase, he took possession of the portions bought and harvested the products thereof.10 In 1966, Pastor sold back to Alberto a portion of Lot No. 6180 which was formerly the share of Albertos father, Procopio.11 In December 1968, Pastor mortgaged the two lots to the spouses Eulogio and Remedios Salvador.12 On 26 September 1978, he executed a document denominated as a Confirmation and Quitclaim whereby he waived all his rights, interests, and participation in the lots in favor of the Salvador spouses.13 On the other hand, by their evidence,14 the spouses Alberto and Elpia Yabo tried to prove that they had repurchased from Pastor Makibalo the share of Procopio, which was previously sold to Pastor, and had bought the shares of Jose and Maria.15 Filoteo Yabo denied having sold the share of his father, Lope Yabo, in the contested lots and disowned his signature and those of his mother, brothers, and sisters appearing at the back of Exhibit C.16 Ignacio Yabo testified that his father, Victoriano Yabo, did not know how to write and sign his name. He further declared that he had no knowledge that his father affixed his thumbmark in the document marked as Exhibit A purporting to alienate his fathers share in the disputed lots.17 On 15 January 1983, the trial court rendered its decision18 holding as follows: Assuming that the thumbmark on the typewritten name Jose Yabo in Exh. 3 was that of Jose Yabo, Alberto Yabo and Elpia R. Yabo purchased the share of Jose Yabo in bad faith because they knew before and up to the execution of Exh. 3 on October 24, 1972 that Jose Yabo was no longer the owner of that area because from the documents she borrowed from Mrs. Salvador they came to know that Jose Yabo had sold his shares to Pedro Ebarat, and they have seen that Pastor Makibalo has been in possession of those shares together with the seven others exclusively as owner, he having mortgaged them to Mrs. Salvador. As Jose Yabo was no longer the owner of the one ninth (1/9) shares which he sold to Alberto Yabo and Elpia Yabo under Exh. 3, the sale is null and void, and Alberto and Elpia acquired nothing because Jose Yabo had no more title, right or interest to dispose of.
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... Pastor Makibalo had been in possession of Jose Yabos share since 1949 after purchasing it from Ebarat, and has been in possession thereof up to September 26, 1978 when he sold it to the spouses Eulogio Salvador and Remedios Salvador, who are now in possession of the same. Exh. A, evidencing the sale of Victoriano Yabos share to Pedro Ebarat was identified by the latter who testified that he sold it to Pastor Makibalo in 1951. Exh. A is an ancient document1949 when the document came to existence up to now is more than 30 years, and the document had been in the possession of Pastor Makibalo, then Remedios Salvador who had interest in its preservation. As regards the shares of Lope Yabo, the same had been sold by his surviving spouse Juana Legaspi, and his children Filoteo, Andresa, Jovita, Bonifacio, and Rundino for P105.00 on January 16, 1951 to Dominador Conomon (Exh. C and C-1), who in turn sold it to Pastor Makibalo in 1952, executing a formal Deed of Waiver and Quitclaim on May 30, 1969 (Exh. D). Exh. C is an ancient document, being more than 30 years old and has been in the possession of Pastor Makibalo and then the spouses Eulogio and Remedios Salvadorwho had an interest in its preservation. The claim of Filoteo Yabo that the signatures appearing in Exh. C are not his and those of his brothers and sisters are of no avail, for if they were not the ones who affixed those signatures and so they did not sell the shares of their father Lope Yabo, why did they not then take possession of said sharesthey remained silent from 1951 to September 16, 1976 a period of 25 years. They are now [e]stopped by laches. And as regards the shares of Baseliza, Francisca and Pelagia, there is no evidence presented to effectively rebut the testimony of Pastor Makibalo that he acquired the shares of Baseliza Yabo in 1942 by changing it with a buffalo; that he bought the shares of Francisca Yabo in 1958 and that he bought the shares of Pelagia Yabo in 1967; Pastor Makibalo had been in possession of these shares from the time he acquired them, continuously, adversely, openly, and peacefully, as owner up to the time he sold his rights and interest therein to the spouses Eulogio and Remedios Salvador. The heirs of Baseliza, Francisca and Pelagia have not taken any step to protect their rights over those shares for over 40 years in the case of Baselizas share, for about 20 years in the case of Franciscas share, and for more than 10 years in the case of Pelagias share. Laches, likewise has rendered their rights stale.

On March 10, 1966 Pastor Makibalo sold back to Alberto Yabo the share of Procopio Yabo in Lot 6180 (Exh. 1 and 2), but there is nothing to show that Pastor Makibalo also sold back Procopios share in Lot 6080. So then, by purchase, Pastor Makibalo and Maria Yabo acquired the shares of Baseliza, Victoriano, Jose, Lope, Procopio and Francisca, or six (6) shares from Lots 6080 and 6180. These belonged to the conjugal partnership of Pastor Makibalo and Maria Yabo. Maria Yabo had also a share from Lots 6080 and 6180, and Pastor Makibalo acquired the shares of Pelagia Yabo in both Lots 6080 and 6180. All in all, Pastor Makibalo acquired eight shares in both Lot 6080 and 6180. While Maria Yabo died on March 17, 1962, and so one-fourth (1/ 4) of the shares of Baseliza, Victoriano, Jose, Lope, and Francisca, or one-fourth of fiveninth (5/9) of both lots and one-fourth (1/4) of Lot 6080 should go to the children of the brothers and sisters of Maria Yabo by virtue of the provisions of Article 1001 of the New Civil Code, the latter have lost their rights thereto by laches for their inaction for a very long period and their rights have become stale. On the other hand, Pastor Makibalo who had been in possession of the whole of the eight shares in both Lots 6080 and 6180, enjoying the fruits thereof exclusively, uninterruptedly, publicly, peacefully, and continuously from the death of Maria Yabo up to the filing of the complaint in Civil Case No. 5174 on October 8, 1976, or a period of 14 years, had acquired title to the whole of the eight shares in Lot 6080 and seven shares in Lot 6180 (the share of Procopio in Lot 6180 had been sold back to Alberto Yabo). IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered finding Pastor Makibalo, now Eulogio Salvador and Remedios Salvador the owner of eight (8) shares, equivalent to eight-ninth (8/9) of Lot No. 6080, and of seven (7) shares, equivalent to seven-ninth (7/9) of Lot No. 6180, and therefore, ordering the partition of Lot 6080 so that the one-ninth (1/9) alloted to Gaudencia Yabo will go to her heirs or their assigns, and the remaining eightninth (8/9) will go to the spouses Eulogio Salvador and Remedios Salvador, as successor of Pastor Makibalo, and the partition of Lot 6180 so that the sevenninth (7/9) portion which formerly belonged to Baseliza, Victoriano, Jose, Lope, Maria, Francisca, and Pelagia will go to the spouses Eulogio and Remedios Salvador, the one-ninth (1/9) which formerly belonged to Procopio, will go to Alberto Yabo, and the remaining one-ninth (1/9) which formerly belonged to Gaudencia, will go to Gaudencias heirs or their assigns.

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Doc. No. 720, recorded on page 28 of Notarial Register No. VII, and acknowledged before Notary Public Isidro S. Baculio (Exh. E) [purportedly executed by Maria Yabo and Pastor Makibalo] is hereby declared null and void, and so the Office of the City Fiscal is directed to cause an investigation of this matter to find out the person or persons responsible for the falsification of the said document, and if the evidence warrants, to file the corresponding criminal action in court. The Office of the City Assessor of Cagayan de Oro City is, likewise, directed to cause the cancellation of Tax Declarations Nos. 33553, marked as Exh. H-3, 33557, marked as Exh. H-2, both in the name of Alberto Yabo, for having been issued on the basis of a falsified document. Let copies of this decision be furnished the Offices of the City Fiscal and City Assessor, both of Cagayan de Oro City. No pronouncement as to damages, attorneys fees and costs. SO ORDERED.19 The defendants in Civil Case No. 5000 and the plaintiffs in Civil Case No. 5174 appealed from the decision to the Court of Appeals on 19 August 1983.20 In its decision of 3 February 1993,21 the Court of Appeals held that (a) Maria Yabo did not sell her share to Alberto and Elpia Yabo; (b) prescription and laches have not run against the private respondents with respect to the 1/9 share of Maria Yabo in the estate of her father and to her conjugal share in the portions acquired from her brothers and sisters; and (c) Procopio never sold his share in Lot No. 6080 to Pastor Makibalo. More specifically it stated: Exh. E is the document found by the lower court to be a falsification. This finding appellants do not dispute and have not raised an error. ... While acknowledging that upon the death of Maria Yabo on March 17, 1962, one-half (1/2) of the share of Maria Yabo in Lots 6080 and 6180 and one-half (1/2) of Maria Yabos conjugal share in the portions bought from Baseliza, Victoriano, Jose, Lope, Pelagia and Francisca should go to the children of the brothers and sisters of Maria in accordance with Article 1001 of the Civil Code, the lower court rule that said children have lost their rights by laches for their inaction for a very long period and their rights have become stale (Decision, p. 16; Record, Vol. 2, p. 158). Appellants in their second assignment of error aver that this is an error.

We agree that the lower court erred. While between March 17, 1962 when Maria Yabo died and October 8, 1976, when Civil Case No. 5174 for partition was filed, was a period of more than fourteen (14) years, that alone to our mind would not suffice to establish laches or prescription. Upon the death of Maria Yabo, appellee Pastor Makibalo and appellants and the other children of the brothers and sisters of Maria, by operation of law become co-owners of the one-ninth (1/9) share of Maria as heir of her father Alipio and the conjugal share of Maria in the portions acquired from Baseliza, Victoriano, Jose, Lope, Pelagia and Francisca. Time alone is not a decisive factor. Appellee Pastor Makibalo, it must be remembered, is the husband of Maria and, therefore, an uncle-in-law of appellants. In our culture, a demand by an heir or heirs for partition immediately upon the death of a relative is more often taken not as a legitimate assertion of a right but of something else, like greed. It must also be noted that the spouses, the appellee Pastor Makibalo and his deceased wife Maria, were childless and, therefore, appellants and the other children of the brothers and sisters of Maria must have felt that at any rate the property would go to them in the course of time. This probably explains why appellants started asserting their right over the property only after appellee Pastor Makibalo sold the same to the spouses Eulogio and Remedios Salvador. Besides, Lots 6080 and 6180 have a combined area only of 5,083 square meters and before the development of Northern Mindanao, and even in 1962 when Maria Yabo died, were not that valuable. This is shown by the fact that each heir sold his or her share only for P110.00. As we have said not time alone. In the early case of Cortes v. Oliva, 33 Phil. 480, it was held that (o)rdinarily, possession by one joint owner will not be presumed to be adverse to the others, but will, as a rule, be held to be for the benefit of all. Much stronger evidence is required to show an adverse holding by one of several joint owners than by a stranger; and in such cases, to sustain a plea of prescription, it must always clearly appear that one who was originally a joint owner has repudiated the claims of his co-owners, and that his coowners were apprised or should have been apprised of his claim of adverse and exclusive ownership before the alleged prescription began to run (at page 484). This ruling on prescription should apply with equal force to laches. The third assignment of error challenges the finding of the lower court that there is nothing to show that Pastor Makibalo also sold back Procopios share in Lot 6080 (Decision, p. 16; Records, Vol. 2, p. 158).

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Exhibits 1 and 2 cover only Procopios share in Lot 6180. In other words, Exhibits 1 and 2 conveyed back to Alberto Yabo only his father, Procopios share in Lot 6180. There is indeed no evidence that Pastor Makibalo also sold back to Alberto, his father Procopios share in Lot 6080. But from the evidence it appears that Procopio Yabo never sold his share in Lot 6080 to Pastor Makibalo. So there was no need to convey back Procopios share in Lot 6080. This fact is evident from the Affidavit of Confirmation of Sale (Exh. M) dated April 22, 1970, executed by Alberto Yabo, which is the very document relied upon by the lower court (Decision, p. 11; Record, Vol. 2, p. 153) in finding that Alberto Yabo admitted that the share of his father Procopio Yabo was previously bought by Pastor Makibalo. A look at Exh. M, particularly par. 3 thereof, reveals that Alberto Yabo merely acknowledged or confirmed the sale of his fathers share to Pastor Makibalo in Lot 6180. In effect, it at the same time proves that Lot 6080 was never sold by Procopio to appellee Pastor Makibalo; otherwise, it would have been included in the said Affidavit of Confirmation of Sale. The Deed of Absolute Sale (Exh. 2) subsequently executed by Pastor Makibalo in favor of Alberto Yabo on April 23, 1970, further proves this point, since the latter merely bought back what was previously sold, his fathers share in Lot 6180.22 The respondent court then concluded and held as follows: In summary, appellee Pastor Makibalo and his assigns, the spouses Eulogio and Remedios Salvador, are entitled only to one-half (1/2) of the one-ninth (1/9) share of Maria and three-fourths (3/4) of the six-ninth (6/9) shares acquired from Baseliza, Victoriano, Jose, Lope, Pelagia and Francisca. Accordingly, the partition should be done as follows: (1) 1/9 of Lots 6080 and 6180 should be given to the heirs of Gaudencia Yabo or their successors and assigns; (2) 1/9 of Lot 6180 should go to Alberto Yabo and his wife Elpia Yabo; Article 160 of the Civil Code provides that all property of the marriage is presumed to belong to the conjugal partnership, unless it be proved that it pertains exclusively to the husband or to the wife. Since the shares of Jose, Victoriano, Lope, Baseliza, Procopio, and Francisca in Lot No. 6180 and Lot

No. 6080 had been purchased by Pastor during his marriage with Maria, and there is no proof that these were acquired with his exclusive money, the same are deemed conjugal properties. Not forming part of the conjugal partnership are: (1) the 1/9 share inherited by Maria which remained as her exclusive property pursuant to Article 148(2) of the Civil Code; (2) the 1/9 share of Gaudencia which was not sold to Pastor; and (3) the 1/9 share of Pelagia which was acquired by Pastor in 1967 or five years after the death of his wife and which was therefore his exclusive property. There is, thus, merit in the petitioners first assigned error. The Court of Appeals should have excluded from the conjugal partnership the share of Pelagia which Pastor had acquired after his wifes death. Upon Marias death in 1962, the conjugal partnership of gains was dissolved.26 Half of the conjugal properties, together with Marias 1/9 hereditary share in the disputed lots, constituted Marias estate and should thus go to her surviving heirs.27 Under Article 1001 of the Civil Code, her heirs are her spouse, Pastor Makibalo, who shall be entitled to one-half (1/2) of her estate, her brother, Jose, and the children of her other brothers and sisters, who shall inherit the other half. There having been no actual partition of the estate yet, the said heirs became co-owners thereof by operation of law.28 We now determine whether prescription and laches can be applied against the co-heirs of Pastor Makibalo. It has been said that Article 494 of the Civil Code which provides that each coowner may demand at any time the partition of the common property implies that an action to demand partition is imprescriptible or cannot be barred by laches.29 The imprescriptibility of the action cannot, however, be invoked when one of the co-owners has possessed the property as exclusive owner and for a period sufficient to acquire it by prescription.30 What needs to be addressed first is whether or not Pastor Makibalo has acquired by prescription the shares of his other co-heirs or co-owners. Prescription as a mode of acquiring ownership requires a continuous, open, peaceful, public, and adverse possession for a period of time fixed by law. This Court has held that the possession of a co-owner is like that of a trustee and shall not be regarded as adverse to the other co-owners but in fact as beneficial to all of them.31 Acts which may be considered adverse to strangers may not be considered adverse insofar as co-owners are concerned. A mere silent possession by a co-owner, his receipt of rents, fruits or profits from the
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property, the erection of buildings and fences and the planting of trees thereon, and the payment of land taxes, cannot serve as proof of exclusive ownership, if it is not borne out by clear and convincing evidence that he exercised acts of possession which unequivocably constituted an ouster or deprivation of the rights of the other co-owners.32 Thus, in order that a co-owners possession may be deemed adverse to the cestui que trust or the other co-owners, the following elements must concur: (1) that he has performed unequivocal acts of repudiation amounting to an ouster of the cestui que trust or the other co-owners; (2) that such positive acts of repudiation have been made known to the cestui que trust or the other coowners; and (3) that the evidence thereon must be clear and convincing.33 In Pangan vs. Court of Appeals,34 this Court had occasion to lay down specific acts which are considered as acts of repudiation: Filing by a trustee of an action in court against the trustor to quiet title to property, or for recovery of ownership thereof, held in possession by the former, may constitute an act of repudiation of the trust reposed on him by the latter. Theissuance of the certificate of title would constitute an open and clear repudiation of any trust, and the lapse of more than 20 years, open and adverse possession as owner would certainly suffice to vest title by prescription. An action for the reconveyance of land based on implied or constructive trust prescribes within 10 years. And it is from the date of the issuance of such title that the effective assertion of adverse title for purposes of the statute of limitation is counted. The prescriptive period may only be counted from the time petitioners repudiated the trust relation in 1955 upon the filing of the complaint for recovery of possession against private respondents so that the counterclaim of the private respondents contained in their amended answer wherein they asserted absolute ownership of the disputed realty by reason of the continuous and adverse possession of the same is well within the 10-year prescriptive period. There is clear repudiation of a trust when one who is an apparent administrator of property causes the cancellation of the title thereto in the name of the apparent beneficiaries and gets a new certificate of title in his own name.

It is only when the defendants, alleged co-owners of the property in question, executed a deed of partition and on the strength thereof obtained the cancellation of the title in the name of their predecessor and the issuance of a new one wherein they appear as the new owners of a definite area each, thereby in effect denying or repudiating the ownership of one of the plaintiffs over his alleged share in the entire lot, that the statute of limitations started to run for the purposes of the action instituted by the latter seeking a declaration of the existence of the co-ownership and of their rights thereunder. The records do not show that Pastor Makibalo adjudicated to himself the whole estate of his wife by means of an affidavit filed with the Office of the Register of Deeds as allowed under Section 1, Rule 74 of the Rules of Court, or that he caused the issuance of a certificate of title in his name or the cancellation of the tax declaration in Alipios name and the issuance of a new one in his own name. The only act which may be deemed as a repudiation by Pastor of the co-ownership over the lots is his filing on 28 April 1976 of an action to quiet title (Civil Case No. 5000). The period of prescription started to run only from this repudiation. However, this was tolled when his co-heirs, the private respondents herein, instituted on 8 October 1976 an action for partition (Civil Case No. 5174) of the lots. Hence, the adverse possession by Pastor being for only about six months would not vest in him exclusive ownership of his wifes estate, and absent acquisitive prescription of ownership, laches and prescription of the action for partition will not lie in favor of Pastor.35 The issue presented by the petitioners in their third assigned error involves a question of fact. This Court is not ordinarily a trier of facts, its jurisdiction being limited to errors of law. Thus, the findings of facts of the Court of Appeals are as a rule deemed conclusive. However, when the findings of facts of the appellate court vary with those of the trial court, this Court has to review the evidence in order to arrive at the correct findings.36 In the instant case, a conflict in the findings of facts of the lower courts exists. The trial court found that Pastor was the owner of Procopios share in Lot No. 6080, as there was nothing to show that he sold it back to Alberto Yabo. The respondent court, on the other hand, held that Procopio Yabo never sold his share in Lot No. 6080 to Pastor, thus, there was no need to convey it back to Procopios son, Alberto. At this juncture, it is worthy to quote pertinent portions of the testimony of Pastor Makibalo: COURT: (To the witness.)
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Q Where is Alberto Yabo living? A It is there in their house at Bulua. ATTY. JARAULA: (Continuing.)

Q Did you give that portion which they requested? A Their share being inherited from their father Procopio was the portion they requested. COURT:

Q Q In whose land? Yes. Did you grant that? A A Alipio Yabos land. Yes. Q Q What relation has that land to the two (2) parcels of land under litigation? That is the area you sold to Alberto Yabo, pursuant to his request? A A I bought already. Q So, will you please tell the Honorable Court, why Alberto Yabo is staying on that land when you said you have bought that land already? A A So, I sold back a portion to them because they requested me. Yes. That land in the Centro. COURT: (To the witness.) Q Q This is now identified as Lot No. 6180? When was that when you said that Alberto Yabo requested a portion? A A Yes, Your Honor. In 1967. ATTY. JARAULA: (Continuing.) COURT:
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Because that was the land they inherited from their father that was what they requested. Q All right. So that, the area now being occupied by Alberto Yabo?

Q Where did you sign a document ceding that portion requested by Alberto Yabo? A We did not make any receipt in favor of Alberto Yabo because they got only the receipt of that of his father. COURT: (To the witness.) Q You mean to say, that the receipt which Procopio signed when he sold his share for [sic] the document which Alberto got? A Yes. COURT:

The same. Q By the same, you are referring by the same amount of One Hundred Ten (P110.00) Pesos? A Yes, Sir. The same amount.37 The petitioners contend that the sales or conveyances made by Alipios heirs were for their consolidated shares in the two lots. If this was so, and the receipt which Procopio signed when he sold his consolidated share to Pastor was turned over to Alberto, the inevitable conclusion is that Alberto redeemed his fathers share in both lots, not only in Lot No. 6180. This conclusion is further buttressed by the above-quoted testimony of Pastor that he bought the shares (consolidated) of each of Alipios heirs for P110.00 and that when he sold back to Alberto the former share of Procopio, Alberto paid him the same amount of P110.00. However, since the share of Procopio in the two litigated parcels of land was purchased by Pastor during his marriage with Maria, the same became conjugal property, and half of it formed part of Marias estate upon her death in 1962. Accordingly, Pastors resale in favor of Alberto could only be valid with respect to Pastors one-half (1/2) conjugal share and one-fourth (1/4) hereditary share as heir of Maria.38 The remaining one-fourth (1/4) should go to Pastors co-heirs, the private respondents herein. Now on the fourth assigned error. Section 1, Rule 69 of the Rules of Court requires that all persons interested in the land sought to be partitioned must be joined as defendants in the complaints. All co-owners and persons having an interest in the property are considered indispensable parties and an action for partition will not lie without the joinder of said persons.39 It has been held that the absence of an indispensable party in a case renders ineffective all the proceedings subsequent to the filing of the complaint including the judgment.40 It must be recalled that in Civil Case No. 5174 the private respondents sought the partition of the two lots based on the co-ownership which arose from the right of succession to Alipios estate. Since Jose Yabo confirmed, through his thumbmark in the verification of the complaint, that he had already parted with
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All right. ATTY. JARAULA (Continuing.) Q Now, for how much did you buy the shares of each of the brothers and sisters of your wife? A One Hundred Ten (P110.00) Pesos. Q When you sold back to Alberto Yabo, the portion corresponding to the share of his father Procopio in the Poblacion, how much did he pay you? A

his share in Alipios estate, he in effect admitted that he had ceased to be a coowner of the two lots which comprised his fathers estate. Thus, his non-joinder as a party-plaintiff in the complaint would appear to be proper. He does not, as well, appear to be an indispensable party in Civil Case No. 5000. As it turned out, however, the evidence and the issues which cropped up rendered imperative the determination of the conjugal assets of Pastor Makibalo and Maria Yabo and the partition of the latters estate among her heirs. Her estate consists of one-half (1/ 2) of the conjugal properties, which should then be divided pursuant to Article 1001 of the Civil Code since the marriage produced no child; thus: one-half (1/2) to Pastor, and the other half to her brother, Jose, and to her nephews and nieces. Insofar as the partition of Maria Yabos estate is concerned, Jose is an indispensable party. Strictly, the rule on indispensable parties may bar a partition of Marias estate. Considering, however, that such estate or its partition are but incidents in Civil Case No. 5000 and Civil Case No. 5174, and the parties have not offered any objection to the propriety of the determination and partition of her estate, then in the light of Section 11 of Rule 341 and Sections 1 and 5, Rule 1042 of the Rules of Court, and following the rulings of this Court in the 1910 case of Alonso vs. Villamor43 and the 1947 case of Cuyugan vs. Dizon,44 an amendment of the complaint in Civil Case No. 5174 to implead Jose Yabo as party plaintiff would be in order. InAlonso, it was held that under Section 110 of the Code of Civil Procedure whose first paragraph is substantially the same as the aforesaid Section 1 of Rule 10and Section 503 thereof, this Court has full power, apart from that power and authority which is inherent, to amend the process, pleadings, proceedings, and decision in this case by substituting, as party plaintiff, the real party in interest. Our ruling in Cuyugan states: 42 They provide: SEC.1.Amendments in general.Pleadings may be amended by adding or striking out an allegation or the name of any party, or by correcting a mistake in the name of a party or a mistaken or inadequate allegation or description in any other respect, so that the actual merits of the controversy may speedily be determined, without regard to technicalities, and in the most expeditious and inexpensive manner. xxx

SEC.5. Amendment to conform to or authorize presentation of evidence. When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects, as if they had been raised in the pleadings. Such amendment of the pleadings as may be necessary to cause them to conform to the evidence and to raise these issues may be made upon motion of any party at any time, even after judgment; but failure so to amend does not affect the result of the trial of these issues. If evidence is objected to at the trial on the ground that it is not within the issues made by the pleadings, the court may allow the pleadings to be amended and shall do so freely when the presentation of the merits of the action will be subserved thereby and the objecting party fails to satisfy the court that the admission of such evidence would prejudice him in maintaining his action or defense upon the merits. The court may grant a continuance to enable the objecting party to meet such evidence. We, however, do not believe that the case should be dismissed for plaintiffs failure to join her husband. (Sec. 11, Rule 2, Rules of Court). Nor should the case be remanded to the court below and a new trial ordered on this account. The complaint may and should be amended here, to cure the defect of party plaintiffs, after final decision is rendered. Section 11, Rule 2, and Section 2, Rule 17, explicitly authorize such procedure. As this Court had occasion to say in Quison vs. Salud, (12 Phil., 109, 116), a second action would be but a repetition of the first and would involve both parties, plaintiffs and defendant, in much additional expense and would cause much delay, in that way defeating the purpose of the section, which is expressly stated to be that the actual merits of the controversy may speedily be determined without regard to technicalities and in the most expeditious and inexpensive manner. (See also Diaz vs. De la Rama, 73 Phil., 104) To avoid further delay in the disposition of this case, we declare Civil Case No. 5174 as thus duly amended. Consequently, Jose Yabo may participate in the partition of the estate of Maria Yabo. The fourth assigned error must then be rejected. In view of the foregoing disquisitions, the appealed judgment should be modified as follows: (a) the former 1/9 share of Pelagia Yabo in Lots No. 6180 and 6080 which she sold to Pastor should be treated as the latters exclusive property which should now pertain to the petitioners, his successors-in-interest; and (b) the former 1/9 share of Procopio Yabo in both lots should be divided as follows: 3/4 (respondent Pastors 1/2 conjugal share and 1/4 representing his share therein as Marias heir) for the spouses Alberto and Elpia Yabo, and 1/4
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(representing the share therein of Marias collateral relatives as Marias heirs) for the private respondents, including Alberto and Jose Yabo. The partition of the two lots in controversy should therefore be made in this wise: (1) 1/9 share of Gaudencia Yabo should be allotted to her heirs or successorsin-interest; (2) 1/9 share formerly belonging to Pelagia Yaboto the petitioners as successors-in-interest of Pastor Makibalo; (3) 1/9 hereditary share of Maria Yabo to be divided as follows: (a) 1/2 for the petitioners (as successors-in-interest of Pastor Makibalo), and (b) 1/2 for the private respondents, including Jose Yabo or his heirs; (4) 1/9 share formerly belonging to Procopio Yabo to be divided thus: (a) 3/4 for Spouses Alberto and Elpia Yabo, and (b) 1/4 for the other private respondents, including Jose Yabo or his heirs; (5) 5/9 shares which became the conjugal properties of Pastor Makibalo and Maria Yabo to be divided thus: (a) 3/4 for the petitioners (as successors-in-interest of Pastor Makibalo), and (b) 1/4 for the private respondents, including Jose Yabo or his heirs. In sum, Lots Nos. 6180 and 6080 should be partitioned as follows: 1/9 or 4/36to Gaudencia Yabos heirs or successors-in-interest; 3/4 of 1/9 or 3/36to the spouses Alberto and Elpia Yabo; 8/36to the private respondents, including Jose Yabo or his heirs; 21/36to the petitioners as successors-in-interest of Pastor Makibalo. WHEREFORE, the challenged decision of the Court of Appeals of 8 February 1993 in CA-G.R. CV No. 12839 is AFFIRMED, subject to the modifications indicated above. Upon the finality of this decision, let this case be forthwith remanded to the court a quo for further proceedings on the partition of Lots Nos. 6180 and 6080 in conformity with this decision. No pronouncement as to costs.

SO ORDERED. Padilla (Chairman), Bellosillo, Quiason and Kapunan, JJ., concur. Judgment affirmed with modifications. Note.Where there are two or more heirs, the whole estate of the decedent is before its partition, owned in common by such heirs. (Mendoza vs. Court of Appeals, 199 SCRA 778 [1991]) o0o

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[No. L-3404. April 2, 1951] ANGELA I. TUASON, plaintiff and appellant, vs. ANTONIO TUASON, JR., and GREGORIO ARANETA, INC., defendants and appellees.
COMMUNITY PROPERTY; PARTITION; RESCISSION.A contract among land co-owners wherein they agreed to fill their property, construct roads therein and then subdivide it into small lots for sale, the proceeds to be later divided among them, and to this end one of them was to finance the whole development and subdivision, to prepare a schedule of prices and conditions of sale subject to the approval of the other two co-owners, to sell the subdivided lots and execute the corresponding contracts with buyers, and to receive 50 per cent of the gross selling price of the lots and the rents that may be collected f rom the property while in the process of sale, the remaining 50 per cent to be divided in equal portions among the three coowners,does not violate article 400 of the Civil Code. Far from violating the prohibition against a co-owner being obliged to remain a party to the community, the contract precisely has for its purpose and object the dissolution of the co-ownership and of the community by selling the parcel held in common and dividing the proceeds of the sale among the co-owners. The obligation imposed in the contract to preserve the co-ownership until all the lots shall have been sold is a mere incident to the main object of dissolving the co-ownership.

lieu of the old title No. 60911 covering the same property. The three co-owners agreed to have the whole parcel subdivided into small lots and then sold, the proceeds of the sale to be later divided among them. This agreement is embodied in a document (Exh. 6) entitled "Memorandum of Agreement" consisting of ten pages, dated June 30, 1941. Before, during and after the execution of this contract (Exh. 6), Atty. J. Antonio Araneta was acting as the attorney-in-fact and lawyer of the two co-owners, Angela I. Tuason and her brother Antonio Tuason Jr. At the same time he was a member of the Board of Directors of the third co-owner, Araneta, Inc. The pertinent terms of the contract (Exh. 6) may be briefly stated as follows: The three co-owners agreed to improve the property by filling it and constructing roads and curbs on the same and then subdivide it into small lots for sale. Araneta Inc. was to finance the whole development and subdivision; it was to prepare a schedule of prices and conditions of sale, subject to the approval of the two other co-owners; it was invested with authority to sell the lots into which the property was to be subdivided, and execute the corresponding contracts and deeds of sale; it was also to pay the real estate taxes due on the property or of any portion thereof that remained unsold, the expenses of surveying, improvements, etc., all advertising expenses, salaries of personnel, commissions, office and legal expenses, including expenses in instituting all actions to eject all tenants or occupants on the property; and it undertook the duty to furnish each of the two co-owners, Angela and Antonio Tuason, copies of the subdivision plans and the monthly sales and rents and collections made thereon. In return f or all this undertaking and obligation assumed by Araneta Inc., particularly the financial burden, it was to receive 50 per cent of the gross selling price of the lots, and any rents that may be collected from the property, while in the process of sale, the remaining 50 per cent to be divided in equal portions among the three co-owners so that each will receive 16.33 per cent of the gross receipts. Because of the importance of paragraphs 9, 11 and 15 of the contract (Exh. 6), for purposes of reference we are reproducing them below: "(9) This contract shall remain in full force and effect during- all the time that it may be necessary f or the PARTY OF THE SECOND PART to fully sell the said property in small and subdivided lots and to fully collect the purchase prices due thereon; it being understood and agreed that said lots may be rented while there are no purchasers thereof;

APPEAL from a judgment of the Court of First Instance of Manila. Pea, J. The facts are stated in the opinion of the Court. Alcuaz & Eiguren for appellant. Araneta & Araneta for appellees. MONTEMAYOR, J.:

In 1941 the sisters Angela L Tuason and Nieves Tuason de Barreto and their brother Antonio Tuason Jr., held a parcel of land with an area of 64,928.6 sq. m. covered by Certificate of Title No. 60911 in Sampaloc, Manila, in common, each owning an undivided 1/3 portion. Nieves wanted and asked for a partition of the common property, but failing in this, she offered to sell her 1/3 portion. It seems that the objection to dividing the property was that it would lose in value by the proposed partition. The share of Nieves was offered for sale to her sister and her brother but both declined to buy it. The offer was later made to their mother but the old lady also declined to buy, saying that if the property later increased in value, she might be suspected of having taken advantage of her daughter. Finally, the share of Nieves was sold to Gregorio Araneta Inc., a domestic corporation, and a new Certificate of Title No. 61721 was issued in

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"(11) The PARTY OF THE SECOND PART (meaning Araneta Inc.) is hereby given full power and authority to sign for and in behalf of all the said co-owners of said property all contracts of sale and deeds of sale of the lots Into which this property might be sub-divided; the powers herein vested to the PARTY OF THE SECOND PART may not be revoked until the purposes of this contract have been fulfilled and carried out, and the PARTY OF THE SECOND PART may, under its own responsibility and risk, delegate any of its powers under this contract to any of its officers, employees or to third persons; "(15) No co-owner of the property subject-matter of this contract shall sell, alienate or dispose of his ownership, interest or participation therein without first giving preference to the other co-owners to purchase and acquire the same under the same terms and conditions as those offered by any other prospective purchaser. Should none of the co-owners of the property subjectmatter of this contract exercise the said preference to acquire or purchase the same, then such sale to a third party shall be made subject to all the conditions, terms, and dispositions of this contract; provided, the PARTIES OF THE FIRST PART (meaning Angela and Antonio) shall be bound by this contract as long as the PARTY OF THE SECOND PART, namely, the GREGORIO ARANETA, INC. is controlled by the members of the Araneta family, who are stockholders of the said corporation at the time of the signing of this contract and/or their lawful heirs;" On September 16, 1944, Angela I. Tuason revoked the powers conferred on her attorney-in-fact and lawyer, J. Antonio Araneta. Then in a letter dated October 19, 1946, Angela notified Araneta, Inc. that because of alleged breach of the terms of the "Memorandum of Agreement" (Exh. 6) and abuse of powers granted to it in the document, she had decided to rescind said contract and she asked that the property held in common be partitioned. Later, on November 20, 1946, Angela filed a complaint in the Court of First Instance of Manila asking the court to order the partition of the property in question and that she be given 1/3 of the same including rents collected during the time that Araneta Inc., administered said property. The suit was directed principally against Araneta, Inc. Plaintiff's brother, Antonio Tuason Jr., one of the co-owners evidently did not agree to the suit and its purpose, for he joined Araneta, Inc. as a co-defendant. After hearing and after considering the extensive evidence introduced, oral and documentary, the trial court presided over by Judge Emilio Pea in a long and considered decision dismissed the complaint without pronouncement as to

costs. The plaintiff appealed f rom that decision, and because the property is valued at more than P50,000, the appeal came directly to this Court. Some of the reasons advanced by appellant to have the memorandum contract (Exh. 6) declared null and void or rescinded are that she had been tricked into signing it; that she was given to understand by Antonio Araneta acting as her attorney-in-fact and legal adviser that said contract would be similar to another contract of subdivision of a parcel into lots and the sale thereof entered into by Gregorio Araneta Inc., and the heirs of D. Tuason, Exhibit "L", but it turned out that the two contracts widely differed from each other, the terms of contract Exh. "L" being relatively much more favorable to the owners therein and less favorable to Araneta Inc.; that Atty. Antonio Araneta was more or less disqualified to act as her legal adviser as he did because he was one of the officials of Araneta Inc., and finally, that the defendant company has violated the terms of the contract (Exh. 6) by not previously showing her the plans of the subdivision, the schedule of prices and conditions of the sale, in not introducing the necessary improvements into the land and in not delivering to her her share of the proceeds of the rents and sales. We have examined Exh. "L" and compared the same with the contract (Exh. 6) and we agree with the trial court that in the main the terms of both contracts are similar and practically the same. Moreover, as correctly found by the trial court, the copies of both contracts were shown to the plaintiff Angela and her husband, a broker, and both had every opportunity to go over and compare them and decide on the advisability of or disadvantage in entering into the contract (Exh. 6); that although Atty. Antonio Araneta was an official of the Araneta Inc.; being a member of the Board of Directors of the Company at the time that Exhibit "6" was executed, he was not the party with which Angela contracted, and that he committed no breach of trust. According to the evidence Araneta, Inc. showed to her the plans of the subdivision and all the pertinent papers, and sent to her checks covering her share of the proceeds of the sale but that she ref used to receive the same; and that as a matter of fact, at the time of the trial, Araneta Inc., had spent about P1 17,000 in improvement and had received as proceeds on the sale of the lots the respectable sum of P1,265,538.48. We quote with approval that portion of the decision appealed from on these points: "The evidence in this case points to the fact that the actuations of J. Antonio Araneta in connection with the execution of exhibit 6 by the parties, are above board. He committed nothing that is violative of the fiduciary relationship existing between him and the plaintiff. The act of J. Antonio Araneta in giving
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the plaintiff a copy of exhibit 6 before the same was executed, constitutes a full disclosure of the facts, for said copy contains all that appears now in exhibit 6. "Plaintiff charges the defendant Gregorio Araneta, Inc. with infringing the terms of the contract in that the defendant corporation has failed (1) to make the necessary improvements on the property as required by paragraphs 1 and 3 of the contract; (2) to submit to the plaintiff from time to time schedule of prices and conditions under which the subdivided lots are to be sold; and to furnish the plaintiff a copy of the subdivision plans, a copy of the monthly statement of the sales and rents of the subdivided lots, and a statement of the monthly gross collections from the sale of the property. "The Court finds from the evidence that the defendant Gregorio Araneta, Incorporated has substantially complied with the obligation imposed by the contract exhibit 6 in its paragraph 1, and that for improvements alone, it has disbursed the amount of P117,167.09. It has likewise paid taxes, commissions and other expenses incidental to its obligations as defined in the agreement. "With respect to the charge that Gregorio Araneta, Incorporated has failed to submit to plaintiff a copy of the subdivision plans, list of prices and the conditions governing the sale of subdivided lots, and monthly statement of collections f rom the sale of the lots, the Court is of the opinion that it has no basis. The evidence shows that the defendant corporation submitted to the plaintiff periodically all the data relative to prices and conditions of the sale of the subdivided lots, together with the amount corresponding to her. But without any justifiable reason, she refused to accept them. With the indifferent attitude adopted by the plaintiff, it was thought useless for Gregorio Araneta, Incorporated to continue sending her statement of accounts, checks and other things. She had shown on various occasions that she did not want to have any further dealings with the said corporation. So, if the defendant corporation proceeded with the sale of the subdivided lots without the approval of the plaintiff, it was because it was under the correct impression that under the contract exhibit 6 the decision of the majority co-owners is binding upon all the three. "The Court feels that rescission of the contract exhibit 6 is not in order. Even granting that the defendant corporation committed minor violations of the terms of the agreement, the general rule is that 'rescission will not be permitted for a slight or casual breach of the contract, but only for such breaches as are so substantial and fundamental as to defeat the object of the parties in making the agreement' (Song Fo & Co. vs. Hawaiian-Philippine Co., 47 Phil. 821)."

As regards improvements, the evidence shows that during the Japanese occupation from 1942 and up to 1946, the Araneta Inc. although willing to fill the land, was unable to obtain the equipment and gasoline necessary for filling the low places within the parcel. As to sales, the evidence shows that Araneta Inc. purposely stopped selling the lots during the Japanese occupantion, knowing that the purchase price would be paid in Japanese military notes; and Atty. Araneta claims that for this, plaintiff should be thankfull because otherwise she would have received these notes as her share of the receipts, which currency later became valueless. But the main contention of the appellant is that the contract (Exh. 6) should be declared null and void because its terms, particularly paragraphs 9, 11 and 15 which we have reproduced, violate the provisions of Art. 400 of the Civil Code, which for the purposes of reference we quote below: "ART. 400. No co-owner shall be obliged to remain a party to the community. Each may, at any time, demand the partition of the thing held in common. "Nevertheless, an agreement to keep the thing undivided for a specified length of time, not exceeding ten years, shall be valid. This period may be a new agreement." We agree with the trial court that the provisions of Art. 400 of the Civil Code are not applicable. The contract (Exh.. 6) far from violating the legal provision that forbids a co-owner being obliged to remain a party to the community, precisely has for its purpose and object the dissolution of the co-ownership and of the community by selling the parcel held in common and dividing the proceeds of the sale among the co-owners. The obligation imposed in the contract to preserve the co-ownership until all the lots shall -have been sold, is a mere incident to the main object of dissolving the co-ownership. By virtue of the document Exh. 6, the parties thereto practically and substantially entered into a contract of partnership as the best and most expedient means of eventually dissolving the co-ownership, the life of said partnership to end when the object of its creation shall have been attained. This aspect of the contract is very similar to and was perhaps based on the other agreement or contract (Exh. "L") referred to by appellant where the parties thereto in express terms entered into a partnership, although this object is not expressed in so many words in Exh. 6. We repeat that we see no violation of Art. 400 of the Civil Code in -the parties entering into the contract (Exh. 6) for the very reason that Art. 400 is not applicable.
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Looking at the case from a practical standpoint as did the trial court, we find no valid ground for the partition insisted upon the appellant. We find from the evidence as was done by the trial court that of the 64,928.6 sq. m. which is the total area of the parcel held in common, only 1,600 sq. m. or 2.5 per cent of the entire area remained unsold at the time of the trial in the year 1947, while the great bulk of 97.5 per cent had already been sold. As well observed by the court below, the partnership is in the process of being dissolved and is about to be dissolved, and even assuming that Art. 400 of the Civil Code were applicable, under which the parties by agreement may agree to keep the thing undivided for a period not exceeding 10 years, there should be no fear that the remaining 1,600 sq. m. could not be disposed of within the four years left of the ten-year period fixed by Art. 400. We deem it unnecessary to discuss and pass upon the other points raised in the appeal and which counsel for appellant has extensively and ably discussed, citing numerous authorities. As we have already said, we have viewed the case from a practical standpoint, brushing aside technicalities and disregarding any minor violations of the contract, and in deciding the case as we do, we are fully convinced that the trial court and this Tribunal are carrying out in a practical and expeditious way the intentions and the agreement of the parties contained in the contract (Exh. 6), namely, to dissolve the community and co-ownership, in a manner most profitable to the said parties. In view of the foregoing, the decision appealed from is hereby affirmed. There is no pronouncement as to costs. So ordered. Pars, C. J., Pablo, Bengzon, Padilla, Tuason, Reyes, Jugo and Bautista Angelo, JJ., concur. Pars, C. J.:

I certify that Mr. Justice Feria voted to affirm. Judgment affirmed. ______________

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Heirs of Flores Restar vs. Heirs of Dolores R. Cichon G.R. No. 161720. November 22, 2005.* HEIRS OF FLORES RESTAR namely: ESMENIA R. RESTAR, BERNARDITA R. RENTINO, LUCIA RESTAR, RODOLFO RESTAR, JANET R. RELOJERO, LORNA R. RAMOS, MANUEL RESTAR, NENITA R. BELLEZA, MIRASOL R. DELA CRUZ, ROSELLE R. MATORRE, POLICARPIO RESTAR and ADOLFO RESTAR, petitioners, vs. HEIRS OF DOLORES R. CICHON, namely: RUDY R. CICHON, NORMA C. LACHICA, NILDA C. JUMAYAO, LYDIA C. SANTOS, and NELSON R. CICHON; HEIRS OF PERPETUA R. STA. MARIA, namely GEORGE STA. MARIA, LILIA M. MANIAGO, DERLY M. CONCEPCION, GERVY STA. MARIA, DORY M. INDULO; HEIRS OF MARIA R. ROSE, namely: TERESITA R. MALOCO, ROLANDO ROSE, EDELYN R. PALACIO and MINERVA R. PASTRANA, DOMINICA RESTAR-RELOJERO and PACIENCIA RESTAR MANARES, respondents.
Property; Co-ownership; Partition; Prescription; While the action to demand partition of a coowned property does not prescribe, a co-owner may acquire ownership thereof by prescription where there exists a clear repudiation of the co-ownership, and the co-owners are apprised of the claim of adverse and exclusive ownership.While the action to demand partition of a coowned property does not prescribe, a co-owner may acquire ownership thereof by prescription where there exists a clear repudiation of the co-ownership, and the co-owners are apprised of the claim of adverse and exclusive ownership. Acquisitive prescription of dominion and other real rights may be ordinary or extraordinary.Ordinary acquisitive prescription requires possession of things in good faith and with just title for a period of ten years. Without good faith and just title, acquisitive prescription can only be extraordinary in character which requires uninterrupted adverse possession for thirty years. Actions; Appeals; While the Supreme Court is not a trier of facts, if the inference drawn by the appellate court from the facts is manifestly mistaken, the Supreme Court may, in the interest of justice, review the evidence in order to arrive at the correct factual conclusions based on the record.Resolving the main issue of whether petitioners acquired ownership over the lot by extraordinary prescription, the appellate court held in the negative. While this Court is not a trier of facts, if the inference drawn by the appellate court from the facts is manifestly mistaken, it may, in the interest of justice, review the evidence in order to arrive at the correct factual conclusions based on the record. Contrary to the findings of the appellate court, the records of the case amply support petitioners claim that the requirements for extraordinary prescription had been duly met. Property; Co-ownership; Prescription; Tax Declarations; The statutory period of prescription commences when a person who has neither title nor good faith, secures a tax declaration in his name and may, therefore, be said to have adversely claimed the ownership of the lot.When

Restar died in 1935, his eight children became pro indiviso co-owners of the lot by intestate succession. Respondents never possessed the lot, however, much less asserted their claim thereto until January 21, 1999 when they filed the complaint for partition subject of the present petition. In contrast, Flores took possession of the lot after Restars death and exercised acts of dominion thereontilling and cultivating the land, introducing improvements, and enjoying the produce thereof. The statutory period of prescription, however, commenced not in 1935 but in 1960 when Flores, who had neither title nor good faith, secured a tax declaration in his name and may, therefore, be said to have adversely claimed ownership of the lot. And respondents were also deemed to have been on said date become aware of the adverse claim. Flores possession thus ripened into ownership through acquisitive prescription after the lapse of thirty years in accordance with the earlier quoted Article 1137 of the New Civil Code. Same; Same; Same; Same; Possession; While tax declarations and receipts are not conclusive evidence of ownership and do not prove title to the land, nevertheless, when coupled with actual possession, they constitute evidence of great weight and can be a basis of claim of ownership through prescription.While tax declarations and receipts are not conclusive evidence of ownership and do not prove title to the land, nevertheless, when coupled with actual possession, they constitute evidence of great weight and can be the basis of a claim of ownership through prescription.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court. Allan B. Gepty for petitioners. Diomedes T. Resurreccion for respondents. CARPIO-MORALES, J.:

In 1935, Emilio Restar (Restar) died intestate, leaving eight (8) childrencompulsory heirs, namely: Flores Restar, Dolores Restar-Cichon, Perpetua Restar-Sta. Maria, Paciencia Restar-Manares, Dominica Restar-Relojero, Policarpio Restar, Maria Restar-Rose and Adolfo Restar. In 1960, Restars eldest child, Flores, on the basis of a July 12, 1959 Joint Affidavit1 he executed with one Helen Restar, caused the cancellation of Tax Declaration No. 66962 in Restars name covering a 5,9183 square meter parcel of land, Lot 3177 (the lot), located at Barangay Carugdog, Lezo, Aklan which was among the properties left by Restar, and the issuance of Tax Declaration No. 11134 in his name.
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Flores died on June 10, 1989. On November 5, 1998, the co-heirs of Flores discovered the cancellation of Restars Tax Declaration No. 6696 and the issuance in lieu thereof of Tax Declaration No. 111344 in his name. On January 21, 1999, the heirs of Flores sisters Dolores R. Cichon, Perpetua Sta. Maria, and Maria Rose who had in the meantime died, together with Flores surviving sisters Dominica RestarRelojero and Paciencia Restar-Manares, filed a Complaint5 against Flores heirs for partition [of the lot], declaration of nullity of documents, ownership with damages and preliminary injunction before the Regional Trial Court (RTC) of Aklan. Flores brothers Policarpio and Adolfo were impleaded also as defendants, they being unwilling co-plaintiffs. The plaintiffs, herein respondents, alleged that, inter alia, during the lifetime of Flores, they were given their shares of palay from the lot and even after Flores death up to 1991; after Flores death in 1989, his widow Esmenia appealed to them to allow her to hold on to the lot to finance the education of her children, to which they (the plaintiffs) agreed on the condition that after the children had finished their education, it would be divided into eight (8) equal parts; and upon their demand for partition of the lot, the defendants Heirs of Flores refused, they claiming that they were the lawful owners thereof as they had inherited it from Flores. By Answer6 filed February 23, 1999, the defendants-herein petitioners Heirs of Flores claimed that they had been in possession of the lot in the concept of owner for more than thirty (30) years and have been paying realty taxes since time immemorial. And they denied having shared with the plaintiffs the produce of the lot or that upon Flores death in 1989, Esmenia requested the plaintiffs to allow her to hold on to it to finance her childrens education, they contending that by 1977, the children had already finished their respective courses.7 The defendants Heirs of Flores further claimed that after World War II and under the new Tax Declaration in 1945, Flores caused the transfer of parcels of ricelands situated in Carugdog, Lezo, Aklan to his siblings as their shares from the estate of their father Restar;8 and an extrajudicial partition was subsequently executed on September 28, 1973 by Restars heirs, which was notarized by one Atty. Jose Igtanloc, dividing and apportioning among themselves four (4) parcels of land.9

The defendant Adolfo Restar, by separate Answer,10 alleged that the complaint did not state a cause of action as against him for he interposed no objection to the partition of the lot among the heirs of Restar. As for the defendant Policarpio Restar, he in his Amended Answer11 acknowledged Flores as the owner of the lot but claimed that a portion of it, 1,315 square meters, was sold to him as shown by a Deed of Absolute Sale dated May 14, 1981.12 He thus prayed that, among other things, an order for the partition of the lot among Restars heirs be issued excluding, however, that portion sold to him by Flores.13 After trial, Branch 3 of the RTC of Kalibo, Aklan held that Flores share in Restars estate was not the lot but that covered by Cadastral Lot No. 3183. Nevertheless, the trial court, holding that Flores and his heirs had performed acts sufficient to constitute repudiation of the co-ownership, concluded that they had acquired the lot by prescription.14 Respecting the defendant Policarpios claim that a portion of the lot was sold to him, the trial court discredited the same upon noting that Flores signature in the purported Deed of Sale differed from those appearing in other documents submitted by the parties; in 1981, when the said Deed of Sale was alleged to have been executed, Flores was admittedly paralyzed and bedridden and could not have written his name in a straight manner, as in fact his signature appearing in at least two documents dated 1980 was crooked, and there existed discrepancies in the spelling of Flores wifes signature which read Esmea in the deed, and not as Esmenia.15 The trial court thus dismissed the complaint by Decision of June 30, 1999.16 On appeal by the defendants Heirs of Flores and Policarpio Restar, the appellate court, by Decision of October 29, 2002.17 reversed the decision of the trial court, it finding that the defendants Heirs of Flores failed to prove that their possession of the lot excluded their co-owners or that they derived title to it from a separate conveyance to them by Restar. The appellate court further found that there was no adequate notice by Flores to his other co-heirs/co-owners of the repudiation of the co-ownership and neither was there a categorical assertion by the defendants of their exclusive right to the entire lot that barred the plaintiffs claim of ownership.18 And the appellate court found it credible for the plaintiffs to have failed to immediately take legal action to protect their rights on account of forbearance
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towards their eldest brother who had asked them to continue cultivating the lot to support his childrens education.19 Respecting the defendant Policarpios claim that part of the lot had been sold to him by Flores, the appellate court sustained the trial courts rejection thereof. Accordingly, the appellate court disposed: WHEREFORE, in view of all the foregoing, the appeal is hereby GRANTED in so far as plaintiffs-appellants Heirs of Dolores Cichon, et al., are concerned and DENIED in so far as defendant-appellant Policarpio Restar. The decision of the Regional Trial Court of Kalibo, Aklan, Branch 3, dated June 30, 1999 is MODIFIED. The ruling of the said court that the heirs of Flores Restar have acquired ownership by adverse possession of the land in question, Cadastral Lot No. 6686, is hereby REVERSED. SO ORDERED. (Emphasis in the original)

xxx No prescription shall run in favor of a co-owner or co-heir against his coowners or co-heirs so long as he expressly or impliedly recognizes the coownership. While the action to demand partition of a co-owned property does not prescribe, a co-owner may acquire ownership thereof by prescription21 where there exists a clear repudiation of the co-ownership, and the co-owners are apprised of the claim of adverse and exclusive ownership.22 Acquisitive prescription of dominion and other real rights may be ordinary or extraordinary. Ordinary acquisitive prescription requires possession of things in good faith and with just title for a period of ten years. Without good faith and just title, acquisitive prescription can only be extraordinary in character which requires uninterrupted adverse possession for thirty years. Thus, the New Civil Code provides:

The appellate court having denied reconsideration of its decision, only the defendants Heirs of Flores filed the present petition, assigning the following errors: A. THE COURT OF APPEALS PATENTLY ERRED IN REVERSING THE RULING OF THE LOWER COURT THAT THE PETITIONERS AS HEIRS OF FLORES RESTAR HAVE ACQUIRED OWNERSHIP BY ADVERSE POSSESSION OF THE LAND IN QUESTION. B. THE COURT OF APPEALS PATENTLY ERRED IN NOT RULING THAT THERE WAS ACQUISITIVE PRESCRIPTION ON THE LAND IN QUESTION NOTWITHSTANDING THAT THE LAND IN QUESTION HAS BEEN DECLARED IN THE NAME OF FLORES RESTAR, FATHER OF PETITIONERS, AS EARLY AS 1960 AND THAT PETITIONERS AND THEIR PREDECESSOR-IN-INTEREST HAVE BEEN IN OPEN, CONTINUOUS, EXCLUSIVE AND NOTORIOUS POSSESSION OF THE LAND IN QUESTION IN THE CONCEPT OF OWNER FOR MORE THAN THIRTY (30) YEARS.20 The petition is impressed with merit. Article 494 of the New Civil Code expressly provides: ART. 494. No co-owner shall be obliged to remain in the co-ownership. Each co-owner may demand at any time the partition of the thing owned in common, insofar as his share is concerned.

ART. 1117. Acquisitive prescription of dominion and other real rights may be ordinary or extraordinary. Ordinary acquisitive prescription requires possession of things in good faith and with just title for the time fixed by law. ART. 1134. Ownership and other real rights over immovable property are acquired by ordinary prescription through possession of ten years. ART. 1137. Ownership and other real rights over immovables also prescribe through uninterrupted adverse possession thereof for thirty years, without need of title or of good faith. Resolving the main issue of whether petitioners acquired ownership over the lot by extraordinary prescription, the appellate court held in the negative. While this Court is not a trier of facts, if the inference drawn by the appellate court from the facts is manifestly mistaken, it may, in the interest of justice, review the evidence in order to arrive at the correct factual conclusions based on the record.23 Contrary to the findings of the appellate court, the records of the case amply support petitioners claim that the requirements for extraordinary prescription had been duly met.
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When Restar died in 1935, his eight children became pro indiviso co-owners of the lot by intestate succession. Respondents never possessed the lot, however, much less asserted their claim thereto until January 21, 1999 when they filed the complaint for partition subject of the present petition. In contrast, Flores took possession of the lot after Restars death and exercised acts of dominion thereontilling and cultivating the land, introducing improvements, and enjoying the produce thereof. The statutory period of prescription, however, commenced not in 1935 but in 1960 when Flores, who had neither title nor good faith, secured a tax declaration in his name and may, therefore, be said to have adversely claimed ownership of the lot. And respondents were also deemed to have been on said date become aware of the adverse claim.24 Flores possession thus ripened into ownership through acquisitive prescription after the lapse of thirty years in accordance with the earlier quoted Article 1137 of the New Civil Code. The following observations of the trial court thus merit this Courts approval. The evidence proved that as far back as 1959, Flores Restar adjudicated unto himself the whole land in question as his share from his father by means of a joint affidavit which he executed with one Helen Restar, and he requested the Provincial Treasurer/Assessor to have the land declared in his name. It was admitted by the parties during the pre-trial that this affidavit was the basis of the transfer of Tax Declaration No. 6686 from Emilio Restar to Flores Restar. So that from 1960 the land was declared in the name of Flores Restar (Exhibit 10). This was the first concrete act of repudiation made by Flores of the coownership over the land in question. x x x Plaintiffs did not deny that aside from the verbal partition of one parcel of land in Carugdog, Lezo, Aklan way back in 1945, they also had an amicable partition of the lands of Emilio Restar in Cerrudo and Palale, Banga Aklan on September 28, 1973 (Exhibit 20). If they were able to demand the partition, why then did they not demand the inclusion of the land in question in order to settle once and for all the inheritance from their father Emilio Restar, considering that at that time all of the brothers and sisters, the eight heirs of Emilio Restar, were still alive and participated in the signing of the extra-judicial partition?

Also it was admitted that Flores died only in 1989. Plaintiffs had all the chances (sic) to file a case against him from 1960, or a period of 29 years when he was still alive, yet they failed to do so. They filed the instant case only on January 22, 1999, almost ten (10) years after Flores death. From the foregoing evidence, it can be seen that the adverse possession of Flores started in 1960, the time when the tax declaration was transferred in his name. The period of acquisitive prescription started to run from this date. Hence, the adverse possession of Flores Restar from 1960 vested in him exclusive ownership of the land considering the lapse of more than 38 years. Acquisitive prescription of ownership, laches and prescription of the action for partition should be considered in favor of Flores Restar and his heirs.25 While tax declarations and receipts are not conclusive evidence of ownership and do not prove title to the land, nevertheless, when coupled with actual possession, they constitute evidence of great weight26 and can be the basis of a claim of ownership through prescription.27 As for respondents claim that they have been receiving shares from the produce of the land, it was correctly discredited by the trial court. [P]laintiffs claim that Flores Restar gave them five to eight gantas each as their shares in the produce cannot be sustained. A few gantas cannot be considered one-eight share of sixty (60) cavans of palay produced per cropping. One eight of sixty cavans would be at least six cavans, not merely gantas after excluding expenses for cultivation and production. If plaintiffs were to be believed, their whole 7/8 share of the produce would total two cavans, six gantas only at the usual rate of 25 gantas per cavan.28 Unless there are strong and impelling reasons to disturb the trial courts findings of facts which must, as a matter of judicial policy, be accorded with the highest respect, they must remain. Respondents have not, however, proffered any reason warranting the disturbance of the trial courts findings of facts. Indeed, the following acts of Flores show possession adverse to his co-heirs: the cancellation of the tax declaration certificate in the name of Restar and securing another in his name; the execution of a Joint Affidavit stating that he is the owner and possessor thereof to the exclusion of respondents; payment of real estate tax and irrigation fees without respondents having ever contributed any share therein; and continued enjoyment of the property and its produce to the exclusion of respondents. And Flores adverse possession was continued by his heirs.
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The appellate courts crediting of respondents justification for failing to immediately take legal action to protect their rightsforbearance toward Flores and/or his wife who asked to be allowed to cultivate the land to support their childrens educationdoes not impress. For assuming such justification to be true, why did not any of respondents assail Flores continuous possession after his children completed their college education in 1977? The trial courts finding and conclusion that Flores and his heirs had for more than 38 years possessed the land in open, adverse and continuous possession in the concept of ownerwhich length of possession had never been questioned, rebutted or disputed by any of respondents, being thus duly supported by substantial evidence, he and his heirs have become owner of the lot by extraordinary prescription. It is unfortunate that respondents slept on their rights. Dura lex sed lex. WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals is REVERSED and SET ASIDE and the June 30, 1999 decision of the trial court is REINSTATED. No pronouncement as to costs. SO ORDERED. Panganiban (Chairman), Corona and Garcia, JJ.,concur. Sandoval-Gutierrez, J.,On Leave. Petition granted, judgment reversed and set aside. That of the trial court reinstated. Notes.A co-ownership or co-possession is not an indicium of the existence of a partnership. The essence of a partnership is that the partners share in the profits and losses. (Heirs of Tan Eng Kee vs. Court of Appeals, 341 SCRA 740 [2000]) There is no co-ownership when the different portions owned by different people are already concretely determined and separately identifiable, even if not yet technically described. (Si vs. Court of Appeals, 342 SCRA 653 [2000] o0o [Heirs of Flores Restar vs. Heirs of Dolores R. Cichon, 475 SCRA 731(2005)]

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Lopez vs. Ilustre [No. 2426. January 24, 1906.] FERNANDO MONTAO LOPEZ, plaintiff and appellee, vs. PEDRO MARTINEZ ILUSTRE, defendant and appellant.
REALTY; TENANTS IN COMMON; SALE OF UNDIVIDED INTEREST; PARTITION.M. and the defendant were owners as tenants in common of twenty-eight separate tracts of land. M. sold to the plaintiff his undivided one-half interest in two of these tracts by contract with pacto de retro. Before the right to repurchase had expired M. and the defendant made a voluntary partition between themselves of the twenty-eight tracts, by which partition the two tracts in which the plaintiff was interested fell to the defendant. M. did not exercise his right of repurchase. Held, That the partition between M. and the defendant did not affect the plaintiff, and that he was the owner of an undivided one-half of the two lots in question.

APPEAL from a judgment of the Court of First Instance of Manila. The facts are stated in the opinion of the court.

It appeared that Francisco Martinez and the defendant, his son, were the owners as tenants in common of twentysix other parcels of land; that in June, 1903, before the expiration of the year in which Francisco Martinez had the right to repurchase the property so conveyed to the plaintiff, he and the defendant, his son, made a voluntary partition of these twenty-eight tracts of land, which partition was approved by the Court of First Instance of Manila on the 15th day of June, 1903. These twenty-eight tracts of land had been acquired by Francisco Martinez during his marriage with his wife, Doa Germana Ilustre. The wife having died, her estate was in process of administration in the Court of First Instance of Manila, and the partition above mentioned was made on the theory that these lands were the property of the conjugal partnership existing between Francisco Martinez and his wife. In this partition the two parcels of land in question in this case fell to the defendant, and his claim is that by this partition plaintiff lost all his interest in the property. Judgment was entered in the court below in favor of plaintiff as prayed for in his complaint, and the defendant has brought the case here by bill of exceptions. Article 399 of the Civil Code is as follows:

Hartigan, Marple, Rohde & Gutierrez, for appellant. Carlos Casademunt, for appellee. WILLARD, J.: "Every cowner shall have full ownership of his part and in the fruits and benefits derived therefrom, and he therefore may alienate, assign, or mortgage it, and even substitute another person in its enjoyment, unless personal rights are in question. But the effect of the alienation or mortgage, with regard to the cowners, shall be limited to the share which may be awarded him in the division on the dissolution of the community." This article gives the owner of an undivided interest in the property the right to freely sell and dispose of itthat is, of his undivided interest. He has no right to sell a divided part of the real estate. If he is the owner of an undivided half of a tract of land, he has a right to sell and convey an undivided half, but he has no right to divide the lot into two parts, and convey the whole of one part by metes and bounds. All that Francisco Martinez undertook to do in this case was to convey his undivided interest in these two properties. This he had a perfect right to do, in accordance with the terms of said article. There is nothing in the last clause of the article inconsistent with this position. That declares simply that when the property is divided the purchaser gets an interest only in that part which may be assigned to him. For the purposes of this case we see no difference between it and a case in which the tenant in common makes an absolute conveyance of his undivided interest in the property, without reserving the right to repurchase. In the case of an absolute conveyance of that character, the relation between the grantor in the deed and his cotenant is
504 | P r o p e r t y

On the 26th day of December, 1902, Francisco Martinez and the defendant, Pedro Martinez, his son, were the owners as tenants in common of two separate parcels of land in Calle Dulumbayan, in the city of Manila, each being the owner of an undivided one-half of each of said tracts of land. On the 26th day of December, 1902, Francisco Martinez conveyed to the plaintiff his undivided half interest in both said tracts of land. This deed contained a clause giving Martinez the right to repurchase the property within one year from December 26, 1902. He did not repurchase it, and on the 28th of December, 1903, the plaintiff caused the proper marginal entry to be made upon the books in the registry of property in which registry the conveyance had been recorded, and afterwards brought this action in March, 1904, asking for a partition of the two lots of land, between himself and the defendant, and that defendant account for and pay to the plaintiff his part of the rents of the said properties from the 26th day of December, 1903.

terminated. They are no longer cotenants. The grantee in the deed takes the place of the grantor, and he and the other owner of the property become cotenants. In such a case the grantor loses all interest in the property, and of course has no right to take any part in th partition of it. It would be absurd to say that after such conveyance the grantor, who had lost all his interest in the property, could by agreement with the other owner make a partition of property in which he had no interest that would be binding upon his grantee. We do not see how the fact that Francisco Martinez and his son were the owners of other pieces of property as tenants in common can affect the question presented in this case. Each tract was separate and distinct from all the others. The parties had a right to deal with one lot without any reference to the other twenty-seven. The fact that the defendant acquired title to all of them by inheritance from his mother did not make them physically one tract of land, so that a conveyance by the son of his undivided, half interest in one of these lots would amount to a conveyance of a divided part of a tract of land held by him in common with his father. The judgment of the court below is affirmed, with the costs of this instance against the appellant, and after the expiration of twenty days judgment should be entered in accordance herewith and the case remanded to the court below for execution. So ordered. Arellano, C. J., Mapa, Johnson, and Carson, JJ., concur. Judgment affirmed. _______________ [Lopez vs. Ilustre, 5 Phil. 567(1906)]

SO ORDERED. Corona (Chairperson), Del Castillo,** Abad*** and Mendoza, JJ., concur. Petition denied. Note.In a contract of sale of land in a mass, the specific boundaries stated in the contract must control over any statement with respect to the area contained within its boundaries. (Salinas vs. Castillo, 566 SCRA 18 [2008]) o0o

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G.R. No. 169504. March 3, 2010.* COFFEE PARTNERS, INC., petitioner, vs. SAN FRANCISCO COFFEE & ROASTERY, INC., respondent.
Intellectual Property Code; Trademarks and Trade Names; Trademark Infringement; A trade name need not be registered with the Intellectual Property Office (IPO) before an infringement suit may be filed by its owner against the owner of an infringing trademark; All that is required is that the trade name is previously used in trade or commerce in the Philippines.A trade name need not be registered with the IPO before an infringement suit may be filed by its owner against the owner of an infringing trademark. All that is required is that the trade name is previously used in trade or commerce in the Philippines. Same; Same; Same; Trade names shall be protected even prior to or without registration with the Intellectual Property Office (IPO). RA 8293, which took effect on 1 January 1998, has dispensed with the registration requirement. Section 165.2 of RA 8293 categorically states that trade names shall be protected, even prior to or without registration with the IPO, against any unlawful act including any subsequent use of the trade name by a third party, whether as a trade name or a trademark likely to mislead the public. Same; Same; Same; It is likelihood of confusion that is the gravamen of infringement; There is no absolute standard for likelihood of confusion.It is the likelihood of confusion that is the gravamen of infringement. But there is no absolute standard for likelihood of confusion. Only the particular, and sometimes peculiar, circumstances of each case can determine its existence. Thus, in infringement cases, precedents must be evaluated in the light of each particular case. Same; Same; Same; Two Tests in Determining Similarity and Likelihood of Confusion.In determining similarity and likelihood of confusion, our jurisprudence has developed two tests: the dominancy test and the holistic test. The dominancy test focuses on the similarity of the prevalent features of the competing trademarks that might cause confusion and deception, thus constituting infringement. If the competing trademark contains the main, essential, and dominant features of another, and confusion or deception is likely to result, infringement occurs. Exact duplication or imitation is not required. The question is whether the use of the marks involved is likely to cause confusion or mistake in the mind of the public or to deceive consumers. In contrast, the holistic test entails a consideration of the entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity. The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing on both marks in order that the observer may draw his conclusion whether one is confusingly similar to the other. Same; Same; Same; The likelihood of confusion is higher in cases where the business of one corporation is the same or substantially the same as that of another corporation.Applying either the dominancy test or the holistic test, petitioners SAN FRANCISCO COFFEE trademark is a clear infringement of respondents SAN FRANCISCO COFFEE & ROASTERY,

INC. trade name. The descriptive words SAN FRANCISCO COFFEE are precisely the dominant features of respondents trade name. Petitioner and respondent are engaged in the same business of selling coffee, whether wholesale or retail. The likelihood of confusion is higher in cases where the business of one corporation is the same or substantially the same as that of another corporation. In this case, the consuming public will likely be confused as to the source of the coffee being sold at petitioners coffee shops. Petitioners argument that San Francisco is just a proper name referring to the famous city in California and that coffee is simply a generic term, is untenable. Respondent has acquired an exclusive right to the use of the trade name SAN FRANCISCO COFFEE & ROASTERY, INC. since the registration of the business name with the DTI in 1995.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals. The facts are stated in the opinion of the Court. Puyat, Jacinto & Santos for petitioner. International Legal Advocates for respondent. CARPIO, J.: The Case

This is a petition for review1 of the 15 June 2005 Decision2 and the 1 September 2005 Resolution3 of the Court of Appeals in CA-G.R. SP No. 80396. In its 15 June 2005 Decision, the Court of Appeals set aside the 22 October 2003 Decision4 of the Office of the Director General-Intellectual Property Office and reinstated the 14 August 2002 Decision5 of the Bureau of Legal Affairs-Intellectual Property Office. In its 1 September 2005 Resolution, the Court of Appeals denied petitioners motion for reconsideration and respondents motion for partial reconsideration. The Facts

Petitioner Coffee Partners, Inc. is a local corporation engaged in the business of establishing and maintaining coffee shops in the country. It registered with the Securities and Exchange Commission (SEC) in January 2001. It has a franchise agreement6 with Coffee Partners Ltd. (CPL), a business entity organized and existing under the laws of British Virgin Islands, for a non506 | P r o p e r t y

exclusive right to operate coffee shops in the Philippines using trademarks designed by CPL such as SAN FRANCISCO COFFEE. Respondent is a local corporation engaged in the wholesale and retail sale of coffee. It registered with the SEC in May 1995. It registered the business name SAN FRANCISCO COFFEE & ROASTERY, INC. with the Department of Trade and Industry (DTI) in June 1995. Respondent had since built a customer base that included Figaro Company, Tagaytay Highlands, Fat Willys, and other coffee companies. In 1998, respondent formed a joint venture company with Boyd Coffee USA under the company name Boyd Coffee Company Philippines, Inc. (BCCPI). BCCPI engaged in the processing, roasting, and wholesale selling of coffee. Respondent later embarked on a project study of setting up coffee carts in malls and other commercial establishments in Metro Manila. In June 2001, respondent discovered that petitioner was about to open a coffee shop under the name SAN FRANCISCO COFFEE in Libis, Quezon City. According to respondent, petitioners shop caused confusion in the minds of the public as it bore a similar name and it also engaged in the business of selling coffee. Respondent sent a letter to petitioner demanding that the latter stop using the name SAN FRANCISCO COFFEE. Respondent also filed a complaint with the Bureau of Legal Affairs-Intellectual Property Office (BLAIPO) for infringement and/or unfair competition with claims for damages. In its answer, petitioner denied the allegations in the complaint. Petitioner alleged it filed with the Intellectual Property Office (IPO) applications for registration of the mark SAN FRANCISCO COFFEE & DEVICE for class 42 in 1999 and for class 35 in 2000. Petitioner maintained its mark could not be confused with respondents trade name because of the notable distinctions in their appearances. Petitioner argued respondent stopped operating under the trade name SAN FRANCISCO COFFEE when it formed a joint venture with Boyd Coffee USA. Petitioner contended respondent did not cite any specific acts that would lead one to believe petitioner had, through fraudulent means, passed off its mark as that of respondent, or that it had diverted business away from respondent. Mr. David Puyat, president of petitioner corporation, testified that the coffee shop in Libis, Quezon City opened sometime in June 2001 and that another coffee shop would be opened in Glorietta Mall, Makati City. He stated that the coffee shop was set up pursuant to a franchise agreement executed in January 2001 with CPL, a British Virgin Island Company owned by Robert Boxwell. Mr.

Puyat said he became involved in the business when one Arthur Gindang invited him to invest in a coffee shop and introduced him to Mr. Boxwell. For his part, Mr. Boxwell attested that the coffee shop SAN FRANCISCO COFFEE has branches in Malaysia and Singapore. He added that he formed CPL in 1997 along with two other colleagues, Shirley Miller John and Leah Warren, who were former managers of Starbucks Coffee Shop in the United States. He said they decided to invest in a similar venture and adopted the name SAN FRANCISCO COFFEE from the famous city in California where he and his former colleagues once lived and where special coffee roasts came from. The Ruling of the Bureau of Legal AffairsIntellectual Property Office

In its 14 August 2002 Decision, the BLA-IPO held that petitioners trademark infringed on respondents trade name. It ruled that the right to the exclusive use of a trade name with freedom from infringement by similarity is determined from priority of adoption. Since respondent registered its business name with the DTI in 1995 and petitioner registered its trademark with the IPO in 2001 in the Philippines and in 1997 in other countries, then respondent must be protected from infringement of its trade name. The BLA-IPO also held that respondent did not abandon the use of its trade name as substantial evidence indicated respondent continuously used its trade name in connection with the purpose for which it was organized. It found that although respondent was no longer involved in blending, roasting, and distribution of coffee because of the creation of BCCPI, it continued making plans and doing research on the retailing of coffee and the setting up of coffee carts. The BLA-IPO ruled that for abandonment to exist, the disuse must be permanent, intentional, and voluntary. The BLA-IPO held that petitioners use of the trademark SAN FRANCISCO COFFEE will likely cause confusion because of the exact similarity in sound, spelling, pronunciation, and commercial impression of the words SAN FRANCISCO which is the dominant portion of respondents trade name and petitioners trademark. It held that no significant difference resulted even with a diamond-shaped figure with a cup in the center in petitioners trademark because greater weight is given to wordsthe medium consumers use in ordering coffee products.
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On the issue of unfair competition, the BLA-IPO absolved petitioner from liability. It found that petitioner adopted the trademark SAN FRANCISCO COFFEE because of the authority granted to it by its franchisor. The BLA-IPO held there was no evidence of intent to defraud on the part of petitioner. The BLA-IPO also dismissed respondents claim of actual damages because its claims of profit loss were based on mere assumptions as respondent had not even started the operation of its coffee carts. The BLA-IPO likewise dismissed respondents claim of moral damages, but granted its claim of attorneys fees. Both parties moved for partial reconsideration. Petitioner protested the finding of infringement, while respondent questioned the denial of actual damages. The BLA-IPO denied the parties partial motion for reconsideration. The parties appealed to the Office of the Director General-Intellectual Property Office (ODG-IPO). The Ruling of the Office of the Director GeneralIntellectual Property Office

Resolution, the Court of Appeals denied petitioners motion for reconsideration and respondents motion for partial reconsideration. The Issue

The sole issue is whether petitioners use of the trademark SAN FRANCISCO COFFEE constitutes infringement of respondents trade name SAN FRANCISCO COFFEE & ROASTERY, INC., even if the trade name is not registered with the Intellectual Property Office (IPO). The Courts Ruling

The petition has no merit. Petitioner contends that when a trade name is not registered, a suit for infringement is not available. Petitioner alleges respondent has abandoned its trade name. Petitioner points out that respondents registration of its business name with the DTI expired on 16 June 2000 and it was only in 2001 when petitioner opened a coffee shop in Libis, Quezon City that respondent made a belated effort to seek the renewal of its business name registration. Petitioner stresses respondents failure to continue the use of its trade name to designate its goods negates any allegation of infringement. Petitioner claims no confusion is likely to occur between its trademark and respondents trade name because of a wide divergence in the channels of trade, petitioner serving ready-made coffee while respondent is in wholesale blending, roasting, and distribution of coffee. Lastly, petitioner avers the proper noun San Francisco and the generic word coffee are not capable of exclusive appropriation. Respondent maintains the law protects trade names from infringement even if they are not registered with the IPO. Respondent claims Republic Act No. 8293 (RA 8293)7 dispensed with registration of a trade name with the IPO as a requirement for the filing of an action for infringement. All that is required is that the trade name is previously used in trade or commerce in the Philippines. Respondent insists it never abandoned the use of its trade name as evidenced by its letter to petitioner demanding immediate discontinuation of the use of its trademark and by the filing of the infringement case. Respondent alleges petitioners trademark is confusingly similar to respondents trade name.

In its 22 October 2003 Decision, the ODG-IPO reversed the BLA-IPO. It ruled that petitioners use of the trademark SAN FRANCISCO COFFEE did not infringe on respondents trade name. The ODG-IPO found that respondent had stopped using its trade name after it entered into a joint venture with Boyd Coffee USA in 1998 while petitioner continuously used the trademark since June 2001 when it opened its first coffee shop in Libis, Quezon City. It ruled that between a subsequent user of a trade name in good faith and a prior user who had stopped using such trade name, it would be inequitable to rule in favor of the latter.

The Ruling of the Court of Appeals In its 15 June 2005 Decision, the Court of Appeals set aside the 22 October 2003 decision of the ODG-IPO in so far as it ruled that there was no infringement. It reinstated the 14 August 2002 decision of the BLA-IPO finding infringement. The appellate court denied respondents claim for actual damages and retained the award of attorneys fees. In its 1 September 2005

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Respondent stresses ordinarily prudent consumers are likely to be misled about the source, affiliation, or sponsorship of petitioners coffee. As to the issue of alleged abandonment of trade name by respondent, the BLAIPO found that respondent continued to make plans and do research on the retailing of coffee and the establishment of coffee carts, which negates abandonment. This finding was upheld by the Court of Appeals, which further found that while respondent stopped using its trade name in its business of selling coffee, it continued to import and sell coffee machines, one of the services for which the use of the business name has been registered. The binding effect of the factual findings of the Court of Appeals on this Court applies with greater force when both the quasi-judicial body or tribunal like the BLA-IPO and the Court of Appeals are in complete agreement on their factual findings. It is also settled that absent any circumstance requiring the overturning of the factual conclusions made by the quasi-judicial body or tribunal, particularly if affirmed by the Court of Appeals, the Court necessarily upholds such findings of fact.8 Coming now to the main issue, in Prosource International, Inc. v. Horphag Research Management SA,9 this Court laid down what constitutes infringement of an unregistered trade name, thus: (1) The trademark being infringed is registered in the Intellectual Property Office; however, in infringement of trade name, the same need not be registered; (2) The trademark or trade name is reproduced, counterfeited, copied, or colorably imitated by the infringer; (3) The infringing mark or trade name is used in connection with the sale, offering for sale, or advertising of any goods, business or services; or the infringing mark or trade name is applied to labels, signs, prints, packages, wrappers, receptacles, or advertisements intended to be used upon or in connection with such goods, business, or services; (4) The use or application of the infringing mark or trade name is likely to cause confusion or mistake or to deceive purchasers or others as to the goods or services themselves or as to the source or origin of such goods or services or the identity of such business; and (5) It is without the consent of the trademark or trade name owner or the assignee thereof.10 (Emphasis supplied)

Clearly, a trade name need not be registered with the IPO before an infringement suit may be filed by its owner against the owner of an infringing trademark. All that is required is that the trade name is previously used in trade or commerce in the Philippines.11 Section 22 of Republic Act No. 166,12 as amended, required registration of a trade name as a condition for the institution of an infringement suit, to wit: Sec. 22. Infringement, what constitutes.Any person who shall use, without the consent of the registrant, any reproduction, counterfeit, copy, or colorable imitation of any registered mark or trade name in connection with the sale, offering for sale, or advertising of any goods, business or services on or in connection with which such use is likely to cause confusion or mistake or to deceive purchasers or others as to the source or origin of such goods or services, or identity of such business; or reproduce, counterfeit, copy, or colorably imitate any such mark or trade name and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles, or advertisements intended to be used upon or in connection with such goods, business, or services, shall be liable to a civil action by the registrant for any or all of the remedies herein provided. (Emphasis supplied) However, RA 8293, which took effect on 1 January 1998, has dispensed with the registration requirement. Section 165.2 of RA 8293 categorically states that trade names shall be protected, even prior to or without registration with the IPO, against any unlawful act including any subsequent use of the trade name by a third party, whether as a trade name or a trademark likely to mislead the public. Thus: SEC. 165.2 (a) Notwithstanding any laws or regulations providing for any obligation to register trade names, such names shall be protected, even prior to or without registration, against any unlawful act committed by third parties. (b) In particular, any subsequent use of a trade name by a third party, whether as a trade name or a mark or collective mark, or any such use of a similar trade name or mark, likely to mislead the public, shall be deemed unlawful. (Emphasis supplied) It is the likelihood of confusion that is the gravamen of infringement. But there is no absolute standard for likelihood of confusion. Only the particular, and sometimes peculiar, circumstances of each case can determine its existence.
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Thus, in infringement cases, precedents must be evaluated in the light of each particular case.13 In determining similarity and likelihood of confusion, our jurisprudence has developed two tests: the dominancy test and the holistic test. The dominancy test focuses on the similarity of the prevalent features of the competing trademarks that might cause confusion and deception, thus constituting infringement. If the competing trademark contains the main, essential, and dominant features of another, and confusion or deception is likely to result, infringement occurs. Exact duplication or imitation is not required. The question is whether the use of the marks involved is likely to cause confusion or mistake in the mind of the public or to deceive consumers.14 In contrast, the holistic test entails a consideration of the entirety of the marks as applied to the products, including the labels and packaging, in determining confusing similarity.15 The discerning eye of the observer must focus not only on the predominant words but also on the other features appearing on both marks in order that the observer may draw his conclusion whether one is confusingly similar to the other.16 Applying either the dominancy test or the holistic test, petitioners SAN FRANCISCO COFFEE trademark is a clear infringement of respondents SAN FRANCISCO COFFEE & ROASTERY, INC. trade name. The descriptive words SAN FRANCISCO COFFEE are precisely the dominant features of respondents trade name. Petitioner and respondent are engaged in the same business of selling coffee, whether wholesale or retail. The likelihood of confusion is higher in cases where the business of one corporation is the same or substantially the same as that of another corporation. In this case, the consuming public will likely be confused as to the source of the coffee being sold at petitioners coffee shops. Petitioners argument that San Francisco is just a proper name referring to the famous city in California and that coffee is simply a generic term, is untenable. Respondent has acquired an exclusive right to the use of the trade name SAN FRANCISCO COFFEE & ROASTERY, INC. since the registration of the business name with the DTI in 1995. Thus, respondents use of its trade name from then on must be free from any infringement by similarity. Of course, this does not mean that respondent has exclusive use of the geographic word San Francisco or the generic word coffee. Geographic or generic words are not, per se, subject to exclusive appropriation. It is only the combination of the words SAN FRANCISCO COFFEE, which is respondents trade name in its coffee business, that is

protected against infringement on matters related to the coffee business to avoid confusing or deceiving the public. In Philips Export B.V. v. Court of Appeals,17 this Court held that a corporation has an exclusive right to the use of its name. The right proceeds from the theory that it is a fraud on the corporation which has acquired a right to that name and perhaps carried on its business thereunder, that another should attempt to use the same name, or the same name with a slight variation in such a way as to induce persons to deal with it in the belief that they are dealing with the corporation which has given a reputation to the name.18 This Court is not just a court of law, but also of equity. We cannot allow petitioner to profit by the name and reputation so far built by respondent without running afoul of the basic demands of fair play. Not only the law but equity considerations hold petitioner liable for infringement of respondents trade name. The Court of Appeals was correct in setting aside the 22 October 2003 Decision of the Office of the Director General-Intellectual Property Office and in reinstating the 14 August 2002 Decision of the Bureau of Legal AffairsIntellectual Property Office. WHEREFORE, we DENY the petition for review. We AFFIRM the 15 June 2005 Decision and 1 September 2005 Resolution of the Court of Appeals in CA-G.R. SP No. 80396. Costs against petitioner. SO ORDERED. Velasco, Jr.,** Del Castillo, Abad and Perez, JJ., concur. Petition denied, judgment and resolution affirmed. Note.Court of Appeals incorrectly concluded that all actions involving trademarks, including charges of unfair competition, are under the exclusive jurisdiction of civil courts. (In-N-Out Burger, Inc. vs. Sehwani, Incorporated, 575 SCRA 535 [2008]) o0o _______________ [Coffee Partners, Inc. vs. San Francisco Coffee & Roastery, Inc., 614 SCRA 113(2010)]
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Go vs. Bacaron G.R. No. 159048. October 11, 2005.* BENNY GO, petitioner, vs. ELIODORO BACARON, respondent.
Civil Law; Mortgages; Loans; Sales; Article 1602 of the Civil Code cites instances in which a contract of sale is presumed to be an equitable mortgage.The instances in which a contract of sale is presumed to be an equitable mortgage are enumerated in Article 1602 of the Civil Code as follows: Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases: (1) When the price of a sale with right to repurchase is unusually inadequate; (2) When the vendor remains in possession as lessee or otherwise; (3) When upon or after 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. Same; Same; Same; Same; That the parties intended to enter into an equitable mortgage is bolstered by respondents continued payment of the real property taxes subsequent to the alleged sale.That the parties intended to enter into an equitable mortgage is bolstered by respondents continued payment of the real property taxes subsequent to the alleged sale. Payment of those taxes is a usual burden attached to ownership. Coupled with continuous possession of the property, it constitutes evidence of great weight that a person under whose name the realty taxes were declared has a valid and rightful claim over the land. Same; Same; Same; Same; Words and Phrases; An equitable mortgage has been defined as one which although lacking in some formality, or form or words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to charge real property as security for a debt, and contains nothing impossible or contrary to law.An equitable mortgage has been defined as one which although lacking in some formality, or form or words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to charge real property as security for a debt, and contains nothing impossible or contrary to law. Evidence; Checks; Checks presented by petitioner may indeed evince respondents indebtedness to him in the amounts stated on the faces of those instruments.Checks have the character of negotiability. At the same time, they may constitute evidence of indebtedness. Those presented by petitioner may indeed evince respondents indebtedness to him in the amounts stated on the faces of those instruments. He, however, acknowledges (1) that respondent paid some of the obligations through the coprax delivered to petitioners father; and (2) that petitioner owed and subsequently paid respondent P214,000.

The facts are stated in the opinion of the Court. Leonardo D. Suario for petitioner. Cariaga Law Offices for respondent. PANGANIBAN J.:

The present Contract, which purports to be an absolute deed of sale, should be deemed an equitable mortgage for the following reasons: (1) the consideration has been proven to be unusually inadequate; (2) the supposed vendor has remained in possession of the property even after the execution of the instrument; and (3) the alleged seller has continued to pay the real estate taxes on the property. The Case Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to set aside the October 17, 2002 Decision2 and the May 20, 2003 Resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 67218. The assailed Decision disposed as follows: WHEREFORE, premises considered, the Decision dated February 24, 2000 of the Regional Trial Court of Davao City, Branch 12, in Civil Case No. 25,101-97 is hereby REVERSED and SET ASIDE and a new one is hereby rendered ordering the reformation of the subject instrument, such that the same must be considered a mortgage contract and not a transfer of right. Costs against [petitioner].4 The assailed Resolution denied Reconsideration. The Facts The antecedents are narrated by the CA as follows: As evidenced by the Transfer of Rights dated October 1, 1993, Eliodoro Bacaron conveyed a 15.3955-hectare parcel of land located in Langub, Talomo, Davao City, in favor of Benny Go for P20,000.00.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.
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About a year thereafter, Bacaron, seeking to recover his property, went to Go to pay his alleged P20,000.00 loan but the latter refused to receive the same and to return his property saying that the transaction between the two of them was a sale and not a mortgage as claimed by Bacaron. Consequently, on March 5, 1997, Eliodoro Bacaron, as plaintiff [herein respondent], filed a Complaint for Reformation of Instrument with Damages and prayer for the issuance of a writ of preliminary injunction, with the Regional Trial Court of Davao City, Branch 12, against the [petitioner] Benny Go, which case was docketed as Civil Case No. 25,101-97. In his Complaint, [respondent] alleged that in the middle part of 1993, he suffered business reversals which prompted him, being in urgent need of funds, to borrow P20,000.00 from the [petitioner]. He however averred that prior to extending said loan to him, the [petitioner] required him to execute a document purporting to be a Transfer of Rights but was told that the same would only be a formality as he could redeem the unregistered land the moment he pays the loan. Admitting that he signed the instrument despite knowing that the same did not express the true intention of the parties agreement, i.e., that the transaction was a mere equitable mortgage, the [respondent] explained that he did so only because he was in a very tight financial situation and because he was assured by the [petitioner] that he could redeem his property. To support this claim, [respondent] stressed the fact that the consideration in the instrument was merely P20,000.00, which is grossly inadequate as the selling price of a 15-hectare land considering that, at that time, the market value of land in Davao City amounts to P100,000.00 per hectare. [Respondent] narrated that a year thereafter, or in a middle part of 1994, he was able to raise the P20,000.00 and went to the [petitioner] to pay his loan but the latter refused to accept his payment, insisting that the transaction entered into by the parties was not an equitable mortgage, as the [respondent] insists, but a real transfer of right over the property. Because of said refusal, [respondent] continued, he was compelled to refer the matter to his lawyer in order to request the [petitioner] to accept his payment otherwise he would file the necessary action in court. Despite said formal demand by the [respondent], however, [petitioner] allegedly continued to refuse to recognize the equitable mortgage, prompting [respondent] to consign the P20,000.00 with the Clerk of Court of the RTC of Davao City, Branch 12. He thus insisted that it is [petitioner] who is dead wrong in not recognizing the equitable mortgage since, aside from the fact that the consideration was unusually inadequate, [respondent] allegedly remained in possession of the property.

[Respondent] thus prayed for an award for moral damages, in view of the [petitioners] evident bad faith in refusing to recognize the equitable mortgage, and for attorneys fees as [petitioners] alleged stubbornness compelled him to engage the services of counsel. He likewise sought an award for exemplary damages to deter others from committing similar acts and at the same time asked the court to issue a writ of preliminary injunction and/or temporary restraining order to prevent [petitioner] from dispossessing [respondent] of the subject property or from disposing of the same in favor of third parties as these acts would certainly work injustice for and cause irreparable damage to the [respondent]. The prayer for the issuance of a restraining order was however denied by the court in an Order. [Petitioner] filed his Answer on May 5, 1997, denying [respondents] claim that the transaction was only an equitable mortgage and not an actual transfer of right. He asserted that the truth of the matter was that when [respondent] suffered business reverses, his accounts with the [petitioner], as evidenced by postdated checks, cash vouchers and promissory notes, remained unpaid and his total indebtedness, exclusive of interests, amounted to P985,423.70. [Petitioner] further averred that, in order to avoid the filing of cases against him, [respondent] offered to pay his indebtedness through dacion en pago, giving the land in question as full payment thereof. In addition, he stressed that considering that the property is still untitled and the [respondent] bought the same from one Meliton Bacarro for only P50,000.00, it is most unreasonable for him to agree to accept said land in exchange for over a million pesos of indebtedness. He claimed though that he was only forced to do so when [respondent] told him that if he did not accept the offer, other creditors would grab the same. By way of affirmative defenses, the [petitioner] pointed out that [respondent] has no cause of action against him as the [respondent] failed to comply with the essential requisites for an action for reformation of instrument. He moreover alleged that the [respondent] is in estoppel because, by his own admission, he signed the document knowing that the same did not express the true intention of the parties. Further, [petitioner] claimed that there was a valid transfer of the property herein since the consideration is not only the actual amount written in the instrument but it also includes the outstanding obligation of [respondent] to the [petitioner] amounting to almost P1 million. As counterclaim, [petitioner] averred that, because of this baseless complaint, he suffered mental anguish, wounded feelings and besmirched reputation, entitling him to moral damages amounting to P20,000.00, and that in order to
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deter others from doing similar acts, exemplary damages amounting to P20,000.00 should likewise be awarded in his favor. [Petitioner] also prayed for attorneys fees and litigation expenses claiming that, because he was constrained to litigate, he was forced to hire the services of counsel. xxx xxx xxx

Trial ensued and thereafter the trial court rendered its Decision dated February 24, 2000 dismissing the complaint while finding the [petitioners] counterclaim meritorious. In making said ruling, the lower court, citing Article 1350 (should be 1359) of the New Civil Code, found that [respondent] failed to establish the existence of all the requisites for an action for reformation by clear, convincing and competent evidence. Considering [respondents] own testimony that he read the document and fully understood the same, signing it without making any complaints to his lawyer, the trial court held that the evidence on record shows that the subject instrument had been freely and voluntarily entered into by the parties and that the same expresses the true intention of the parties. The court further noted that the [respondents] wife even signed the document and that the same had been duly acknowledged by the parties before a notary public as their true act and voluntary deed. The trial court likewise observed that, contrary to [respondents] claim that the transaction was a mere mortgage of the property, the terms of the instrument are clear and unequivocable that the property subject of the document was sold, transferred, ceded and conveyed to the [petitioner] by way of absolute sale, and hence, no extrinsic aids are necessary to ascertain the intention of the parties as the same is determinable from the document itself. Moreover, said court emphasized that considering the fact that [respondent] is an educated person, having studied in an exclusive school like Ateneo de Davao, and an experienced businessman, he is presumed to have acted with due care and to have signed the instrument with full knowledge of its contents and import. [Respondents] claim that he merely borrowed money from the [petitioner] and mortgaged the property subject of litigation to guarantee said loan was thus found to be specious by the court, which found that the [respondent] was actually indebted to the [petitioner] for almost a million pesos and that the true consideration of the sale was in fact said outstanding obligation. With respect to [respondents] alleged possession of the property and payment of real estate taxes, both of which were relied upon by the [respondent] to boost his assertion that the transaction was merely an

equitable mortgage, the trial court said that his claim of possession is belied by the fact that the actual occupants of the property recognize that the [petitioner] owns the same and in fact said occupants prevented [respondents] wife from entering the premises. The court, noting that the [petitioner] also paid the realty taxes, was also of the opinion that [respondent] merely made such payments in order to lay the basis of his allegation that the contract was a mere equitable mortgage. Accordingly, the court held that [respondent] is also not entitled to his other claims and that his unfounded action caused [petitioner] to an award for moral damages, in addition to the expenses he incurred in defending his cause, i.e. services of a lawyer and transportation and other expenses, which justifies an award for the reimbursement of his expenses and attorneys fees.5 Ruling of the Court of Appeals Granting respondents appeal, the appellate court ruled that the Contract entered into by the parties should be deemed an equitable mortgage, because the consideration for the sale was grossly inadequate. By continuing to harvest the crops and supervise his workers, respondent remained in control of the property. True, upon the institution of this case, petitioner paid the required real estate taxes that were still in arrears. Respondent, however paid the taxes for 1995, 1996 and 1997the years between the dates when the alleged absolute sale was entered into on October 1, 1993, and when this case was instituted on March 5, 1997.6 Granting respondents prayer for reformation of the Contract, the CA ruled that the instrument failed to reflect the true intention of the parties because of petitioners inequitable conduct.7 Hence, this Petition.8 The Issues Petitioner raises the following issues for this Courts consideration: I.

Whether o[r] not the Court of Appeals erred in ruling that there was inadequate consideration.
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II.

(2) When the vendor remains in possession as lessee or otherwise; (3) When upon or after 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;

Whether o[r] not the Court of Appeals erred in ruling that the respondent remained in possession of the land in question. III.

(5) When the vendor binds himself to pay the taxes on the thing sold; Whether or not the Court of Appeals erred in ruling that the taxes were not paid by the petitioner. IV. (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. Furthermore, Article 1604 of the Civil Code provides that [t]he provisions of Article 1602 shall also apply to a contract purporting to be an absolute sale. In the present case, three of the instances enumerated in Article 1602grossly inadequate consideration, possession of the property, and payment of realty taxesattended the assailed transaction and thus showed that it was indeed an equitable mortgage. Inadequate Consideration Petitioner Go avers that the amount of P20,000 was not unusually inadequate. He explains that the present parties entered into a Dacion en Pago, whereby respondent conveyed the subject property as payment for his outstanding debts to petitionerdebts supposedly amounting to P985,243.70.11 To substantiate his claim, petitioner presented the checks that respondent had issued, as well as the latters testimony purportedly admitting the genuineness and due execution of the checks and the existence of the outstanding debts.12 Petitioner Go contends that respondent failed to establish by sufficient evidence that those debts had already been paid.13 Petitioner relies on the trial courts finding that respondent knowingly and intentionally entered into a contract of sale, not an equitable mortgage.14 On the other hand, Respondent Bacaron argues that the value of the property at the time of the alleged sale was P120,000 per hectare, and that the indicated sale amount of P20,000 was thus grossly iniquitous.15 Allegedly, the
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Whether or not the Court of Appeals erred in ruling that reformation is proper.9 Simply put, these are the issues to be resolved: (1) whether the agreement entered into by the parties was one for equitable mortgage or for absolute sale; and (2) whether the grant of the relief of contract reformation was proper. The Courts Ruling The Petition has no merit. First Issue: Equitable Mortgage An equitable mortgage has been defined as one which although lacking in some formality, or form or words, or other requisites demanded by a statute, nevertheless reveals the intention of the parties to charge real property as security for a debt, and contains nothing impossible or contrary to law.10 The instances in which a contract of sale is presumed to be an equitable mortgage are enumerated in Article 1602 of the Civil Code as follows: Art. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases: (1) When the price of a sale with right to repurchase is unusually inadequate;

previous cash advances secured from petitioners father had been settled, as evidenced by the fact that petitioner did not negotiate further or encash the checks; the latter could have done so, if the obligation was still extant.16 Respondent points out that he paid for that obligation with the coprax he had previously delivered to the father.17 Petitioner allegedly admitted this fact, though inadvertently, when he testified that respondent had already paid some of the latters previous cash advances.18 Otherwise, petitioner would have then set off his own debt to respondent (amounting to P214,000) against the amount of almost one million pesos that the latter supposedly owed him.19 Checks have the character of negotiability. At the same time, they may constitute evidence of indebtedness.20 Those presented by petitioner may indeed evince respondents indebtedness to him in the amounts stated on the faces of those instruments. He, however, acknowledges (1) that respondent paid some of the obligations through the coprax delivered to petitioners father; and (2) that petitioner owed and subsequently paid respondent P214,000.21 The parties respective arguments show that the sum of P20,000, by itself, is inadequate to justify the purported absolute Transfer of Rights.22 Petitioners claim that there was a dacion en pago is not reflected on the instrument executed by the parties. That claim, however, confirms the inadequacy of the P20,000 paid in consideration of the Transfer of Rights; hence, the Contract does not reflect the true intention of the parties. As to what their true intention waswhether dacion en pago or equitable mortgagewill have to be determined by some other means. Possession According to Article 1602(2) of the New Civil Code, one of the instances showing that a purported contract of sale is presumed to be an equitable mortgage is when the supposed vendor remains in possession of the property even after the conclusion of the transaction. In general terms, possession is the holding of a thing or the enjoyment of a right, whether by material occupation or by the fact that the rightor, as in this case, the propertyis subjected to the will of the claimant.23 In Director of Lands v. Heirs of Abaldonado,24 the gathering of the products of and the act of planting on the land were held to constitute occupation, possession and cultivation. In the present case, the witnesses of respondent swore that they had seen him gather fruits and coconuts on the property. Based on the cited case, the

witnesses testimonies sufficiently establish that even after the execution of the assailed Contract, respondent has remained in possession of the property. The testimonies proffered by petitioners witnesses merely indicated that they were tenants of the property. Petitioner only informed them that he was the new owner of the property. This attempt at a factual presentation hardly signifies that he exercised possession over the property. As held by the appellate court, petitioners other witness (Redoa) was unconvincing, because he could not even say whether he resided within the premises.25 The factual findings of the trial court and the CA are conflicting and, hence, may be reviewed by this Court.26 Normally, the findings of the trial court on the credibility of witnesses should be respected. Here, however, their demeanor while testifying is not at issue. What is disputed is the substance of their testimoniesthe facts to which they testified. Assuming that the witnesses of petitioner were indeed credible, their testimonies were insufficient to establish that he enjoyed possession over the property. Payment of Realty Taxes Finally, petitioner asserts that the trial courts finding that he paid the realty taxes should also be given corresponding weight.27 Respondent counters with the CAs findings that it was he who paid realty taxes on the property. The appellate court concluded that he had paid taxes for the years 1995, 1996 and 1997 within each of those years; hence, before the filing of the present controversy. In contrast, petitioner paid only the remaining taxes due on October 17, 1997, or after the case had been instituted. This fact allegedly proves that respondent has remained in possession of the property and continued to be its owner.28 He argues that if he had really transferred ownership, he would have been foolish to continue paying for those taxes.29 On this point, we again rule for respondent. Petitioner indeed paid the realty taxes on the property for the years 1980 to 1997. The records show that the payments were all simultaneously made only on October 31, 1997, evidently in the light of the Complaint respondent had filed before the trial court on March 5, 1997.30 On the other hand, respondent continued to pay for the realty taxes due on the property for the years 1995, 1996 and 1997.31 That the parties intended to enter into an equitable mortgage is bolstered by respondents continued payment of the real property taxes subsequent to the
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alleged sale. Payment of those taxes is a usual burden attached to ownership. Coupled with continuous possession of the property, it constitutes evidence of great weight that a person under whose name the realty taxes were declared has a valid and rightful claim over the land.32 That the parties intended to enter into an equitable mortgage is also shown by the fact that the seller was driven to obtain the loan at a time when he was in urgent need of money; and that he signed the Deed of Sale, despite knowing that it did not express the real intention of the parties.33 In the present proceedings, the collapse of his business prompted respondent to obtain the loan.34 Petitioner himself admitted that at the time they entered into the alleged absolute sale, respondent had suffered from serious business reversals.35 Second Issue: Reformation of Instrument Petitioner claims that the CA erred in granting the remedy of reformation of contracts. He avers that the failure of the instrument to express the parties true agreement was not due to his mistake; or to fraud, inequitable conduct, or accident.36 We rule for respondent. Ultimately, it is the intention of the parties that determines whether a contract is one of sale or of mortgage.37 In the present case, one of the parties to the contract raises as an issue the fact that their true intention or agreement is not reflected in the instrument. Under this circumstance, parol evidence becomes admissible and competent evidence to prove the true nature of the instrument.38 Hence, unavailing is the assertion of petitioner that the interpretation of the terms of the Contract is unnecessary, and that the parties clearly agreed to execute an absolute deed of sale. His assertion does not hold, especially in the light of the provisions of Article 1604 of the Civil Code, under which even contracts purporting to be absolute sales are subject to the provisions of Article 1602. Moreover, under Article 1605 of the New Civil Code, the supposed vendor may ask for the reformation of the instrument, should the case be among those mentioned in Articles 1602 and 1604. Because respondent has more than sufficiently established that the assailed Contract is in fact an equitable

mortgage rather than an absolute sale, he is allowed to avail himself of the remedy of reformation of contracts. WHEREFORE, the Petition is hereby DENIED,and the assailed Decision and Resolution AFFIRMED. SO ORDERED. Sandoval-Gutierrez, Corona, Carpio-Morales and Garcia, JJ., concur. Petition denied, assailed decision and resolution affirmed. Notes.For the presumption of an equitable mortgage to arise, one must first satisfy the requirement that the parties entered into a contract denominated as a contract of sale, and that their intention was to secure an existing debt by way of mortgage. (Fernandez vs. Tarun, 391 SCRA 653 [2002]) The existence of any of the circumstances enumerated in Article 1602, not a concurrence or an overwhelming number thereof, suffices to give rise to the presumption that a contract purporting to be an absolute sale is actually an equitable mortgage. (Heirs of the Late Spouses Aurelio and Esperanza Balite vs. Lim, 446 SCRA 56 [2004]) o0o

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Spouses Medina and Bernal vs. Valdellon No. L-38510. March 25, 1975.* SPOUSES DOLORES MEDINA and MOISES BERNAL, petitioners, vs . THE HONORABLE NELLY L. ROMERO VALDELLON OF THE COURT OF FIRST INSTANCE OF MALOLOS, BULACA N , SPOUSES CIPRIANO VILLANUEVA and RUFINA PANGANIBAN, respondents.
Actions; Accion publiciana; Accion publiciana distinguished from unlawful detainer; Case at bar.The nature of the action embodied in the complaint is one for recovery of possession brought before the Court of First Instance by the alleged owners of a piece of land against the defendants who were supposed to have unlawfully continued in possession sin ce 1969 when they were supposed to return it to plaintiffs, plus damages. That the action is not for unlawful detainer contemplated in Rule 70 of the Rules of Court, which falls under the exclusive original jurisdiction of the city courts or municipal courts, is very apparent because an action of unlawful detainer is defined as withholding by a person from another for not more than one y ear, of the possession of a land or building to which the latter is entitled after the expiration or termination of the formers right to hold possession by virtue of a contract express or implied. Same; Same; Dispossession by means other than those enumerated by Rule 70, Rules of Court; Action to recover possession may be brought even before the expiration of the one-year period.Not all cases of dispossession are covered by Rule 70 of the Rules of Court because whenever the owner of property is dispossessed b y any other means than those mentioned in the aforementioned rule, he may initiate and maintain a plenary action to recover possession in the Court of First Instance, and it is not necessary for him to wait until the expiration of one year before commencing such action. It may also be brought after the expiration of said period of one year, if no action had been initiated for forcible entry and detainer during that time in the inferior court. This plenary action to recover possession must be insti tuted in the Court of First Instance. Same; Same; Plea of title or ownership over the land in question cannot be used as basis to di smiss action to recover possession.It is a fundamental principle in the law governing unlawful detainer cases (including recovery of possession cases) that a mere plea of title or ownership over the disputed land by the defendant cannot be used as a sound legal basis for dismissing an action for recovery of possessio n because an action for recovery of possession can be maintained even against the very owner of the property . Same; Same; Judgment rendered in action conclusive only on question of possession.An action for recovery of possession is totally distinct and different from an action for recovery of title or ownership. In fact, a judgment rendered in a case of recovery of possession is conclusive only on the question of possession and not that of ownership. It does not in any way bind the title or affect the ownership of the land or building.

Same; Dismissal; Pendency of another action between the same parties for the same cause; Pendency of land registration case will not bar institution of action to recover possession; Case at bar.The case for recovery of possession and damages was arbitrarily and erroneously dismissed on the basis of the alleged pendency of another action because while identity of pa rties may be established in both cases, there is no identity of cause of action or of rights asserted and relief pray ed for, so that judgment which may be rendered in one case would not necessarily result in res judicata for the other. Courts; Land registration court with limited and special jurisdiction to determine the legality and propriety of the issuance of title over land in question.The Court of First Instance acting as a land registration court has a limited and special jurisdiction confined to the determination of the legality and propriety of the issue of title over the land subject matter of the registration, and it has no power to entertain issues of rightful possession and claim for damages emanating from ownership.

PETITION for review by certiorari of an order of the Court of First Instance of Bulacan, Branch I.

The facts are stated in the opinion of the Court. Ponciano H. Gupit (Citiz en Legal Assistance Office) for petitioners. Rosendo G. Tansinsin, Jr. for respondents. ESGUERRA, J.:

Petition to review by certiorari the order dated October 23, 1973 of the Hon. Nelly L. Romero Valdellon, Ju dge of the Court of First Instance of Bulacan, Branch I, which dismissed with costs against the plaintiffs its Civil Case No. 4353-M, entitled Spouses Dolores Medina and Moises Bernal, plaintiffs, vs. Spouses Cipriano Villanueva and Rufina Panganiban, defendants. The complaint in Civil Case No . 4353-M of the Court of First Instance of Bulacan alleges that plaintiffs (petitioners in this case) are the owners of a parcel of land situated at Bo. San Pascual, Hagonoy, Bulacan, with an assessed value of P800.00 which was purchased sometime in April 1967 from Margarita Punzalan, Rosal Punzalan, Quaquin Gaddi and Paulina Gaddi; that as defendants are family friends of the plaintiffs, defendants were allowed to remain in the premises and to construct their residential house, sub ject to the condition that defendants will return unto th e plaintiffs the premises upon
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demand; that much to the surprise of the plaintiffs-spouses, on demand, defendants-spouses refused and remain obstinate in their refusal to surrender th e property in question; that because of said defendants unjustified acts plaintiffs had to institute action and incur damage of P 500 as expenses for court litigation; that the reasonable value of the use of the premises is P100 a month, taking into consideration its commercial value; and prayed that the defendants be ordered to vacate the premises and surrender unto plaintiffs the said property and defendants be ordered to pay plaintiffs the amount of P500 as incidental expenses and the amount of P100 a month from the filing of this action to the time they surrender its possession to the plaintiffs. A subsequent motion to amend and admit amended comp laint was filed by plaintiffs, the amendment consisting of: 4.That as defendants-spouses are family friends of the plaintiffs, they (defendants) were allowed to build a small house in the premises in April 1967, subject to the condition that they will return to the plaintiffs the premises in 1969; 5. That much to the sur prise of the plaintiffs-spouses on demand, defendantsspouses refuse d and remains obstinate in their refusal to surrender the property in question claiming that they are the owners thereof; A motion to dismiss the comp laint a nd an opposition to the motion to amend and admit the amended complaint filed by the defendants (respondents in this case) preceded the respondent courts questioned order of October 30, 1973, that dismissed the comp laint on the ground of th ere being another case pending between the same parties over the same property, namely Land Registration Case No. 2814 of this Court. Petitioners motion for reconsideration was denied by respondent court in its order dated February 8, 1974. The only legal issues raised are: Whether or not the pendency of a land registration case will bar the institution of an action for the recovery of possession; and in the negative, whether or not the respondent judge can be countenanced in her act of dismissing the latter case in view of the pendency of the land registration case. When this Court (First Division) on May 10, 1974, resolv ed without giving due course to the petition, to require the respondents to comment thereon, within 10 days from notice, and both parties to state whether or not there is any valid

reason why Civil Case No. 4353-M of the respondent court should not be tried and decided jointly with Land Registration Case No. 2814 of Branch VI of said court, considering that the claim of the plaintiffs in Civil Case No. 4353-M (herein petitioners) for damages due to alleged illegal occupancy of the land involved by the defendants (respondents herein) may not be properly passed upon and adjudicated in the land registration case, where only the question of title to the property sought to be registered will be decided between the applicants and oppositors, counsel for respondents, Rosendo G Tansinsin Jr., included in his Manifestation and/or Comment, dated May 20, 1974 , th e following state ment: nevertheless, from the reading of the resolution aforequoted, one will certainly have no doubt th at there is no need for the respondents to make any comment on the matter as the same will be an exercise of futili ty sin ce this Honorable Court has not only given due course to the petition, but has actually decided the sa me, x x x. By reason of the disrespectful tone of the aforesaid statement, said counsel was required by this Courts (First Division) resolution of May 29, 1974, to show cause why he should not be dealt with for contempt of court. The petitioners by way of comp lia nce with th is Courts aforementioned resolution of May 10, 1974, requested that the order of October 30, 1973 of the respondent court be set asid e and that the Court of First Instance of Bulacan (Branch I and VI) be ordered to consolidate, try and decide Civil Case No. 4353-M of Branch I and L. R.C. Case No. 2814 of Branch VI. The explanation submitted by respondents counsel, although it contained an apology, was not considered satisfactory by this Court. Hence in its resolution of July 10, 1974, Atty. Rosendo G. Tansinsin Jr. was declared in contempt of court and suspended from the practice of law for a period of three months. His subsequent motion for reconsideration and personal plea for leniency, sympathy and understanding, coupled with his repeated apolog y and regret an d the fact that his act appeared to be his first offense of that nature, made this Court reconsider the suspension from the practice of law and, instead, ordered him to pay a fine of P300.00 which he has paid. On the principal issues raised in this case, W e have no doubt that the nature of the action embodied in the complaint in Civil Case No. 4353-M is one for recovery of possession brought before the Court of First Instance by the alleged owners of a piece of land against the defendan ts who were su pposed to have unlawfully continued in possession since 1969 when they were supposed to return it to plaintiffs, plus damages. That the action is not for unlawful detainer conte mp lated in Rule 70 of the Rules of Court, which falls
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under the exclusive original jurisdiction of the city courts or municipal courts, is very apparent because an action of unlawful detainer is defined as withholding by a person from another for not more than one year, of the possession of a land or building to which the latter is entitled after the expiration or termination of the formers right to hold possession by virtue of a contract express or implied. (Tenorio vs. Gomba 81 Phil. 54; Dikit vs. Ycasiano 89 Phil. 44) On the basis of the alleg ations of the complaint in Civil Case No. 4363-M, the defendants withheld possession from the plaintiffs since 1969 or very much more than the one year period contemp la ted in unlawful detainer cases at the time the comp laint was filed in July of 1973. Not all cases of dispossession are covered by Rule 70 of the Rules of Court (Forcible Entry and Unlawful Detainer cases) because whenever the owner of property is dispossessed by any other means than those mentioned in the aforementioned rule, he may init iate and maintain a plenary action to recover possession in the Court of First Instance, and it is not necessary for him to wait until the expiration of one year before commencing such action. (Gumiran vs. Gumiran 21 Phil. 174) It may also be brought after the expiration of said period of one year, if no action had been initiated for forcible entry and detainer during that time i n the inferior court. This plenary action to recover possession (accion publiciana) must be instituted in the Court of First Instance as was done in this case. The respondent courts action in dismissing Civil Case No. 4353-M on the ground that there is another pending case (L.R. C. No. 2814 of Branch VI of the same court) between the same parties over the same property is to Our mind rather precipitate, for We find sufficient merit in petitioners contention that the rights sought to be enforced and the reliefs prayed for in Civil Case 4353-M (recovery of possession and damages) are entirely separate and distinct from that sought in L. R. C. Case No. 2814 (where petitioners as oppositors are seeking the exclusion of their land from that of private respondents claim of title over a bigger tract of land). It is likewise true that the Court of First Instance of Bulacan (Branch VI) acting as a land registration court has a limited and special j urisdiction confined to the determination of the legality and propriety of the issue of title over the land subject matter of registration, and it has no power to entertain issues of rightful possession and claim for damages emanating from ownership. It is a fundamental principle in the law governing unlawful detainer cases (including recovery of possession cases) th at a mere plea of title or own ership over the disputed land by the defendant cannot be used as a sound legal basis for dismissing an action for recovery of possession because an action for recovery of possession can be maintained even against the very owner of the property. (Prado vs. Calpo et al, G. R. No. L-19379, April 30, 1964) In the case at bar, there is not even a plea of title on the part of priv

ate responden ts over the disputed property but a mere allegation that there is another action (L. R. C. No. 2814 pending in Branch VI of that court) for registration of title to that land the possession of which is being recovered by petitioners in Civil Case No. 4353-M. An action for recovery of possession is totally distinct and different from an action for recovery of title or ownership. In fact, a judgment rendered in a case of recovery of possession is conclusive only on the question of possession and not that of ownership. It does not in any way bind the title or affect the ownership of the land or building. (Sec. 7, Rule 70, Revised Rules of Court) The inevitable conclusion fro m the foregoing is that Civil Case No. 4353-M (for recovery of possession and damages) was arbitrarily and erroneously dismissed on the basis of the alleged pendency of ano ther action (L. R. C. No. 2814 pending in Branch VI of the same court), because while identity of parties may be established in both cases, there is no identity of cause of action or of rights asserted and relief prayed for, so th at j udg men t which ma y b e rend ered in on e case would not necessarily result in res judicata for the other case. We cannot see any sufficient reason for any of the parties in this case to object to the consolidation of the trial of both cases (L. R. C. Case No. 2814 and Civil Case No. 4353-M), since the evidence that ma y be presented by the parties involving possession and ownership of the disputed parcel of land may facilitate an expeditious termination of both cases. While the issues raised in both cases are not exactly identical, the evidence involving the issues of possession and ownership over the same land mu st be related and its presentation before one court of justice would redound to a speedy disposition of this litigation. WHEREFORE, the respondent courts orders of October 30, 1973, and February 8, 1974, are hereby declared null and void and set aside; the comp la int a nd amended complai nt in Civil Case No. 4353-M revived; both the respondent Judge and the Presiding Judge, Branch VI, of the Court of First Instance of Bulacan, being directed to consolidate the trial of L. R. C. No. 2814 and Civil Case No. 4353-M in one branch of that court. Costs against private respondents. SO ORDERED. Makalintal, C.J., Castro, Teehankee and Makasiar, JJ., concur. Orders declared null and void and set aside; complaint and amended complaint revived; bo th respondent Judge and Presiding Judge, Branch VI, of the Court
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of First Instance of Bulacan directed to consolidate trial of L.R.C. No. 2814 and Civil Case No. 4353-M in one branch of that court. Notes.a) Possession.Public interest, public policy, and public order demand that the party in peaceful possession of the land, regardless of wh ether it is priv ate or is part of th e public domain, be not ousted therefrom by means of force, violence, or inti midation, reg ardless of the quality of his alleged right to possession thereof, and that whoever claims to hae a better title or right thereto should seek from the proper authorities the legal re medies established therefo r instead of taking the law into their own hands (Lopez vs. Judge Santiago, L-14889, April 25, 1960). b) Description of property.In an action for recovery of possession of real property where a description of the property claimed is indispensable, it is not required that a detailed technical description be given; all that is called for is an adequate identification of the portion s involved by describing the location, area, and boundaries (Galace vs. Bagtas, L- 15400, August 31, 1964). c) Propriety of ejectment and not accion publiciana.Ejectment and not an accion publiciana is the proper reme dy in a case of undoubtful deprivation or withholding of possession of a real property when a demand to vacate the same was ignored (Calubayan vs. Pascual, L-2 2645, September 18, 1967). o0o [Spouses Medina and Bernal vs. Valdellon, 63 SCRA 278(1975)]

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Republic vs. Court of Appeals G.R. No. 108926. July 12, 1996.* REPUBLIC OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS and HEIRS OF DEMOCRITO O. PLAZA, respondents.
Land Registration; Tax Declarations; Evidence; Although tax declarations or realty tax payments 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.Although tax declarations or realty tax payments 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 ones 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 ones bona fide claim of acquisition of ownership. Same; Appeals; Findings of fact of the Court of Appeals are final and conclusive on the Supreme Court; Exceptions.Well-settled and oft-repeated is the rule that findings of facts of the Court of Appeals are final and conclusive on the Supreme Court except: 1.) when the conclusion is a finding grounded entirely on speculation, surmises and conjectures; 2.) when the inference made is manifestly mistaken, absurd or impossible; 3.) when there is a grave abuse of discretion; 4.) when the judgment is based on a misapprehension of facts; 5.) when the findings of facts are conflicting; 6.) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee; 7.) when the findings of the Court of Appeals are contrary to those of the trial court; and 8.) when the findings of fact are conclusions without citation of specific evidence on which they are based. Same; Torrens System; Registration does not vest titleit is merely evidence of such title; The Torrens system was not established as a means for the acquisition of title to private land, as it merely confirms, but does not confer ownership.The Court of Appeals opined that the issuance of the proclamation did not have any effect on the subject property as the proclamation only withdrew it from sale or settlement and reserved the same for slum improvement and sites and services program, but subject to actual survey and existing private rights. The proclamation did not prohibit the registration of title of one who claims, and proves, to be the owner thereof. We agree. At any rate, registration does not vest title. It is merely evidence of such title. Our land Registration laws do not give the holder any better title than what he actually has. When the conditions set by law are complied with, the possessor of the land, by operation of law, acquires a right to a grant, a government grant, without the necessity of a certificate of title being issued. The Torrens system was not established as a means for the acquisition of title to private land, as it merely confirms, but does not confer ownership.

Equity; Over time, Courts have recognized with almost pedantic adherence that what is inconvenient or contrary to reason is not allowed in law.Over time, Courts have recognized with almost pedantic adherence that what is inconvenient or contrary to reason is not allowed in lawQuod est inconveniens, aut contra rationem non permissum est in lege. Undoubtedly, reason and law find respondent entitled to rights of ownership over the disputed property.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court. The Solicitor General for petitioner. Esmeraldo U. Guloy for private respondent. TORRES, JR., J.:

Petitioner implores this Court to review and set aside the decision1 of February 8, 1993 of the Court of Appeals in CA-G.R. CV No. 34950 which affirmed the decision of June 14, 1991 of the Regional Trial Court of Makati in LRC Case No. M-99 confirming respondent Democrito O. Plazas title over Rel. Plan 1059, which is the relocation plan of Psu-97886. After the filing of private respondents Comment, this Court, in its resolution of May 24, 1993, gave due course to the petition and required the parties to submit their respective Memoranda. The petitioner filed its Memorandum on June 29, 1993 while private respondent filed his Memorandum on July 6, 1993. The factual background is summarized in the Decision2 of the Court of Appeals as follows: According to petitioner-appellee, the subject property situated at Liwanag, Talon (formerly Pamplona), Las Pias, Rizal, now Metro Manila, having an area of 45,295 sq. m., was first owned by Santos de la Cruz who declared the same in his name under Tax Declaration Nos. 3932, for the year 1913; 3933 for 1917; and 6905, for 1921 (Exhs. 2-B, 2-C and 2-D, Exh. K for petitionerappellee, pp. 514-516, Record). Subsequently, the subject property was successively bought or acquired by Pedro Cristobal, Regino Gervacio, Diego Calugdan and Gil Alhambra. To evidence their respective acquisition of the property in question, Tax Declaration Nos. 7937, for the year 1923; 8463, for 1927; 9467, for 1934; and 2708 (year not available) were presented.3 After Gil
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Alhambra died, his heirs extra-judicially partitioned the subject property and declared it in their names under Tax Declaration Nos. 5595 and 5596 for the year 1960.4 On 5 July 1966, they executed a Deed of Sale With Mortgage deeding the subject property to petitioner-appellee for P231,340.00 payable in three (3) installments, the payment of which was secured by a mortgage on the property. Upon receipt of the full payment, they executed a Release of Mortgage on 1 August 1968.5 After the sale, petitioner-appellee took possession of the subject property and paid the taxes due thereon for the years 1966 up to 1986, and in 1985 declared it in his name under Tax Declaration Nos. B-013-01392 and B-013-01391.6 He appointed Mauricio Plaza and Jesus Magcanlas as the administrator and caretaker thereof, respectively. Due to losses, the property in question was cultivated only for a while. Five (5) years according to Mauricio Plaza, and from 1966 up to 1978 according to Jesus Magcanlas.7 On 14 November 1986, petitioner-appellee filed a petition, which was amended on 17 July 1987, for the registration and confirmation of his title over the subject property alleging, among others, that: 1. by virtue of the deed of sale, he is the owner thereof; 2. he and his predecessors-in-interest have been in open, continuous, exclusive and notorious possession and occupation of the property prior to, and since 12 June 1945; 3. other than himself, there is no other person occupying, or having any interest over the property; and, 4. there are no tenants or agricultural lessees thereon.8 On 24 February 1988, oppositor-appellant, the Republic of the Philippines (Republic, for brevity), filed its opposition maintaining, among others, that: (1) petitioner-appellee and his predecessors-ininterest have not been in open, continuous, exclusive and notorious possession and occupation of the land in question since 12 June 1945 or prior thereto; (2) the muniment of title and tax declarations as well as tax payments relied upon do not constitute sufficient evidence of a bona fide acquisition of the land by petitioner-appellee and of his open, continuous possession and occupation thereof in the concept of owner since 12 June 1945, or prior thereto, and (3) the subject property pertains to the public domain and is not subject to private appropriation.9

On 9 March 1988, after the compliance of the jurisdiction requirements was proved and, on motion, the lower court issued its order of general default.10 Aside from the Republic, there were others who opposed the petition and filed their opposition thereto prior to, or were allowed to submit their opposition despite, and after, the issuance of the order of general default. They are: (a) Arsenio Medina who withdrew his opposition on 29 May 1989;11 (b) Emilio, Leopoldo and Abraham, all surnamed Borbon; Heirs of Andres Reyes; Maximo Lopez; and, Marilou Castanares who prayed that the lower court direct petitioner-appellee to see to it that their respective property, which adjoins the land in question, are not included in the petition;12 (c) The Heirs of Santos de la Cruz and the Kadakilaan Estate. Upon their respective motion, the order of default was set aside as to them and they were allowed to file their opposition. The Heirs of Santos de la Cruz argue that; (1) their predecessor-in-interest, Santos de la Cruz, is the primitive owner of the subject lot; and, (2) he, his heirs, and upon their tolerance, some other persons have been in open, peaceful, notorious and continuous possession of the land in question since time immemorial until the present. The Kadakilaan Estate contends that: (1) by reason of its Titulo de Propiedad de Terrenos of 1891 Royal Decree 01-4, with approved plans registered under the Torrens System in compliance with, and as a consequence of, P.D. 872, it is the owner of the subject property; and, (2) petitioner-appellee or his predecessors-in-interest have not been in open, continuous, exclusive and notorious possession and occupation of the land in question since 12 June 1945 or earlier.13 (d) the Heirs of Hermogenes Rodriguez. They allege, among others, that by reason of a Titulo de Propiedad de Terrenos of 1891; Royal Decree No. 01-4, Protocol of 1891; Decree No. 659, approved Plan of the Bureau of Lands No. 12298 dated 10 September 1963, their predecessor-in-interest is the owner of the subject property. Despite (sic) that their motion to lift order of default as to them and admit their opposition, which motion was opposed by petitionerappellee, does not appear to have been acted upon by the lower court, they were able to present one (1) witness;14 and,

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(e) Phase II Laong Plaza Settlers Association, Inc. It filed a motion to intervene in the case but the motion does not appear to have been acted upon by the lower court.15 On 13 March 1990, the Community Environment and Natural Resources Office, West Sector (CENRO-WEST) of the Department of Environment and Natural Resources requested the lower court to furnish it photocopies of the records of the petition as the property in question was the subject of a request for a Presidential Proclamation reserving the land in question for Slum Improvement and Resettlement Site (SIR) of the National Housing Authority.16 On 22 June 1990, upon order of the lower court, an ocular inspection was conducted on the subject property by the court-appointed commissioner who submitted his report on 2 July 1990.17 On 3 January 1991 Proclamation No. 679 was issued by the President of the Republic of the Philippines withdrawing the subject property from sale or settlement and reserve (the same) for slum improvement and sites and services program under the administration and disposition of the National Housing Authority in coordination with the National Capital Region, Department of Environment and Natural Resources subject to actual survey and private rights if any there be, . . . The National Housing Authority was authorized to develop, administer and dispose of the area in accordance with LOI 555, as amended (by LOI Nos. 686 and 1283), and LOI 557.18 On 31 May 1991 petitioner-appellee filed his memorandum.19 The oppositors did not, Nevertheless, among them, only the Republic and the Heirs of Santos de la Cruz formally offered their evidence.20 On 14 June 1991 the lower court rendered the judgment referred to earlier. On 8 July 1991, from among the oppositors, only the Republic filed a notice of appeal which was approved on 10 July 1991.21 By reason of the approval thereof, the motion filed on 23 July 1991 by the Heirs of Hermogenes Rodriguez for the reconsideration of the judgment was denied on 1 August 1991.22 On February 8, 1993, the Court of Appeals rendered a decision affirming the trial courts judgment. Hence, this petition filed by the Republic of the Philippines alleging that:

THE DECISION OF THE COURT OF APPEALS AFFIRMING THE DECISION OF THE REGIONAL TRIAL COURT GRANTING PRIVATE RESPONDENTS APPLICATION FOR REGISTRATION, IS NOT SUPPORTED BY AND IS CONTRARY TO LAW, THE EVIDENCE AND EXISTING JURISPRUDENCE. Petitioner argues that the burden rests on the applicant to show by convincing evidence that he has a registrable title over the property sought to be titled, which the latter failed to do. According to petitioner, aside from mere tax declarations all of which are of recent vintage, private respondent has not established actual possession of the property in question in the manner required by law (Section 14, P.D. 1529) and settled jurisprudence on the matter. Thus, no evidence was adduced that private respondent cultivated much less, fenced the subject property if only to prove actual possession. The actual fencing of the property was done only starting 1988 when the actual occupants were forcibly ejected and driven out from their respective abodes and that its witnesses namely: Elascio Domitita, Manuel Dolom, Bernadette Aguinaldo and Virginia Franco, who were all actual residents of the questioned area, categorically testified on this score, summarized as follows: 1. In their long stay in the area, the longest staying occupant being Domitita who had been in the premises for more than thirty (30) years nobody ever claimed ownership over the subject property; 2. It was only in 1988 that they learned that private respondent had filed a petition to have the property titled in his name; 3. Private respondent had not introduced any improvement nor was there a caretaker assigned by him to look after the property; and, 4. Aside from them, there were about 200 more families residing in the area but through force, intimidation and illegal demolitions, were driven out by private respondent from the premises. We are not persuaded. On this point, the respondent Court correctly found that: Proof that petitioner-appellee and his predecessors-in-interest have acquired and have been in open, continuous, exclusive and notorious possession of the subject property for a period of 30 years under a bona fide claim of ownership are the tax declarations of petitioner-appellees predecessors-in-interest, the deed of sale, tax payment receipts and petitioner-appellees tax declarations.
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The evidence on record reveals that: (1) the predecessors-in-interest of petitioner-appellee have been declaring the property in question in their names in the years 1923, 1927, 1934 and 1960; and, (2) in 1966, petitioner-appellee purchased the same from the Heirs of Gil Alhambra and since then paid the taxes due thereon and declared the property in his name in 1985. xxx xxx xxx

Neither do we find merit in the assertions of petitioners witnesses Elascio Domitita, Manuel Dolom, Bernadette Aguinaldo and Virginia Franco. As properly stated by the public respondent, x x x Their alleged possession is not based on any right. Neither do they claim to have any title or interest over the subject property. As a matter of fact, they did not bother to oppose the petition. The most that can be said of their alleged possession is that it was only with the tolerance of rightful owners of the propertyplaintiff-appellee and his predecessors-in-interest, hence, is no bar to the granting of the petition. We do not see why we should accept the bare assertions of the alleged occupants at their face value as against the claim of ownership of plaintiff-appellee backed up by legal documents, tax declarations, and tax receipts.27 Well-settled and oft-repeated is the rule that findings of facts of the Court of Appeals are final and conclusive on the Supreme Court except: 1.) when the conclusion is a finding grounded entirely on speculation, surmises and conjectures; 2.) when the inference made is manifestly mistaken, absurd or impossible; 3.) when there is a grave abuse of discretion; 4.) when the judgment is based on a misapprehension of facts; 5.) when the findings of facts are conflicting; 6.) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee; 7.) when the findings of the Court of Appeals are contrary to those of the trial court; and 8.) when the findings of fact are conclusions without citation of specific evidence on which they are based.28 Concededly, none of the above exceptions obtains in the case at bar. Petitioner also alleges that the land in question had been withdrawn from the alienable portion of the public domain pursuant to Presidential Proclamation No. 679 entitled Reserving for Slum Improvement and Resettlement (SIR) Sites and Services of the National Housing Authority, A Certain Parcel of Land of the Public Domain Situated in the Municipality of Las Pias, Metro Manila, which was issued on January 7, 1991 or almost 6 months prior to the issuance of the trial courts decision. The Court of Appeals opined that the issuance of the proclamation did not have any effect on the subject property as the proclamation only withdrew it from sale or settlement and reserved the same for slum improvement and sites and services program, but subject to actual survey and existing private rights. The proclamation did not prohibit the registration of title of one who claims, and proves, to be the owner thereof. We agree. At any rate, registration does not
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x x x Considering the dates of the tax declarations and the re-alty tax payments, they can hardly be said to be of recent vintage indicating petitionerappellees pretended possession of the property. On the contrary, they are strong evidence of possession in the concept of owner by petitioner-appellee and his predecessors-in-interest. Moreover, the realty tax payment receipts show that petitioner-appellee has been very religious in paying the taxes due on the property. This is indicative of his honest belief that he is the owner of the subject property. We are, therefore, of the opinion that petitioner-appellee has proved that he and his predecessors-in-interest have been in open, continuous, exclusive and notorious possession of the subject property in the concept of owner for a period of 30 years since 12 June 1945 and earlier. By operation of law, the property in question has become private property.23 Contrary to the representations of the Republic, petitioner-appellee had introduced some improvements on the subject property from the time he purchased it. His witnesses testified that peti-tioner-appellee developed the subject property into a ricefield and planted it with rice, but only for about five years because the return on investment was not enough to sustain the continued operation of the riceland. Though not in the category of permanent structures, the preparation of the land into a ricefield and planting it with rice are considered improvements thereon.24 Although tax declarations or realty tax payments 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.25 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 ones 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 ones bona fide claim of acquisition of ownership.26

vest title. It is merely evidence of such title.29 Our land Registration laws do not give the holder any better title than what he actually has. When the conditions set by law are complied with, the possessor of the land, by operation of law, acquires a right to a grant, a government grant, without the necessity of a certificate of title being issued. The Torrens system was not established as a means for the acquisition of title to private land, as it merely confirms, but does not confer ownership.30 Of particular relevance is the finding of the respondent Court of Appeals to the effect that We have found that petitioner-appellee has proven his claim of ownership over the subject property. As provided in the proclamation itself, his ownership of the subject property must be respected and he cannot be barred from having the land titled in his name. This does not contravene or negate the intention of the proclamation. Besides, its implementing Letters of Instruction recognize that there may be lands declared included in the Slum Improvement Resettlement (SIR) program that are privately owned. Paragraph 10 of LOI No. 555 provides that if the land declared to be included in the SIR program is privately owned, the concerned local government, upon the approval by the National Housing Authority of its project plan, shall acquire the property through expropriation. In LOI No. 686 paragraph 3, it is mandated that the NHA, upon request of the local government, expropriate or otherwise acquire land for the SIR program. Proclamation No. 679 is, therefore, not a valid justification to deny the petition. x x x At the time the Proclamation was issued, the controversy over the subject property was sub-judice. The conflicting rights over it had been presented to the court for resolution. That jurisdiction could not be removed from it by subsequent legislation. The President must have been aware of this. Hence, the inclusion of the cautionary clause subject to existing private rights. 31 Over time, Courts have recognized with almost pedantic adherence that what is inconvenient or contrary to reason is not allowed in lawQuod est inconveniens, aut contra rationem non permissum est in lege. Undoubtedly, reason and law find respondent entitled to rights of ownership over the disputed property. ACCORDINGLY, the assailed decision dated February 8, 1993 is hereby AFFIRMED and the instant petition is hereby DISMISSED. SO ORDERED.

Regalado (Chairman), Romero, Puno and Mendoza, JJ., concur. Judgment affirmed, petition dismissed. Notes.Application for land registration shall be filed with the RTC of the province or city where the land lies. (Office of the Court Administrator vs. Matas, 247 SCRA 9 [1995]) Equity, which has been aptly described a justice outside legality, is applied only in the absence of, and never against, statutory law or judicial rules of procedure. (Mendiola vs. Court of Appeals, 258 SCRA 492 [1996]) o0o [Republic vs. Court of Appeals, 258 SCRA 712(1996)]

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Liu vs. Loy, Jr. G.R. No. 145982. July 3, 2003.* FRANK N. LIU, deceased, substituted by his surviving spouse DIANA LIU, and children, namely: WALTER, MILTON, FRANK, JR., HENRY and JOCKSON, all surnamed LIU, REBECCA LIU SHUI and PEARL LIU RODRIGUEZ, petitioners, vs. ALFREDO LOY, JR., TERESITA A. LOY and ESTATE OF JOSE VAO, respondents.
Civil Law; Contracts; Sales; Rescission; Although the law allows the extra-judicial cancellation of a contract to sell upon failure of one party to comply with his obligation, notice of such cancellation must still be given to the party who is at fault.Although the law allows the extrajudicial cancellation of a contract to sell upon failure of one party to comply with his obligation, notice of such cancellation must still be given to the party who is at fault. The notice of cancellation to the other party is one of the requirements for a valid cancellation of a contract to sell, aside from the existence of a lawful cause. Same; Same; Same; One who buys from a person who is not the registered owner is not a purchaser in good faith.The registration by the Loys of their contracts of sale did not defeat the right of prior buyers because the person who signed the Loys contracts was not the registered owner. The registered owner of Lot Nos. 5 and 6 was the Estate of Jose Vao. Teodoro Vao was the seller in the contract of sale with Alfredo Loy, Jr. The Estate of Jose Vao was the seller in the contract of sale with Teresita Loy. Teodoro Vao signed both contracts of sale. The rule is well-settled that one who buys from a person who is not the registered owner is not a purchaser in good faith . Same; Same; Same; Registration of the contracts without court approval would be ineffective to bind third persons, especially creditors of the estate.The contracts of the Loys did not convey ownership of the lots to them as against third persons. The contracts were binding only on the seller, Teodoro Vao. The contracts of the Loys would become binding against third persons only upon approval of the sale by the probate court and registration with the Register of Deeds. Registration of the contracts without court approval would be ineffective to bind third persons, especially creditors of the estate. Otherwise, this will open the door to fraud on creditors of the estate. Same; Same; Same; Trusts; It is mandatory that notice be served on the heirs and other interested persons of the application for approval of any conveyance of property held in trust by the deceased otherwise the order authorizing the conveyance, as well as the conveyance itself, is completely void.The failure to notify the administratrix and other interested persons rendered the sale to the Loys void. As explained by Justice J.B.L. Reyes in De Jesus v. De Jesus: Section 9, Rule 90, however, provides that authority can be given by the probate court to the administrator to convey property held in trust by the deceased to the beneficiaries of the trust only after notice given as required in the last preceding section; i.e., that no such conveyance shall be authorized until notice of the application for that purpose has been given personally or by mail

to all persons interested, and such further notice has been given, by publication or otherwise, as the court deems proper (sec. 8, Rule 90). This rule makes it mandatory that notice be served on the heirs and other interested persons of the application for approval of any conveyance of property held in trust by the deceased, and where no such notice is given, the order authorizing the conveyance, as well as the conveyance itself, is completely void. (Emphasis supplied) Same; Same; Same; A sale of estate property made by an administrator without court authority is void and does not confer on the purchaser a title that is available against a succeeding administrator.In Teresita Loys case, her seller was the Estate of Jose Vao. Teodoro Vao executed the contract of sale in his capacity as administrator of the Estate of Jose Vao, the registered owner of the lots. The Court has held that a sale of estate property made by an administrator without court authority is void and does not confer on the purchaser a title that is available against a succeeding administrator. Same; Same; Same; An administrator cannot unilaterally cancel a contract to sell made by the decedent in his lifetime.A prior contract to sell made by the decedent prevails over the subsequent contract of sale made by the administrator without probate court approval. The administrator cannot unilaterally cancel a contract to sell made by the decedent in his lifetime. Any cancellation must observe all legal requisites, like written notice of cancellation based on lawful cause.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court. Loyola, Rodriguez, Delos Santos & Naidas Law Office for petitioners. Diores Law Offices for private respondents Loys. CARPIO, J.:

The Case This is a petition for review on certiorari of the Decision1 dated 13 June 2000 and the Resolution dated 14 November 2002 of the Court of Appeals which affirmed the Decision2 of the Regional Trial Court, Branch 14, Cebu City. The Court of Appeals agreed with the trial court that the sales by the late Teodoro Vao to respondents Alfredo Loy, Jr. and Teresita A. Loy of Lot Nos. 5 and 6, respectively, were valid. The Court of Appeals also agreed with the trial court
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that the unilateral extrajudicial rescission by the late Teodoro Vao of the contract to sell involving five lots, including Lot Nos. 5 and 6, between him and Benito Liu (predecessor-in-interest of Frank Liu) was valid. The Facts On 13 January 1950, Teodoro Vao, as attorney-in-fact of Jose Vao, sold seven lots of the Banilad Estate located in Cebu City to Benito Liu and Cirilo Pangalo.3 Teodoro Vao dealt with Frank Liu, the brother of Benito Liu, in the sale of the lots to Benito Liu and Cirilo Pangalo. The lots sold to Benito Liu were Lot Nos. 5, 6, 13, 14, and 15 of Block 12 for a total price of P4,900. Benito Liu gave a down payment of P1,000, undertaking to pay the balance of P3,900 in monthly installments of P100 beginning at the end of January 1950. The lots sold to Cirilo Pangalo were Lot Nos. 14 and 15 of Block 11 for a total price of P1,967.50. Cirilo Pangalo gave P400 as down payment, undertaking to pay the balance of P1,567.50 in monthly installments of P400 beginning at the end of January 1950. Meanwhile, Jose Vao passed away. Benito Liu subsequently paid installments totaling P2,900, leaving a balance of P1,000.4 Apparently, Benito Liu stopped further payments because Teodoro Vao admitted his inability to transfer the lot titles to Benito Liu. Later, in a letter5 dated 16 October 1954, Teodoro Vao informed Frank Liu6 that the Supreme Court had already declared valid the will of his father Jose Vao. Thus, Teodoro Vao could transfer the titles to the buyers names upon payment of the balance of the purchase price. When Frank Liu failed to reply, Teodoro Vao sent him another letter,7 dated 1 January 1955, reminding him of his outstanding balance. It appears that it was only after nine years that Frank Liu responded through a letter,8 dated 25 January 1964. In the letter, Frank Liu informed Teodoro Vao that he was ready to pay the balance of the purchase price of the seven lots. He requested for the execution of a deed of sale of the lots in his name and the delivery of the titles to him. On 22 April 1966, Benito Liu sold to Frank Liu the five lots (Lot Nos. 5, 6, 13, 14 and 15 of Block 12) which Benito Liu purchased from Teodoro Vao.9 Frank Liu assumed the balance of P1,000 for the five lots. Cirilo Pangalo likewise sold to Frank Liu the two lots (Lot Nos. 14 and 15 of Block 11) that Pangalo purchased from Teodoro Vao. Frank Liu likewise assumed the balance of P417 for the two lots.

On 21 March 1968, Frank Liu reiterated in a letter10 his request for Teodoro Vao to execute the deed of sale covering the seven lots so he could secure the corresponding certificates of title in his name. He also requested for the construction of the subdivision roads pursuant to the original contract. In the letter, Frank Liu referred to another letter, dated 25 June 1966, which he allegedly sent to Teodoro Vao. According to Frank Liu, he enclosed PBC Check No. D-782290 dated 6 May 1966 for P1,417, which is the total balance of the accounts of Benito Liu and Cirilo Pangalo on the seven lots. However, Frank Liu did not offer in evidence the letter or the check. Frank Liu sent two other letters,11 dated 7 June 1968 and 29 July 1968, to Teodoro Vao reiterating his request for the execution of the deed of sale in his favor but to no avail. On 19 August 1968, Teodoro Vao sold Lot No. 6 to respondent Teresita Loy for P3,930.12 The Register of Deeds of Cebu City entered this sale in the Daybook on 24 February 1969.13 On 2 December 1968, Frank Liu filed a complaint against Teodoro Vao for specific performance, execution of deed of absolute sale, issuance of certificates of title and construction of subdivision roads, before the Court of First Instance of Davao. The case was docketed as Civil Case No. 6300.14 On 19 December 1968, Frank Liu filed with the Register of Deeds of Cebu City a notice of lis pendens on the seven lots due to the pendency of Civil Case No. 6300.15 However, the Register of Deeds denied the registration of the lis pendens on the ground that the property is under administration and said claim must be filed in court.16 On 16 December 1969, Teodoro Vao sold Lot No. 5 to respondent Alfredo Loy for P3,910.17 The Register of Deeds of Cebu City entered this sale in the Daybook on 16 January 1970.18 On 3 October 1970, the Court of First Instance of Davao, on motion of Teodoro Vao, dismissed Civil Case No. 6300 on the ground that Frank Liu should have filed the claim with the probate court.19 Thus, on 17 February 1972, Frank Liu filed before the probate court a claim against the Estate of Jose Vao for Specific Performance, Execution of Deed of Absolute Sale, Issuance of Certificate of Title, and Construction of Subdivision Roads.20 During the proceedings, Teodoro Vao died. His widow, Milagros Vao, succeeded as administratrix of the Estate of Jose Vao.
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On 24 February 1976, the probate court approved the claim of Frank Liu. On 5 March 1976, Milagros Vao executed a deed of conveyance covering the seven lots in favor of Frank Liu, in compliance with the probate courts order.21 The deed of conveyance included Lot Nos. 5 and 6, the same lots Teodoro Vao sold respectively to Alfredo Loy, Jr. on 16 December 1969 and to Teresita Loy on 19 August 1968. On 19 March 1976, the probate court, upon an ex-parte motion filed by Teresita Loy, issued an Order22 approving the 16 August 1968 sale by Teodoro Vao of Lot No. 6 in her favor. Likewise, upon an ex-parte motion filed by Alfredo Loy, Jr., the probate court issued on 23 March 1976 an Order23 approving the 16 December 1969 sale of Lot No. 5 by Teodoro Vao in his favor. On 10 May 1976, the Register of Deeds of Cebu City cancelled TCT No. 44204 in the name of the Estate of Jose Vao covering Lot No. 5 and issued a new title, TCT No. 64522, in the name of Alfredo Loy, Jr. and Perfeccion V. Loy.24 Likewise, on the same date, the Register of Deeds cancelled TCT No. 44205 in the name of the Estate of Jose Vao covering Lot No. 6, and issued TCT No. 64523 in the name of Teresita A. Loy.25 On 3 June 1976, Milagros Vao, as administratrix of the estate, filed a motion for reconsideration of the Orders of the probate court dated 19 and 23 March 1976. She contended that she already complied with the probate courts Order dated 24 February 1976 to execute a deed of sale covering the seven lots, including Lot Nos. 5 and 6, in favor of Frank Liu. She also stated that no one notified her of the motion of the Loys, and if the Loys or the court notified her, she would have objected to the sale of the same lots to the Loys. On 4 June 1976, Frank Liu filed a complaint for reconveyance or annulment of title of Lot Nos. 5 and 6. Frank Liu filed the case in the Regional Trial Court of Cebu City, Branch 14, which docketed it as Civil Case No. R-15342. On 5 August 1978, the probate court denied the motion for reconsideration of Milagros Vao on the ground that the conflicting claims regarding the ownership of Lot Nos. 5 and 6 were already under litigation in Civil Case No. R15342. On 8 April 1991, the Regional Trial Court of Cebu City (trial court), Branch 14, rendered judgment against Frank Liu as follows: WHEREFORE, judgment is hereby rendered:

(1) Dismissing the complaint at bar; and (2) Confirming the unilateral extrajudicial rescission of the contract Exhibit A by the late Teodoro Vao, conditioned upon the refund by the Estate of Jose Vao of one-half (1/2) of what the plaintiff had paid under that contract. The counterclaims by the defendants Alfredo A. Loy, Jr. and Teresita A. Loy and by the defendant Estate of Jose Vao, not having been substantiated, are hereby denied. Without special pronouncement as to costs. SO ORDERED.26 Frank Liu appealed to the Court of Appeals, which affirmed in toto the decision of the trial court. Frank Liu27 filed a motion for reconsideration but the Court of Appeals denied the same. Hence, the instant petition. The Trial Courts Ruling The trial court held that the contract between Teodoro Vao and Benito Liu was a contract to sell. Since title to Lot Nos. 5 and 6 never passed to Benito Liu due to non-payment of the balance of the purchase price, ownership of the lots remained with the vendor. Therefore, the trial court ruled that the subsequent sales to Alfredo Loy, Jr. and Teresita Loy of Lot Nos. 5 and 6, respectively, were valid. The trial court viewed the letter of Teodoro Vao dated 1 January 1995 addressed to Frank Liu as a unilateral extrajudicial rescission of the contract to sell. The trial court upheld the unilateral rescission subject to refund by the Estate of Jose Vao of one-half (1/2) of what Frank Liu paid under the contract. The trial court ruled that Teodoro Vao, as administrator of the Estate of Jose Vao and as sole heir of Jose Vao, acted both as principal and as agent when he sold the lots to Alfredo Loy, Jr. and Teresita Loy. The probate court subsequently approved the sales. The trial court also found that Alfredo Loy, Jr. and Teresita Loy were purchasers in good faith. The Court of Appeals Ruling

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In affirming in toto the trial courts decision, the appellate court found no evidence of fraud or ill-motive on the part of Alfredo Loy, Jr. and Teresita Loy. The Court of Appeals cited the rule that the law always presumes good faith such that any person who seeks to be awarded damages due to the acts of another has the burden of proving that the latter acted in bad faith or ill-motive. The Court of Appeals also held that the sales to Alfredo Loy, Jr. and Teresita Loy of Lot Nos. 5 and 6, respectively, were valid despite lack of prior approval by the probate court. The Court of Appeals declared that Teodoro Vao sold the lots in his capacity as heir of Jose Vao. The appellate court ruled that an heir has a right to dispose of the decedents property, even if the same is under administration, because the hereditary property is deemed transmitted to the heir without interruption from the moment of the death of the decedent. The Court of Appeals held that there is no basis for the claim of moral damages and attorneys fees. The appellate court found that Frank Liu failed to prove that he suffered mental anguish due to the actuations of the Loys. The Court of Appeals likewise disallowed the award of attorneys fees. The fact alone that a party was compelled to litigate and incur expenses to protect his claim does not justify an award of attorneys fees. Besides, the Court of Appeals held that where there is no basis to award moral damages, there is also no basis to award attorneys fees. The Issues Petitioners28 raise the following issues:29 1. Whether prior approval of the probate court is necessary to validate the sale of Lot Nos. 5 and 6 to Loys; 2. Whether the Loys can be considered buyers and registrants in good faith despite the notice of lis pendens; 3. Whether Frank Liu has a superior right over Lot Nos. 5 and 6; 4. Whether the Court of Appeals erred in not passing upon the trial courts declaration that the extra-judicial rescission by Teodoro Vao of the sale in favor of Frank Liu is valid; 5. Whether petitioners are entitled to moral damages and attorneys fees. The Courts Ruling

The petition is meritorious. Whether there was a valid cancellation of the contract to sell There was no valid cancellation of the contract to sell because there was no written notice of the cancellation to Benito Liu or Frank Liu. There was even no implied cancellation of the contract to sell. The trial court merely viewed the alleged unilateral extrajudicial rescission from the letter of Teodoro Vao, dated 1 January 1955, addressed to Frank Liu, stating that: Two months, I believe, is ample for the allowance of delays caused by your (sic) either too busy, or having been some place else, or for consultations. These are the only reasons I can think of that could have caused the delay in your answer, unless you do not think an answer is necessary at all, as you are not the party concerned in the matter. I shall therefor (sic) appreciate it very much, if you will write me within ten days from receipt of this letter, or enterprete (sic) your silence as my mistake in having written to the wrong party, and therefor (sic) proceed to write Misters: B. Liu and C. Pangalo.30 (Emphasis supplied) Obviously, we cannot construe this letter as a unilateral extrajudicial rescission of the contract to sell. As clearly stated in the letter, the only action that Teodoro Vao would take if Frank Liu did not reply was that Teodoro Vao would write directly to Benito Liu and Cirilo Pangalo. The letter does not mention anything about rescinding or cancelling the contract to sell. Although the law allows the extrajudicial cancellation of a contract to sell upon failure of one party to comply with his obligation, notice of such cancellation must still be given to the party who is at fault.31 The notice of cancellation to the other party is one of the requirements for a valid cancellation of a contract to sell, aside from the existence of a lawful cause. Even the case cited by the trial court emphasizes the importance of such notice: Of course, it must be understood that the act of a party in treating a contract as cancelled or resolved on account of infractions by the other contracting party must be made known to the other and is always provisional, being ever subject to scrutiny and review by the proper court. If the other party denies that rescission is justified, it is free to resort to judicial action in its own behalf, and bring the matter to court. Then, should the court, after due hearing, decide that the resolution of the contract was not warranted, the responsible party will be sentenced to damages; in the contrary case, the resolution will be affirmed,
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and the consequent indemnity awarded to the party prejudiced.32 (Emphasis supplied) The fact that Teodoro Vao advised Frank Liu to file his claim with the probate court is certainly not the conduct of one who supposedly unilaterally rescinded the contract with Frank Liu.33 In this case, there was prior delay or default by the seller. As admitted by Teodoro Vao, he could not deliver the titles because of a case questioning the authenticity of the will of his father. In a letter34 to Frank Liu dated 16 October 1954, Teodoro Vao stated: Some time last May, if I remember correctly, you offered to settle the whole balance of your account if I can have the Titles transferred immediately in your brothers name, and to that of Mr. Pangalos. I cannot blame you if you were disappointed then, to know that I could not have the titles transferred, even should you have paid in full. (Emphasis supplied) In the same letter of 16 October 1954, Teodoro Vao informed Frank Liu that the titles were ready for transfer, thus: However, last June 30, of this year, the Supreme Court, unanimously concurred in the reversal of the decision of the Court of First Instance, as regard the legality of the Will of my father. Now that the Will of my Father has been declared Legal, my opponents have lost their personality in the case, and with it their power to harass me in court. Also, sometime in the middle of July, also this year, the Supreme Court again declared that all the sales I have made of the properties of my Father, were Legal, and that I should be empowered to have the Titles transferred in the buyers names, should they have paid in full. A few have already received their Titles. And yours can be had too in two days time from the time you have paid in full. Nevertheless, the subsequent approval by the probate court of the sale of Lot Nos. 5 and 6 to Frank Liu rendered moot any question on the continuing validity of the contract to sell. Whether the lis pendens in the Davao case served as notice to the Loys. The lis pendens in the Davao case did not serve as notice to the Loys. The Register of Deeds of Cebu City denied registration of the lis pendens on 19 December 1968.35 Frank Liu did not appeal to the Land Registration

Commission36 to keep alive the lis pendens. Republic Act No. 1151,37 which took effect 17 June 1954, provides: SEC. 4. Reference of doubtful matters to Commissioner of Land Registration.When the Register of Deeds is in doubt with regard to the proper step to be taken or memorandum to be made in pursuance of any deed, mortgage, or other instrument presented to him for registration, or where any party in interest does not agree with the Register of Deeds with reference to any such matter, the question shall be submitted to the Commissioner of Land Registration either upon the certification of the Register of Deeds, stating the question upon which he is in doubt, or upon the suggestion in writing by the party in interest, and thereupon the Commissioner, after consideration of the matter shown by the records certified to him, and in case of registered lands, after notice to the parties and hearing, shall enter an order prescribing the step to be taken or memorandum to be made. His decision in such cases shall be conclusive and binding upon all Registers of Deeds: Provided, however, That when a party in interest disagrees with a ruling or resolution of the Commissioner and the issue involves a question of law, said decision may be appealed to the Supreme Court within thirty days from and after receipt of the notice thereof. (Emphasis supplied) Frank Lius failure to appeal38 the denial of the registration rendered the lis pendens ineffective. The Court of First Instance of Davao City eventually dismissed Frank Lius complaint on 3 October 1970. Whether the registration by the Loys of their contracts of sale made them the first registrants in good faith to defeat prior buyers The registration by the Loys of their contracts of sale did not defeat the right of prior buyers because the person who signed the Loys contracts was not the registered owner. The registered owner of Lot Nos. 5 and 6 was the Estate of Jose Vao. Teodoro Vao was the seller in the contract of sale with Alfredo Loy, Jr. The Estate of Jose Vao was the seller in the contract of sale with Teresita Loy. Teodoro Vao signed both contracts of sale. The rule is wellsettled that one who buys from a person who is not the registered owner is not a purchaser in good faith.39 As held in Toledo-Banaga v. Court of Appeals:40 To repeat, at the time of the sale, the person from whom petitioner Tan bought the property is neither the registered owner nor was the former authorized by
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the latter to sell the same. She knew she was not dealing with the registered owner or a representative of the latter. One who buys property with full knowledge of the flaws and defects in the title of his vendor is enough proof of his bad faith and cannot claim that he acquired title in good faith as against the owner or of an interest therein. When she nonetheless proceeded to buy the lot, petitioner Tan gambled on the result of litigation. She is bound by the outcome of her indifference with no one to blame except herself if she looses her claim as against one who has a superior right or interest over the property. x x x. The Loys were under notice to inquire why the land was not registered in the name of the person who executed the contracts of sale. They were under notice that the lots belonged to the Estate of Jose Vao and any sale of the lots required court approval. Any disposition would be subject to the claims of creditors of the estate who filed claims before the probate court.41 The contracts of the Loys did not convey ownership of the lots to them as against third persons. The contracts were binding only on the seller, Teodoro Vao. The contracts of the Loys would become binding against third persons only upon approval of the sale by the probate court and registration with the Register of Deeds. Registration of the contracts without court approval would be ineffective to bind third persons, especially creditors of the estate. Otherwise, this will open the door to fraud on creditors of the estate. Whether the probate courts ex-parte approval of the contracts of the Loys was valid Section 8, Rule 89 of the 1964 Rules of Court42 specifically requires notice to all interested parties in any application for court approval to convey property contracted by the decedent in his lifetime. Thus: SECTION 8. When court may authorize conveyance of realty which deceased contracted to convey. Notice. Effect of deed.Where the deceased was in his lifetime under contract, binding in law, to deed real property, or an interest therein, the court having jurisdiction of the estate may, on application for that purpose, authorize the executor or administrator to convey such property according to such contract, or with such modifications as are agreed upon by the parties and approved by the court; and if the contract is to convey real property to the executor or administrator, the clerk of the court shall execute the deed. The deed executed by such executor, administrator, or clerk of court shall be as effectual to convey the property as if executed by the deceased in

his lifetime; but no such conveyance shall be authorized until notice of the application for that purpose has been given personally or by mail to all persons interested, and such further notice has been given, by publication or otherwise, as the court deems proper; nor if the assets in the hands of the executor or administrator will thereby be reduced so as to prevent a creditor from receiving his full debt or diminish his dividend. (Rule 89, 1964 Rules of Court) (Emphasis supplied) Despite the clear requirement of Section 8 of Rule 89, the Loys did not notify the administratrix of the motion and hearing to approve the sale of the lots to them. The administratrix, who had already signed the deed of sale to Frank Liu as directed by the same probate court, objected to the sale of the same lots to the Loys. Thus, as found by the trial court: On June 3, 1976, Milagros H. Vao moved for the reconsideration of the Order issued by Judge Ramolete on March 19, 1976 and March 23, 1976, contending that she had not been personally served with copies of the motions presented to the Court by Alfredo Loy, Jr. and by Teresita Loy seeking the approval of the sales of the lots in their favor, as well as the Orders that were issued by the Court pursuant thereto; that the Court in its Order of February 24, 1976 had ordered her (Milagros H. Vao), to execute a deed of absolute sale in favor of the plaintiff, which sale had been approved by the Court; that she had not known of the sale of Lots 5 and 6 to any other person except to the plaintiff; that the sale of the two lots in favor of plaintiff was made earlier, when there was yet no litigation with the Bureau of Internal Revenue, while those in favor of the defendant Loys were made when there was already a prohibition by the Court against any sale thereof; that the sales in favor of the Loys were made without Court authority; and that if the approval of the sales had not been obtained ex-parte she would have informed the Court of the complication arising therefrom, and she would not have executed the sale in favor of plaintiff, and she would have asked the Court to decide first as to who had preference over said lots.43 The failure to notify the administratrix and other interested persons rendered the sale to the Loys void. As explained by Justice J.B.L. Reyes in De Jesus v. De Jesus:44 Section 9, Rule 90, however, provides that authority can be given by the probate court to the administrator to convey property held in trust by the deceased to the beneficiaries of the trust only after notice given as required in the last preceding section; i.e., that no such conveyance shall be authorized
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until notice of the application for that purpose has been given personally or by mail to all persons interested, and such further notice has been given, by publication or otherwise, as the court deems proper (sec. 8, Rule 90). This rule makes it mandatory that notice be served on the heirs and other interested persons of the application for approval of any conveyance of property held in trust by the deceased, and where no such notice is given, the order authorizing the conveyance, as well as the conveyance itself, is completely void. (Emphasis supplied) In this case, the administratrix, the wife of the deceased Teodoro Vao, was not notified of the motion and hearing to approve the sale of the lots to the Loys. Frank Liu did not also receive any notice, although he obviously was an interested party. The issuance of new titles to the Loys on 10 May 1976 by the Registry of Deeds did not vest title to the Loys because the conveyance itself was completely void. The consequences for the failure to notify the administratrix and other interested parties must be borne by the Loys. Necessity of court approval of sales Indisputably, an heir can sell his interest in the estate of the decedent, or even his interest in specific properties of the estate. However, for such disposition to take effect against third parties, the court must approve such disposition to protect the rights of creditors of the estate. What the deceased can transfer to his heirs is only the net estate, that is, the gross estate less the liabilities. As held in Baun v. Heirs of Baun:45 The heir legally succeeds the deceased, from whom he derives his right and title, but only after the liquidation of the estate, the payment of the debts of the same, and the adjudication of the residue of the estate of the deceased; and in the meantime the only person in charge by law to attend to all claims against the estate of the deceased debtor is the executor or administrator appointed by the court. In Opulencia v. Court of Appeals,46 an heir agreed to convey in a contract to sell her share in the estate then under probate settlement. In an action for specific performance filed by the buyers, the seller-heir resisted on the ground that there was no approval of the contract by the probate court. The Court ruled that the contract to sell was binding between the parties, but subject to the outcome of the testate proceedings. The Court declared: x x x Consequently, although the Contract to Sell was perfected between the petitioner (seller-heir) and private respondents (buyers) during the pendency of

the probate proceedings, the consummation of the sale or the transfer of ownership over the parcel of land to the private respondents is subject to the full payment of the purchase price and to the termination and outcome of the testate proceedings. x x x Indeed, it is settled that the sale made by an heir of his share in an inheritance, subject to the pending administration, in no wise stands in the way of such administration. (Emphasis supplied) In Alfredo Loys case, his seller executed the contract of sale after the death of the registered owner Jose Vao. The seller was Teodoro Vao who sold the lot in his capacity as sole heir of the deceased Jose Vao. Thus, Opulencia applies to the sale of the lot to Alfredo Loy, Jr., which means that the contract of sale was binding between Teodoro Vao and Alfredo Loy, Jr., but subject to the outcome of the probate proceedings. In Frank Lius case, as successor-in-interest of Benito Liu, his seller was Jose Vao, who during his lifetime executed the contract to sell through an attorneyin-fact, Teodoro Vao. This is a disposition of property contracted by the decedent during his lifetime. Section 8 of Rule 89 specifically governs this sale: SECTION 8. When court may authorize conveyance of realty which deceased contracted to convey. Notice. Effect of deed.Where the deceased was in his lifetime under contract, binding in law, to deed real property, or an interest therein, the court having jurisdiction of the estate may, on application for that purpose, authorize the executor or administrator to convey such property according to such contract, or with such modifications as are agreed upon by the parties and approved by the court; x x x Thus, Frank Liu applied to the probate court for the grant of authority to the administratrix to convey the lots in accordance with the contract made by the decedent Jose Vao during his lifetime. The probate court approved the application. In Teresita Loys case, her seller was the Estate of Jose Vao. Teodoro Vao executed the contract of sale in his capacity as administrator of the Estate of Jose Vao, the registered owner of the lots. The Court has held that a sale of estate property made by an administrator without court authority is void and does not confer on the purchaser a title that is available against a succeeding administrator.47 Manotok Realty, Inc. v. Court of Appeals48 emphasizes the need for court approval in the sale by an administrator of estate property. The Court held in Manotok Realty:
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We also find that the appellate court committed an error of law when it held that the sale of the lot in question did not need the approval of the probate court. Although the Rules of Court do not specifically state that the sale of an immovable property belonging to an estate of a decedent, in a special proceeding, should be made with the approval of the court, this authority is necessarily included in its capacity as a probate court. An administrator under the circumstances of this case cannot enjoy blanket authority to dispose of real estate as he pleases, especially where he ignores specific directives to execute proper documents and get court approval for the sales validity. Section 91 of Act No. 496 (Land Registration Act) specifically requires court approval for any sale of registered land by an executor or administrator, thus: SEC. 91. Except in case of a will devising the land to an executor to his own use or upon some trust or giving to the executor power to sell, no sale or transfer of registered land shall be made by an executor or by an administrator in the course of administration for the payment of debts or for any other purpose, except in pursuance of an order of a court of competent jurisdiction obtained as provided by law. (Emphasis supplied) Similarly, Section 88 of Presidential Decree No. 1529 (PropertyRegistration Decree) provides: SEC. 88. Dealings by administrator subject to court approval.After a memorandum of the will, if any, and order allowing the same, and letters testamentary or letters of administration have been entered upon the certificate of title as hereinabove provided, the executor or administrator may alienate or encumber registered land belonging to the estate, or any interest therein, upon approval of the court obtained as provided by the Rules of Court. (Emphasis supplied) Clearly, both the law and jurisprudence expressly require court approval before any sale of estate property by an executor or administrator can take effect. Moreover, when the Loys filed in March 1976 their ex-parte motions for approval of their contracts of sale, there was already a prior order of the probate court dated 24 February 1976 approving the sale of Lot Nos. 5 and 6 to Frank Liu. In fact, the administratrix had signed the deed of sale in favor of Frank Liu on 5 March 1976 pursuant to the court approval. This deed of sale

was notarized on 5 March 1976, which transferred ownership of Lot Nos. 5 and 6 to Frank Liu on the same date.49 Thus, when the probate court approved the contracts of the Loys on 19 and 23 March 1976, the probate court had already lost jurisdiction over Lot Nos. 5 and 6 because the lots no longer formed part of the Estate of Jose Vao. _______________

49 The Civil Code provides: Art. 1477. The ownership of the thing sold shall be transferred to the vendee upon the actual or constructive delivery thereof. Art. 1496. The ownership of the thing sold is acquired by the vendee from the moment it is delivered to him in any of the ways specified in Articles 1497 to 1501, or in any other manner signifying an agreement that the possession is transferred from the vendor to the vendee. Art. 1498. When the sale is made through a public instrument, the execution thereof shall be equivalent to the delivery of the thing which is the object of the contract, if from the deed the contrary does not appear or cannot clearly be inferred. xxx In Dolar v. Sundiam,50 an heir sold parcels of land that were part of the estate of the decedent. The probate court approved the sale. Thereafter, the probate court authorized the administrator to sell again the same parcels of land to another person. The Court ruled that the probate court had already lost jurisdiction to authorize the further sale of the parcels of land to another person because such property no longer formed part of the estate of the decedent. The Court declared: In our opinion, where, as in this case, a piece of property which originally is a part of the estate of a deceased person is sold by an heir of the deceased having a valid claim thereto, and said piece of property is, by mistake, subsequently inventoried or considered part of the deceaseds estate subject to settlement, and, thereafter, with the authority and approval of the probate court, it sold once more to another person, a receiver of the property so sold may, during the pendency of a motion to set aside the second sale, be appointed by
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the court when in its sound judgment the grant of such temporary relief is reasonably necessary to secure and protect the rights of its real owner against any danger of loss or material injury to him arising from the use and enjoyment thereof by another who manifestly cannot acquire any right of dominion thereon because the approving surrogate court had already lost jurisdiction to authorize the further sale of such property. (Emphasis supplied) Similarly, in this case, the Loys cannot acquire any right of dominion over Lot Nos. 5 and 6 because the probate court had already lost jurisdiction to authorize the second sale of the same lots. Moreover, the probate courts approval of the sale to the Loys was completely void due to the failure to notify the administratrix of the motion and hearing on the sale. Whether the Loys were in good faith when they built on the Lots. 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. In Duran v. Intermediate Appellate Court,51 the Court explained possession in good faith in this manner: Guided by previous decisions of this Court, good faith consists in the possessors belief that the person from whom he received the thing was the owner of the same and could convey his title (Arriola vs. Gomez de la Serna, 14 Phil. 627). Good faith, while it is always presumed in the absence of proof to the contrary, requires a well-founded belief that the person from whom title was received was himself the owner of the land, with the right to convey it (Santiago vs. Cruz, 19 Phil. 148). There is good faith where there is an honest intention to abstain from taking unconscientious advantage from another (Fule vs. Legare, 7 SCRA 351).

The Loys were not in good faith when they built on the lots because they knew that they bought from someone who was not the registered owner. The registered owner on the TCTs of the lots was the Estate of Jose Vao, clearly indicating that the sale required probate court approval. Teodoro Vao did not show any court approval to the Loys when they purchased the lots because there was none. To repeat, any one who buys from a person who is not the registered owner is not a purchaser in good faith.52 If the Loys built on the lots before the court approval, then they took the risk. Contract to sell versus contract of sale A prior contract to sell made by the decedent prevails over the subsequent contract of sale made by the administrator without probate court approval. The administrator cannot unilaterally cancel a contract to sell made by the decedent in his lifetime.53 Any cancellation must observe all legal requisites, like written notice of cancellation based on lawful cause.54 It is immaterial if the prior contract is a mere contract to sell and does not immediately convey ownership.55 If it is valid, then it binds the estate to convey the property in accordance with Section 8 of Rule 89 upon full payment of the consideration. Frank Lius contract to sell became valid and effective upon its execution.56 The seller, Jose Vao, was then alive and thus there was no need for court approval for the immediate effectivity of the contract to sell. In contrast, the execution of the contracts of sale of the Loys took place after the death of the registered owner of the lots. The law requires court approval for the effectivity of the Loys contracts of sale against third parties. The probate court did not validly give this approval since it failed to notify all interested parties of the Loys motion for court approval of the sale. Besides, the probate court had lost jurisdiction over the lots after it approved the earlier sale to Frank Liu. Clearly, Frank Lius contract to sell prevails over the Loys contracts of sale. Whether petitioners are entitled to award of moral damages and attorneys fees. The Court upholds the ruling of the trial and appellate courts that petitioners are not entitled to moral damages. Moral damages should not enrich a complainant at the expense of the defendant.57

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Likewise, as found by the trial court and the appellate court, there is no basis to award attorneys fees. The policy of the law is to put no premium on the right to litigate.58 The court may award attorneys fees only in the instances mentioned in Article 2208 of the Civil Code. The award of attorneys fees is the exception rather than the rule.59 None of the instances mentioned in Article 2208 apply to this case. Conclusion Since the Loys have no contract of sale validly approved by the probate court, while Frank Liu has a contract of sale approved by the probate court in accordance with Section 8 of Rule 89, Lot Nos. 5 and 6 belong to Frank Liu. The Estate of Jose Vao should reimburse the Loys their payments on Lot Nos. 5 and 6, with annual interest at 6% from 4 June 1976, the date of filing of the complaint, until finality of this decision, and 12% thereafter until full payment.60 WHEREFORE, the Decision of the Court of Appeals is SET ASIDE and a new one is RENDERED: 1. Declaring null and void the deeds of sale of Lot Nos. 5 and 6 executed by Teodoro Vao in favor of Alfredo Loy, Jr. and Teresita Loy, respectively. 2. Ordering the Register of Deeds of Cebu City to cancel TCT Nos. 64522 and 64523 and to issue a new one in the name of petitioner Frank N. Liu; 3. Ordering the Estate of Jose Vao to reimburse to respondent Loys the amounts paid on Lot Nos. 5 and 6, with interest at 6% per annum from 4 June 1976 until finality of this decision, and 12% per annum thereafter until full payment. SO ORDERED. Davide, Jr. (C.J., Chairman), Vitug, Ynares-Santiago and Azcuna, JJ., concur. Judgment set aside. Note.Mutual restitution is required in rescission, but this presupposes that both parties may be restored in their original situation. (Asuncion vs. Evangelista, 316 SCRA 848 [1999]) o0o [Liu vs. Loy, Jr., 405 SCRA 316(2003)]
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Calicdan vs. Cendaa G.R. No. 155080. February 5, 2004.* SOLEDAD CALICDAN, represented by her guardian GUADALUPE CASTILLO, petitioner, vs. SILVERIO CENDAA, substituted by his legal heir CELSA CENDAA-ALARAS, respondent.
Appeals; As a rule, the Supreme Courts jurisdiction in cases brought from the Court of Appeals is limited to the review and revision of errors of law allegedly committed by the appellate court; Exceptions.As a rule, our jurisdiction in cases brought from the Court of Appeals is limited to the review and revision of errors of law allegedly committed by the appellate court. This is because its findings of fact are deemed conclusive and we are not duty-bound to analyze and weigh all over again the evidence already considered in the proceedings below. The rule, however, admits of the following exceptions: (1) when the findings are grounded on speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion in the appreciation of facts; (4) when the factual findings of the trial and appellate courts are conflicting; (5) when the Court of Appeals, in making its findings, has gone beyond the issues of the case and such findings are contrary to the admissions of both appellant and appellee; (6) when the judgment of the appellate court is premised on a misapprehension of facts or when it has failed to consider certain relevant facts which, if properly taken into account, will justify a different conclusion; (7) when the findings of fact are conclusions without citation of specific evidence upon which they are based; and (8) when findings of fact of the Court of Appeals are premised on the absence of evidence but are contradicted by the evidence on record. In the case at bar, the factual findings of the trial court and the Court of Appeals are conflicting; thus, we are constrained to review the findings of facts. Witnesses; Hearsay Rule; Words and Phrases; Hearsay Evidence is defined as evidence not of what the witness knows himself but of what he has heard from others; The hearsay rule bars the testimony of a witness who merely recites what someone else has told him, whether orally or in writing.In People v. Masinag Vda. de Ramos, we held that: Under Rule 130, Section 36 of the Rules of Court, a witness can testify only to those facts which he knows of his own personal knowledge, i.e., which are derived from his own perception; otherwise, such testimony would be hearsay. Hearsay evidence is defined as evidence not of what the witness knows himself but of what he has heard from others. The hearsay rule bars the testimony of a witness who merely recites what someone else has told him, whether orally or in writing. In Sanvicente v. People, we held that when evidence is based on what was supposedly told the witness, the same is without any evidentiary weight for being patently hearsay. Familiar and fundamental is the rule that hearsay testimony is inadmissible as evidence. Property; Ownership; Possession; Prescription; Words and Phrases; Prescription, Explained; 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. Notwithstanding the invalidity of the donation, we find that respondent has become the rightful owner of the land by extraordinary acquisitive prescription. Prescription is another mode of

acquiring ownership and other real rights over immovable property. It is concerned with lapse of time in the manner and under conditions laid down by law, namely, that the possession should be in the concept of an owner, public, peaceful, uninterrupted and adverse. Acquisitive prescription is either ordinary or extraordinary. Ordinary acquisitive prescription requires possession in good faith and with just title for ten years. In extraordinary prescription ownership and other real rights over immovable property are acquired through uninterrupted adverse possession thereof for thirty years without need of title or of good faith. 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. For purposes of prescription, there is just title when the adverse claimant came into possession of the property through one of the modes recognized by law for the acquisition of ownership or other real rights, but the grantor was not the owner or could not transmit any right. Same; Same; Same; Same; Tax Declarations; Together with a persons actual possession of the land, tax declarations constitute strong evidence of ownership of the land occupied by him.The records show that the subject land is an unregistered land. When the petitioner filed the instant case on June 29, 1992, respondent was in possession of the land for 45 years counted from the time of the donation in 1947. This is more than the required 30 years of title and good faith. Such possession was public, adverse and in the concept of an owner. Respondent fenced the land and built his house in 1949, with the help of Guadalupes father as his contractor. His act of cultivating and reaping the fruits of the land was manifest and visible to all. He declared the land for taxation purposes and religiously paid the realty taxes thereon. Together with his actual possession of the land, these tax declarations constitute strong evidence of ownership of the land occupied by him. As we said in the case of Heirs of Simplicio Santiago v. Heirs of Mariano Santiago: 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 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 ones 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 ones bona fide claim of acquisition of ownership. Same; Same; Same; Same; Donation; A deed of donation, albeit void for having been executed by one who was not the owner of the property donated, may still be used to show the exclusive and adverse character of the donees possession.Moreover, the deed of donation inter vivos, albeit void for having been executed by one who was not the owner of the property donated, may still be used to show the exclusive and adverse character of respondents possession. Thus, in Heirs of Segunda Maningding v. Court of Appeals, we held: Even assuming that the donation propter nuptias is void for failure to comply with formal requisites, it could still constitute a legal basis for adverse possession. With clear and convincing evidence of possession, a private document of donation may serve as basis for a claim of ownership. In Pensader v. Pensader we ruled that while the verbal donation under which the defendant and his predecessors-in-interest have been in possession of the lands in question is not effective as a transfer of title, still it is a
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circumstance which may explain the adverse and exclusive character of the possession. (Italics ours)

PETITION for review on certiorari of a decision of the Court of Appeals.

possession of the land for a period of 45 years. Moreover, he argued that the complaint was barred by prior judgment in the special proceedings for the Inventory of Properties of Incompetent Soledad Calicdan, where the court decreed the exclusion of the land from the inventory of properties of the petitioner.7 On November 12, 1996, the trial court rendered a decision in favor of the petitioner, the dispositive portion of which reads as follows: WHEREFORE, judgment is rendered in favor of plaintiff and against the defendant as follows: 1. Ordering defendant Silverio Cendaa to vacate the land in question and surrender ownership and possession of the same to plaintiff; and 2. Ordering defendant to pay plaintiff P20,000.00 as moral damages, P20,000.00 as exemplary damages, P10,000.00 by way of attorneys fees and other litigation expenses, plus cost of suit. SO ORDERED.8 On appeal by the respondent, the Court of Appeals reversed the trial courts decision and declared that the donation was valid. Furthermore, it held that petitioner lost her ownership of the property by prescription. Hence, the instant petition for review on the following issues: (1) whether or not the donation inter vivos is valid; and (2) whether or not petitioner lost ownership of the land by prescription. As a rule, our jurisdiction in cases brought from the Court of Appeals is limited to the review and revision of errors of law allegedly committed by the appellate court. This is because its findings of fact are deemed conclusive and we are not duty-bound to analyze and weigh all over again the evidence already considered in the proceedings below.9 The rule, however, admits of the following exceptions: (1) when the findings are grounded on speculation, surmises or conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion in the appreciation of facts;
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The facts are stated in the opinion of the Court. Villamor A. Tolete for petitioner. Albino Gonzales for respondent. YNARES-SANTIAGO, J.:

This petition for review seeks the reversal of the April 4, 2002 decision of the Court of Appeals in CA-G.R. CV No. 67266, 1 which set aside the November 12, 1996 decision of the Regional Trial Court of Dagupan City, Branch 44 in Civil Case No. D-10270.2 The instant controversy involves a 760 square meter parcel of unregistered land located in Poblacion, Mangaldan, Pangasinan. The land was formerly owned by Sixto Calicdan, who died intestate on November 4, 1941. He was survived by his wife, Fermina, and three children, namely, petitioner Soledad, Jose and Benigno, all surnamed Calicdan.3 On August 25, 1947, Fermina executed a deed of donation inter vivos whereby she conveyed the land to respondent Silverio Cendana,4 who immediately entered into possession of the land, built a fence around the land and constructed a two-storey residential house thereon sometime in 1949, where he resided until his death in 1998.5 On June 29, 1992, petitioner, through her legal guardian Guadalupe Castillo, filed a complaint for Recovery of Ownership, Possession and Damages against the respondent, alleging that the donation was void; that respondent took advantage of her incompetence in acquiring the land; and that she merely tolerated respondents possession of the land as well as the construction of his house thereon.6 In his Answer with Motion to Dismiss, respondent alleged, by way of affirmative defenses, that the land was donated to him by Fermina in 1947; and that he had been publicly, peacefully, continuously, and adversely in

(4) when the factual findings of the trial and appellate courts are conflicting; (5) when the Court of Appeals, in making its findings, has gone beyond the issues of the case and such findings are contrary to the admissions of both appellant and appellee; (6) when the judgment of the appellate court is premised on a misapprehension of facts or when it has failed to consider certain relevant facts which, if properly taken into account, will justify a different conclusion; (7) when the findings of fact are conclusions without citation of specific evidence upon which they are based; and (8) when findings of fact of the Court of Appeals are premised on the absence of evidence but are contradicted by the evidence on record.10 In the case at bar, the factual findings of the trial court and the Court of Appeals are conflicting; thus, we are constrained to review the findings of facts. The trial court found the donation of the land void because Fermina was not the owner thereof, considering that it was inherited by Sixto from his parents. Thus, the land was not part of the conjugal property of the spouses Sixto and Fermina Calicdan, because under the Spanish Civil Code, the law applicable when Sixto died in 1941, the surviving spouse had a right of usufruct only over the estate of the deceased spouse. Consequently, respondent, who derived his rights from Fermina, only acquired the right of usufruct as it was the only right which the latter could convey. After a review of the evidence on record, we find that the Court of Appeals ruling that the donation was valid was not supported by convincing proof. Respondent himself admitted during the cross examination that he had no personal knowledge of whether Sixto Calicdan in fact purchased the subject land from Felomino Bautista. Pertinent portions of his testimony read: Q. And Sixto Calicdan inherited this property from his parents? A. No, sir.

Q. What do you mean by no? A. To my knowledge and information, Sixto Calicdan bought the property from his cousin, I think Flaviano or Felomino Bautista. Q. So, in other words, you have no personal knowledge about how Sixto Calicdan acquired this property? A. I think it was by purchase. Q. According to information, so you have no actual personal knowledge how Sixto Calicadan acquired this property? A. Yes, because when the property was bought by my uncle, I was not yet born, so information only. Q. So when you were born, you came to know already that Sixto Calicdan is the owner of this property? A. Yes, thru the son of Felomino Bautista who is now, I think, in Baguio. Q. You have not seen any document to show that Sixto Calicdan purchased the property from one Felomino Bautista? A. None, sir.11
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In People v. Masinag Vda. de Ramos,12 we held that: Under Rule 130, Section 36 of the Rules of Court, a witness can testify only to those facts which he knows of his own personal knowledge, i.e., which are derived from his own perception; otherwise, such testimony would be hearsay. Hearsay evidence is defined as evidence not of what the witness knows himself but of what he has heard from others. The hearsay rule bars the testimony of a witness who merely recites what someone else has told him, whether orally or in writing. In Sanvicente v. People, we held that when evidence is based on what was supposedly told the witness, the same is without any evidentiary weight for being patently hearsay. Familiar and fundamental is the rule that hearsay testimony is inadmissible as evidence. The Court of Appeals thus erred in ruling based on respondents bare hearsay testimony as evidence of the donation made by Fermina. Notwithstanding the invalidity of the donation, we find that respondent has become the rightful owner of the land by extraordinary acquisitive prescription. Prescription is another mode of acquiring ownership and other real rights over immovable property. It is concerned with lapse of time in the manner and under conditions laid down by law, namely, that the possession should be in the concept of an owner, public, peaceful, uninterrupted and adverse. Acquisitive prescription is either ordinary or extraordinary. Ordinary acquisitive prescription requires possession in good faith and with just title for ten years. In extraordinary prescription ownership and other real rights over immovable property are acquired through uninterrupted adverse possession thereof for thirty years without need of title or of good faith.13 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.14 For purposes of prescription, there is just title when the adverse claimant came into possession of the property through one of the modes recognized by law for the acquisition of ownership or other real rights, but the grantor was not the owner or could not transmit any right.15 Assuming arguendo that ordinary acquisitive prescription is unavailing in the case at bar as it demands that the possession be in good faith and with just title,16 and there is no evidence on record to prove respondents good faith, nevertheless, his adverse possession of the land for more than 45 years aptly shows that he has met the requirements for extraordinary acquisitive prescription to set in.

The records show that the subject land is an unregistered land. When the petitioner filed the instant case on June 29, 1992, respondent was in possession of the land for 45 years counted from the time of the donation in 1947. This is more than the required 30 years of uninterrupted adverse possession without just title and good faith. Such possession was public, adverse and in the concept of an owner. Respondent fenced the land and built his house in 1949, with the help of Guadalupes father as his contractor. His act of cultivating and reaping the fruits of the land was manifest and visible to all. He declared the land for taxation purposes and religiously paid the realty taxes thereon.17 Together with his actual possession of the land, these tax declarations constitute strong evidence of ownership of the land occupied by him. As we said in the case of Heirs of Simplicio Santiago v. Heirs of Mariano Santiago:18 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 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 ones 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 ones bona fide claim of acquisition of ownership. Moreover, the deed of donation inter vivos, albeit void for having been executed by one who was not the owner of the property donated, may still be used to show the exclusive and adverse character of respondents possession. Thus, in Heirs of Segunda Maningding v. Court of Appeals,19 we held: Even assuming that the donation propter nuptias is void for failure to comply with formal requisites, it could still constitute a legal basis for adverse possession. With clear and convincing evidence of possession, a private document of donation may serve as basis for a claim of ownership. In Pensader v. Pensader we ruled that while the verbal donation under which the defendant and his predecessors-in-interest have been in possession of the lands in question is not effective as a transfer of title, still it is a circumstance which may explain the adverse and exclusive character of the possession. (Italics ours)

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In sum, the Court of Appeals correctly ordered the dismissal of Civil Case No. D-10270 before the Regional Trial Court of Dagupan City, Branch 44, and declared respondent the rightful owner of the subject property, not on the basis of the Deed of Donation Inter Vivos, which is hereby declared void, but on extraordinary acquisitive prescription. WHEREFORE, in view of the foregoing, the petition is DENIED. The Decision of the Court of Appeals dated April 4, 2002 in CA-G.R. CV No. 67266, which ordered the dismissal of Civil Case No. D-10270 before the Regional Trial Court of Dagupan City, Branch 44, is AFFIRMED. SO ORDERED. Davide, Jr. (C.J., Chairman), Panganiban and Carpio, JJ., concur. Azcuna, J., On Official Leave. Petition denied, assailed decision affirmed. Notes.A mere tax declaration does not vest ownership of the property upon the declarantneither do tax receipts nor declarations of ownership for taxation purposes constitute adequate evidence of ownership or of the right to possess realty. (Santos vs. Santos, 342 SCRA 753 [2000]) Hearsay evidence, whether objected to or not, possesses no probative value unless the proponent can show that the same falls within the exception to the hearsay rule. (People vs. Barro, Jr., 343 SCRA 238 [2000]) o0o National Housing Authority vs. Court of Appeals

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G.R. No. 148830. April 13, 2005.* NATIONAL HOUSING AUTHORITY, petitioner, vs. COURT OF APPEALS, BULACAN GARDEN CORPORATION and MANILA SEEDLING BANK FOUNDATION, INC., respondents.
Actions; Appeals; Even though the matter raised in a petition for review under Rule 45 is factual, it deserves resolution if the findings of the trial court and the appellate court conflict on several points.Rule 45 of the 1997 Rules of Civil Procedure limits the jurisdiction of this Court to the review of errors of law. Absent any of the established grounds for exception, this Court will not disturb findings of fact of lower courts. Though the matter raised in this petition is factual, it deserves resolution because the findings of the trial court and the appellate court conflict on several points. Usufruct; A usufruct may be constituted for a specified term and under such conditions as the parties may deem convenient subject to the legal provisions on usufruct; A usufructuary may lease the object held in usufruct.A usufruct may be constituted for a specified term and under such conditions as the parties may deem convenient subject to the legal provisions on usufruct. A usufructuary may lease the object held in usufruct. Thus, the NHA may not evict BGC if the 4,590 square meter portion MSBF leased to BGC is within the seven-hectare area held in usufruct by MSBF. The owner of the property must respect the lease entered into by the usufructuary so long as the usufruct exists. However, the NHA has the right to evict BGC if BGC occupied a portion outside of the seven-hectare area covered by MSBFs usufructuary rights. Same; Manila Seedling Bank Foundation, Inc.s (MSBF) right as a usufructuary as granted by Proclamation No. 1670 should rest on something more substantial than where it chose to place a gate.More evidence supports MSBFs stand on the location of the seven-hectare area. The main structures of MSBF are found in the area indicated by MSBFs survey. These structures are the main office, the three green houses, the warehouse and the composting area. On the other hand, the NHAs delineation of the seven-hectare area would cover only the four hardening bays and the display area. It is easy to distinguish between these two groups of structures. The first group covers buildings and facilities that MSBF needs for its operations. MSBF built these structures before the present controversy started. The second group covers facilities less essential to MSBFs existence. This distinction is decisive as to which survey should prevail. It is clear that the MSBF intended to use the yellow-shaded area primarily because it erected its main structures there. Inobaya testified that his main consideration in using Agham Road as the starting point for his survey was the presence of a gate there. The location of the gate is not a sufficient basis to determine the starting point. MSBFs right as a usufructuary as granted by Proclamation No. 1670 should rest on something more substantial than where MSBF chose to place a gate. To prefer the NHAs survey to MSBFs survey will strip MSBF of most of its main facilities. Only the main building of MSBF will remain with MSBF since the main building is near the corner of EDSA and Quezon Avenue. The rest of MSBFs main facilities will be outside the seven-hectare area.

Same; A usufructuary has the duty to protect the owners inter-estsa usufruct gives a right to enjoy the property of another with the obligation of preserving its form and substance, unless the title constituting it or the law otherwise provides.This Court cannot countenance MSBFs act of exceeding the seven-hectare portion granted to it by Proclamation No. 1670. A usufruct is not simply about rights and privileges. A usufructuary has the duty to protect the owners interests. One such duty is found in Article 601 of the Civil Code which states: ART. 601. The usufructuary shall be obliged to notify the owner of any act of a third person, of which he may have knowledge, that may be prejudicial to the rights of ownership, and he shall be liable should he not do so, for damages, as if they had been caused through his own fault. A usufruct gives a right to enjoy the property of another with the obligation of preserving its form and substance, unless the title constituting it or the law otherwise provides. This controversy would not have arisen had MSBF respected the limit of the beneficial use given to it. MSBFs encroachment of its benefactors property gave birth to the confusion that attended this case. To put this matter entirely to rest, it is not enough to remind the NHA to respect MSBFs choice of the location of its seven-hectare area. MSBF, for its part, must vacate the area that is not part of its usufruct. MSBFs rights begin and end within the seven-hectare portion of its usufruct. This Court agrees with the trial court that MSBF has abused the privilege given it under Proclamation No. 1670. The direct corollary of enforcing MSBFs rights within the seven-hectare area is the negation of any of MSBFs acts beyond it. Same; Corporation Law; The law clearly limits any usufruct constituted in favor of a corporation or association to 50 yearsa usufruct is meant only as a lifetime grant.The law clearly limits any usufruct constituted in favor of a corporation or association to 50 years. A usufruct is meant only as a lifetime grant. Unlike a natural person, a corporation or associations lifetime may be extended indefinitely. The usufruct would then be perpetual. This is especially invidious in cases where the usufruct given to a corporation or association covers public land. Proclamation No. 1670 was issued 19 September 1977, or 28 years ago. Hence, under Article 605, the usufruct in favor of MSBF has 22 years left.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court. Fregillana, Jr., D.D. for respondents. CARPIO, J.:

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The Case This is a petition for review1 seeking to set aside the Decision2 dated 30 March 2001 of the Court of Appeals (appellate court) in CA-G.R. CV No. 48382, as well as its Resolution dated 25 June 2001 denying the motion for reconsideration. The appellate court reversed the Decision3 of Branch 87 of the Regional Trial Court of Quezon City (trial court) dated 8 March 1994 in Civil Case No. Q-53464. The trial court dismissed the complaint for injunction filed by Bulacan Garden Corporation (BGC) against the National Housing Authority (NHA). BGC wanted to enjoin the NHA from demolishing BGCs facilities on a lot leased from Manila Seedling Bank Foundation, Inc. (MSBF). MSBF allegedly has usufructuary rights over the lot leased to BGC. Antecedent Facts On 24 October 1968, Proclamation No. 481 issued by then President Ferdinand Marcos set aside a 120-hectare portion of land in Quezon City owned by the NHA4 as reserved property for the site of the National Government Center (NGC). On 19 September 1977, President Marcos issued Proclamation No. 1670, which removed a seven-hectare portion from the coverage of the NGC. Proclamation No. 1670 gave MSBF usufructuary rights over this segregated portion, as follows: Pursuant to the powers vested in me by the Constitution and the laws of the Philippines, I, FERDINAND E. MARCOS, President of the Republic of the Philippines, do hereby exclude from the operation of Proclamation No. 481, dated October 24, 1968, which established the National Government Center Site, certain parcels of land embraced therein and reserving the same for the Manila Seedling Bank Foundation, Inc., for use in its operation and projects, subject to private rights if any there be, and to future survey, under the administration of the Foundation. This parcel of land, which shall embrace 7 hectares, shall be determined by the future survey based on the technical descriptions found in Proclamation No. 481, and most particularly on the original survey of the area, dated July 1910 to June 1911, and on the subdivision survey dated April 19-25, 1968. (Emphasis added) MSBF occupied the area granted by Proclamation No. 1670. Over the years, MSBFs occupancy exceeded the seven-hectare area subject to its usufructuary rights. By 1987, MSBF occupied approximately 16 hectares. By then the land occupied by MSBF was bounded by Epifanio de los Santos

Avenue (EDSA) to the west, Agham Road to the east, Quezon Avenue to the south and a creek to the north. On 18 August 1987, MSBF leased a portion of the area it occupied to BGC and other stallholders. BGC leased the portion facing EDSA, which occupies 4,590 square meters of the 16-hectare area. On 11 November 1987, President Corazon Aquino issued Memorandum Order No. 127 (MO 127) which revoked the reserved status of the 50 hectares, more or less, remaining out of the 120 hectares of the NHA property reserved as site of the National Government Center. MO 127 also authorized the NHA to commercialize the area and to sell it to the public. On 15 August 1988, acting on the power granted under MO 127, the NHA gave BGC ten days to vacate its occupied area. Any structure left behind after the expiration of the ten-day period will be demolished by NHA. BGC then filed a complaint for injunction on 21 April 1988 before the trial court. On 26 May 1988, BGC amended its complaint to include MSBF as its coplaintiff. The Trial Courts Ruling The trial court agreed with BGC and MSBF that Proclamation No. 1670 gave MSBF the right to conduct the survey, which would establish the seven-hectare area covered by MSBFs usufructuary rights. However, the trial court held that MSBF failed to act seasonably on this right to conduct the survey. The trial court ruled that the previous surveys conducted by MSBF covered 16 hectares, and were thus inappropriate to determine the seven-hectare area. The trial court concluded that to allow MSBF to determine the seven-hectare area now would be grossly unfair to the grantor of the usufruct. On 8 March 1994, the trial court dismissed BGCs complaint for injunction. Thus: Premises considered, the complaint praying to enjoin the National Housing Authority from carrying out the demolition of the plaintiffs structure, improvements and facilities in the premises in question is hereby DISMISSED, but the suggestion for the Court to rule that Memorandum Order 127 has repealed Proclamation No. 1670 is DENIED. No costs. SO ORDERED.5
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The NHA demolished BGCs facilities soon thereafter. The Appellate Courts Ruling Not content with the trial courts ruling, BGC appealed the trial courts Decision to the appellate court. Initially, the appellate court agreed with the trial court that Proclamation No. 1670 granted MSBF the right to determine the location of the seven-hectare area covered by its usufructuary rights. However, the appellate court ruled that MSBF did in fact assert this right by conducting two surveys and erecting its main structures in the area of its choice. On 30 March 2001, the appellate court reversed the trial courts ruling. Thus: WHEREFORE, premises considered, the Decision dated March 8, 1994 of the Regional Trial Court of Quezon City, Branch 87, is hereby REVERSED and SET ASIDE. The National Housing Authority is enjoined from demolishing the structures, facilities and improvements of the plaintiff-appellant Bulacan Garden Corporation at its leased premises located in Quezon City which premises were covered by Proclamation No. 1670, during the existence of the contract of lease it (Bulacan Garden) had entered with the plaintiff-appellant Manila Seedling Bank Foundation, Inc. No costs. SO ORDERED.6 The NHA filed a motion for reconsideration, which was denied by the appellate court on 25 June 2001. Hence, this petition. The Issues The following issues are considered by this Court for resolution: WHETHER THE PETITION IS NOW MOOT BECAUSE OF THE DEMOLITION OF THE STRUCTURES OF BGC; and WHETHER THE PREMISES LEASED BY BGC FROM MSBF IS WITHIN THE SEVEN-HECTARE AREA THAT PROCLAMATION NO. 1670 GRANTED TO MSBF BY WAY OF USUFRUCT. The Ruling of the Court

We remand this petition to the trial court for a joint survey to determine finally the metes and bounds of the seven-hectare area subject to MSBFs usufructuary rights. Whether the Petition is Moot because of the Demolition of BGCs Facilities BGC claims that the issue is now moot due to NHAs demolition of BGCs facilities after the trial court dismissed BGCs complaint for injunction. BGC argues that there is nothing more to enjoin and that there are no longer any rights left for adjudication. We disagree. BGC may have lost interest in this case due to the demolition of its premises, but its co-plaintiff, MSBF, has not. The issue for resolution has a direct effect on MSBFs usufructuary rights. There is yet the central question of the exact location of the seven-hectare area granted by Proclamation No. 1670 to MSBF. This issue is squarely raised in this petition. There is a need to settle this issue to forestall future disputes and to put this 20-year litigation to rest. On the Location of the Seven-Hectare Area Granted by Proclamation No. 1670 to MSBF as Usufructuary Rule 45 of the 1997 Rules of Civil Procedure limits the jurisdiction of this Court to the review of errors of law.7 Absent any of the established grounds for exception,8 this Court will not disturb findings of fact of lower courts. Though the matter raised in this petition is factual, it deserves resolution because the findings of the trial court and the appellate court conflict on several points. The entire area bounded by Agham Road to the east, EDSA to the west, Quezon Avenue to the south and by a creek to the north measures approximately 16 hectares. Proclamation No. 1670 gave MSBF a usufruct over only a seven-hectare area. The BGCs leased portion is located along EDSA. A usufruct may be constituted for a specified term and under such conditions as the parties may deem convenient subject to the legal provisions on usufruct.9 A usufructuary may lease the object held in usufruct.10 Thus, the NHA may not evict BGC if the 4,590 square meter portion MSBF leased to BGC is within the seven-hectare area held in usufruct by MSBF. The owner of the property must respect the lease entered into by the usufructuary so long as
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the usufruct exists.11 However, the NHA has the right to evict BGC if BGC occupied a portion outside of the seven-hectare area covered by MSBFs usufructuary rights. MSBFs survey shows that BGCs stall is within the seven-hectare area. On the other hand, NHAs survey shows otherwise. The entire controversy revolves on the question of whose land survey should prevail. MSBFs survey plots the location of the seven-hectare portion by starting its measurement from Quezon Avenue going northward along EDSA up until the creek, which serves as the northern boundary of the land in question. Mr. Ben Malto (Malto), surveyor for MSBF, based his survey method on the fact that MSBFs main facilities are located within this area. On the other hand, NHAs survey determines the seven-hectare portion by starting its measurement from Quezon Avenue going towards Agham Road. Mr. Rogelio Inobaya (Inobaya), surveyor for NHA, based his survey method on the fact that he saw MSBFs gate fronting Agham Road. BGC presented the testimony of Mr. Lucito M. Bertol (Bertol), General Manager of MSBF. Bertol presented a map,12 which detailed the area presently occupied by MSBF. The map had a yellow-shaded portion, which was supposed to indicate the seven-hectare area. It was clear from both the map and Bertols testimony that MSBF knew that it had occupied an area in excess of the seven-hectare area granted by Proclamation No. 1670.13 Upon cross-examination, Bertol admitted that he personally did not know the exact boundaries of the seven-hectare area.14 Bertol also admitted that MSBF prepared the map without consulting NHA, the owner of the property.15 BGC also presented the testimony of Malto, a registered forester and the Assistant Vice-President of Planning, Research and Marketing of MSBF. Malto testified that he conducted the land survey, which was used to construct the map presented by Bertol.16 Bertol clarified that he authorized two surveys, one in 1984 when he first joined MSBF, and the other in 1986.17 In both instances, Mr. Malto testified that he was asked to survey a total of 16 hectares, not just seven hectares. Malto testified that he conducted the second survey in 1986 on the instruction of MSBFs general manager. According to Malto, it was only in the second survey that he was told to determine the seven-hectare portion. Malto further clarified that he based the technical descriptions of both surveys on a previously existing survey of the property.18

The NHA presented the testimony of Inobaya, a geodetic engineer employed by the NHA. Inobaya testified that as part of the NHAs Survey Division, his duties included conducting surveys of properties administered by the NHA.19 Inobaya conducted his survey in May 1988 to determine whether BGC was occupying an area outside the seven-hectare area MSBF held in usufruct.20 Inobaya surveyed the area occupied by MSBF following the same technical descriptions used by Malto. Inobaya also came to the same conclusion that the area occupied by MSBF, as indicated by the boundaries in the technical descriptions, covered a total of 16 hectares. He further testified that the sevenhectare portion in the map presented by BGC,21 which was constructed by Malto, does not tally with the boundaries BGC and MSBF indicated in their complaint. Article 565 of the Civil Code states: ART. 565. The rights and obligations of the usufructuary shall be those provided in the title constituting the usufruct; in default of such title, or in case it is deficient, the provisions contained in the two following Chapters shall be observed. In the present case, Proclamation No. 1670 is the title constituting the usufruct. Proclamation No. 1670 categorically states that the seven-hectare area shall be determined by future survey under the administration of the Foundation subject to private rights if there be any. The appellate court and the trial court agree that MSBF has the latitude to determine the location of its seven-hectare usufruct portion within the 16-hectare area. The appellate court and the trial court disagree, however, whether MSBF seasonably exercised this right. It is clear that MSBF conducted at least two surveys. Although both surveys covered a total of 16 hectares, the second survey specifically indicated a seven-hectare area shaded in yellow. MSBF made the first survey in 1984 and the second in 1986, way before the present controversy started. MSBF conducted the two surveys before the lease to BGC. The trial court ruled that MSBF did not act seasonably in exercising its right to conduct the survey. Confronted with evidence that MSBF did in fact conduct two surveys, the trial court dismissed the two surveys as self-serving. This is clearly an error on the part of the trial court. Proclamation No. 1670 authorized MSBF to determine the location of the seven-hectare area. This authority, coupled with the fact that Proclamation No. 1670 did not state the location of the seven-hectare area, leaves no room for doubt that Proclamation No. 1670 left it to MSBF to choose the location of the seven-hectare area under its usufruct.
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More evidence supports MSBFs stand on the location of the seven-hectare area. The main structures of MSBF are found in the area indicated by MSBFs survey. These structures are the main office, the three green houses, the warehouse and the composting area. On the other hand, the NHAs delineation of the seven-hectare area would cover only the four hardening bays and the display area. It is easy to distinguish between these two groups of structures. The first group covers buildings and facilities that MSBF needs for its operations. MSBF built these structures before the present controversy started. The second group covers facilities less essential to MSBFs existence. This distinction is decisive as to which survey should prevail. It is clear that the MSBF intended to use the yellow-shaded area primarily because it erected its main structures there. Inobaya testified that his main consideration in using Agham Road as the starting point for his survey was the presence of a gate there. The location of the gate is not a sufficient basis to determine the starting point. MSBFs right as a usufructuary as granted by Proclamation No. 1670 should rest on something more substantial than where MSBF chose to place a gate. To prefer the NHAs survey to MSBFs survey will strip MSBF of most of its main facilities. Only the main building of MSBF will remain with MSBF since the main building is near the corner of EDSA and Quezon Avenue. The rest of MSBFs main facilities will be outside the seven-hectare area. On the other hand, this Court cannot countenance MSBFs act of exceeding the seven-hectare portion granted to it by Proclamation No. 1670. A usufruct is not simply about rights and privileges. A usufructuary has the duty to protect the owners interests. One such duty is found in Article 601 of the Civil Code which states: ART. 601. The usufructuary shall be obliged to notify the owner of any act of a third person, of which he may have knowledge, that may be prejudicial to the rights of ownership, and he shall be liable should he not do so, for damages, as if they had been caused through his own fault. A usufruct gives a right to enjoy the property of another with the obligation of preserving its form and substance, unless the title constituting it or the law otherwise provides.22 This controversy would not have arisen had MSBF respected the limit of the beneficial use given to it. MSBFs encroachment of its benefactors property gave birth to the confusion that attended this case. To put this matter entirely to rest, it is not enough to remind the NHA to respect MSBFs choice of the location of its seven-hectare area. MSBF, for its part,

must vacate the area that is not part of its usufruct. MSBFs rights begin and end within the seven-hectare portion of its usufruct. This Court agrees with the trial court that MSBF has abused the privilege given it under Proclamation No. 1670. The direct corollary of enforcing MSBFs rights within the seven-hectare area is the negation of any of MSBFs acts beyond it. The seven-hectare portion of MSBF is no longer easily determinable considering the varied structures erected within and surrounding the area. Both parties advance different reasons why their own surveys should be preferred. At this point, the determination of the seven-hectare portion cannot be made to rely on a choice between the NHAs and MSBFs survey. There is a need for a new survey, one conducted jointly by the NHA and MSBF, to remove all doubts on the exact location of the seven-hectare area and thus avoid future controversies. This new survey should consider existing structures of MSBF. It should as much as possible include all of the facilities of MSBF within the seven-hectare portion without sacrificing contiguity. A final point. Article 605 of the Civil Code states: ART. 605. Usufruct cannot be constituted in favor of a town, corporation, or association for more than fifty years. If it has been constituted, and before the expiration of such period the town is abandoned, or the corporation or association is dissolved, the usufruct shall be extinguished by reason thereof. (Emphasis added) The law clearly limits any usufruct constituted in favor of a corporation or association to 50 years. A usufruct is meant only as a lifetime grant. Unlike a natural person, a corporation or associations lifetime may be extended indefinitely. The usufruct would then be perpetual. This is especially invidious in cases where the usufruct given to a corporation or association covers public land. Proclamation No. 1670 was issued 19 September 1977, or 28 years ago. Hence, under Article 605, the usufruct in favor of MSBF has 22 years left. MO 127 released approximately 50 hectares of the NHA property as reserved site for the National Government Center. However, MO 127 does not affect MSBFs seven-hectare area since under Proclamation No. 1670, MSBFs seven-hectare area was already exclude[d] from the operation of Proclamation No. 481, dated October 24, 1968, which established the National Government Center Site. WHEREFORE, the Decision of the Court of Appeals dated 30 March 2001 and its Resolution dated 25 June 2001 in CA-G.R. CV No. 48382 are SET ASIDE.
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This case is REMANDED to Branch 87 of the Regional Trial Court of Quezon City, which shall order a joint survey by the National Housing Authority and Manila Seedling Bank Foundation, Inc. to determine the metes and bounds of the seven-hectare portion of Manila Seedling Bank Foundation, Inc. under Proclamation No. 1670. The seven-hectare portion shall be contiguous and shall include as much as possible all existing major improvements of Manila Seedling Bank Foundation, Inc. The parties shall submit the joint survey to the Regional Trial Court for its approval within sixty days from the date ordering the joint survey. SO ORDERED. Davide, Jr. (C.J., Chairman), Quisumbing, Ynares-Santiago and Azcuna, JJ., concur. Judgment and resolution set aside, case remanded to Regional Trial Court, Branch 87, Quezon City for further proceedings. Notes.Under the Spanish Civil Code of 1889, a spouse who is survived by brothers or sisters or children of brothers or sisters of the decedent, was entitled to receive in usufruct the part of the inheritance pertaining to said heirs. (Noel vs. Court of Appeals, 240 SCRA 78 [1995]) In a usufruct, only the jus utendi and jus fruendi over the property is transferred to the usufructuarythe owner of the property maintains the jus disponendi or the power to alienate, encumber, transform, and even destroy the same. (Hemedes vs. Court of Appeals, 316 SCRA 347 [1999]) o0o [National Housing Authority vs. Court of Appeals, 456 SCRA 17(2005)]

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[No. L-2659. October 12, 1950] In the matter of the testate estate of Emil Maurice Bachrach, deceased. MARY McDONALD BACHRACH, petitioner and appellee, vs. SOPHIE SEIFERT and ELISA ELIANOFF, oppositors and appellants.
1.USUFRUCT; STOCK DIVIDEND CONSIDERED CIVIL FRUIT AND BELONGS TO USUFRUCTUARY.Under the Massachusetts rule, a stock dividend is considered part of the capital and belongs to the remainderman; while under the Pennsylvania rule, all earnings of a corporation, when declared as dividends in whatever form, made during the lifetime of the usufructuary, belong to the latter. 2.ID.; ID.The Pennsylvania rule is more in accord with our statutory laws than the Massachusetts rule. Under section 16 of our Corporation Law, no corporation may make or declare any dividend except from the surplus profits arising from its business. Any dividend, therefore, whether cash or stock, represents surplus profits. Article 471 of the Civil Code provides that the usufructuary shall be entitled to receive all the natural, industrial, and civil fruits of the property in usufruct. The stock dividend in question in this case is a civil fruit of the original investment. The shares of stock issued in payment of said dividend may be sold independently of the original shares, just as the offspring of a domestic animal may be sold independently of its mother.

above; and she may enjoy said usufruct and use or spend such fruits as she may in any manner wish." The will further provided that upon the death of Mary McDonald Bachrach, onehalf of all his estate "shall be divided share and share alike by and between my legal heirs, to the exclusion of my brothers." The estate of E. M. Bachrach, as owner of 108,000 shares of stock of the AtokBig Wedge Mining Co., Inc., received from the latter 54,000 shares representing 50 per cent stock dividend on the said 108,000 shares. On June 10, 1948, Mary McDonald Bachrach, as usufructuary or life tenant of the estate, petitioned the lower court to authorize the Peoples Bank and Trust Company, as administrator of the estate of E. M. Bachrach, to transfer to her the said 54,000 shares of stock dividend by indorsing and delivering to her the corresponding certificate of stock, claiming that said dividend, although paid out in the form of stock, is fruit or income and therefore belonged to her as usufructuary or life tenant. Sophie Siefert and Elisa Elianoff, legal heirs of the deceased, opposed said petition on the ground that the stock dividend in question was not income but formed part of the capital and therefore belonged not to the usufructuary but to the remainderman. And they have appealed from the order granting the petition and overruling their objection. While appellants admit that a cash dividend is an income, they contend that a stock dividend is not, but merely represents an addition to the invested capital. The so-called Massachusetts rule, which prevails in certain jurisdictions in the United States, supports appellants' contention. It regards cash dividends, however large, as income, and stock dividends, however made, as capital. (Minot vs. Paine, 99 Mass., 101; 96 Am. Dec., 705.) It holds that a stock dividend is not in any true sense any dividend at all since it involves no division or severance from the corporate assets of the subject of the dividend; that it does not distribute property but simply dilutes the shares as they existed before; and that it takes nothing from the property of the corporation, and adds nothing to the interests of the shareholders. On the other hand, the so-called Pennsylvania rule, which prevails in various other jurisdictions in the United States, supports appellee's contention. This rule declares that all earnings of the corporation made prior to the death of the testator stockholder belong to the corpus of the estate, and that all earnings, when declared as dividends in whatever form, made during the lifetime of the usufructuary or life tenant are income and belong to the usufructuary or life tenant. (Earp's Appeal, 28 Pa., 368.)
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APPEAL from an order of the Court of First Instance of Manila. Rodas, J. The facts are stated in the opinion of the Court. Ross, Selph, Carrascoso & Janda for appellants. Delgado & Flores for appellee. OZAETA, J.:

Is a stock dividend fruit or income, which belongs to the usufructuary, or is it capital or part of the corpus of the estate, which pertains to the remainderman? That is the question raised in this appeal. The deceased E. M. Bachrach, who left no forced heir except his widow Mary McDonald Bachrach, in his last will and testament made various legacies in cash and willed the remainder of his estate as follows: "Sixth: It is my will and do herewith bequeath and devise to my beloved wife Mary McDonald Bachrach for life all the fruits and usufruct of the remainder of all my estate after payment of the legacies, bequests, and gifts provided for

"'* * * It is clear that testator intended the remaindermen should have only the corpus of the estate he left in trust, and that all dividends should go to the life tenants. It is true that profits realized are not dividends until declared by the proper officials of the corporation, but distribution of profits, however made, is dividends, and the form of the distribution is immaterial." (In re Thompson's Estate, 262 Pa., 278; 105 Atl. 273, 274.) In Hite vs. Hite (93 Ky., 257; 20 S. W., 778, 780), the Court of Appeals of Kentucky, speaking thru its Chief Justice, said: "* * * Where a dividend, although declared in stock, is based upon the earnings of the company, it is in reality, whether called by one name or another, the income of the capital invested in it. It is but a mode of distributing the profit. If it be not income, what is it? If it is, then it is rightfully and equitably the property of the life tenant. If it be really profit, then he should have it, whether paid in stock or money. A stock dividend proper is the issue of new shares paid for by the transfer of a sum equal to their par value from the profit and loss account to that representing capital stock; and really a corporation has no right to declare a dividend, either in cash or stock, except from its earnings; and a singular state of caseit seems to us, an unreasonable oneis presented if the company, although it rests with it whether it will declare a dividend, can bind the courts as to the proper ownership of it, and by the mode of payment substitute its will for that of the testator, and favor the life tenants or the remainder-men, as it may desire. It cannot, in reason, be considered that the testator contemplated such a result. The law regards substance, and not form, and such a rule might result not only in a violation of the testator's intention, but it would give the power to the corporation to beggar the life tenants, who, in this case, are the wife and children of the testator, for the benefit of the remaindermen, who may perhaps be unknown to the testator, being unborn when the will was executed. We are unwilling to adopt a rule which to us seems so arbitrary, and devoid of reason and justice. If the dividend be in fact a profit, although declared in stock, it should be held to be income. It has been so held in Pennsylvania and many other states, and we think it the correct rule. Earp's Appeal, 28 Pa. St. 368; Cook, Stocks & S. sec. 554. * * *" We think the Pennsylvania rule is more in accord with our statutory laws than the Massachusetts rule. Under section 16 of our Corporation Law, no corporation may make or declare any dividend except f rom the surplus profits arising from its business. Any dividend, therefore, whether cash or stock, represents surplus profits. Article 471 of the Civil Code provides that the

usufructuary shall be entitled to receive all the natural, industrial, and civil fruits of the property in usufruct. And articles 474 and 475 provide as follows: "ART. 474. Civil fruits are deemed to accrue day by day, and belong to the usufructuary in proportion to the time the usufruct may last. "ART. 475. When a usufruct is created on the right to receive an income or periodical revenue, either in money or fruits, or the interest on bonds or securities payable to bearer, each matured payment shall be considered as the proceeds or fruits of such right. "When it consists of the enjoyment of the benefits arising from an interest in an industrial or commercial enterprise, the profits of which are not distributed at fixed periods, such profits shall have the same consideration. "In either case they shall be distributed as civil fruits, and shall be applied in accordance with the rules prescribed by the next preceding article." The 108,000 shares of stock are part of the property in usufruct. The 54,000 shares of stock dividend are civil fruits of the original investment They represent profits. and the delivery of the certificate of stock covering' said dividend is equivalent to the payment of said profits. Said shares may be sold independently of the original shares just as the offspring of a domestic animal may be sold independently of its mother. The order appealed from, being in accordance with the above- quoted provisions of the Civil Code, is hereby affirmed, with costs against the appellants. Moran, C. J., Pars, Feria. Pablo, Bengzon. Tuason. Montemayor, and Reyes, JJ., concur. Order affirmed

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No. L-28034. February 27, 1971. THE BOARD OF ASSESSMENT APPEALS OF ZAMBOANGA DEL SUR and PLACIDO L. LUMBAY, in his capacity as Provincial Assessor of Zamboanga del Sur, petitioners, vs. SAMAR MINING COMPANY,INC. and THE COURT OF TAX APPEALS, respondents.
Civil law; Improvements; Road is an improvement on the land.There is no question that the road constructed by respondent Samar on the public lands leased to it by the government is an improvement. Taxation; Road constructed by lessee on public land exempt from realty tax; Reasons.It cannot be disputed that the ownership of the road that was constructed by appellee belongs to the government by right of accession not only because it is inherently incorporated or attached to the timber land leased to appellee but also because upon the expiration of the concession, said road would ultimately pass to the national government. Then while the road was constructed by appellee primarily for its use and benefit, the privilege is not exclusive, for, under the lease contract entered into by the appellee and the government, its use can also be availed of by the employees of the government and by the public in general. In other words, the government has practically reserved the rights to use the road to promote its varied activities. Same; Realty tax to be paid by owner.It is well settled that a real tax, being a burden upon the capital, should be paid by the owner of the land and not by a usufructuary. Same; Dikes and gates built by lessee on swamp lands exempt from realty tax.The lessee who introduced improvements consisting of dikes, gates and guard-houses on swamp lands leased to him by the Bureau of Fisheries in converting the swamps into fishponds, is exempt from payment of realty taxes on those improvements. Same; Improvement on public lands, whether inalienable or alienable, exempt from taxation. The pronouncement in the Bislig case contains no hint whatsoever that the road was not subject to tax because it was constructed on inalienable public lands. What is emphasized in the Bislig case is that the improvement is exempt from taxation because it is an integral part of the public land on which it is constructed and the improvement is the property of the government by right of accession. Under Section 3(a) of the Assessment Law (Com. Act 470), all properties owned by the government, without any distinction, are exempt from taxation. Same; Party disputing assessment need not pay under protest realty tax in order to appeal from decision of Board of Assessment Appeals.Section 11 of Republic Act 1125 does not require that before an appeal from the decision of the Board of Assessment Appeals can be brought to the Court of Tax Appeals it must first be shown that the party disputing the assessment had paid under protest the realty tax assessed. In the absence of such a requirement under the law, all that is necessary for a party aggrieved by the decision of the Board of Assessment Appeals is to file his notice of appeal to the Court of Tax Appeals within 30 days after receipt of the decision of the Board of Assessment Appeals, as provided by Section 11 of Republic Act 1125.

Court of Tax Appeals; Extent and scope of powers.The extent and scope of the jurisdiction of the Court of Tax Appeals regarding matters related to assessment or real property taxes are provided for in Section 7, paragraph (3) and Section 11 of Republic Act No, 1125. A critical and analytical study of Section 7 of Republic Act No. 1125, in relation to subsections (1), (2) and (3) thereof, will readily show that it was the intention of Congress to lodge in the Court of Tax Appeals the exclusive appellate jurisdiction over cases involving the legality of real property tax assessment, as distinguished from cases involving the refund of real property taxes. Taxation: Refund of real property tax; Jurisdiction remains with the CFI.Prior to the enactment of Republic Act No. 1125, all civil actions involving the legality of any tax, impost or assessment were under the jurisdiction of the Court of First Instance (Sec. 44, Republic Act No. 296). It is clear, therefore, that before the creation of the Court of Tax Appeals all cases involving the legality of assessments for real property taxes, as well as the refund thereof, were properly brought and taken cognizance by the said court. However, with the passage by Congress and the approval by the President of Republic Act No. 1125, the jurisdiction over cases involving the validity of realty tax assessment were transferred from the Court of First Instance to the Court of Tax Appeals (See Sec. 22, Rep. Act No. 1125). The only exception to the grant of exclusive appellate jurisdiction to the Tax Court relates to cases involving the refund of real property taxes which remained with the Court of First Instance. Board of Assessment Appeals; Question that may be raised.The only question that may be brought before the City or Provincial Board of Assessment Appeals is the question which relates to the reasonableness or legality of the realty tax that is assessed against a taxpayer. Such being the case, it would be unjust to require the realty owner to first pay the tax, that he precisely questions, before he can lodge an appeal to the Court of Tax Appeals. Same; Implied repeal of Sec. 54 of Com. Act 470.In so far as appeals from the decision or resolution of the Board of Assessment Appeals, Section 54 of Commonwealth Act 470 does not apply, and said section can be considered as impliedly repealed by Sections 7, 11 and 21 of Republic Act 1125.

APPEAL from a decision of the Court of Tax Appeals. Alvarez, J . The facts are stated in the opinion of the Court. Solicitor General Antonio P. Barredo, Assistant Solicitor General Pacifico P. de Castro and Solicitor Lolita O. Gal-lang for petitioners. Pacifico de Ocampo and Sofronio G. Sayo for respondent Samar Mining Company, Inc. ZALDIVAR, J.:

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Appeal from the decision of the Court of Tax Appeals, in its CTA Case No. 1705, declaring respondent Samar Mining Company, Inc. (hereinafter referred to as Samar, for short) exempt from paying the real property tax assessed against it by the Provincial Assessor of Zamboanga del Sur. There is no dispute as to the facts of this case. Samar is a domestic corporation engaged in the mining industry. As the mining claims and the mill of Samar are located inland and at a great distance from the loading point or pier site, it decided to construct a gravel road as a convenient means of hauling its ores from the mine site at Buug to the pier area at Pamintayan, Zamboanga del Sur; that as an initial step in the construction of a 42-kilometer road which would traverse public lands Samar, in 1958 and 1959, filed with the Bureau of Lands and the Bureau of Forestry miscellaneous lease applications for a road right of way on lands under the jurisdiction of said bureaus where the proposed road would traverse; that having been given temporary permit to occupy and use the lands applied for by it, said respondent constructed a road thereon, known as the Samico road; that although the gravel road was finished in 1959, and had since then been used by the respondent in hauling its iron from its mine site to the pier area, and that its lease applications were approved on October 7, 1965, the execution of the corresponding lease contracts were held in abeyance even up to the time this case was brought to the Court of Tax Appeals.1 On June 5, 1964, Samar received a letter from the Provincial Assessor of Zamboanga del Sur assessing the 13.8 kilometer road2 constructed by it for real estate tax purposes in the total sum of P1,117,900.00. On July 14, 1964, Samar appealed to the Board of Assessment Appeals of Zamboanga del Sur, (hereinafter referred to as Board, for short), contesting the validity of the assessment upon the ground that the road having been constructed entirely on a public land cannot be considered an improvement subject to tax within the meaning of section 2 of Commonwealth Act 470, and invoking further the decision of this Court in the case of Bislig Bay Lumber Company, Inc. vs. The Provincial Government of Surigao, G.R. No. L9023, promulgated on November 13, 1956. On February 10, 1965, after the parties had submitted a stipulation of facts, Samar received a resolution of the Board, dated December 22, 1964, affirming the validity of the assessment made by the Provincial Assessor of Zamboanga del Sur under tax declaration No. 3340, but holding in abeyance its enforceability until the lease contracts were duly executed.

On February 16, 1965, Samar moved to reconsider the resolution of the Board, praying for the cancellation of tax declaration No. 3340, and on August 3, 1965, Samar received Resolution No. 13 not only denying its motion for reconsideration but modifying the Board's previous resolution of December 22, 1964 declaring the assessment immediately enforceable, and that the taxes to be paid by Samar should accrue or commence with the year 1959. When its second motion for reconsideration was again denied by the Board, Samar elevated the case to the Court of Tax Appeals. The jurisdiction of the Court of Tax Appeals to take cognizance of the case was assailed by herein petitioners (the Board and the Provincial Assessor of Zamboanga del Sur) due to the failure of Samar to first pay the realty tax imposed upon it before interposing the appeal, and prayed that the resolution of the Board appealed from be affirmed. On June 28, 1967, the Court of Tax Appeals ruled that it had jurisdiction to entertain the appeal and then reversed the resolution of the Board. The Court of Tax Appeals ruled that since the road is constructed on public lands such that it is an integral part of the lands and not an independent improvement thereon, and that upon the termination of the lease the road as an improvement will automatically be owned by the national government, Samar should be exempt from paying the real estate tax assessed against it. Dissatisfied with the decision of the Court of Tax Appeals, petitioners Board and Placido L. Lumbay, as Provincial Assessor of Zamboanga del Sur, interposed the present petition for review before this Court. The issue to be resolved in the present appeal is whether or not respondent Samar should pay realty tax on the assessed value of the road it constructed on alienable or disposable public lands that are leased to it by the government. Petitioners maintain that the road is an improvement and, therefore, taxable under Section 2 of the Assessment Law (Commonwealth Act No. 470) which provides as follows: Sec. 2. Incidence of real property tax.Except in chartered cities, there shall be levied, assessed, and collected, an annual, ad valorem tax on real property including land, buildings, machinery, and other improvements not hereinafter specifically exempted. There is no question that the road constructed by respondent Samar on the public lands leased to it by the government is an improvement. But as to whether the same is taxable under the aforequoted provision of the Assessment Law, this question has already been answered in the negative by
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this Court. In the case of Bislig Bay Lumber Co., Inc. vs. Provincial Government of Surigao, 100 Phil., 303, where a similar issue was raised as to whether the timber concessionaire should be required to pay realty tax for the road it constructed at its own expense within the territory of the lumber concession granted to it, this Court, after citing Section 2 of Commonwealth Act 470, held: Note that said section authorizes the levy of real tax not only on lands, buildings, or machinery that may be erected thereon, but also on any other improvements, and considering the road constructed by appellee on the timber concession granted to it as an improvement, appellant assessed the tax now in dispute upon the authority of the above provision of the law. It is the theory of appellant that, inasmuch as the road was constructed by appellee for its own use and benefit it is subject to real tax even if it was constructed on a public land. On the other hand, it is the theory of appellee that said road is exempt from real tax because (1) the road belongs to the national government by right of accession, (2) the road cannot be removed or separated from the land on which it is constructed and so it is part and parcel of the public land, and (3), according to the evidence, the road was built not only for the use and benefit of appellee but also of the public in general. We are inclined to uphold the theory of appellee. In the first place, it cannot be disputed that the ownership of the road that was constructed by appellee belongs to the government by right of accession not only because it is inherently incorporated or attached to the timber land leased to appellee but also because upon the expiration of the concession, said road would ultimately pass to the national government (Articles 440 and 445, new Civil Code; Tobatabo vs. Molero, 22 Phil., 418). In the second place, while the road was constructed by appellee primarily for its use and benefit, the privilege is not exclusive, for, under the lease contract entered into by the appellee and the government, its use can also be availed of by the employees of the government and by the public in general. x x x In other words, the government has practically reserved the rights to use the road to promote its varied activities. Since, as above shown, the road in question cannot be considered as an improvement which belongs to appellee, although in part is for its benefit, it is clear that the same cannot be the subject of assessment within the meaning of section 2 of Commonwealth Act No. 470. We are not oblivious of the fact that the present assessment was made by appellant on the strength of an opinion rendered by the Secretary of Justice,

but we find that the same is predicated on authorities which are not in point, for they refer to improvements that belong to the lessees although constructed on lands belonging to the government. It is well settled that a real tax, being a burden upon the capital, should be paid by the owner of the land and not by a usufructuary (Mercado vs. Rizal, 67 Phil., 608; Article 597, new Civil Code). Appellee is but a partial usufructuary of the road in question. Again, in the case of Municipality of Cotabato, et al. vs. Santos, et al., 105 Phil. 963, this Court ruled that the lessee who introduced improvements consisting of dikes, gates and guard-houses on swamp lands leased to him by the Bureau of Fisheries, in converting the swamps into fishponds, is exempt from payment of realty taxes on those improvements. This Court held: We however believe that the assessment on the improvements introduced by defendant on the fishpond has included more than what is authorized by law. The improvements as assessed consist of dikes, gates and guard-houses and bodegas totals P6,850.00 which appellants are not now questioning, but they dispute the assessment on the dikes and gates in this wise: 'After the swamps were leased to appellants, the latter cleared the swamps and built dikes> by pushing the soil to form these dikes in the same way that paddies are built on lands intended for the cultivation of palay, the only difference being that dikes used in fishponds are relatively much larger than the dikes used in ricelands. We believe this contention to be correct, because those dikes can really be considered as integral parts of the fishponds and not as independent improvements. They cannot be taxed under the assessment law. The assessment, therefore, with regard to improvements should be modified by excluding the dikes and gates. It is contended by petitioners that the ruling in the Bislig case is not applicable in the present case because if the concessionaire in the Bislig case was exempt from paying the realty tax it was because the road in that case was constructed on a timberland or on an indisposable public land, while in the instant case what is being taxed is the 13.8 kilometer portion of the road traversing alienable public lands. This contention has no merit. The pronouncement in the Bislig case contains no hint whatsoever that the road was not subject to tax because it was constructed on inalienable public lands. What is emphasized in the Bislig case is that the improvement is exempt from taxation because it is an integral part of the public land on which it is constructed and the improvement is the property of the government by right of accession. Under Section 3 (a) of the Assessment Law (Com. Act 470), all
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properties owned by the government, without any distinction, are exempt from taxation. It is also contended by petitioners that the Court of Tax Appeals can not take cognizance of the appeal of Samar from the resolution of the Board assessing realty tax on the road in question, because Samar had not first paid under protest the realty tax assessed against it as required under the provisions of Section 54 of the Assessment Law (Com. Act 470), which partly reads as follows: SEC. 54. Restriction upon power of Court to impeach tax.No court shall entertain any suit assailing the validity of a tax assessment under this Act until the taxpayer shall have paid under protest the taxes assessed against him, nor shall any court declare any tax invalid by reason. ... The extent and scope of the jurisdiction of the Court of Tax Appeals regarding matters related to assessment or real property taxes are provided for in Section 7, paragraph (3) and Section 11 of Republic Act No. 1125, which partly read as follows: SEC.7.Jurisdiction The Court of Tax Appeals shall exercise exclusive appellate jurisdiction to review by appeal, as herein provided x x x x x

legality of assessments for real property taxes, as well as the refund thereof, were properly brought and taken cognizance by the said court. However, with the passage by Congress and the approval by the President of Republic Act No. 1125, the jurisdiction over cases involving the validity of realty tax assessment were transferred from the Court of First Instance to the Court of Tax Appeals (See Sec. 22, Rep. Act No. 1125). The only exception lo the grant of exclusive appellate jurisdiction to the Tax Court relates to cases involving the refund of real property taxes which remained with the Court of First Instance (See City of Cabanatuan, et al. vs. Gatmaitan, et al., G.R. No. L19129, February 28, 1963). A critical and analytical study of Section 7 of Republic Act No. 1125, in relation to subsections (1), (2) and (3) thereof, will readily show that it was the intention of Congress to lodge in the Court of Tax Appeals the exclusive appellate jurisdiction over cases involving the legality of real property tax assessment, as distinguished from cases involving the refund of real property taxes. To require the taxpayer, as contended by respondents, to pay first the disputed real property tax before he can file an appeal assailing the legality and validity of the realty tax assessment will render nugatory the appellate jurisdictional power of the Court of Tax Appeals as envisioned in Section 7 (3), in relation to Section 11, of Republic Act No. 1125. If we follow the contention of respondents to its logical conclusion, we cannot conceive of a case involving the legality and validity of real property tax assessment, decided by the Board of Assessment Appeals, which can be appealed to the Court of Tax Appeals. The position taken by respondents is, therefore, in conflict with the Explanatory Note contained in House Bill No. 175, submitted during the First Session, Third Congress of the Republic of the Philippines, and the last paragraph of Section 21 of Republic Act No. 1125 which provides as follows: SEC. 21. General provisions. x x x x x

(3) Decisions of provincial or city Board of Assessment Appeals in cases involving the assessment and taxation of real property or other matters arising under the Assessment Law, including rules and regulations relative thereto. SEC. 11. Who may appeal; effect of appeal.-Any person, association or corporation adversely affected by a decision or ruling of x x x any provincial or city Board of Assessment Appeals may file an appeal in the Court of Tax Appeals within thirty days after the receipt of such decision or ruling. In this connection the Court of Tax Appeals, in the decision appealed from, said: Prior to the enactment of Republic Act No. 1125, all civil actions involving the legality of any tax, impost or assessment were under the jurisdiction of the Court of First Instance (Sec. 44, Republic Act No. 296). It is clear, therefore, that before the creation of the Court of Tax Appeals all cases involving the

Any law or part of law, or any executive order, rule or regulation or part thereof, inconsistent with the provisions of this Act is hereby repealed. Accordingly, we hold that this Court can entertain and give due course to petitioner's appeal assailing the legality and validity of the real property tax assessment here in question without paying first the disputed real property tax as required by Section 54 of the Assessment Law.
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We agree with the foregoing view of the Court of Tax Appeals. It should be noted that what is involved in the present case is simply an assessment of realty tax, as fixed by the Provincial Assessor of Zamboanga del Sur, which was disputed by Samar before the Board of Assessment Appeals of said province. There was no demand yet for payment of the realty tax. In fact the letter of the Provincial Assessor, of June 5, 1964, notifying Samar of the assessment, states as follows: Should you find the same to be not in accordance with law or its valuation to be not satisfactory, you may appeal this assessment under Section 17 of Commonwealth Act 470 to the Board of Assessment Appeals, through the Municipal Treasurer of Buug, Zamboanga del Sur, within 60 days from the date of your receipt hereof.3 Accordingly Samar appealed to the Board questioning the validity of the assessment. The Board rendered a resolution over-ruling the contention of Samar that the assessment was illegal. Then Samar availed of its right to appeal from the decision of the Board to the Court of Tax Appeals as provided in Section 11 of Republic Act 1125. Section 11 does not require that before an appeal from the decision of the Board of Assessment Appeals can be brought to the Court of Tax Appeals it must first be shown that the party disputing the assessment had paid under protest the realty tax assessed. In the absence of such a requirement under the law, all that is necessary for a party aggrieved by the decision of the Board of Assessment Appeals is to file his notice of appeal to the Court of Tax Appeals within 30 days after receipt of the decision of the Board of Assessment Appeals, as provided in Section 11 of Republic Act 1125. This Court, in the case of City of Cabanatuan vs. Gatmaitan,4 said: ... if the real estate tax has already been paid it is futile for a taxpayer to take the matter to the City Board of Assessment Appeals for the jurisdiction of that body is merely confined to the determination of the reasonableness of the assessment or taxation of the property and is not extended to the authority of requiring the refund of the tax unlike cases involving assessment of internal revenue taxes. In the circumstances, we hold that this case comes under the jurisdiction of the proper court of first instance it involving: the refund of a real estate tax which does not come under the appellate jurisdiction of the Court of Tax Appeals. From the aforequoted portion of the decision of this Court, We gather that the only question that may be brought before the City or Provincial Board of

Assessment Appeals is the question which relates to the reasonableness or legality of the realty tax that is assessed against a taxpayer. Such being the case, it would be unjust to require the realty owner to first pay the tax, that he precisely questions, before he can lodge an appeal to the Court of Tax Appeals. We believe that it is not the intendment of the law that in questioning before the Court of Tax Appeals the validity or reasonableness of the assessment approved by the Board of Assessment Appeals the taxpayer should first pay the questioned tax. It is Our view that in so far as appeals from the decision or resolution of the Board of Assessment Appeals, Section 54 of Commonwealth Act 470 does not apply, and said section can be considered as impliedly repealed by Sections 7, 11 and 21 of Republic Act 1125. IN VIEW OF THE FOREGOING, the decision of the Court of Tax Appeals, appealed from, is affirmed, without pronouncement as to costs. It is so ordered. Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Castro, Fernando, Teehankee, Villamor and Makasiar, JJ., concur. Barredo, J., took no part. Decision affirmed. Note.Jurisdiction of the Court of Tax Appeals.See the annotation in 7 SCRA 431-439. _______________ [Board of Assessment Appeals of Zamboanga del Sur vs. Samar Mining Company, Inc., 37 SCRA 734(1971)]

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City of Manila vs. El Monte de Piedad [No. 1975. November 10, 1905.] THE CITY OF MANILA, plaintiff and appellant, vs. EL MONTE DE PlEDAD Y CAJA DE AHORROS DE MANILA, defendant and appellee.
1.REALTY; INTEREST IN LAND; OCCUPATION UPON CONDITION.The cession made in 1887 by the city of Manila to the Monte de Piedad of an interest in certain land in the Plaza de Goiti gave that institution the right to occupy the land so long as it was devoted to the purposes of a Monte de Piedad. 2.ID.; ID.; FORFEITURE.Such right was not forfeited by the fact that in 1901 the Monte de Piedad claimed to be the absolute owner of the land. 3.ID.; ID.; ID.; ID.Rules of law prevailing in the United States to the effect that such an act works a forfeiture were not in force in these Islands in 1887. 4.ID.; POSSESSORY INFORMATION; INSCRIPTION OF ACTUAL INTEREST.The possessory information based upon the claim of ownership is cancelled in its entirety, preserving to the institution the right to inscribe the possession of the interest which it actually has. JOHNSON and CARSON, JJ., dissenting: 5.ID.; INTEREST IN LAND; OCCUPATION UPON CONDITION.The cession of land made by the city of Manila to the defendant was made for a particular purposethat is to say, the defendant had but a usufructuary interest in said land. 6.ID.; ID.; FORFEITURE.When the defendant asserted or claimed title to said land, it thereby renounced the usufructuary interest in said land. 7.ID.; ID.; ID.When the defendant asserted that it owned the fee in said land instead of a usufructuary interest simply, its possession became a tortious one and it thereby forfeited its right under its original grant. 8.ID.; ID.; ID.; RENUNCIATION.Any act on the part of a holder of a usufructuary interest, simply, in lands hostile to the real interest of the owner of said lands, is a renunciation of said usufructuary interest.

WILLARD, J.:

It was admitted during the trial of this case that the city of Manila was, on and prior to the 6th day of July, 1887, the owner of the land in the Plaza de Goiti, on which the building of defendant now stands. On the 1st day of July, 1887, the defendant presented a petition to the city of Manila, in which it asked that the city give to the defendant permission "edificar en su terreno bajo la condicin de que si llega abandonarse la edificacin deja de estar destinada Monte de Piedad y Caja de Ahorros, la propiedad del terreno revertir al Municipio, condicin con la que cedi hace aos terreno de su propiedad en el campo de Arroceros para la edificacin del Teatro del Prncipe Alfonso." On the 6th day of July, 1887, the city of Manila adopted the following resolution: "Information being received with reference to a communication from the most reverend archbishop of Manila, president of the administrative board of the 'Monte de Piedad y Caja de Ahorros' of this city, dated 1st instant (July 1887), stating that the offices of those charitable establishments are installed since the same were opened, in the insalubrious and small place occupied by them on the ground floor of the 'Santa Isabel College,' and the members of this board having acknowledged by unanimous vote the necessity of situating the above offices in a proper place of this city, by acquiring or erecting a building which, on account of its conditions, may meet the increasing requirements of the same, the above-mentioned board has decided to erect a building for its offices, with the independence and security required, among other reasons, by the fact that property of great value was to be kept in it, and to this effect the said board applies to the municipal corporation, whose feelings of rectitude and Christian piety are well known, asking the above corporation to take an active part in these noble purposes and to grant gratuitously for said building the land occupied in the 'Plaza de Goiti' by the 'Paseo de Santa Cruz,' which is of no use to anybody, on condition that should the building be abandoned or cease to be devoted to the purpose for which it will be erected, the possession of the land will revert to the municipal corporation in the same form as a land was granted in Arroceros some years ago, in which the 'Principe Alfonso' theatre was situated.

APPEAL from a judgment of the Court of First Instance of Manila. The facts are stated in the opinion of the court. Modesto Reyes, f or appellant. Hartigan, Marple, Solignac & Gutierrez; Chicote, Miranda & Sierra, and Francisco Dominguez, for appellee.

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"The corporation having been informed of the contents of the above communication, and wishing to cooperate, within the limit of its powers, with the charitable purpose intended by the board of administration of the 'Monte de Piedad,' decided by general consent to grant 'the gratuitous use of the land' asked for the erection of the above-mentioned building and with the stated condition, this resolution having to be submitted previously to the superior authority." This resolution was submitted to and approved by the Governor-General of these Islands, the superior authority therein mentioned. The defendant constructed its building upon the land in question, where it has since remained. From its construction until the present time the building has been and is now devoted to the purposes mentioned in the petition and resolution. On the 14th of May, 1901, the defendant presented to the Court of First Instance of Manila, a petition asking that its possession as owner of the land and building in question be inscribed in accordance with the provisions of article 390 of the Mortgage Law. The proceedings usual in such cases were taken, the prayer of the petition was granted by the Court of First Instance, and on the 13th of June, 1901, the inscription was made in the registry of property for the city of Manila. On the 13th of October, 1903, the plaintiff brought this action against the defendant, asking that the above-mentioned inscription be canceled, and that judgment be entered in favor of the plaintiff for the possession of the property and the sum of $ 14,000, money of the United States, as damages. Judgment was entered in the court below in favor of the plaintiff so far as to order that the inscription be so modified as to show that the plaintiff was the owner of the land, and that the defendant had a right to occupy it gratuitously, so long as it devoted the land to the purposes above mentioned. The judgment denied the plaintiff any other relief. Plaintiff has appealed from the judgment, but the defendant has not. The appeal is based upon two grounds: The appellant claims that the grant to the defendant was made upon the same terms as those found in the grant to the Teatro del Prncipe Alfonso, and that by the terms of the latter grant the grantee was bound to vacate the premises whenever the grantor desired to use them. Evidence was introduced by the plaintiff to sustain its claim as to the terms of the grant to the theater. There is some doubt as to the exact conditions upon which that grant was made, but we

will assume, for the purposes of this. case, that they were as claimed by the appellant. In the petition presented by the defendant, the conditions upon which it desired to acquire the land are plainly and distinctly stated. It desired to obtain the right to hold the land so long as it should be devoted to the maintenance of the institution in question. The petition thereafter stated that this was the same condition upon which land had previously been granted to the theater. It is evident that the petitioner then believed that the grant to the theater was made upon the terms which had been before stated, and the evidence shows that the city of Manila did make the grant to the theater upon those precise terms, but that this action of the city was afterwards modified by the Governor-General to the effect claimed by the appellant. We do not think that this mistake made by the petitioner in regard to the terms on which the grant was made to the theater, had the effect of modifying or changing in any way the conditions stated by it as the ones upon which it desired to acquire the use of the land. The resolution of the city shows that it intended to grant the prayer of the petition. It recites the condition in the same way as it is stated in the petition. It adds also a statement in regard to the grant to the theater, but we do not think that by this reference it intended to cut down or limit the grant to the Monte de Piedad. If the city had intended to do this it would have said simply that it granted the land upon the same terms upon which it had previously granted land to the theater. It did not do that. It distinctly said that it granted the land upon the condition that if the building should be abandoned, or should cease to be devoted to a Monte de Piedad it should revert to the municipality. This distinct and positive statement as to what the condition was must prevail, even if it should be discovered that there was a difference between that condition and the condition upon which the grant had been previously made to the theater. And we hold that the defendant has a right to occupy the land in question so long as the building is not aban.doned, and so long as it is devoted to the purposes of a Monte de Piedad y Caja de Ahorros. The appellant also bases its appeal upon the ground that the defendant, by claiming in the proceedings relating to the possessory information to be the absolute owner of the land and building, forfeited all the rights which it acquired by virtue of the cession of 1887; that by this claim it repudiated the relation which had theretofore existed between it and the appellant, and virtually said that it no longer occupied the land under the terms of the grant, but was the
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absolute owner thereof. At the trial below evidence was introduced by the defendant to show that this claim of ownership was made by the officers then in charge of the defendant institution under a mistake of fact; that the only documents which the then officers had before them at the time the proceeding was commenced, indicated that the city had conveyed in 1887 to the defendant an absolute title to the land. The evidence tended to show that the then managers of the Monte de Piedad were not informed of and did not see copies of the petition to which we have referred, nor of the resolution of the city of Manila making the cession, and the claim of the defendant is that there was no intention on its part in presenting the petition for the inscription, to make any claim which was not justified by the grant made to it by the city in 1887. We do not think it necessary to pass upon this question of good faith. Did the laws in force in these Islands, at the time this grant was made in 1887, impose the penalty of forfeiture upon a person in the condition of the defendant who asserted a claim to the ownership of the land? The appellant has cited no law which so provides. It has limited itself, so far as the laws in force in the Islands are concerned, to the citation of various articles of the Civil Code. Even if the Civil Code could be considered as governing the rights which the defendant acquired in 1887, we do not think that any of the articles cited support the claim of the appellant. Its claim is that the defendant is to be considered as a usufructuary, and that by claiming to be the owner of the property it surrendered its rights as such usufructuary. The surrender mentioned in paragraph 4 of article 513 to our minds does not include such an act as this. It refers to a voluntary surrender of the very rights which the usufructuary has; made by him with the intent to so surrender them. It does not relate to a forfeiture which may be claimed to be the result of some act performed by the usufructuary inconsistent with the relation which exists between him and the owner of the property. The appellant, however, seems to rely chiefly upon the law in force in the United States upon this point. That law has never been extended to these Islands, is not in force here now, nor was it in 1887. The judgment, however, should, we think, be modified in one respect. The defendant had its possession registered on the ground that it was the owner. It was not the owner, and the inscription should be canceled in its entirety. The defendant has never asked to have its real interest registered. If it desires to have this done it can present a petition to that effect, and the question as to its right to such registry can then be decided.

The judgment of the court below is modified so that the disposing part shall read as follows: "It is therefore ordered that possessory inscription, as above mentioned, be canceled in its entirety, and that a copy of this decision be sent to the register of deeds of Manila for its execution, and that the defendant institution pay the costs of this trial." In other respects the judgment of the court below is affirmed. No costs will be allowed to either party in this court, and after the expiration of twenty days judgment should be entered in accordance herewith, and the case remanded to the court below for execution of said judgment. So ordered. Arellano, C. J., Torres and Mapa, JJ., concur. JOHNSON and CARSON, JJ., dissenting:

We dissent from the conclusions of the majority opinion and hold that the defendant should be dispossessed of the land in question for the following reasons: First. The defendant was granted the use of the land in question for a particular purpose only, without any right or title in said land for any other end or purpose than that indicated in its grant by the city of Manila, dated the 6th of July, 1887. Second. When the defendant on the 14th day of May, 1901, attempted to secure title to said land, it thereby renounced its former relation with the plaintiff and forfeited its right to continue in possession of said land. The defendant, in its application to obtain a possessory title to said land, alleged that it was the owner of said land and presented three witnesses to prove the fact. When it asserted that it was the owner of the land and not merely the possessor, under a grant for a particular purpose, it thereby renounced its relation with the city of Manila, which relation was created by the concession of the 6th day of July, 1887. The defendant only had the usufruct of said land and not the title thereto, and whenever it attempted to exercise ownership over said land, it thereby renounced its former relation with the grantor, the plaintiff herein. The very moment that the defendant exercised a control over the said land which was hostile or contrary to the interests of the city, other than the usufruct indicated in the said grant, it thereby forfeited its right to continue in possession of the land. Whenever the defendant asserted a right over the land or an interest
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therein antagonistic to the interests of the city of Manila, it became an adverse holder thereof. (Doe vs. Wells, 10 Alderson and Ellis, 427; Sherman vs. Transportation Co., 31 Vt, 162; Wilson vs. Watkins, 28 U. S., 42,) When the defendant asserted that it owned the fee in said land, its possession became a tortious one and it thereby forfeited its right under its original grant. (Peyton vs. Stith, 30 U. S., 483; Walden vs. Bodley, 39 U. S., 156; McGinnis vs. Porter, 20 Penn. State, 80; Civil Code, art. 513, par. 4.) Whenever the defendant impugned the title of the city of Manila, affirming by a matter of record or otherwise the fee to said land to be in itself or another, or claimed a greater estate in said land than it was entitled to, it thereby forfeited its right to continue in possession of said land. (Fenn vs. Smart, 12 East, 444; Goodwright vs. Davides, Cowper, 803.) The act of the defendant, by which it attempted to secure a possessory title to the land in question, under the provisions of the mortgage law in force in the Philippine Islands, alleging that it was the owner of said land, had the effect of putting into operation the statute of prescription, so that in due time it might transfer a good title to third persons as against the city of Manila. This act was certainly antagonistic to the interests of the city of Manila and amounted to a renunciation of the relation existing between the defendant and the plaintiff, thereby giving the plaintiff the right to terminate the contract and bring an action to eject the defendant. The prayer of the petition of the plaintiff should be granted and the defendant should be dispossessed of said land. Judgment modified.

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[No. L-13361. December 29, 1959] ROSARIO GREY VDA. DE ALBAR and JOSE M. GREY, petitioners, vs. JOSEFA FABIE DE CARANGDANG, respondent.
1.USUFRUCT; RENTALS ON LAND AND BUILDING; EFFECT OF DESTRUCTION OF BUILDING.A life usufruct constituted on the rentals of the "fincas situadas" located at a certain place includes the rentals both on the building and the land on which it is erected, because the building can not exist without the land. Hence, the usufruct is not extinguished by the destruction of the building, for under the law usufruct is extinguished only by the total loss of the thing subject of the encumbrance. 2.ID.; ID.; ID.; WAR DAMAGE PAYMENT; USUFRUCTUARY ENTITLED TO INTEREST FOR LIFE.Where a building over which a life usufruct was constituted in favor of one person and the naked ownership was vested in another, was destroyed during the war, any war damage payment received by the naked owner should also be subject to usufruct for life if such payment has not been used in the construction of a new building. Consequently, the usufructuary should be paid 6% interest from the time the war damage payment was actually received until his death. 3.ID.; ID.; WHEN REAL ESTATE TAXES ARE PAYABLE BY USUFRUCTUARY.A usufructuary who is the only recipient of all the benefits of the property subject of the usufruct, and who has bound himself to pay the real estate taxes on the property in a formal agreement approved by the court, should pay such taxes.

fincas * * * en la calle Ongpin, Numeros 950 al 956 del Distrito de Santa Cruz, Manila, * * * y prohibo enajene, hipoteque, permuta o transfiera de algun modo mientras que ella sea menor de edad." Said property was registered in the name of Rosario Grey Vda. de Albar, et al. as naked owners and the right of Josefa Fabie as life usufructuary was expressly noted on the new title. Pursuant to the 9th clause of the will, an encumbrance was likewise noted on the title prohibiting the usufructuary from selling, mortgaging or transferring her right of usufruct during her minority. During liberation, as a consequence of the fire that gutted the buildings in many portions of Manila, the building on the Ongpin lot was burned, leaving only the walls and other improvements that were not destroyed by the fire. One Au Pit, a Chinaman, offered to lease the property for a period of five years at a monthly rental of P500.00, at the same time agreeing to construct on the lot a new building worth P30,000.00 provided the naked owners as well as the usufructuary sign the agreement of lease. As the usufructuary maintains that she has the exclusive right to cede the property by lease and to receive the full rental value by virtue of her right of usufruct while on the other hand the naked owners maintain that the right of usuf ruct was extinguished when the building was destroyed, the right of the usufructuary being limited to the legal interest on the value of the lot and the materials, in order that the agreement of lease may be effected, the parties agreed on a temporary compromise whereby the naked owners would receive P100.00, or 20% of the monthly rental of P500.00 and the usufructuary the balance of 80% or P400.00 of said monthly rental. It was likewise stipulated in the agreement that the title to the building to be constructed would accrue to the land upon its completion as an integral part of the lot covered by the transfer certificate of title issued in the name of the naked owners but subject to the right of usufruct of Josefa Fabie. The parties expressly reserved the right to litigate their respective claims after the termination of the contract of lease to determine which of said claims was legally correct. By reason of the destruction of the building on the Ongpin property, the United States War Damage Commission approved the claim that was presented for the damage caused to the property in the amount of P8,574.00 which was paid to and received by the naked owners. In the meantime, the usufructuary paid the real estate taxes due on the property at Ongpin for the years 1945 to 1952 in the total amount of P1,989.27, as well as the real estate taxes for the years 1953 and 1954 in the annual sum of P295.80.

PETITION for review by certiorari of a decision of the Court of Appeals. The facts are stated in the opinion of the Court. Jos W. Diokno for petitioners. Ambrosio Padilla, Ciriaco Lpez, Jr., and Santiago P. Blanco for respondent. BAUTISTA ANGELO, J.:

Doa Rosario Fabie y Grey was the owner of a lot situated in the City of Manila with a building and improvements thereon erected at 950-956 Ongpin as evidenced by Original Certificate of Title No. 5030, and by a will left by her upon her death which was duly probated she devised the naked ownership of the whole property to Rosario Grey Vda. de Albar, et al. but its usufruct to Josefa Fabie for life. The pertinent provision of the will reads as follows: "Lego a mi a ahijada menor de edad, Maria Josefa de la Paz Fabie, en usufructo vitalicio las rentas de las

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On October 2, 1952, Rosario Grey Vda. de Albar, et al. commenced the present action to settle the dispute and conflicting views entertained by the parties in line with their agreement and prayed that judgment be rendered declaring that the usufruct in favor of Josefa Fabie is now only limited to receiving the legal interest on the value of the land, and that her right to receive any rental under the contract entered into between the parties has already ceased. On August 10, 1953, the trial-court rendered judgment the dispositive part of which reads: "EN VIRTUD DE TODO Lo CUAL, el Juzgado promulga decision a favor de la demandada usufructuaria, declarando: (a) Que su usufructo vitalicio continua sobre la finca en Ongpin con derecho exclusivo de percibir durante su vida la totalidad de sus rentas, sin que los demandantes tengan derecho de inmiscuirse en la administracin de dicha finca; (b) Con derecho de percibir el 6% de la cantidad de P8,574.00 percibidos como indemnizacin de guerra desde Enero 11, 1950; (c) Al reembolso de la suma de P1 ,989.27 pagados o abonados por la demandada como pagos del amillaramiento desde la fecha de la Contestacin, Octubre 22, 1953; (d) Mas la suma de P2,000.00 como daos y perjuicios en forma de honorarios de abogado y gastos de litigio. (e) Con las costas a cargo de los demandantes." On appeal by plaintiff s, the Court of Appeals modified the decision as follows: "Wherefore, we hereby affirm the decision appealed from in so far as it holds that appellee's right of life usufruct subsists and is in full force and effect upon the Ongpin lot and the building now existing thereon, and that she is entitled to receive from appellants the legal interest or 6% interest per annum of the amount of P3,272.00 from the time it was actually received from the Philippine War Damage Commission for the whole period of the usufruct, and appellants are hereby required to give sufficient security for the payment of such interest, and we hereby reverse said decision, declaring that reimbursement to appellee of the sum of P1,987.27 paid by her for real estate taxes is deffered until the

termination of the usufruct, and that she is not entitled to any amount for attorney's fees. Without pronouncement regarding costs." Plaintiffs interposed the present petition for review. The main issue to be determined hinges on the interpretation of that portion of the will which devises to Josefa Fabie all the rentals of the property situated in Ongpin and Sto. Cristo Streets, City of Manila. The pertinent provision of the will reads: "Lego a mi ahijada menor de edad Maria Josefa de la Paz Fabie, en usufructo vitalicio las rentas de las fincas situadas en la calle Santo Cristo * * * y en la calle Ongpin, Numeros 950 al 956 del Distrito de Santa Cruz, Manila." Petitioners contend that this provision of the will should be interpreted as constituting only a life usufruct on the rentals of the buildings erected on the lands and that once these buildings are destroyed the usufruct is extinguished. Respondent, on the other hand, contends that that provision should be interpreted as constituting a life usufruct both on the buildings and the lands because the former cannot be separated from the latter. In Lopez vs. Constantino, 74 Phil., 160, we said: "It may indeed seem at first blush that the rents out of which the pension was payable were earned by or paid for the building only, independently of the lot on which it was erected; but further reflection will show that such impression is wrong. When both land and building belong to the same owner, as in this case, the rents on the building constitute an earning of the capital invested in the acquisition of both land and building. There can be a land without a building, but there can be no building without land. The land, being an indispensable part of the rented premises cannot be considered as having no rental value whatsoever." (Italics supplied) In another part of the decision, this Court said: "Since appellant's participation in the rents of the leased premises by way of life pension was part of the consideration of the sale, it cannot be deemed extinguished so long as she lives and so long as the land exists, because that land may be rented to anyone who may desire to errect a building thereon." (Italics supplied) From the above, it is clear that when the deceased constituted the life usufruct on the rentals of the "fincas situadas" in Ongpin and Sto. Cristo streets, she meant to impose the encumbrance both on the building and the land on which it is erected for indeed the building cannot exist without the land. And as this Court well said, "The land, being an indispensable part of the rented premises cannot be considered as having no rental value whatsoever." Moreover, in the
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Spanish language, the term "fincas" has a broad scope; it includes not only building but land as well. (Diccionario Ingles-Espaol, por Martines Amador) Since only the building was destroyed and the usufruct is constituted not only on the building but on the land as well, then the usufruct is not deemed extinguished by the destruction of the building for under the law usufruct is extinguished only by the total loss of the thing subject of the encumbrance (Article 603, old Civil Code). In our opinion, this case comes under Article 517 of the same Code which provides: "If the usufruct is constituted on immovable property of which a building forms part, and the latter should be destroyed in any manner whatsoever, the usufructuary shall have a right to make use of the land and materials." This is a temporary measure calculated to maintain the usufruct alive until the very thing that has been destroyed be reconstructed or replaced. The reason is obvious: since the usufruct has not been extinguished by the destruction of the building and the usufruct is for life as in this case, it is but fair that the usufructuary continue to enjoy the use of the land and the materials that may have been left by the fire or to the use of the new building that may be constructed on the land. To hold otherwise would be to affirm that the usufruct has been extinguished. The question that now arises is: Who is called upon to undertake the new construction, and at whose cost? Of course, this is addressed to the wisdom and discretion of the usufructuary who, to all intents and purposes is deemed as the administrator of the property. This has been clarified in the case of Fabie vs. Gutierrez David, 75 Phil., 536, which was litigated between the same parties and wherein the scope of the same provision of the will has been the subject of interpretation. The following is what this Court said: "Construing said judgment in the light of the ninth clause of the will of the deceased Rosario Fabie y Grey, which was quoted in the decision and by which Josefa Fabie was made the usufructuary during her lifetime of the income of the property in question, we find that the said usufructuary has the right to administer the property in question. All the acts of administrationto collect the rents for herself, and to conserve the property by making all necessary repair and paying all the taxes, special assessments, and insurance premiums thereonwere by said judgment vested in the usufructuary. The pretension of the respondent Juan Grey that he is the administrator of the property with the right to choose the tenants and to dictate the conditions of the lease is contrary to both the letter and spirit of the said clause of the will, the stipulation of the parties, and the judgment of the court. He cannot manage or

administer the property after all the acts of management or administration have been vested by the court, with his consent, in the usufructuary." In the instant case, however, a happy compromise was reached by the parties in view of the offer of one Chinaman to lease the land for five years and to construct thereon a building worth P30,000.00 upon the condition that upon its completion the building would become an integral part of the land on which it is erected. This means that its naked ownership should belong to petitioners and its beneficial ownership to respondent. This is a happy medium which fits into the purpose contemplated in Article 517 above referred to: that the usufruct should continue on the land and the new improvement that may be constructed thereon. We therefore hold that the Court of Appeals did not err in finding that appellee's right of usufruct subsists and is in full force and effect upon the Ongpin lot and the building existing thereon, affirming the decision of the trial court. Petitioners' contention that the Court of Appeals erred in ruling that the damages paid by the War Damage Commission to said petitioners was intended to be an indemnity for the destruction of the building in question and in ordering them to pay respondent 6% interest per annum on the amount of the damage paid is also untenable, for it cannot be denied that a war damage payment is intended to replace part of the capital invested in the building destroyed or to assuage somewhat the material loss of its owner. It cannot be maintained that war damage payments are intended to be a mere gesture of appreciation of the people of the United States of America towards our people for it is a well-known fact that countless of our countrymen who suffered in the last war or whose kin-folks lost their lives did not receive any war damage payment because they have no damaged property that could be indemnified. The ruling that 6% interest per annum of such war damage payment should be paid to respondent from the time it was actually received to the end of the life of the usufruct should, in my opinion, be modified in the sense that that obligation should only be valid up to the date the new building was constructed by the Chinaman who leased the property upon the theory that the amount of damage paid by the War Damage Commission which was intended to replace the old building has in turn been replaced by the new. However, the majority is of the opinion that the same should also be subject to usufruct for life because it has not been used in the construction of the new building, although they suggested the alternative that the naked owners may turn over the money to the usufructuary so that she may use it during her lifetime subject to its return to them after her death if they desire to be relieved of this encumbrance.
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We find, however, merit in the contention that the real estate taxes paid by respondent in her capacity as usufructuary for several years previous to the present litigation should be paid by her, as she did, instead of by petitioners not only because she is the only recipient of all the benefits of the property but because she bound herself to pay such taxes in a formal agreement approved by the court in Civil Case No. 1659 of the Court of First Instance of Manila (Fabie vs. Gutierrez David, supra). In that case, which involved the same parties and the same properties subject of usufruct, the parties submitted an amicable agreement which was approved by the court wherein the usufructuary, herein respondent, bound herself to pay all the real estate taxes,, special. assessment and insurance premiums, and make all the necessary repairs on each of the properties covered by the usufruct and in accordance with said agreement, respondent paid all the taxes for the years 1945 to 1954. In said agreement, it was also stipulated that the same "shall be in effect during the term of the usufruct and shall be binding on the successors and assigns of each of the parties." There is therefore no valid reason why petitioners should now be ordered to reimburse respondent for all the real taxes she had paid on the property. In this respect, the decision of the Court of Appeals should be modified. Wherefore, with the modification that petitioners should not be made to reimburse the real estate taxes paid by the respondent for the years abovementioned, the decision appealed from is affirmed in all other respects, without pronouncement as to costs. Labrador, Endencia, Barrera, and Gutirrez David, JJ., concur. MONTEMAYOR, J., concurring and dissenting:

interest on the war damage payment during her lifetime. In my opinion, the construction of the new building does not relieve the owners of the land who received the war damage payment from continuing the payment of interest. Had said owners of the land used the war damage payment to construct the building, then they would be free from paying interest because the rent of the new building would correspond to the interest on the war damage payment. But the fact is the new building was not constructed by the owners of the land, but by the Chinese lessee. The majority opinion states that the usufructuary would then be receiving the interest on the war damage payment and also the rent of the new buildinga sort of double benefit, which is said to be unfair. That is one view. The other view is that at the end of the usufruct, the owners of the land or their heirs shall have received not only equivalent or value of the old building destroyed, in the form of the war damage payment but also the new building constructed absolutely at no cost or expense to themalso a double benefit, which might also be regarded as unfair following the point of view of the majority opinion. So, in this respect of double benefit, both parties stand on the same footing. Viewed thus, there is nothing unfair in the arrangement. Furthermore, we should not lose sight of the fact that the usufructuary, as the majority opinion well states has a right to the use and the fruits not only of the improvements, such as buildings on the land, but of the land itself. Consequently, anything built on the land would be subject to the usufruct, and the fruits thereof, such as rents, would go to the usufructuary. This naturally includes the interest on the war damage payment for the old building destroyed during the war, which payment is the equivalent of said building. Had the owners of the land used the amount of said payment to construct another building on the land, or should they have used the sum to add another story or extension of the building constructed thereon by the Chinese lessee, there would surely be no question that any rent therefrom would belong to the usufructuary, because then it could be regarded as improvement on the land, which, as already said, is the equivalent or a reproduction of said old building. Just because the owners of the land kept said war damage payment for their own use did not relieve them of the obligation of paying the interest on the same to the usufructuary, because otherwise, they would be having not only the naked ownership of the equivalent of said building, but also its fruits. The foregoing are some of the reasons for my dissent. Pars, C. J., Bengzon, and Concepcin, JJ., concur.
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I concur in the learned opinion of the majority, penned by Mr. Justice Bautista Angelo, with the exception of that portion thereof on page 10, which holds that the payment to the usufructuary of the 6% interest per annum of the war damage payment should end on the date of the construction of the new building by the Chinaman who leased the property, from which ruling I dissent. It will be noticed that both the trial court and the Court of Appeals were of the opinion that said payment of interest should continue during the lifetime of the usufruct. I agree to said opinion. The reason is obvious. The war damage payment is the equivalent of the building destroyed. Since the usufructuary had a right to the use or the fruits of the building, she therefore had the right to the

REYES, J. B. L., J.:

I concur in the opinion of Justice Montemayor, specially because the usufructuary receives only a part of the rent of the new building. Decision affirmed with modification.

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Vda. de Albar, et al. vs. Carandang, 106 Phil. 855(1959)]

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G.R. No. 137882. February 4, 2005.* SPS. ELIZABETH DE LA CRUZ and ALFREDO DE LA CRUZ, petitioners, vs. OLGA RAMISCAL represented by ENRIQUE MENDOZA, respondent.
Remedial Law; Appeals; The right to appeal is not a constitutional, natural or inherent rightit is a statutory privilege and of statutory origin and, therefore, available only if granted or provided by statute; The right to appeal may be exercised only in the manner prescribed by, and in accordance with, the provisions of the law.Petitioners take the stand that even assuming the brief was filed late, the Court of Appeals still erred in dismissing their petition in light of the rulings of this Court allowing delayed appeals on equitable grounds. Indeed, in certain special cases and for compelling causes, the Court has disregarded similar technical flaws so as to correct an obvious injustice made. In this case, petitioners, however, failed to demonstrate any justifiable reasons or meritorious grounds for a liberal application of the rules. We must remind petitioners that the right to appeal is not a constitutional, natural or inherent rightit is a statutory privilege and of statutory origin and, therefore, available only if granted or provided by statute. Thus, it may be exercised only in the manner prescribed by, and in accordance with, the provisions of the law. Civil Law; Easements; An easement or servitude is a real right, constituted on the corporeal immovable property of another, by virtue of which the owner has to refrain from doing, or must allow someone to do, something on his property, for the benefit of another thing or person.An easement or servitude is a real right, constituted on the corporeal immovable property of another, by virtue of which the owner has to refrain from doing, or must allow someone to do, something on his property, for the benefit of another thing or person. The statutory basis for this right is Article 613, in connection with Article 619, of the Civil Code. Same; Same; Requisites for the conferment of a legal easement of right of way under Article 649.The conferment of a legal easement of right of way under Article 649 is subject to proof of the following requisites: (1) it is surrounded by other immovables and has no adequate outlet to a public highway; (2) payment of proper indemnity; (3) the isolation is not the result of its own acts; (4) the right of way claimed is at the point least prejudicial to the servient estate; and (5) to the extent consistent with the foregoing rule, where the distance from the dominant estate to a public highway may be the shortest. Same; Actions; Laches; Essential Elements of Laches.The essential elements of laches are: (a) conduct on the part of the defendant, or of one under whom he claims, giving rise to the situation complained of; (b) delay in asserting complainants rights after he had knowledge of defendants acts and after he has had the opportunity to sue; (c) lack of knowledge or notice by defendant that the complainant will assert the right on which he bases his suit; and (d) injury or prejudice to the defendant in the event the relief is accorded to the complainant.

The facts are stated in the opinion of the Court. Jose Reny T. Albarico for petitioners. Arnel U. Torres for respondent. CHICO-NAZARIO, J.:

This petition for review assails (1) the Resolution1 dated 11 September 1998 of the Court of Appeals which dismissed the appeal filed by petitioners from the Decision dated 31 July 1997 of the Regional Trial Court (RTC), Branch 91, Quezon City, for Demolition of Illegally Constructed Structure, and (2) the Resolution2 dated 05 March 1999 denying the subsequent motion for reconsideration. The following facts, as recapitulated by the trial court, are undisputed. Respondent Olga Ramiscal is the registered owner of a parcel of land located at the corner of 18th Avenue and Boni Serrano Avenue, Murphy, Quezon City, covered by Transfer Certificate of Title (TCT) No. 300302 of the Register of Deeds for Quezon City.3 Petitioners SPS. ELIZABETH and ALFREDO DE LA CRUZ are occupants of a parcel of land, with an area of eighty-five (85) square meters, located at the back of Ramiscals property, and covered by TCT No. RT-56958 (100547) in the name of Concepcion de la Pea, mother of petitioner Alfredo de la Cruz.4 The subject matter of this case is a 1.10-meter wide by 12.60-meter long strip of land owned by respondent which is being used by petitioners as their pathway to and from 18th Avenue, the nearest public highway from their property. Petitioners had enclosed the same with a gate, fence, and roof.5 In 1976, respondent leased her property, including the building thereon, to Phil. Orient Motors. Phil. Orient Motors also owned a property adjacent to that of respondents. In 1995, Phil. Orient Motors sold its property to San Benito Realty. After the sale, Engr. Rafael Madrid prepared a relocation survey and location plan for both contiguous properties of respondent and San Benito Realty. It was only then that respondent discovered that the aforementioned pathway being occupied by petitioners is part of her property.6

PETITION for review on certiorari of the resolutions of the Court of Appeals.

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Through her lawyer, respondent immediately demanded that petitioners demolish the structure constructed by them on said pathway without her knowledge and consent. As her letter dated 18 February 1995 addressed to petitioners went unheeded, the former referred the matter to the Barangay for conciliation proceedings, but the parties arrived at no settlement. Hence, respondent filed this complaint with the RTC in Civil Case No. Q-95-25159, seeking the demolition of the structure allegedly illegally constructed by petitioners on her property. Respondent asserted in her complaint that petitioners have an existing right of way to a public highway other than the current one they are using, which she owns. She prayed for the payment of damages.7 In support of the complaint, respondent presented TCT No. RT-56958 (100547) covering the property denominated as Lot 1-B in the name of Concepcion de la Pea, mother of petitioner herein Alfredo de la Cruz. The aforesaid TCT reveals that a portion of Lot 1-B, consisting of 85 square meters and denominated as Lot 1-B-2, is being occupied by petitioners. To prove that petitioners have an existing right of way to a public highway other than the pathway which respondent owns, the latter adduced in evidence a copy of the plan of a subdivision survey for Concepcion de la Pea and Felicidad Manalo prepared in 1965 and subdivision plan for Concepcion de la Pea prepared in 1990. These documents establish an existing 1.50-meter wide alley, identified as Lot 1-B-1, on the lot of Concepcion de la Pea, which serves as passageway from the lot being occupied by petitioners (Lot 1-B-2), to Boni Serrano Avenue.8 On the other hand, petitioners, in their Answer, admitted having used a 1.10meter wide by 12.60-meter long strip of land on the northern side of respondents property as their pathway to and from 18th Avenue, the nearest public highway from their property, but claimed that such use was with the knowledge of respondent.9 Petitioners alleged in their Answer that in 1976, respondent initiated the construction on her property of a motor shop known as Phil. Orient Motors and they, as well as the other occupants of the property at the back of respondents land, opposed the construction of the perimeter wall as it would enclose and render their property without any adequate ingress and egress. They asked respondent to give them a 1.50-meter wide and 40.15-meter long easement on the eastern side of her property, which would be reciprocated with an equivalent 1.50-meter wide easement by the owner of another adjacent estate. Respondent did not want to give them the easement on the eastern side of her

property, towards Boni Serrano Avenue but, instead, offered to them the said 1.10-meter wide passageway along the northern side of her property towards 18th Avenue, which offer they had accepted.10 Petitioners additionally averred in their Answer that they were made to sign a document stating that they waived their right to ask for an easement along the eastern side of respondents property towards Boni Serrano Avenue, which document was among those submitted in the application for a building permit by a certain Mang Puling,11 the person in charge of the construction of the motor shop. That was why, according to petitioners, the perimeter wall on respondents property was constructed at a distance of 1.10-meters offset and away from respondents property line to provide a passageway for them to and from 18th Avenue. They maintained in their Answer that respondent knew all along of the 1.10-meter pathway and had, in fact, tolerated their use thereof. On 31 July 1997, the RTC handed down a decision,12 giving probative weight to the evidence adduced by respondent. The decretal portion enunciates: Plaintiffs claim for moral damages must be denied as no evidence in support thereof was presented at all by her. Consequently, plaintiff is not entitled to exemplary damages.13 However, for having been compelled to file this suit and incur expenses to protect her interest, plaintiff is entitled to an attorneys fees in the amount of P10,000.00. WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and ordering the defendants to demolish the structure built by them along the pathway on the eastern side of plaintiffs property towards 18th Avenue, Murphy, Quezon City and to pay [the] plaintiff the amount of P10,000.00 as and by way of attorneys fees. Costs against the defendants.14 The Court of Appeals dismissed the appeal filed by petitioners from the RTC decision for failure to file brief within the reglementary period. The fallo of the Court of Appeals decision, provides: WHEREFORE, for failure of the defendants-appellants to file brief within the reglementary period, the instant appeal is hereby DISMISSED pursuant to Section 1(e), Rule 50 of the 1997 Rules of Civil Procedure.

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The Compliance/Explanation filed by defendants-appellants, submitting the Letter-withdrawal of Atty. Judito Tadeo addressed to the said defendantsappellants is NOTED. Let a copy of this Resolution be likewise served on defendants-appellants themselves.15 The motion for reconsideration filed by petitioners met the same fate in the Resolution of the Court of Appeals dated 05 March 1999. Petitioners now lay their cause before us through the present petition for review, raising the following issues: A. WHETHER OR NOT THE DENIAL OF THE COURT OF APPEALS OF THE PETITIONERS MOTION FOR RECONSIDERATION OF ITS RESOLUTION DATED SEPTEMBER 11, 1998 IS SANCTIONED BY THE RULINGS AND LEGAL PRONOUNCEMENTS OF THE HONORABLE SUPREME COURT? B. WHETHER OR NOT THE PETITIONERS ARE NONETHELESS ENTITLED TO A LEGAL EASEMENT OF RIGHT OF WAY, ASSUMING NO VOLUNTARY RIGHT OF WAY WAS GRANTED THEM BY THE RESPONDENT? C. WHETHER OR NOT OPERATIVE EQUITABLE PRINCIPLE OF LACHES TO BAR THE RESPONDENT FROM DEPRIVING THE PETITIONERS CONTINUED USE OF THE SAID RIGHT OF WAY?16 The issues rivet on the adjective as well as on the substantive law, specifically: (1) whether or not the Court Appeals erred in dismissing the appeal filed by petitioners for failure to file appellants brief on time, (2) whether or not petitioners are entitled to a voluntary or legal easement of right of way, and (3) whether or not respondent is barred by laches from closing the right of way being used by petitioners. On the first issue, petitioners assert positively that the petition was filed on time on 30 April 1998, which is well within the 45-day period reckoned from 17 March 1998, when the secretary of their former counsel received the notice to file appeal. Petitioners arguments fail to persuade us. Press earnestly as they would, the evidence on record, nevertheless, evinces contrariety to petitioners assertion that they have beat the 45-day period to file appellants brief before the appellate court. It is clear from the registry return

receipt card17 that the Notice to File Brief was received on 12 March 1998 by one May Tadeo from the Office of Atty. Judito Angelo C. Tadeo, petitioners previous counsel. Thus, on 30 April 1998, when their new counsel entered his appearance and at the same time filed an appellants brief, the 45 days have run out. For failure of petitioners to file brief within the reglementary period, the Court of Appeals correctly dismissed said appeal pursuant to Section 1(b), Rule 50 of the 1997 Rules of Civil Procedure.18 Neither can the members of this Court lend credence to petitioners contention that the written note of Atty. Tadeos office on the face of the Order reads that the said office received it on 17 March 1998.19 It is a rule generally accepted that when the service is to be made by registered mail, the service is deemed complete and effective upon actual receipt by the addressee as shown by the registry return card.20 Thus, between the registry return card and said written note, the former commands more weight. Not only is the former considered as the official record of the court, but also as such, it is presumed to be accurate unless proven otherwise, unlike a written note or record of a party, which is often self-serving and easily fabricated. Further, this error on the part of the secretary of the petitioners former counsel amounts to negligence or incompetence in record-keeping, which is not an excuse for the delay of filing. Petitioners justification that their former counsel belatedly transmitted said order to them only on 20 March 1998 is not a good reason for departing from the established rule. It was the responsibility of petitioners and their counsel to devise a system for the receipt of mail intended for them.21 Rules on procedure cannot be made to depend on the singular convenience of a party. Petitioners next take the stand that even assuming the brief was filed late, the Court of Appeals still erred in dismissing their petition in light of the rulings of this Court allowing delayed appeals on equitable grounds.22 Indeed, in certain special cases and for compelling causes, the Court has disregarded similar technical flaws so as to correct an obvious injustice made.23 In this case, petitioners, however, failed to demonstrate any justifiable reasons or meritorious grounds for a liberal application of the rules. We must remind petitioners that the right to appeal is not a constitutional, natural or inherent rightit is a statutory privilege and of statutory origin and, therefore, available only if granted or provided by statute.24 Thus, it may be exercised only in the manner prescribed by, and in accordance with, the provisions of the law.25
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Anent the second issue, an easement or servitude is a real right, constituted on the corporeal immovable property of another, by virtue of which the owner has to refrain from doing, or must allow someone to do, something on his property, for the benefit of another thing or person.26 The statutory basis for this right is Article 613, in connection with Article 619, of the Civil Code, which states: Art. 613. An easement or servitude is an encumbrance imposed upon an immovable for the benefit of another immovable belonging to a different owner. The immovable in favor of which the easement is established is called the dominant estate; that which is subject thereto, the servient estate. Art. 619. Easements are established either by law or by the will of the owners. The former are called legal and the latter voluntary easements. Did respondent voluntarily accord petitioners a right of way? We rule in the negative. Petitioners herein failed to show by competent evidence other than their bare claim that they and their tenants, spouses Manuel and Cecilia Bondoc and Carmelino Masangkay, entered into an agreement with respondent, through her foreman, Mang Puling, to use the pathway to 18th Avenue, which would be reciprocated with an equivalent 1.50meter wide easement by the owner of another adjacent estate. The hands of this Court are tied from giving credence to petitioners self-serving claim that such right of way was voluntarily given them by respondent for the following reasons: First, petitioners were unable to produce any shred of document evidencing such agreement. The Civil Code is clear that any transaction involving the sale or disposition of real property must be in writing.27 Thus, the dearth of corroborative evidence opens doubts on the veracity of the naked assertion of petitioners that indeed the subject easement of right of way was a voluntary grant from respondent. Second, as admitted by the petitioners, it was only the foreman, Mang Puling, who talked with them regarding said pathway on the northern side of respondents property. Thus, petitioner Elizabeth de la Cruz testified that she did not talk to respondent regarding the arrangement proposed to them by Mang Puling despite the fact that she often saw respondent.28 It is, therefore, foolhardy for petitioners to believe that the alleged foreman of respondent had the authority to bind the respondent relating to the easement of right of way. Third, their explanation that said Mang Puling submitted said agreement to the Quezon City Engineers Office, in connection with the application for a building permit but said office could no longer produce

a copy thereof, does not inspire belief. As correctly pointed out by the trial court,29 petitioners should have requested a subpoena duces tecum from said court to compel the Quezon City Engineers Office to produce said document or to prove that such document is indeed not available. The fact that the perimeter wall of the building on respondents property was constructed at a distance of 1.10 meters away from the property line, does not by itself bolster the veracity of petitioners story that there was indeed such an agreement. Further, as noted by the trial court, it was Atty. Federico R. Onandia, counsel of Phil. Orient Motors, who wrote petitioners on 25 August 1994 advising them that his client would close the pathway along 18th Avenue, thereby implying that it was Phil. Orient Motors, respondents lessee, which tolerated petitioners use of said pathway.30 Likewise futile are petitioners attempts to show that they are legally entitled to the aforesaid pathway under Article 649 of the Civil Code, to wit: Art. 649. The owner, or any person who by virtue of a real right may cultivate or use any immovable, which is surrounded by other immovables pertaining to other persons, and without adequate outlet to a public highway, is entitled to demand a right of way through the neighboring estates, after payment of the proper indemnity. The conferment of a legal easement of right of way under Article 649 is subject to proof of the following requisites: (1) it is surrounded by other immovables and has no adequate outlet to a public highway; (2) payment of proper indemnity; (3) the isolation is not the result of its own acts; (4) the right of way claimed is at the point least prejudicial to the servient estate; and (5) to the extent consistent with the foregoing rule, where the distance from the dominant estate to a public highway may be the shortest.31 The first three requisites are not obtaining in the instant case. Contrary to petitioners contention, the trial court found from the records that Concepcion de la Pea had provided petitioners with an adequate ingress and egress towards Boni Serrano Avenue. The trial court, gave weight to TCT No. RT-56958 (100547) covering the property denominated as Lot 1-B in the name of Concepcion de la Pea, mother of petitioner herein Alfredo de la Cruz. Said TCT indicates that a portion of Lot 1-B, consisting of 85 square meters and denominated as Lot 1-B-2, is the one being occupied by petitioners.32 In this connection, a copy of the plan of a subdivision survey for Concepcion de la Pea and Felicidad Manalo prepared in 1965 and subdivision plan for Concepcion de la Pea prepared in 1990 revealed an existing 1.50-meter wide
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alley, identified as Lot 1-B-1, on the lot of Concepcion de la Pea, which serves as passageway from the lot being occupied by petitioners (Lot 1-B-2) to Boni Serrano Avenue.33 During the trial, petitioner Elizabeth de la Cruz herself admitted knowledge of the existence of the subdivision plan of Lot 1-B prepared for Concepcion de la Pea by Engr. Julio Cudiamat in 1990. The Subdivision Plan subdivided Lot 1-B into three portions, namely: (1) Lot 1-B-1, which is an existing alley, consisting of 59.60 square meters, towards Boni Serrano Avenue; (2) Lot 1-B-2, consisting of 85.20 square meters, which is being occupied by petitioners; and (3) Lot 1-B-3, consisting also of 85.20 square meters, which is being occupied by the sister of petitioner Alfredo dela Cruz.34 From petitioner Elizabeth de la Cruzs own admission, Lot 1-B-1 was intended by the owner, Concepcion de la Pea, to serve as an access to a public highway for the occupants of the interior portion of her property.35 Inasmuch as petitioners have an adequate outlet to a public highway (Boni Serrano Avenue), they have no right to insist on using a portion of respondents property as pathway towards 18th Avenue and for which no indemnity was being paid by them. Petitioner Elizabeth de la Cruz claimed before the trial court that although there was indeed a portion of land allotted by Concepcion de la Pea to serve as their ingress and egress to Boni Serrano Avenue, petitioners can no longer use the same because de la Pea had constructed houses on it. As found by the trial court, the isolation of petitioners property was due to the acts of Concepcion de la Pea, who is required by law to grant a right of way to the occupants of her property. In the trial courts rationale: . . . Article 649 of the Civil Code provides that the easement of right of way is not compulsory if the isolation of the immovable is due to the proprietors own acts. To allow defendants access to plaintiffs property towards 18th Avenue simply because it is a shorter route to a public highway, despite the fact that a road right of way, which is even wider, although longer, was in fact provided for them by Concepcion de la Pea towards Boni Serrano Avenue would ignore what jurisprudence has consistently maintained through the years regarding an easement of right of way, that mere convenience for the dominant estate is not enough to serve as its basis. To justify the imposition of this servitude, there must be a real, not a fictitious or artificial necessity for it. . . . In Francisco vs.

Intermediate Appellate Court, 177 SCRA 527, it was likewise held that a person who had been granted an access to the public highway through an adjacent estate cannot claim a similar easement in an alternative location if such existing easement was rendered unusable by the owners own act of isolating his property from a public highway, such as what Concepcion de la Pea allegedly did to her property by constructing houses on the 1.50 meter wide alley leading to Boni Serrano Avenue. And, if it were true that defendants had already bought Lot 1-B-2, the portion occupied by them, from Concepcion de la Pea, then the latter is obliged to grant defendants a right of way without indemnity.36 We hasten to add that under the above-quoted Article 649 of the Civil Code, it is the owner, or any person who by virtue of a real right may cultivate or use any immovable surrounded by other immovable pertaining to other persons, who is entitled to demand a right of way through the neighboring estates. In this case, petitioners fell short of proving that they are the owners of the supposed dominant estate. Nor were they able to prove that they possess a real right to use such property. The petitioners claim to have acquired their property, denominated as Lot 1-B-2, from Concepcion de la Pea, mother of defendant Alfredo de la Cruz, who owns Lot 1-B-3, an adjacent lot. However, as earlier noted, the trial court found that the title to both lots is still registered in the name of Concepcion de la Pea under TCT No. RT-56958 (100547).37 Neither were petitioners able to produce the Deed of Sale evidencing their alleged purchase of the property from de la Pea. Hence, by the bulk of evidence, de la Pea, not petitioners, is the real party-in-interest to claim a right of way although, as explained earlier, any action to demand a right of way from de la Peas part will not lie inasmuch as by her own acts of building houses in the area allotted for a pathway in her property, she had caused the isolation of her property from any access to a public highway. On the third issue, petitioners cannot find sanctuary in the equitable principle of laches under the contention that by sleeping on her right to reclaim the pathway after almost twenty years, respondent has, in effect, waived such right over the same. It is not just the lapse of time or delay that constitutes laches. The essence of laches is the failure or neglect, for an unreasonable and unexplained length of time, to do that which, through due diligence, could or should have been done earlier, thus giving rise to a presumption that the party entitled to assert it had either abandoned or declined to assert it.38 The essential elements of laches are: (a) conduct on the part of the defendant, or of one under whom he claims, giving rise to the situation complained of; (b)
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delay in asserting complainants rights after he had knowledge of defendants acts and after he has had the opportunity to sue; (c) lack of knowledge or notice by defendant that the complainant will assert the right on which he bases his suit; and (d) injury or prejudice to the defendant in the event the relief is accorded to the complainant.39 The second and third elements, i.e., knowledge of defendant's acts and delay in the filing of such suit are certainly lacking here. As borne by the records, it was only in 1995 that respondent found out that the pathway being used by petitioners was part of her property when a relocation survey and location plan of her property and the adjacent land bought by San Benito Realty were prepared.40 She immediately demanded petitioners to demolish the structure illegally constructed by them on her property without her knowledge and consent. As her letter dated 18 February 1995 addressed to petitioners fell on deaf ears, and as no settlement was arrived at by the parties at the Barangay level, respondent seasonably filed her complaint with the RTC in the same year.41 Respondent, in her Comment,42 brings the Courts attention to petitioners conversion of the pathway, subject matter of this case, into a canteen and videoke bar, as shown by the pictures43 showing the property bearing the signage, FREDS44 CANTEEN/VIDEOKE KAMBINGAN. Respondent, likewise, complains in her Comment about the structures installed by petitioners that encroached on respondents property line as a result of the commercial activities by petitioners on the disputed property. Petitioners have implicitly admitted this conversion of the propertys use by their silence on the matter in their Reply45 and Memorandum.46 Such conversion is a telltale sign of petitioners veiled pecuniary interest in asserting a right over the litigated property under the pretext of an innocuous claim for a right of way. Viewed from all angles, from the facts and the law, the Court finds no redeeming value in petitioners asseverations that merit the reversal of the assailed resolutions. WHEREFORE, the instant petition is DENIED. The Resolutions dated 11 September 1998 and 5 March 1999 of the Court of Appeals in CA-G.R. SP No. 68216 are AFFIRMED. The Decision dated 31 July 1997 of the Regional Trial Court is likewise UPHELD. Costs against petitioners. SO ORDERED. Puno (Chairman), Austria-Martinez, Callejo, Sr. and Tinga, JJ., concur.

Petition denied, resolutions affirmed. Note.A simple right of way easement transmits no rights, except the easement. (Camarines Norte Electric Cooperative, Inc. vs. Court of Appeals, 345 SCRA 85 [2000]) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [De la Cruz vs. Ramiscal, 450 SCRA 449(2005)]

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G.R. No. 136897. November 22, 2005.* PRIVATE DEVELOPMENT CORPORATION OF THE PHILIPPINES, PELAGIO TOLOSA, in his capacity as Register of Deeds, General Santos City, and ATANACIO M. VILLEGAS, petitioners, vs. THE COURT OF APPEALS and GENERAL SANTOS DOCTORS HOSPITAL, INC., respondents.
Property; Easements; Words and Phrases; An easement is a real right on anothers property, corporeal and immovable, whereby the owner of the latter must refrain from doing or allowing somebody else to do or something to be done on his property, for the benefit of another person or tenement.As defined, an easement is a real right on anothers property, corporeal and immovable, whereby the owner of the latter must refrain from doing or allow somebody else to do or something to be done on his property, for the benefit of another person or tenement. Easements are established either by law or by the will of the owner. The former are called legal, and the latter, voluntary easements. As correctly found by the trial court, the easement of rightof-way over the exterior lot in favor of respondent GSDHI was voluntarily constituted by agreement between the latter and the original owner thereof, the Narcisos. Same; Same; Land Titles; Banks and Banking; The rule that a person, be he a buyer or mortgagee, dealing with a titled property is not required to go beyond what appears on the face of the covering title itself, does not apply to banks.A person, be he a buyer or mortgagee, dealing with a titled property, as the exterior lot is, is not required to go beyond what appears on the face of the covering title itself. Section 39 of Act 496 or the Land Registration Decree says as much. Unfortunately for petitioner PDCP, however, the aforementioned rule does not apply to banks, of which PDCP is. So it is that in Robles vs. CA, this Court, citing Tomas vs. Tomas, ruled: xxx Banks, indeed, should exercise more care and prudence in dealing even with registered lands, than private individuals, for their business is one affected with public interest, keeping in trust money belonging to their depositors, which they should guard against loss by not committing any act of negligence which amounts to lack of good faith by which they would be denied the protective mantle of land registration statute, Act 496, extended only to purchasers for value and in good faith, as well as to mortgagees of the same character and description. x x x Same; Same; Same; Same; Judicial Notice; Judicial notice is taken of the standard practice for banks, before approving a loan, to send representatives to the premises of the land offered as collateral.Considering the foregoing, and bearing in mind that judicial notice is taken of the standard practice for banks, before approving a loan, to send representatives to the premises of the land offered as collateral, PDCPs feigned ignorance of the road right-of-way, much less of the existence of the road itself along the exterior lot, is simply ridiculous, to say the least, more so in the light of the factual findings of the two courts below that PDCP, contrary to its assertion, had indeed sent its personnel to inspect the land when the same was mortgaged to it by the Narcisos. For sure, as found by the appellate court, no less than PDCPs own Legal Officer, Virgilio Lagunilla, admitted that an appraisal was conducted by the bank on the exterior lot before accepting the mortgage thereof.

Same; Same; Same; Where the party has knowledge of a prior existing interest which is unregistered at the time he acquired a right to the same land, his knowledge of that prior unregistered interest has the effect of registration as to him.In Lagandaon vs. CA, we said: As a general rule, every buyer of a registered land who takes a certificate of title for value and in good faith shall hold the same free of all encumbrances except those noted on said certificate. It has been held, however, that where the party has knowledge of a prior existing interest which is unregistered at the time he acquired a right to the same land, his knowledge of that prior unregistered interest has the effect of registration as to him. x x x

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court. Puno & Associates Law Office for petitioners. Samuel R. Matunog for respondent. GARCIA, J.:

In this petition for review on certiorari under Rule 45 of the Rules of Court, petitioners Private Development Corporation of the Philippines and Atanacio M. Villegas seek the reversal and setting aside of the following issuances of the Court of Appeals in CA-G.R. CV No. 52542, to wit: 1.Decision dated July 16, 1998,1 affirming an earlier decision of the Regional Trial Court at General Santos City which ordered the petitioners, in particular petitioner Atanacio M. Villegas, to present before the Register of Deeds of General Santos City TCT No. T-32610 covering Lot 908-B-6-L-4-B for the annotation thereon of a Memorandum of Agreement establishing an easement of right-of-way in favor of private respondent General Santos Doctors Hospital, Inc.; and 2.Resolution dated January 8, 1999,2 denying petitioners motion for reconsideration. Culled from the records are the following factual antecedents: The spouses Agustin Narciso and Aurora Narciso (the Narcisos, for short) were the original owners of two (2) lots situated at Barrio Lagao, General Santos
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City, Cotabato. The first lot, which is a portion of a bigger parcel of land known as Lot No. 908-B-6-L-3 and covered by TCT No. 22608, is identified as Lot No. 908-B-6-L-3-A, hereinafter referred to as the interior lot, with an area of one (1) hectare. Adjacent to this lot and abutting the national highway is the second lot, Lot No. 908-B-6-L-4-B, hereinafter referred to as the exterior lot, covered by TCT No. 13550.3 On September 6, 1968, the Narcisos executed in favor of herein respondent, General Santos Doctors Hospital, Inc. (GSDHI) an Option to Buy4 the interior lot, subject, among others, to the condition that: 5. The vendors shall construct a 10 meter wide road commencing from the National Highway, traversing the property of the Vendors and terminating perpendicularly at the mid-point of the Southern boundary of the property subject of this Option, facing the national highway. Additionally, the vendors shall also construct a 10 meter wide road alongside the same southern boundary of the subject land, forming a right angle with the road first above described. The Vendors shall also provide drainage facilities.5 True enough, on September 25, 1968, the interior lot was bought by GSDHI, as evidenced by a Deed of Absolute Sale.6 On the same day of the sale, a Memorandum of Agreement7 was executed by and between the Narcisos and GSDHI, paragraph 7 of which practically reproduced the same condition, supra, appearing in the earlier Option to Buy, thus: 7. The vendors [Narcisos] also known as Party of the First Part, shall construct a ten (10) meter wide road commencing from the National Highway, traversing the property of the vendors and terminating perpendicularly at the mid-point of the Southern boundary of the property subject of the sale facing the National Highway. Additionally, the vendors or party of the first part, shall also construct a ten (10) meter wide road alongside the same Southern boundary of the subject land, forming a right angle with the road first above-described. The vendors shall also provide drainage facilities.8 Years later, or on September 30, 1977, the exterior lot was mortgaged by the Narcisos to one of the petitioners herein, Private Development Corporation of the Philippines (PDCP). Upon the Narcisos failure to pay the mortgage obligation, the mortgage was foreclosed and the mortgaged property (exterior lot) sold at a public auction on June 21, 1982 with PDCP as the lone bidder. Accordingly, the Narcisos title covering the exterior lot was cancelled and in lieu thereof TCT No. 23202 was issued in the name of PDCP.

On April 18, 1988, in the Regional Trial Court at General Santos City, respondent GSDHI, claiming that it has an easement of right-of-way over the foreclosed property (exterior lot), filed a complaint for specific performance against PDCP, therein impleading the Register of Deeds of General Santos City, Pelagio T. Tolosa, as a nominal party-defendant, to compel PDCP to present before the Register of Deeds its duplicate copy of TCT No. 23202 over the exterior lot for the annotation thereon of the Memorandum of Agreement establishing an easement of right-of-way in favor of GSDHI. In its complaint, docketed with the trial court as Civil Case No. 4128, respondent GSDHI, as plaintiff, alleged that the easement was a condition and primary consideration for its purchase from the Narcisos of the interior lot so that the hospital it intends to build thereat would have an access to the national highway; that the grant is evidenced by two (2) public documents executed between it and the Narcisos, i.e., Option to Buy9 the interior lot dated September 6, 1968 and Memorandum of Agreement10 dated September 25, 1968; that the portion covered by the easement was inadvertently and erroneously included in the mortgage of the exterior lot as the same was not segregated from the mother title; that upon informing PDCP of the easement on January 27, 1983, it (respondent) even offered to buy the whole exterior lot so as to avoid future litigation but although negotiations lasted until August of 1988, no agreement was reached on the price, hence, it (respondent) opted to continue and preserve the easement of right-of-way established in its favor since 1968. In its Answer, PDCP denied any knowledge of the alleged easement of right-ofway, averring that it was not a party to any of the transactions between respondent and the Narcisos. PDCP argued that the Option to Buy and Memorandum of Agreement cannot by themselves constitute a valid agreement to create and vest in favor on respondent an easement of right-ofway in the absence of terms providing for, among others, the amount of consideration therefor. And, even assuming that the Memorandum of Agreement created such an easement, PDCP contended that it cannot be bound thereby because said agreement was not duly inscribed and registered with the Registry of Deeds. Furthermore, PDCP asserted that it is an innocent purchaser for value and in good faith, hence, the alleged easement cannot be enforced against it. Meanwhile, during the pendency of the case, or sometime in January, 1989, PDCP sold the exterior lot to the other petitioner herein, Atanacio M. Villegas.

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On account thereof, PDCPs title over the exterior lot was cancelled and TCT No. 32610 issued in the name of Villegas. Consequently, respondent GSDHI amended its complaint by impleading Villegas as additional party-defendant. For his part, Villegas formally adopted PDCPs aforementioned allegations and defenses in its Answer. Eventually, in a decision dated December 15, 1998,11 the trial court rendered judgment for plaintiff GSDHI and against defendants PDCP and Villegas, to wit: Accordingly, judgment is rendered for the plaintiff and against the defendants ordering the latter, particularly Atanacio M. Villegas to present before the Register of Deeds of General Santos City Transfer Certificate of Title No. T32610 for annotation of the Memorandum of Agreement establishing the casement of right-of-way in favor of the plaintiff. SO ORDERED. Explains the trial court in its decision: The long and short of the seeming complexity of the issues raised by the parties is summed up by the question of whether or not the plaintiff under the circumstances is entitled to compel the defendants particularly Atanacio M. Villegas to respect and annotate in the certificate of title the easement of right of way, or conversely whether the defendants are innocent mortgagor or purchaser for value, hence not bound by it. The dominion of the plaintiff over the disputed road that virtually cut into two lot 908-B-6-L-4-B comprising a total area of 1,000 square (10 m x 100m) was elucidated and clarified by Agustin N. Narciso, the source of plaintiffs rights. (Exhibits A and B) When Lot 908-B-L-3-A was sold by Narciso to GSDHI way back on September 25, 1963 the imperfection of the document of absolute sale was discovered at once. (Exhibit D) So a Memorandum of Agreement was executed that same day to rectify the omission and put in black and white the agreement regarding the direct access road to the national highway passing through the adjoining lot 908-B-6-L-4-B then owned by Narciso. (Exhibit E) The relevant portion of the agreement provides: xx ten the the x 7. The vendors also known as Party of the First Part, shall construct a (10) meter wide road commencing from the National Highway, traversing property of the vendors and terminating perpendicularly at the mid-point of Southern boundary of the property subject of the sale facing the National

Highway. Additionally, the vendors or party of the first part, shall also construct a ten (10) meter wide road alongside the same Southern boundary of the subject land, forming a right angle with the road first above-described. The vendors shall also provide drainage facilities. x x x Prior to the execution of the Deed of Absolute Sale and the Memorandum of Agreement, the Narcisos and the plaintiff executed a document denominated Option to Buy on September 6, 1968, the pertinent portion of which provides: x x x 5. The vendors shall construct a 10 meter wide road commencing from the National Highway, traversing the property of the Vendors and terminating perpendicularly at the mid-point of the Southern boundary of the property subject of this Option, facing the national highway. Additionally, the vendors shall also construct a 10 meter wide road alongside the same southern boundary of the subject land, forming a right angle with the road first above described. The Vendors shall also provide drainage facilities. x x x In keeping with their agreement with the plaintiff, the Narcisos caused to be constructed a 10 meter wide road starting from the National Highway passing through Lot 908-B-6-L-4-B until the midpoint of the Southern boundary of Lot 908-B-L-3-A which was the property sold to the plaintiff. He also had a 10 meter wide road alongside the southern boundary of the land sold to the plaintiff forming an angle with the road that commenced from the national highway. These undertakings of the Narcisos were in compliance with their agreement with the plaintiff to guarantee direct access to the national highway from the hospital that was to be constructed by the plaintiff on inner Lot 908-B-L-3-A. The total consideration for the sale of Lot 908-B-L-3-A covering an area of one hectare was P100,000.00 and an additional of P10,000.00 was paid for the 10 meter wide road right-of-way from the southern boundary of the property straight to the national highway with an approximate length of 100 meters. This was not specifically mentioned in the Deed of Absolute Sale but this was in pursuance of their agreement that the one hectare lot was priced at P10.00 per square meter, or for P100,000.00. Narcisos agreement with the plaintiff for the construction of the road right-of-way was for its use in perpetuity by the plaintiff as well as the public. The road right-of-way was constructed immediately upon execution of the Deed of Sale but it is being maintained ever since by the plaintiff. The road was located in the shortest distance between the national highway and the hospital of the plaintiff and because of it the property over

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which the easement of road right-of-way passing through at the middle was substantially benefited making it commercial. Sometime in 1976 or 1977, the Narcisos mortgaged Lot 908-B-6-L-4-B which was the servient estate to PDCP thru its branch office in Davao City. As a requirement, the Narcisos submitted to PDCP the title of the land, the map and the sketch on the easement that was granted by the plaintiff to the GSDHI. When the property was inspected, Agustin Narciso showed the extent of the property offered as collateral and together with the manager and other officers of the PDCP even passed through the road right-of-way in question. The metes and bounds of the Narcisos property was also shown to the officers of the PDCP including the signboard along the national highway leading to the hospital. Thereafter the loan was approved. On cross-examination, Agustin Narciso admitted having mortgaged the property covered by his title but excluding the 10 x 100 meter road which was paid for by the plaintiff. The Memorandum of Agreement, however, and the Option to Buy which embodied the meeting of minds of the plaintiff and the Narcisos regarding the easement of right-of-way over Lot 908-B-6-L-4-B was not registered or annotated. Agustin Narciso reiterated that when the property mortgaged to PDCP was verified, several personnel of PDCP came, a certain Mr. Rey Feria, Mr. Lim, Mr. Alcantara and a certain Mr. Delgado. He did not, however, furnish them copies of the Option to Buy and the Memorandum of Agreement. The importance of the road right-of-way to the plaintiff was underscored by officers of the plaintiff. Acquisition of the hospital site was premised on the grant by the then owner and seller Agustin Narciso of the ten meter wide access road through the servient property owned by the seller. It was a condition sine qua non of the contract between plaintiff and the Narcisos because the plaintiff wanted the site to be a bit far from the national highway but with easy and direct access to the highway because of the nature of the business they were putting up. The hospital having been constructed sometime in 1968, plaintiff maintained the 10 x 100 meters road to the highway and used it including the public openly, continuously and notoriously without being challenged by any party. When the Narcisos failed to pay their account with the defendant PDCP Lot 908-B-L-3-B which was put up as guarantee thereof was foreclosed and in the subsequent public auction sale the defendant PDCP was the lone bidder and therefore it became the owner.

The plaintiff learned of the acquisition by PDCP of the property previously owned by the Narcisos and steps were taken by the plaintiff to buy peace when it was realized that the Memorandum of Agreement as well as the Option to Buy evidencing their ownership of the road right-of-way of 10 x 100 meters was only duly recorded with the Register of Deeds. Negotiations were had with the defendant PDCP but no agreement was reached because of the wide gap between the offers and counter offers made. In the meantime, the defendant PDCP never asserted that it is the rightful owner of the road right-of-way, neither did it interrupt the continued use by the plaintiff and the general public of the road in question. Requests were made of the defendant PDCP to allow the plaintiff to have its right over the road right-of-way annotated in the title of the said defendant but it was ignored. Overtures were made by the plaintiff to buy peace or as gesture of compromise to the defendant PDCP but those were fruitless. The defendants, particularly the original and one of the principal defendants, did not challenge the genuiness and authenticity of the documents in the possession of the plaintiff and presented in evidence like the Option to Buy, Memorandum of Agreement and the Deed of Absolute Sale. The centerpiece of PDCPs defense was the nonregistration of the Option to Buy and Memorandum of Agreement embodying the right of the plaintiff over the contested road right of way. The defendant Atanacio M. Villegas relied entirely on the defenses put up by its predecessor-in-interest PDCP. It was the contention also of the defendant PDCP that had it known of the existence of the road right-of-way over the property mortgaged and subsequently acquired by it in a public auction sale, they would not have paid the big amount for the property considering that with the existence of the road right-of-way the value of the property was very much diminished. Considering, however, that the defendant PDCP is a banking institution and it is normal business practice that when loan is granted the property offered as security is invariably inspected, it would be unlikely cr unrealistic that the defendant PDCP accepted Lot-908-B-6-L-4-B without knowing its actual state. The evidence also disclosed that when the loan was contracted by the previous owner Agustin Narciso several officers of the bank repaired to the area and made an on-the-spot verification of the land.
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On the part of Atanacio Villegas, his attorney-in-fact who took the witness stand affirmed that the road right-of-way has been in existence way back in the late 1960s and he noticed it when he frequently traveled to General Santos City even when this was still a rustic community as reflected in his testimony. In the light of the undisputed facts obtaining that the road right-of-way is conspicuously situated and has been in existence and in constant use for a long period of time, or for over 25 years failure of the plaintiff to cause the registration of its road right-of-way did not in the face of reality militate against its right over the casement.12 From the trial courts decision, petitioners went to the Court of Appeals (CA) whereat their appellate recourse was docketed as CA-G.R. CV No. 52542. In the herein assailed Decision dated July 16, 1998, the CA affirmed that of the trial court. With their motion for reconsideration having been denied by the appellate court in its equally challenged Resolution of January 8, 1999, petitioners are now with us via this petition for review, imputing error to the CA: (1) in affirming the lower courts decision without first resolving the issue of whether or not respondent is entitled to an easement of right-of-way; (2) in finding and concluding that petitioners are not innocent mortgagees or purchasers for value; and (3) in not holding that respondent GSDHI is not entitled to a legal easement of right-of-way. The petition is bereft of merit. At bottom, the issues are: (1) whether or not respondent GSDHI has an easement of right-of-way over the exterior lot (Lot No. 908-B-6-L-4-B); and (2) whether or not petitioners are innocent mortgagees/purchasers for value of the same lot. We resolve both issues in favor of respondent. As defined, an easement is a real right on anothers property, corporeal and immovable, whereby the owner of the latter must refrain from doing or allow somebody else to do or something to be done on his property, for the benefit of another person or tenement.13 Easements are established either by law or by the will of the owner. The former are called legal, and the latter, voluntary easements.14 As correctly found by the trial court, the easement of right-of-way over the exterior lot in favor of respondent GSDHI was voluntarily constituted by agreement between the latter and the original owner thereof, the Narcisos.

It is beyond cavil that the Narcisos did intend to establish an easement of rightof-way over the exterior lot for the respondents benefit. This is very evident from the fact that in the Option to Buy in connection with the interior lot, one of the conditions stipulated upon is that the Narcisos will construct two (2) tenmeter wide roads along the exterior lot from the interior lot leading to the national highway.15 True, the Deed of Absolute Sale between respondent and the Narcisos covering the interior lot did not embody the aforementioned condition. It was precisely to cure this deficiency, however, that on the very same day the deed of sale was executed, the Narcisos and respondent forged a Memorandum of Agreement to reflect what they failed to state in the document of sale. In the precise words of the trial court: x x x the imperfection of the document of absolute sale was discussed at once (Exhibit D). So a Memorandum of Agreement was executed that same day to rectify the omission and put in black and white the agreement regarding the direct access road to the national highway passing through the adjoining lot 908-B-6-L-4-B then owned by Narciso. Moreover, contrary to the petitioners assertion, the Narcisos grant of the easement to respondent was for a valuable consideration. Again, we quote from the trial courts decision: The total consideration for the sale of Lot 908-B-L-3-A covering an area of one hectare was P100,000.00 and an additional of P10,000.00 was paid for the 10 meter wide road right-of-way from the southern boundary of the property straight to the national highway with an approximate length of 100 meters. This was not specifically mentioned in the Deed of Absolute Sale but this was in pursuance of their agreement that the one hectare lot was priced at P10.00 per square meter, or for P100,000.00.16 In any event, it bears stressing that the two courts below are one in their common factual finding about the existence of the conventional easement of right of way in favor of respondent. Absent, as here, of any credible evidence to the contrary, the Court is not inclined to disturb such a finding. After all, this Court is not a trier of facts. Having ruled on the existence of an easement of right of way, we now come to the second issue. It is petitioners posture that they cannot be bound by the subject easement because the Memorandum of Agreement establishing the same was not
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annotated in the certificate of title of the exterior lot and registered with the Registry of Deeds. Having relied on a title which does not reflect any easement thereon, petitioner PDCP contends that it was an innocent mortgagee and later an innocent purchaser for value. Chanting the same tone, petitioner Villegas insists that he, too, is an innocent purchaser of said lot. We are unimpressed. Concededly, a person, be he a buyer or mortgagee, dealing with a titled property, as the exterior lot is, is not required to go beyond what appears on the face of the covering title itself.17 Section 39 of Act 496 or the Land Registration Decree18 says as much. Unfortunately for petitioner PDCP, however, the aforementioned rule does not apply to banks,19 of which PDCP is. So it is that in Robles vs. CA,20 this Court, citing Tomas vs. Tomas,21 ruled: x x x Banks, indeed, should exercise more care and prudence in dealing even with registered lands, than private individuals, for their business is one affected with public interest, keeping in trust money belonging to their depositors, which they should guard against loss by not committing any act of negligence which amounts to lack of good faith by which they would be denied the protective mantle of land registration statute, Act 496, extended only to purchasers for value and in good faith, as well as to mortgagees of the same character and description. x x x Considering the foregoing, and bearing in mind that judicial notice is taken of the standard practice for banks, before approving a loan, to send representatives to the premises of the land offered as collateral,22 PDCPs feigned ignorance of the road right-of-way, much less of the existence of the road itself along the exterior lot, is simply ridiculous, to say the least, more so in the light of the factual findings of the two courts below that PDCP, contrary to its assertion, had indeed sent its personnel to inspect the land when the same was mortgaged to it by the Narcisos. For sure, as found by the appellate court, no less than PDCPs own Legal Officer, Virgilio Lagunilla, admitted that an appraisal was conducted by the bank on the exterior lot before accepting the mortgage thereof. Says the appellate court in this respect: We have the confirmation on cross examination of the PDCP Legal Officer, Virgilio Lagunilla, in the matter of PDCPs practice of appraising the property, being offered as collateral, which calls for an actual examination of the condition of the property. He even admitted that an appraisal was conducted by

the bank on the exterior lot before the mortgage, the reason being that it is the Central Banks requirement to limit the loans of commercial banks to only 70% of the appraise value of the security being offered. As for PDCP, there was an uncharacteristic silence on the result of the appraisal of the exterior lot which presupposes the observation that the bank, at the time of the mortgage, knew about the existence of the easement. The nature alone of the easement of right-of-way, which is ten meters wide and open to the public for its use continuously supports the observation that its easement was never overlooked by the bank at the time of the propertys appraisal. We cannot allow actual notice of knowledge of the burden on the property to be denied on the mere pretension alone that the title does not bear any annotation of such burden. Equally unworthy of belief is petitioner Villegas protestation of innocence of the easement in question. It is a matter of record that prior to his purchase of the exterior lot, Villegas, through his attorney-in-fact, Benjamin Miranda, was very much aware of the existence of a road over said lot since the 1960s. Again, to quote from the assailed decision of the appellate court: x x x His (Mirandas) other admission was that Villegas knew of the easement before purchasing the property. He even added that he was consulted by Villegas himself before the purchase and he told him (Villegas) that there was an existing road from the hospital leading to the national highway. In Lagandaon vs. CA,23 we said: As a general rule, every buyer of a registered land who takes a certificate of title for value and in good faith shall hold the same free of all encumbrances except those noted on said certificate. It has been held, however, that where the party has knowledge of a prior existing interest which is unregistered at the time he acquired a right to the same land, his knowledge of that prior unregistered interest has the effect of registration as to him. x x x WHEREFORE, the assailed issuances of the appellate court are AFFIRMED and this petition DISMISSED for lack of merit. Costs against petitioners. SO ORDERED. Panganiban (Chairman), Corona and Carpio-Morales, JJ., concur.
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Sandoval-Gutierrez, J., On Official Leave. Assailed issuances affirmed and dismissed. Notes.A transferee of property upon which an easement has been created cannot extricate itself from the principle of res judicata by the expedient of initiating another redress for the termination of the same easement. (Sunflower Umbrella Manufacturing Co., Inc. vs. De Leon, 237 SCRA 153 [1994]) The word passage does not clearly and unmistakably convey a meaning that includes a right to install water pipes on the access road since the ordinary meaning of the word is that it is the act or action of passing; movement or transference from one place or point to another, and its legal meaning is not different, which is the act of passing; transit; transition. (Prosperity Credit Resources, Inc. vs. Court of Appeals, 301 SCRA 52 [1999]) The National Irrigation Administration is under no obligation to pay just compensation for the taking of a portion of a private property for use as easement of right of way where the Certificate of Title covering said parcel of land contained a reservation granting the government a right of way over the land covered therein. (National Irrigation Administration vs. Court of Appeals, 340 SCRA 661 [2000]) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Private Development Corporation of the Philippines vs. Court of Appeals, 475 SCRA 591(2005)]

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No. L-33507. July 20, 1981.* FE P. VELASCO, represented by ALFREDO GONZALES, petitioner, vs. HON. VICENTE N. CUSI, JR. and THE CITY OF DAVAO, respondents.
Civil Law; Easements; Easement of public highway; Public highway deemed a legal encumbrance to the lot originally registered despite the absence of annotation on the title, as the highway was already subsisting when the title was issued.From the foregoing provision, Bolton Street which is a public highway, already subsisting when O.C.T. No. 638 was issued, as this fact is apparent too from the face of the complaint itself, is deemed to have attached as a legal encumbrance to the lot originally registered Lot No. 77, notwithstanding the lack of an annotation thereof in O.C.T. No. 638. Petitioner, therefore, cannot rely, as she almost entirely does for the relief she seeks, on the aforequoted provision, which she had repeatedly cited but without making mention, perhaps conveniently, of the exception as expressly provided in the later part of the legal provision invoked (Sec. 39, Act 496).

PETITION for certiorari to review the Order of the Court of First Instance of Davao. Cusi, Jr., J.

subdivision plan Psd-22295. According to the complaint, . . . . when plaintiff bought the said lot 77-B-2 from the original owner in 1956, the Bolton Street was already existing; that without ascertaining the monuments along Bolton Street, she had her house constructed on her said lot and built fence along said Bolton Street which she believed to be the boundary between her lot and said street and in line with other fences already existing when she bought said lot; 6. That plaintiff has just discovered, after a relocation of the monuments of her lot, Lot No. 77-B-2, that the Bolton Street of the defendant has encroached at least TWENTYFIVE (25) SQUARE METERS with dimension of 2.5 meters by 10 meters, making her actual occupation of her lot 10 meters by 47.5 meters, as indicated in the plan Annex A hereon enclosed thereon by red pencil lines; 7. That plaintiff has just discovered also that the width of the Bolton Street is only NINE (9) METERS and since the defendant is now asphalting the said Bolton Street, plaintiff has filed this complaint in order to quiet her title to the said portion of 2.5 meters by 10 meters as shown in the, plan enclosed in red pencil on Annex A hereon because the continued occupation of said portion by the defendant has cast a cloud of doubt on the title of the plaintiff over the portion of plaintiffs Lot No. 77-B-2 now being occupied by Bolton Street, valued at four hundred pesos per square meters. After quoting the material allegations of the complaint as above set forth, the court a quo analyzed them carefully and scrutinizingly, and came up with the conclusion that the allegations of the complaint state no cause of action. Thus The allegations in the complaint that the Bolton Street encroached on the lot of the plaintiff and that the defendant had continuously occupied the portion so encroached upon do not, contrary to the conclusion of the plaintiff found in the complaint, cast . . . a cloud of doubt on the title of the plaintiff over . . . said portion which would justify this action. In her present petition, petitioner assigned as error of the court a quo the following: 1. THE LOWER COURT ERRED IN DECLARING THAT THE BOLTON STREET AS AN EASEMENT MUST REMAIN A BURDEN ON LOT 77-B-2 (LOT IN QUESTION) PURSUANT TO SECTION 39 OF ACT 496 ON THE GROUND THAT IT IS SUBJECT TO EASEMENT OF PUBLIC HIGHWAY. 2. THE LOWER COURT ERRED IN DECLARING THAT THE PORTION OF THE LAND OF PETITIONER ENCROACHED UPON BY THE RESPONDENT
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The facts are stated in the opinion of the Court. DE CASTRO, J.:

Petitioner filed in the Court of First Instance of Davao an action against Davao City to quiet title to her lot known as Lot 77-B-2, a portion of which she claims to having been occupied illegally as part of Bolton Street, Davao City. On a motion to dismiss filed by the defendant, on the ground that the complaint states no cause of action, the Court, presided over by respondent Judge Hon. Vicente Cusi Jr., dismissed the case. Hence, this petition for certiorari seeking a review of the Order of dismissal dated July 11, 1970 (Annex D to the Petition).1 The dismissal being on the ground that the complaint does not state a cause of action, the allegations of the complaint have to be closely examined, as the court a quo did in its Order aforecited, which quoted the material allegations of the complaint as follows: The action is to quiet title and damages. But the complaint does not allege any cloud or doubt on the title, Transfer Certificate of Title No. T-7000 of the Register of Deeds of the City of Davao, of the plaintiff to Lot No. 77-B-2,

CITY OF DAVAOS BOLTON STREET DOES NOT CAST A CLOUD OF DOUBT IN THE TITLE OF PETITIONER. 3. THE LOWER COURT ERRED IN DECLARING THAT ASSUMING THE FACTS ALLEGED IN THE COMPLAINT TO BE TRUE, A JUDGMENT UPON THE SAME IN ACCORDANCE WITH THE PRAYER COULD NOT BE RENDERED. 4. THE LOWER COURT ERRED IN DISMISSING THE COMPLAINT FOR LACK OF CAUSE OF ACTION. As alleged by petitioner, the lot in question, Lot No. 77-B-2, which she bought in 1956, was part of Lot No. 77-B, which was in turn originally a portion of Lot No. 77, covered by O.C.T. No. 683, issued on July 21, 1911. For the lot she bought, she received Transfer Certificate of Title No. T-7000. In 1970, petitioner discovered that the Bolton Street of the City of Davao had encroached upon her a lot of portion of 2.5 meters wide and 10 meters long, along said Street, or an area of 25 square meters. She also discovered that Bolton Street was delimited to nine (9) meters wide, but the proposed width was 15 meters, and in that same year 1970, the Bolton Street had already encroached on her lot, on the northwestern part thereof, to the extent as above stated (par. 7, Complaint, Annex A, to Petition). From the allegations of the complaint as set forth above, as well as in the questioned Order quoted earlier, We agree with respondent judge that the complaint states no cause of action upon which to render judgment in favor of petitioner, even assuming the said allegations to be true, as, indeed, in a motion to dismiss for lack of cause of action, the allegations of the complaint must be hypothetically admitted.2 It appears on the face of the complaint that Bolton Street has been where it is from time immemorial. When the mother title of petitioners Transfer Certificate of Title No. T-7000, which is O.C.T. No. 638, was issued in 1911, it was issued subject to the provisions of Section 39 of Act 496 which reads: Section 39. Every person receiving a certificate of title in pursuance of a decree or registration, and every subsequent purchasers of registered land who takes a certificate of title for value in good faith shall hold the same free of all encumbrances, except those noted on said certificate, and any of the following encumbrances which may be subsisting namely: xxxx Third. Any public highway, way, private way, x x x or any government irrigation, canal, or lateral thereof x x x. From the foregoing provision, Bolton Street which is a public highway, already subsisting when O.C.T. No. 638 was issued, as this fact is apparent too from the face of the complaint itself, is deemed to have attached as a legal encumbrance to the lot originally registered Lot No. 77, notwithstanding the lack of an annotation thereof on O.C.T. No. 638. Petitioner, therefore, cannot rely, as she almost entirely does for the relief she seeks, on the aforequoted provision, which she had repeatedly cited but without making mention, perhaps conveniently, of the exception as expressly provided in the later part of the legal provision invoked (Sec. 39, Act 496). If from the undisputed fact that when Lot 77 was registered, Bolton Street had already been a legal encumbrance on said lot, pursuant to Section 39 of Act 496, contrary to petitioners theory based on the same legal provision, but omitting the portion pertinent to the instant case, there can be no gainsaying the fact that petitioners lot, Lot No. 77-B-2, which admittedly was originally a part of Lot No. 77, must have to remain subject to the same legal encumbrance of a public highway. From her own allegations in her complaint, Bolton Street cannot be a discontinuous easement as she claims it to be, which may not be acquired by prescription. Nonetheless, whether the mode of acquisition of the easement that Bolton Street is, would be only by virtue of title, as petitioner contends, this is not material or of any consequence, in the present proceedings, once it indubitably appears as it does, from the allegations of the complaint itself, that Bolton Street constituted an easement of public highway on Lot No. 77, from which petitioners lot was taken, when the said bigger lot was originally registered. It remained as such legal encumbrance, as effectively as if it had been duly noted on the certificate of title, by virtue of the clear and express provision of Section 39 of Act 496, it being admitted that at the time of the registration of Lot 77, the public highway was already in existence or subsisting. This fact erases whatever cause of action petitioner may have to bring the complaint she filed in the court a quo for quieting of title on a portion of the street which she claims to be part of her lot, free from encumbrance of any kind. The Order complained of has only this legal postulate as its basis. Nothing has been mentioned therein on the acquisition by the City of Davao of

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the lot in question by prescription, and a discussion of this matter as is found in petitioners brief3 would be entirely irrelevant. WHEREFORE, no reversible error having been found in the Order complained of, the same is hereby affirmed, and the instant petition, dismissed. Costs against petitioner. SO ORDERED. Barredo (Chairman), Aquino and Concepcion Jr., JJ., concur. Abad Santos, J., in the result. Order affirmed, petition dismissed. Notes.A Torrens Title is generally a conclusive evidence of the ownership of the land referred to therein (Section 47, Act 496). A strong presumption exists that Torrens Titles were regularly issued and that they are valid. (Salao vs. Salao, 70 SCRA 65). Where public land is conveyed or granted, the same shall be brought under the operation of the Land Registration Act. (Republic vs. Court of Appeals, 73 SCRA 146). The act of registration is the operative act that conveys and affects the land. That means that any transaction affecting the registered land should be evidenced by a registerable deed. (Salao vs. Salao, 70 SCRA 65). Once a patent is registered and the correspondingly certificate of title is issued, the land ceases to be part of the public domain and becomes private property over which the Director of Lands has neither control nor jurisdiction. (Municipality of Hagonoy, Bulacan vs. Secretary of Agriculture and Natural Resources, 73 SCRA 507). The real purpose of the Torrens System is to quiet title of land. Once a title is registered; the owner may rest secure, without the necessity of waiting in the portals of the court, or sitting in the mirador de su casa, to avoid the possibility of losing his land. (Salao vs. Salao, 70 SCRA 65). A personal servitude does not inure to the benefit of the successors-in-interest of the former owner of the dominant estate. (Jabonete vs. Monteverde, 16 SCRA 462).

The fact that an easement by grant may have also qualified as an easement of necessity does not detract from its permanency as property right which survives the termination of the necessity. (Benedicto vs. Court of Appeals, 25 SCRA 145). Article 118 of the Spanish Law of Waters allows the creation of a compulsory easement of aqueduct for the purpose of establishing or extending an irrigation system and there is nothing thereto contrary to the Civil Code. (Salazar vs. Gutierrez, 33 SCRA 242). The preliminary injunction against the right of way cannot be granted where the conditions for granting the writ have not been established. (Bacolod-Murcia Milling Co. vs. Capital Subdivision, Inc., 17 SCRA 731). The dominant estate cannot presume that the route granted to it under a previous contract will be the same route the court will grant under a legal easement. (Talisay-Silay Milling Co. vs. CFI Negros Occidental, 42 SCRA 577). o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Velasco vs. Cusi, Jr., 105 SCRA 616(1981)]

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No. L-37409. May 23, 1988.* NICOLAS VALISNO, plaintiff-appellant, vs. FELIPE ADRIANO, defendantappellee.
Civil Law; Easements and Servitudes; Land Titles; Existence of an apparent sign of easement between two estates, maintained by the owner of both, shall be considered as a title.The existence of the irrigation canal on defendants land for the passage of water from the Pampanga River to Honoratas land prior to and at the time of the sale of Honoratas land to the plaintiff was equivalent to a title for the vendee of the land to continue using it, as provided in Article 624 of the Civil Code: Article 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. (Civil Code) Same; Same; Same; Same; Water rights appurtenant to a parcel of land pass with the conveyance of the land, although not specifically mentioned in the conveyance.Water rights, such as the right to use a drainage ditch for irrigation purposes, which are appurtenant to a parcel of land, pass with the conveyance of the land, although not specifically mentioned in the conveyance. The purchasers easement of necessity in a water ditch running across the grantors land cannot be defeated even if the water is supplied by a third person (Watson vs. French, 112 Me 371, 19 C J. 868897). The fact that an easement by grant may also have qualified as an easement of necessity does not detract from its permanency as property right, which survives the determination of the necessity (Benedicto vs. CA, 25 SCRA 145). As an easement of waters in favor of the appellant has been established, he is entitled to enjoy it free from obstruction, disturbance or wrongful interference (19 CJ 984), such as the appellees act of levelling the irrigation canal to deprive him of the use of water from the Pampanga River.

This case was certified to this Court by the Court of Appeals in a resolution dated August 10, 1973, the sole issue being a question of law and beyond its jurisdiction to decide. Admitted by the parties in their pleadings and established during the trial on the merits are the following material facts: On June 20,1960, the plaintiff-appellant file against the defendant-appellee an action for damages docketed as Civil Case No. 3472 in the Court of First Instance of Nueva Ecija. The complaint alleged that the plaintiff is the absolute owner and actual possessor of a 557,949-square-meter parcel of land in La Fuente, Santa Rosa, Nueva Ecija, and more particularly described in his Transfer Certificate of Title No. NT-16281. The plaintiff-appellant Valisno bought the land from the defendantappellees sister, Honorata Adriano Francisco, on June 6, 1959. (Deed of Absolute Sale, Exh. A".) The land which is planted with watermelon, peanuts, corn, tobacco, and other vegetables adjoins that of the appellee Felipe Adriano on the bank of the Pampanga River. Both parcels of land had been inherited by Honorata Adriano Francisco and her brother, Felipe Adriano, from their father, Eladio Adriano. At the time of the sale of the land to Valisno, the land was irrigated by water from the Pampanga River through a canal about seventy (70) meters long, traversing the appellees land. On December 16, 1959, the appellee levelled a portion of the irrigation canal so that the appellant was deprived of the irrigation water and prevented from cultivating his 57-hectare land. The appellant filed in the Bureau of Public Works and Communications a complaint for deprivation of water rights. A decision was rendered on March 22,1960 ordering Adriano to reconstruct the irrigation canal, otherwise judicial action shall be taken against him under the provisions of Section 47 of Act 2152 (the Irrigation Act), as amended. Instead of restoring the irrigation canal, the appellee asked for a reinvestigation of the case by the Bureau of Public Works and Communications. A reinvestigation was granted. In the meantime, plaintiff Valisno rebuilt the irrigation canal at his own expense because his need for water to irrigate his watermelon fields was urgent. On June 20, 1960, he filed a complaint for damages in the Court of First Instance (now Regional Trial Court) of Nueva Ecija (Civil Case No. 3472) claiming that he suffered damages amounting to P8,000 when he failed to plant his fields that year (1960) for lack of irrigation water, P800 to reconstruct the
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APPEAL from the decision of the Court of First Instance of Nueva Ecija, Br. I. The facts are stated in the opinion of the Court. Honorio Valisno Garcia I for plaintiff-appellant. Felipe K. Medina for defendant-appellee. GRIO-AQUINO, J.:

canal on defendant Adrianos land, and P1,500 for attorneys fees and the costs of suit. On October 25, 1961, the Secretary of Public Works and Communications reversed the Bureaus decision by issuing a final resolution dismissing Valisnos complaint. The Secretary held that Eladio Adrianos water rights which had been granted in 1923 ceased to be enjoyed by him in 1936 or 1937, when his irrigation canal collapsed. His non-use of the water right since then for a period of more than five years extinguished the grant by operation of law, hence the water rights did not form part of his hereditary estate which his heirs partitioned among themselves. Valisno, as vendee of the land which Honorata received from her fathers estate did not acquire any water rights with the land purchased. In his answer to the damage suit (Civil Case No. 3472), the defendant Felipe Adriano admitted that he levelled the irrigation canal on his land, but he averred: that neither his late father nor his sister Honorata possessed water rights for the land which she sold to the appellant; that he (the appellee) applied for water rights for his land in 1956 and obtained the same in 1958; and that he had a perfect right to level his land for his own use because he merely allowed his sister to use his water rights when she still owned the adjacent land. He set up a counterclaim for P3,000 as damages incurred by him in levelling the land on which the appellant dug an irrigation canal, P2,000 as actual damages, P3,000 as attorneys fees, and expenses of litigation. In a decision dated April 21,1966, the trial court held that the plaintiff had no right to pass through the defendants land to draw water from the Pampanga River. It pointed out that under Section 4 of the Irrigation Law, controversies between persons claiming a right to water from a stream are within the jurisdiction of the Secretary of Public Works and his decision on the matter is final, unless an appeal is taken to the proper court within thirty days. The court may not pass upon the validity of the decision of the Public Works Secretary collaterally. Furthermore, there was nothing in the plaintiffs evidence to show that the resolution was not valid. It dismissed the complaint and counterclaim. The plaintiffs motion for reconsideration of the decision was denied by the trial court. The plaintiff appealed to the Court of Appeals which certified the case to Us upon the legal question of whether the provisions of the Irrigation Act (Act No. 2152) or those of the Civil Code should apply to this case. The plaintiff-appellant argues that while the trial court correctly held that the Secretary of Public Works may legally decide who between the parties is

entitled to apply for water rights under the Irrigation Act, it erred in ruling that the Secretary has authority to hear and decide the plaintiffs claim for damages for the defendants violation of his (plaintiffs) right to continue to enjoy the easement of aqueduct or water through the defendants land under Articles 642, 643, and 646 of the Civil Code, which provide: Article 642. Any person who may wish to use upon his own estate any water of which he can dispose shall have the right to make it flow through the interventing estates, with the obligation to indemnify their owners, as well as the owners of the lower estates upon which the waters may filter or descend. Article 643. One desiring to make use of the right granted in the preceding article is obliged: "(1) To prove that he can dispose of the water and that it is sufficient for the use for which it is intended; "(2) To show that the proposed right of way is the most convenient and the least onerous to third persons; "(3) To indemnify the owner of the servient estate in the manner determined by the laws and regulations. Article 646. For legal purposes, the easement of aqueduct shall be considered as continuous and apparent, even though the flow of the water may not be continuous, or its use depends upon the needs of the dominant estate, or upon a schedule of alternate days or hours. The existence of the irrigation canal on defendants land for the passage of water from the Pampanga River to Honoratas land prior to and at the time of the sale of Honoratas land to the plaintiff was equivalent to a title for the vendee of the land to continue using it, as provided in Article 624 of the Civil Code: Article 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 (Civil Code)
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This provision was lifted from Article 122 of the Spanish Law of Waters which provided: Article 122. Whenever a tract of irrigated land which previously received its waters from a single point is divided through inheritance, sale or by virtue of some other title, between two or more owners, the owners of the higher estates are under obligation to give free passage to the water as an easement of conduit for the irrigation of the lower estates, and without right to any compensation therefore unless otherwise stipulated in the deed of conveyance. (Art. 122, Spanish Law of Waters of August 3, 1866.) No enlightened concept of ownership can shut out the idea of restrictions thereon, such as easements. Absolute and unlimited dominion is unthinkable, inasmuch as the proper enjoyment of property requires mutual service and forbearance among adjoining estates (Amor vs. Florentino, 74 Phil. 403). As indicated in the decision dated March 22, 1960 of the Bureau of Works the principal issue involved in this case falls under the subject of servitude of waters which are governed by Article 648 of the new Civil Code and the suppletory laws mentioned in the cases of Lunod vs. Meneses (11 Phil. 128) and Osmea vs. Camara (C.A. 380 62773) which are the irrigation law and the Spanish Law of Waters of August 3, 1866, specifically Article 122 thereof. The deed of sale in favor of Valisno included the conveyance and transfer of the water rights and improvements appurtenant to Honorata Adrianos property, By the terms of the Deed of Absolute Sale, the vendor Honorata Adriano Francisco sold, ceded, conveyed and transferred to Dr. Nicolas Valisno all rights, title, interest and participations over the parcel of land above-described, together with one Berkely Model 6 YRF Centrifugal Pump G" suction, 6" discharge 5001500 GPM, with Serial No. 5415812 and one (1) set of suction pipe and discharge of pipe with elbow, nipples, flanges and footvalves, and the water rights and such other improvements appertaining to the property subject of this sale. According to the appellant, the water right was the primary consideration for his purchase of Honoratas property, for without it the property would be unproductive. Water rights, such as the right to use a drainage ditch for irrigation purposes, which are appurtenant to a parcel of land, pass with the conveyance of the land, although not specifically mentioned in the conveyance. The purchasers easement of necessity in a water ditch running across the grantors land cannot be defeated even if the water is supplied by a third person (Watson vs. French, 112 Me 371, 19 C.J. 868897). The fact that an easement by grant may also

have qualified as an easement of necessity does not detract from its permanency as property right, which survives the determination of the necessity (Benedicto vs. CA, 25 SCRA 145). As an easement of waters in favor of the appellant has been established, he is entitled to enjoy it free from obstruction, disturbance or wrongful interference (19 CJ 984), such as the appellees act of levelling the irrigation canal to deprive him of the use of water from the Pampanga River. WHEREFORE, the appealed decision is set aside, and a new one is entered ordering the appellee to grant the appellant continued and unimpeded use of the irrigation ditch traversing his land in order to obtain water from the Pampanga River to irrigate appellants land. Let the records of this case be remanded to the court a quo for the reception of evidence on the appellants claim for damages, SO ORDERED. Narvasa, Cruz, Gancayco and Medialdea, JJ., concur. Decision set aside. Note.Respondents closure of the irrigation canal thus depriving petitioner of water from the Silmod River makes judicial intervention necessary as the issue involved is not right of petitioner to use water but the recognition of that right as an easement to respondents land. (Amistoso vs. Ong, 130 SCRA 228.) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Valisno vs. Adriano, 161 SCRA 398(1988)]

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G.R. No. 95252. September 5, 1997.* LA VISTA ASSOCIATION, INC., petitioner, vs. COURT OF APPEALS, SOLID HOMES, INC., ATENEO DE MANILA UNIVERSITY, ROMULO VILLA, LORENZO TIMBOL, EMDEN ENCARNACION, VICENTE CASIO, JR., DOMINGO REYES, PEDRO C. MERCADO, MARIO AQUINO, RAFAEL GOSECO, PORFIRIO CABALU, JR., and ANTONIO ADRIANO, in their behalf and in behalf of the residents of LOYOLA GRAND VILLAS, INC., PHASES I AND II, respondents.
Remedial Law; Writ of Preliminary Injunction; A writ of preliminary injunction is generally based solely on initial and incomplete evidence. The opinion and findings of fact of a court when issuing a writ of preliminary injunction are interlocutory in nature and made even before the trial on the merits is terminated.We do not agree with petitioner. The reliance of petitioner on the cited cases is out of place as they involve the issuance of a preliminary injunction pending resolution of a case on the merits. In the instant case, however, the subject of inquiry is not merely the issuance of a preliminary injunction but the final injunctive writ which was issued after trial on the merits. A writ of preliminary injunction is generally based solely on initial and incomplete evidence. The opinion and findings of fact of a court when issuing a writ of preliminary injunction are interlocutory in nature and made even before the trial on the merits is terminated. Consequently there may be vital facts subsequently presented during the trial which were not obtaining when the writ of preliminary injunction was issued. Hence, to equate the basis for the issuance of a preliminary injunction with that for the issuance of a final injunctive writ is erroneous. And it does not necessarily mean that when a writ of preliminary injunction issues a final injunction follows. Civil Law; Easement; A legal or compulsory easement is that which is constituted by law for public use or for private interest. A voluntary easement on the other hand is constituted simply by will or agreement of the parties.A legal or compulsory easement is that which is constituted by law for public use or for private interest. By express provisions of Arts. 649 and 650 of the New Civil Code, the owner of an estate may claim a legal or compulsory right-of-way only after he has established the existence of four (4) requisites, namely, (a) the estate is surrounded by other immovables and is without adequate outlet to a public highway; (b) after payment of the proper indemnity; (c) the isolation was not due to the proprietors own acts; and, (d) the rightof-way claimed is at a point least prejudicial to the servient estate, and insofar as consistent with this rule, where the distance from the dominant estate to a public highway may be the shortest. A voluntary easement on the other hand is constituted simply by will or agreement of the parties. Same; Same; When the court says that an easement exists, it is not creating one. For, even an injunction cannot be used to create one as there is no such thing as a judicial easement. The court merely declares the existence of an easement created by the parties.Resultantly, when the court says that an easement exists, it is not creating one. For, even an injunction cannot be used to create one as there is no such thing as a judicial easement. As in the instant case, the court merely declares the existence of an easement created by the parties. Respondent court could not have said it any betterIt must be emphasized, however, that We are not constituting

an easement along Mangyan Road, but merely declaring the existence of one created by the manifest will of the parties herein in recognition of autonomy of contracts (Articles 1306 and 619, New Civil Code; Tolen-tino, supra, page 308; Civil Code of the Philippines, by Paras, Volume II, 1984 edition, page 549). Same; Same; The denial of the motions for intervention arising from the strict application of the Rule due to alleged lack of notice to, or the alleged failure of, movants to act seasonably will lead the Court to commit an act of injustice to the movants, to their successors-in-interest and to all purchasers for value and in good faith and thereby open the door to fraud, falsehood and misrepresentation, should intervenors claims be proven to be true.Petitioner questions the intervention of some LOYOLA residents at a time when the case was already on appeal, and submits that intervention is no longer permissible after trial has been concluded. It is quite clear and patent that the motions for intervention filed by the movants at this stage of the proceedings where trial has already been concluded, a judgment thereon had been promulgated in favor of private respondent and on appeal by the losing party x x x the same was affirmed by the Court of Appeals and the instant petition for certiorari to review said judgment is already submitted for decision by the Supreme Court, are obviously and manifestly late, beyond the period prescribed under x x x Section 2, Rule 12 of the Rules of Court (now Sec. 2, Rule 19, 1997 Rules of Civil Procedure). But Rule 12 of the Rules of Court, like all other Rules therein promulgated, is simply a rule of procedure, the whole purpose and object of which is to make the powers of the Court fully and completely available for justice. The purpose of procedure is not to thwart justice. Its proper aim is to facilitate the application of justice to the rival claims of contending parties. It was created not to hinder and delay but to facilitate and promote the administration of justice. It does not constitute the thing itself which courts are always striving to secure to litigants. It is designed as the means best adopted to obtain that thing. In other words, it is a means to an end. The denial of the motions for intervention arising from the strict application of the Rule due to alleged lack of notice to, or the alleged failure of, movants to act seasonably will lead the Court to commit an act of injustice to the movants, to their successors-in-interest and to all purchasers for value and in good faith and thereby open the door to fraud, falsehood and misrepresentation, should intervenors claims be proven to be true. After all, the intervention does not appear to have been filed to delay the proceedings. On the contrary, it seems to have expedited the resolution of the case as the incidents brought forth by the intervention, which could have been raised in another case, were resolved together with the issues herein resulting in a more thorough disposal of this case.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court. Bonifacio A. Alentajan for petitioner. Benedicto G. Arcinas collaborating counsel for petitioner.

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Angara, Abello, Concepcion, Regala & Cruz for Romulo Villa, et al. Bengzon, Narciso, Cudala, Pecson, Bengson & Jimenez for Ateneo de Manila University. Tomas R. Leonidas for Solidhomes, Inc. BELLOSILLO, J.:

The ASSIGNEE hereby agrees and assumes to pay the mortgage obligation on the above-described land in favor of the MORTGAGOR and to perform any and all terms and conditions as set forth in the Deed of Sale with Mortgage dated July 1, 1949, hereinabove referred to, which said document is incorporated herein and made an integral part of this contract by reference x x xx On their part, the Tuasons developed a part of the estate adjoining the portion sold to Philippine Building Corporation into a residential village known as La Vista Subdivision. Thus the boundary between LA VISTA and the portion sold to Philippine Building Corporation was the 15-meter wide roadway known as the Mangyan Road. On 6 June 1952 ATENEO sold to MARYKNOLL the western portion of the land adjacent to Mangyan Road. MARYKNOLL then constructed a wall in the middle of the 15-meter wide roadway making one-half of Mangyan Road part of its school campus. The Tuasons objected and later filed a complaint before the then Court of First Instance of Rizal for the demolition of the wall. Subsequently, in an amicable settlement, MARYKNOLL agreed to remove the wall and restore Mangyan Road to its original width of 15 meters. Meanwhile, the Tuasons developed its 7.5-meter share of the 15-meter wide boundary. ATENEO deferred improvement on its share and erected instead an adobe wall on the entire length of the boundary of its property parallel to the 15-meter wide roadway. On 30 January 1976 ATENEO informed LA VISTA of the formers intention to develop some 16 hectares of its property along Mangyan Road into a subdivision. In response, LA VISTA President Manuel J. Gonzales clarified certain aspects with regard to the use of Mangyan Road. Thus x x x The Mangyan Road is a road fifteen meters wide, one-half of which is taken from your property and the other half from the La Vista Subdivision. So that the easement of a right-of-way on your 7 1/2 m. portion was created in our favor and likewise an easement of right-of-way was created on our 7 1/2 portion of the road in your favor (paragraph 3 of the Deed of Sale between the Tuasons and the Philippine Building Corporation and Ateneo de Manila dated 1 July 1949 x x x x On 28 April 1976 LA VISTA President Manuel J. Gonzales, in a letter to ATENEO President Fr. Jose A. Cruz, S.J., offered to buy under specified conditions the property ATENEO was intending to develop. One of the
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MANGYAN ROAD is a 15-meter wide thoroughfare in Quezon City abutting Katipunan Avenue on the west, traversing the edges of La Vista Subdivision on the north and of the Ateneo de Manila University and Maryknoll (now Miriam) College on the south. Mangyan Road serves as the boundary between LA VISTA on one side and ATENEO and MARYKNOLL on the other. It bends towards the east and ends at the gate of Loyola Grand Villas Subdivision. The road has been the subject of an endless dispute, the disagreements always stemming from this unresolved issue: Is there an easement of right-of-way over Mangyan Road? In resolving this controversy, the Court would wish to write finis to this seemingly interminable debate which has dragged on for more than twenty years. The area comprising the 15-meter wide roadway was originally part of a vast tract of land owned by the Tuasons in Quezon City and Marikina. On 1 July 1949 the Tuasons sold to Philippine Building Corporation a portion of their landholdings amounting to 1,330,556 square meters by virtue of a Deed of Sale with Mortgage. Paragraph three (3) of the deed provides that x x x the boundary line between the property herein sold and the adjoining property of the VENDORS shall be a road fifteen (15) meters wide, one-half of which shall be taken from the property herein sold to the VENDEE and the other half from the portion adjoining belonging to the VENDORS. On 7 December 1951 the Philippine Building Corporation, which was then acting for and in behalf of Ateneo de Manila University (ATENEO) in buying the properties from the Tuasons, sold, assigned and formally transferred in a Deed of Assignment with Assumption of Mortgage, with the consent of the Tuasons, the subject parcel of land to ATENEO which assumed the mortgage. The deed of assignment states

conditions stipulated by the LA VISTA President was that [i]t is the essence of the offer that the mutual right of way between the Ateneo de Manila University and La Vista Homeowners Association will be extinguished. The offer of LA VISTA to buy was not accepted by ATENEO. Instead, on 10 May 1976 ATENEO offered to sell the property to the public subject to the condition that the right to use the 15-meter roadway will be transferred to the vendee who will negotiate with the legally involved parties regarding the use of such right as well as the development costs for improving the access road. LA VISTA became one of the bidders. However it lost to Solid Homes, Inc., in the bidding. Thus on 29 October 1976 ATENEO executed a Deed of Sale in favor of Solid Homes, Inc., over parcels of land covering a total area of 124,424 square meters subject, among others, to the condition that 7. The VENDOR hereby passes unto the VENDEE, its assigns and successors-in-interest the privileges of such right of way which the VENDOR acquired, and still has, by virtue of the Deeds mentioned in the immediately preceeding paragraph hereof; provided, that the VENDOR shall nonetheless continue to enjoy said right of way privileges with the VENDEE, which right of way in favor of the VENDOR shall be annotated on the pertinent road lot titles. However it is hereby agreed that the implementation of such right of way shall be for the VENDEEs sole responsibility and liability, and likewise any development of such right of way shall be for the full account of the VENDEE. In the future, if needed, the VENDOR is therefore free to make use of the aforesaid right of way, and/or Mangyan Road access, but in such a case the VENDOR shall contribute a pro-rata share in the maintenance of the area. Subsequently, Solid Homes, Inc., developed a subdivision now known as Loyola Grand Villas and together they now claim to have an easement of rightof-way along Mangyan Road through which they could have access to Katipunan Avenue. LA VISTA President Manuel J. Gonzales however informed Solid Homes, Inc., that LA VISTA could not recognize the right-of-way over Mangyan Road because, first, Philippine Building Corporation and its assignee ATENEO never complied with their obligation of providing the Tuasons with a right-of-way on their 7.5-meter portion of the road and, second, since the property was purchased for commercial purposes, Solid Homes, Inc., was no longer entitled to the right-of-way as Mangyan Road was established exclusively for ATENEO in whose favor the right-of-way was originally constituted. LA VISTA, after instructing its security guards to prohibit agents and assignees of Solid Homes,

Inc., from traversing Mangyan Road, then constructed one-meter high cylindrical concrete posts chained together at the middle of and along the entire length of Mangyan Road thus preventing the residents of LOYOLA from passing through. Solid Homes, Inc., complained to LA VISTA but the concrete posts were not removed. To gain access to LOYOLA through Mangyan Road an opening through the adobe wall of ATENEO was made and some six (6) cylindrical concrete posts of LA VISTA were destroyed. LA VISTA then stationed security guards in the area to prevent entry to LOYOLA through Mangyan Road. On 17 December 1976, to avert violence, Solid Homes, Inc., instituted the instant case, docketed as Civil Case No. Q-22450, before the then Court of First Instance of Rizal and prayed that LA VISTA be enjoined from preventing and obstructing the use and passage of LOYOLA residents through Mangyan Road. LA VISTA in turn filed a third-party complaint against ATENEO. On 14 September 1983 the trial court issued a preliminary injunction in favor of Solid Homes, Inc. (affirming an earlier order of 22 November 1977), directing LA VISTA to desist from blocking and preventing the use of Mangyan Road. The injunction order of 14 September 1983 was however nullified and set aside on 31 May 1985 by the then Intermediate Appellate Court1 in AC-G.R. SP No. 02534. Thus in a petition for review on certiorari, docketed as G.R. No. 71150, Solid Homes, Inc., assailed the nullification and setting aside of the preliminary injunction issued by the trial court. Meanwhile, on 20 November 1987 the Regional Trial Court of Quezon City rendered a decision on the merits2 in Civil Case No. Q-22450 affirming and recognizing the easement of right-of-way along Mangyan Road in favor of Solid Homes, Inc., and ordering LA VISTA to pay damages thus ACCORDINGLY, judgment is hereby rendered declaring that an easement of a right-of-way exists in favor of the plaintiff over Mangyan Road, and, consequently, the injunction prayed for by the plaintiff is granted, enjoining thereby the defendant, its successors-in-interest, its/their agents and all persons acting for and on its/their behalf, from closing, obstructing, preventing or otherwise refusing to the plaintiff, its successors-in-interest, its/their agents and all persons acting for and on its/their behalf, and to the public in general, the unobstructed ingress and egress on Mangyan Road, which is the boundary road between the La Vista Subdivision on one hand, and the Ateneo de Manila University, Quezon City, and the Loyola Grand Villas Subdivision, Marikina, Metro Manila, on the other; and, in addition the defendant is ordered to pay the
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plaintiff reasonable attorneys fees in the amount of P30,000.00. The defendant-third-party plaintiff is also ordered to pay the third-party defendant reasonable attorneys fees for another amount of P15,000.00. The counterclaim of the defendant against the plaintiff is dismissed for lack of merit. With costs against the defendant. Quite expectedly, LA VISTA appealed to the Court of Appeals, docketed as CA-G.R. CV No. 19929. On 20 April 1988 this Court, taking into consideration the 20 November 1987 Decision of the trial court, dismissed the petition docketed as G.R. No. 71150 wherein Solid Homes, Inc., sought reversal of the 31 May 1985 Decision in AC-G.R. SP No. 02534 which nullified and set aside the 14 September 1983 injunction order of the trial court. There we said Considering that preliminary injunction is a provisional remedy which may be granted at any time after the commencement of the action and before judgment when it is established that the plaintiff is entitled to the relief demanded and only when his complaint shows facts entitling such reliefs (Section 3[a], Rule 58) and it appearing that the trial court had already granted the issuance of a final injunction in favor of petitioner in its decision rendered after trial on the merits (Sections 7 & 10, Rule 58, Rules of Court), the Court resolved to Dismiss the instant petition having been rendered moot and academic. An injunction issued by the trial court after it has already made a clear pronouncement as to the plaintiffs right thereto, that is, after the same issue has been decided on the merits, the trial court having appreciated the evidence presented, is proper, notwithstanding the fact that the decision rendered is not yet final (II Moran, pp. 81-82, 1980 ed.). Being an ancillary remedy, the proceedings for preliminary injunction cannot stand separately or proceed independently of the decision rendered on the merit of the main case for injunction. The merit of the main case having been already determined in favor of the applicant, the preliminary determination of its non-existence ceases to have any force and effect.3 On the other hand, in CA-G.R. CV No. 19929, several incidents were presented for resolution: two (2) motions filed by Solid Homes, Inc., to cite certain officers of LA VISTA for contempt for alleged violation of the injunction ordaining free access to and egress from Mangyan Road, to which LA VISTA responded with its own motion to cite Solid Homes, Inc., for contempt; a motion for leave to intervene and to re-open Mangyan Road filed by residents of LOYOLA; and, a petition praying for the issuance of a restraining order to enjoin the closing of Mangyan Road. On 21 September 1989 the incidents were resolved by the Court of Appeals4 thus

1. Defendant-appellant La Vista Association, Inc., its Board of Directors and other officials and all persons acting under their orders and in their behalf are ordered to allow all residents of Phase I and II of Loyola Grand Villas unobstructed right-of-way or passage through the Mangyan Road which is the boundary between the La Vista Subdivision and the Loyola Grand Villas Subdivision; 2. The motion to intervene as plaintiffs filed by the residents of Loyola Grand Villas Subdivision is GRANTED; and 3. The motions for contempt filed by both plaintiff-appellee and defendantappellant are DENIED. This resolution is immediately executory.5 On 15 December 1989 both motions for reconsideration of Solid Homes, Inc., and LA VISTA were denied. In separate petitions, both elevated the 21 September 1989 and 15 December 1989 Resolutions of the Court of Appeals to this Court. The petition of Solid Homes, Inc., docketed as G.R. No. 91433, prayed for an order directing the appellate court to take cognizance of and hear the motions for contempt, while that of LA VISTA in G.R. No. 91502 sought the issuance of a preliminary injunction to order Solid Homes, Inc., ATENEO and LOYOLA residents to desist from intruding into Mangyan Road. On 22 May 1990, pending resolution of G.R. Nos. 91433 and 91502, the Second Division of the Court of Appeals6 in CA-G.R. CV No. 19929 affirmed in toto the Decision of the trial court in Civil Case No. Q-22450. On 6 September 1990 the motions for reconsideration and/or re-raffle and to set the case for oral argument were denied. In view of the affirmance of the Decision by the Court of Appeals in CA-G.R. CV No. 19929 this Court dismissed the petition in G.R. No. 91502 for being moot as its main concern was merely the validity of a provisional or preliminary injunction earlier issued. We also denied the petition in G.R. No. 91433 in the absence of a discernible grave abuse of discretion in the ruling of the appellate court that it could not entertain the motions to cite the parties for contempt because a charge of contempt committed against a superior court may be filed only before the court against whom the contempt has been committed (Sec. 4, Rule 71, Rules of Court).7 Consequently we are left with the instant case where petitioner LA VISTA assails the Decision of respondent Court of Appeals affirming in toto the Decision of the trial court which rendered a judgment on the merits and recognized an easement of right-of-way along Mangyan Road, permanently
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enjoining LA VISTA from closing to Solid Homes, Inc., and its successors-ininterest the ingress and egress on Mangyan Road. In its first assigned error, petitioner LA VISTA argues that respondent appellate court erred in disregarding the decisions in (a) La Vista Association, Inc. v. Hon. Ortiz,8 affirmed by this Court in Tecson v. Court of Appeals;9 (b) La Vista Association, Inc. v. Hon. Leviste,10 affirmed by this Court in Rivera v. Hon. Intermediate Appellate Court;11 and, (c) La Vista v. Hon. Mendoza,12 and in holding that an easement of right-of-way over Mangyan Road exists.13 We do not agree with petitioner. The reliance of petitioner on the cited cases is out of place as they involve the issuance of a preliminary injunction pending resolution of a case on the merits. In the instant case, however, the subject of inquiry is not merely the issuance of a preliminary injunction but the final injunctive writ which was issued after trial on the merits. A writ of preliminary injunction is generally based solely on initial and incomplete evidence. The opinion and findings of fact of a court when issuing a writ of preliminary injunction are interlocutory in nature and made even before the trial on the merits is terminated. Consequently there may be vital facts subsequently presented during the trial which were not obtaining when the writ of preliminary injunction was issued. Hence, to equate the basis for the issuance of a preliminary injunction with that for the issuance of a final injunctive writ is erroneous. And it does not necessarily mean that when a writ of preliminary injunction issues a final injunction follows. Accordingly, respondent Court of Appeals in its assailed Decision rightly held that We are unswayed by appellants theory that the cases cited by them in their Brief (pages 17 and 32) and in their motion for early resolution (page 11, Rollo) to buttress the first assigned error, are final judgments on the merits of, and therefore res judicata to the instant query. It is quite strange that appellant was extremely cautious in not mentioning this doctrine but the vague disquisition nevertheless points to this same tenet, which upon closer examination negates the very proposition. Generally, it is axiomatic that res judicata will attach in favor of La Vista if and when the case under review was disposed of on the merits and with finality (Manila Electric Co. vs. Artiaga, 50 Phil. 144; 147; S. Diego vs. Carmona, 70 Phil. 281; 283; cited in Comments on the Rules of Court, by Moran, Volume II, 1970 edition, page 365; Roman Catholic Archbishop vs. Director of Lands, 35 Phil. 339; 350-351, cited in Remedial Law Compendium, by Regalado, Volume I, 1986 Fourth revised Edition, page 40). Appellants suffer from the mistaken notion that the merits of the certiorari petitions impugning the preliminary injunction in the cases cited by it are

tantamount to the merits of the main case, subject of the instant appeal. Quite the contrary, the so-called final judgments adverted to dealt only with the propriety of the issuance or non-issuance of the writ of preliminary injunction, unlike the present recourse which is directed against a final injunctive writ under Section 10, Rule 58. Thus the invocation of the disputed matter herein is misplaced.14 We thus repeat what we said in Solid Homes, Inc. v. La Vista15 which respondent Court of Appeals quoted in its assailed Decision16 Being an ancillary remedy, the proceedings for preliminary injunction cannot stand separately or proceed independently of the decision rendered on the merits of the main case for injunction. The merits of the main case having been already determined in favor of the applicant, the preliminary determination of its non-existence ceases to have any force and effect. Petitioner LA VISTA in its lengthy Memorandum also quotes our ruling in Ramos, Sr. v. Gatchalian Realty, Inc.,17 no less than five (5) times18 To allow the petitioner access to Sucat Road through Gatchalian Avenue inspite of a road right-of-way provided by the petitioners subdivision for its buyers simply because Gatchalian Avenue allows petitioner a much greater ease in going to and coming from the main thoroughfare is to completely ignore what jurisprudence has consistently maintained through the years regarding an easement of a right-of-way, that mere convenience for the dominant estate is not enough to serve as its basis. To justify the imposition of this servitude, there must be a real, not a fictitious or artificial, necessity for it (See Tolentino, Civil Code of the Philippines, Vol. II, 2nd ed., 1972, p. 371) Again this is misplaced. Ramos, Sr. v. Gatchalian Realty, Inc.,19 concerns a legal or compulsory easement of right-of-way Since there is no agreement between the contending parties in this case granting a right-of-way by one in favor of the other, the establishment of a voluntary easement between the petitioner and the respondent company and/or the other private respondents is ruled out. What is left to examine is whether or not petitioner is entitled to a legal or compulsory easement of a right-of-way which should be distinguished from a voluntary easement. A legal or compulsory easement is that which is constituted by law for public use or for private interest. By express provisions of Arts. 649 and 650 of the New Civil
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Code, the owner of an estate may claim a legal or compulsory right-of-way only after he has established the existence of four (4) requisites, namely, (a) the estate is surrounded by other immovables and is without adequate outlet to a public highway; (b) after payment of the proper indemnity; (c) the isolation was not due to the proprietors own acts; and, (d) the right-of-way claimed is at a point least prejudicial to the servient estate, and insofar as consistent with this rule, where the distance from the dominant estate to a public highway may be the shortest.20 A voluntary easement on the other hand is constituted simply by will or agreement of the parties. From the facts of the instant case it is very apparent that the parties and their respective predecessors-in-interest intended to establish an easement of rightof-way over Mangyan Road for their mutual benefit, both as dominant and servient estates. This is quite evident when: (a) the Tuasons and the Philippine Building Corporation in 1949 stipulated in par. 3 of their Deed of Sale with Mortgage that the boundary line between the property herein sold and the adjoining property of the VENDORS shall be a road fifteen (15) meters wide, one-half of which shall be taken from the property herein sold to the VENDEE and the other half from the portion adjoining belonging to the vendors; (b) the Tuasons in 1951 expressly agreed and consented to the assignment of the land to, and the assumption of all the rights and obligations by ATENEO, including the obligation to contribute seven and one-half meters of the property sold to form part of the 15-meter wide roadway; (c) the Tuasons in 1958 filed a complaint against MARYKNOLL and ATENEO for breach of contract and the enforcement of the reciprocal easement on Mangyan Road, and demanded that MARYKNOLL set back its wall to restore Mangyan Road to its original width of 15 meters, after MARYKNOLL constructed a wall in the middle of the 15-meter wide roadway; (d) LA VISTA President Manuel J. Gonzales admitted and clarified in 1976, in a letter to ATENEO President Fr. Jose A. Cruz, S.J., that Mangyan Road is a road fifteen meters wide, one-half of which is taken from your property and the other half from the La Vista Subdivision. So that the easement of a right-of-way on your 7 1/2 m. portion was created in our favor and likewise an easement of right-of-way was created on our 7 1/2 m. portion of the road in your favor; (e) LA VISTA, in its offer to buy the hillside portion of the ATENEO property in 1976, acknowledged the existence of the contractual right-of-way as it manifested that the mutual right-of-way between the Ateneo de Manila University and La Vista Homeowners Association would be extinguished if it bought the adjacent ATENEO property and would thus become the owner of both the dominant and servient estates; and, (f) LA VISTA President Luis G. Quimson, in a letter addressed to the Chief Justice, received by this Court on 26 March 1997, acknowledged that one-half of the

whole length of (Mangyan Road) belongs to La Vista Assn., Inc. The other half is owned by Miriam (Maryknoll) and the Ateneo in equal portions; These certainly are indubitable proofs that the parties concerned had indeed constituted a voluntary easement of right-of-way over Mangyan Road and, like any other contract, the same could be extinguished only by mutual agreement or by renunciation of the owner of the dominant estate. Thus respondent Court of Appeals did not commit a reversible error when it ruled that Concerning the pivotal question posed herein on the existence of an easement, we are of the belief, and thus hereby hold that a right-of-way was properly appreciated along the entire route of Mangyan Road. Incidentally, the pretense that the court a quo erred in holding that Mangyan Road is the boundary road between La Vista and Ateneo (page 31, Appellants Brief) does not raise any critical eyebrow since the same is wholly irrelevant to the existence of a servitude thereon from their express admission to the contrary (paragraph 1, Answer). Ones attention should rather be focused on the contractual stipulations in the deed of sale between the Tuason Family and the Philippine Building Corporation (paragraph 3, thereof) which were incorporated in the deed of assignment with assumption of mortgage by the Philippine Building Corporation in favor of Ateneo (first paragraph, page 4 of the deed) as well as in the deed of sale dated October 24, 1976 when the property was ultimately transferred by Ateneo to plaintiff-appellee. Like any other contractual stipulation, the same cannot be extinguished except by voluntary rescission of the contract establishing the servitude or renunciation by the owner of the dominant lots (Chuanico vs. Ibaez, 7 CA Reports, 2nd Series, 1965 edition, pages 582; 589, cited in Civil Law Annotated, by Padilla, Volume II, 1972 Edition, pages 602-603), more so when the easement was implicitly recognized by the letters of the La Vista President to Ateneo dated February 11 and April 28, 1976 (page 22, Decision; 19 Ruling Case Law 745). The free ingress and egress along Mangyan Road created by the voluntary agreement between Ateneo and Solid Homes, Inc., is thus legally demandable (Articles 619 and 625, New Civil Code) with the corresponding duty on the servient estate not to obstruct the same so much so that When the owner of the servient tenement performs acts or constructs works impairing the use of the servitude, the owner of the dominant tenement may ask for the destruction of such works and the restoration of the things to their condition before the impairment was committed, with indemnity for damages suffered (3 Sanchez
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Roman 609). An injunction may also be obtained in order to restrain the owner of the servient tenement from obstructing or impairing in any manner the lawful use of the servitude (Resolme v. Lazo, 27 Phil. 416; 417; 418). (Commentaries and Jurisprudence on the Civil Code of the Philippines, by Tolentino, Volume 2, 1963 edition, page 320)21 Resultantly, when the court says that an easement exists, it is not creating one. For, even an injunction cannot be used to create one as there is no such thing as a judicial easement. As in the instant case, the court merely declares the existence of an easement created by the parties. Respondent court could not have said it any better It must be emphasized, however, that We are not constituting an easement along Mangyan Road, but merely declaring the existence of one created by the manifest will of the parties herein in recognition of autonomy of contracts (Articles 1306 and 619, New Civil Code; Tolentino, supra, page 308; Civil Code of the Philippines, by Paras, Volume II, 1984 edition, page 549).22 The argument of petitioner LA VISTA that there are other routes to LOYOLA from Mangyan Road is likewise meritless, to say the least. The opening of an adequate outlet to a highway can extinguish only legal or compulsory easements, not voluntary easements like in the case at bar. The fact that an easement by grant may have also qualified as an easement of necessity does not detract from its permanency as a property right, which survives the termination of the necessity.23 That there is no contract between LA VISTA and Solid Homes, Inc., and thus the court could not have declared the existence of an easement created by the manifest will of the parties, is devoid of merit. The predecessors-in-interest of both LA VISTA and Solid Homes, Inc., i.e., the Tuasons and the Philippine Building Corporation, respectively, clearly established a contractual easement of right-of-way over Mangyan Road. When the Philippine Building Corporation transferred its rights and obligations to ATENEO the Tuasons expressly consented and agreed thereto. Meanwhile, the Tuasons themselves developed their property into what is now known as LA VISTA. On the other hand, ATENEO sold the hillside portions of its property to Solid Homes, Inc., including the right over the easement of right-of-way. In sum, when the easement in this case was established by contract, the parties unequivocally made provisions for its observance by all who in the future might succeed them in dominion.

The contractual easement of right-of-way having been confirmed, we find no reason to delve on the issue concerning P.D. No. 957 which supposedly grants free access to any subdivision street to government or public offices within the subdivision. In the instant case, the rights under the law have already been superseded by the voluntary easement of right-of-way. Finally, petitioner questions the intervention of some LOYOLA residents at a time when the case was already on appeal, and submits that intervention is no longer permissible after trial has been concluded. Suffice it to say that in Director of Lands v. Court of Appeals,24 we said It is quite clear and patent that the motions for intervention filed by the movants at this stage of the proceedings where trial has already been concluded, a judgment thereon had been promulgated in favor of private respondent and on appeal by the losing party x x x the same was affirmed by the Court of Appeals and the instant petition for certiorari to review said judgment is already submitted for decision by the Supreme Court, are obviously and manifestly late, beyond the period prescribed under x x x Section 2, Rule 12 of the Rules of Court (now Sec. 2, Rule 19, 1997 Rules of Civil Procedure). But Rule 12 of the Rules of Court, like all other Rules therein promulgated, is simply a rule of procedure, the whole purpose and object of which is to make the powers of the Court fully and completely available for justice. The purpose of procedure is not to thwart justice. Its proper aim is to facilitate the application of justice to the rival claims of contending parties. It was created not to hinder and delay but to facilitate and promote the administration of justice. It does not constitute the thing itself which courts are always striving to secure to litigants. It is designed as the means best adopted to obtain that thing. In other words, it is a means to an end. The denial of the motions for intervention arising from the strict application of the Rule due to alleged lack of notice to, or the alleged failure of, movants to act seasonably will lead the Court to commit an act of injustice to the movants, to their successors-in-interest and to all purchasers for value and in good faith and thereby open the door to fraud, falsehood and misrepresentation, should intervenors claims be proven to be true. After all, the intervention does not appear to have been filed to delay the proceedings. On the contrary, it seems to have expedited the resolution of the case as the incidents brought forth by the intervention, which could have been raised in another case, were resolved together with the issues herein resulting in a more thorough disposal of this case.
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WHEREFORE, the Decision of respondent Court of Appeals dated 22 May 1990 and its Resolution dated 6 September 1990, which affirmed the Decision of the RTC-Br. 89, Quezon City, dated 20 November 1987, are AFFIRMED. SO ORDERED. Vitug, Kapunan and Hermosisima, Jr., JJ., concur. Judgment affirmed. Notes.View that the purpose of a temporary restraining order or preliminary injunction is to preserve the status quo ante litem motam or the last actual, peaceable, noncontested status. (Lim vs. Pacquing, 240 SCRA 649 [1995]) To be permitted to intervene in a pending action, the party must have a legal interest in the matter in litigation, or in the success of either of the parties or an interest against both, or he must be so situated as to be adversely affected by a distribution or other disposition of the property in the custody of the court or an officer thereof. (Acenas II vs. Court of Appeals, 247 SCRA 773 [1995]) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [La Vista Association, Inc. vs. Court of Appeals, 278 SCRA 498(1997)]

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[No. 48384. October 11, 1943] Severo Amor, petitioner, vs. Gabriel Florentino et al., respondents.
1.Easements; Light and View and "Altius non Tollendi"; Requirement upon the Owner of Servient Estate; Negative and Positive Easements.The easement of light and view and easement not to build higher (altius non tollendi) go together because an easement of light and view requires that the owner of the servient estate shall not build to a height that will obstruct the window. They are, as it were, the two sides of the same coin. While an easement of light and view is positive, that of altius non tollendi is negative. 2.Id.; Modes of Establishing and Acquiring Easements.According to article 536, Civil Code, easements are established by law or by will of the owners. Acquisition of easements is first by title or its equivalent and secondly by prescription. 3.Id.; What Characterizes Its Existence.Under article 541 of the Civil Code, the visible and permanent sign of an easement is the title that characterizes its existence. 4.Id.; When an Easement Is Deemed Created; Nobody Can Have an Easement over His Own Property.The easement is not created till the division of the property, inasmuch as a predial or real easement is one of the rights in another's property, or jura in re aliena and nobody can have an easement over his own property, nemini sua res servit. 5.Id.; Requisite of Easement under Article 530 of Civil Code.The requisite of an easement as required by article 530 of the Civil Code is that there must be two proprietorsone, of the dominant estate and another, of the servient estate. 6.Id.; the Present Case and that of Cortes vs. Yu-Tibo (2 Phil., 29), Distinguished.The present case is distinguished from that of the case of Cortes vs. Yu-Tibo (2 Phil., 29), that in the latter it involved acquisition of easement by prescription, while in the present case the question is the acquisition of easement by title, or its equivalent, under article 541 of the Civil Code. While a formal prohibition was necessary in the former case in order to start the period of prescription, no such act is necessary in the present case because of the existence of the apparent sign which is a sufficient title in itself to create the easement. 7.Id.; Easement Enjoyed by Former Owner Subsists after Division of Estate in the Absence of Contract to the Contrary.When an estate is divided between different persons, and in the contract nothing is said about a mode of enjoyment different from that used by the original owner thereof, the nec-essary easements for said mode of enjoyment are understood to be subsisting. 8.Id.; Law of Easement Prior to Civil Code Is the Same as in the Latter.The same principle enunciated in article 541 of the Spanish Civil Code was already an integral part of the Spanish law before the promulgation of the Civil Code in 1889, and, therefore, even if the case should be governed by the Spanish law prior to the Civil Code, the easement in question would also have to be upheld.

9.Id.; Prescriptive Laws of Easement before and after the Civil Code.The prescriptive period under the Partidas was 10 years between persons who were present, and 20 years between ab-sentees. (4 Manresa, 605.) According to article 537 of the Civil Code, continuous and apparent easements may be acquired by prescription for 20 years. Under sections 40 and 41 of the Code of Civil Procedure, the period is 10 years. 10.Id.; Rights of Purchasers of Land Burdened with Apparent Easements.Purchasers of lands burdened with apparent ease-ments do not enjoy the rights of third persons who acquire prop-erty, though the burden is not recorded. 11.Id.; Easements Exist Side by Side with Ownership.Absolute and unlimited dominion is unthinkable because it would destroy and defeat itself, inasmuch as proper enjoyment or property requires mutual service and forbearance among the adjoining estates. It is thus that easements, whether created by law or established by will of the parties, must perforce exist side by side with ownership.

PETITION to review on certiorari a decision of the Court of Appeals. The facts are stated in the opinion of the court. Bocobo, J.: The petitioner asks for the setting aside of the decision of the Court of Appeals which affirmed the judgment of the Court of First Instance of Ilocos Sur. The trial court declared that an easement of light and view had been established in favor of the property of the plaintiffs (re-spondents herein) and ordered the petitioner to remove within 30 days all obstruction to the windows of respondents' house, to abstain from constructing within three meters from the boundary line, and to pay P200.00 in damages. It appears that over 50 years ago, Maria Florentino owned a house and a camarin or warehouse in Vigan, Ilocos Sur. The house had and still has, on the north side, three windows on the upper story, and a fourth one on the ground floor. Through these windows the house receives light and air from the lot where the camarin stands. On September 6, 1885, Maria Florentino made a will, devising the house and the land on which it is situated to Gabriel Florentino, one of the respondents herein, and to Jose Florentino, father of the other respondents. In said will, the testatrix also devised the warehouse and the lot where it is situated to Maria Encarnacion Florentino. Upon the death of the tes-tatrix in 1892, nothing was said or done by the devisees in regard to the windows in question. On July 14,1911, Maria Encarnacion Florentino sold her lot and the warehouse thereon to the petitioner, Severo Amor, the deed of sale stating that the vendor had inherited the property from her aunt, Maria
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Florentino. In January, 1938, petitioner destroyed the old warehouse and started to build instead a two-story house. On March 1st of that year, respondents filed an action to prohibit petitioner herein from building higher than the original structure and from executing any work which would shut off the light and air that had for many years been received through the four windows re-ferred to. The Court of First Instance found on the loth of the same month that the construction of the new house had almost been completed, so the court denied the writ of preliminary injunction. I Inasmuch as Maria Florentino died in 1892, according to the finding of fact of the Court of Appeals, Article 541 of the Civil Code governs this case. The facts above recited create the very situation provided for in said article, which reads as follows: "Art. 541. La existencia de un signo aparente de servidumbre entre dos fincas, establecido por el propietario de ambas, se considerar si se enajenare una, como ttulo para que la servidumbre contine activa y pasivamente, a no ser que, al tiempo de separarse la propiedad de las dos fincas, se exprese lo contrario en el ttulo de enajenacin de cualquiera de ellas, o se haga desaparecer aquel signo antes del otorgamiento de la escritura." "Art. 541. The existence of an apparent sign of ease-ment between two estates, established by the proprietor of both, shall be considered, if one of them is alienated, as a title so that the easement will continue actively and pas-sively, unless at the time the ownership of the two estates is divided, the contrary is stated in the deed of alienation of either of them, or the sign is made to disappear before the instrument is executed."

interest, Maria Encarnacion Florentino, object to them or demand that they be closed. The easement was therefore created from the time of the death of the original owner of both estates, so when petitioner bought the land and the camarin thereon from Maria Encarnacion Florentino, the burden of this easement continued on the real property so acquired because according to Article 534, "easements are inseparable from the estate to which they actively or passively pertain." An incidental, question that arises at this juncture is whether or not Article 541 applies to a division of property by succession. The affirmative has been authoritatively, declared. (Manresa, "Comentarios al Cdigo Civil Espaol," vol. 4, p. 619; Sentence of the Supreme Tribunal of Spain, November 17, 1911). Petitioner assigns as an error of the Court of Appeals the supposed failure of. that tribunal to pass upon his motion to consider certain allegedly new evidence to prove that Maria Florentino, the original owner of the properties, died in 1885. Petitioner alleges that Maria Florentino died in 1885 and, therefore, the Law of the Partidas should be followed in this case and not the Civil Code. However, the petitioner's contention cannot be upheld without rejecting the finding of fact made by the Court of Appeals, as follows: "Habiendo pasado la propiedad de la casa de manposteria a los demandantes, a la muerte de Maria Florentino, ocurrida en 1892, (el demandado sostiene que fue con anterioridad a 1889) no hay duda ninguna de que los demandantes adquirieron la servidumbre de luces y vistas sobre el camarin del demandado mediante ttulo y por pre-scripcin (Art.537)." We cannot review the above finding of fact by the Court of Appeals that Maria Florentino died in 1892. The evidentiary fact from which the Court of Appeals drew the above finding is that Gregorio Florentino during the trial in 1938 testified to facts of his own personal knowledge, and he was then 58 years old, having been born in 1880. If Maria Florentino, as claimed by petitioner, had died in 1885, Gregorio Florentino would have been only 5 years of age at the time of Maria Florentino's death. The Court of Appeals therefore concluded that Maria Florentino died in 1892, when Gregorio Florentino was then 12 years of age. We do not believe we can disturb the finding of the Court of Appeals, because its deduction as to the date of Maria Florentine's death may be right or wrong, according to one's own reasoning. In other words, its conclusion of fact from Gregorio Florentino's testimony is not necessarily and unavoidably mistaken. On the contrary, it is reason-able to believe that a person 58 years

When the original owner, Maria Florentino, died in 1892, the ownership of the house and its lot passed to respondents, while the dominion over the camarin and its lot was vested in Maria Encarnacion Florentino, from whom said property was later bought by petitioner. At the time the devisees took possession of their respective portions of the inherit-ance, neither the respondents nor Maria Encarnacion Florentino said or did anything with respect to the four windows of the respondents' house. The respondents did not renounce the use of the windows, either by stipulation or by actually closing them permanently. On the contrary, they exercised the right of receiving light and air through those windows. Neither did the petitioner's predecessor in

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old cannot remember facts of inheritance as far back as when he was only 5 years of age. Furthermore, the burial certificate and the gravestone, whose copy and photograph, respectively, were offered by petitioner in a motion for new trial filed in the Court of Appeals, could have been discovered by petitioner before the trial in the Court of First Instance by the exercise of due diligence. There is no reason why this evidence could be found when the case was already before the Court of Appeals, but could not be found before the trial in the Court of First Instance. It was easy, before such trial, for the petitioner to inquire from the relatives of Maria Florentino as to when she died. And having ascertained the date, it was also easy to secure the burial certificate and a photo-graph of the gravestone, supposing them to be really of Maria Florentino. The fact is, petitioner never tried to find out such date and never tried to secure the additional evidence till his counsel raised this issue for the first time before the Court of Appeals. That Court was therefore right in rejecting petitioner's claim that Maria Florentino died in 1885. (Sec. 497, Act 190). The petitioner's state-ment in his brief (p. 11) that the Court of Appeals neither passed upon his motion nor took the burial certificate and the gravestone into account is not true, because the very words of the Court of Appeals clearly show that the Court had in mind said motion and evidence when the decision was signed. The decision said: "a la muerte de Maria Florentino ocurrida en 1892 (el demandado sostiene que fu con anterioridad a 1889)" (Italics supplied). Lastly, the issue as to the date of Maria Florentino's death cannot be raised for the first time on appeal. Petitioner did not in the trial court allege or prove this point. He presented this issue for the first time in the Court of Appeals. (Sec. 497, Act 190). Let us now consider Article 541 more closely in its application to the easement of light and view and to the ease-ment not to build higher (altius non tollendi). These two easements necessarily go together because an easement of light and view requires that the owner of the servient estate shall not build to a height that will obstruct the window. They are, as it were, the two sides of the same coin. While an easement of light and view is positive, that of altius non tollendi is negative. Clemente de Diego states that when article 538 speaks of the time for the commencement of prescription for negative easements, "it refers to those negative easements which are the result and consequence of others that are positive, such as the easement not to build higher, or not to construct, which is indispensable to the easement of light." ("Se refiere a aquellas servidumbres negativas que son sucuela y consecuencia de otras

positivas, como la de no levantar ms alto, o de no edificar, que es imprescindible para la servidumbre de luces.") ("Curso Elemental de Derecho Civil Espaol, Comun y Foral," vol. 3, p. 450). This relation of these two easements should be borne in mind in connection with the following discussion of (1) the modes of establishing and acquiring easements; (2) the meaning of article 541; and (3) the doctrine in the case of Cortes vs. Yu-Tibo. First, as to the modes of establishing and acquiring ease-ments. According to Article 536, easements are established by law or by will of the owners. Acquisition of easements is first by title or its equivalent and secondly by prescrip-tion. What acts take the place of title ? They are mentioned in Articles 540 and 541, namely, (1) a deed of recognition by the owner of the servient estate; (2) a final judgment; and (3) an apparent sign between two estates, established by the owner of both, which is the case of article 541. Sanchez Roman calls such apparent sign under article 541 "supletoria del ttulo constitutive de la servidumbre." (Derecho Civil, vol. 3, p. 656). The same jurist says in regard to the ways of constituting easements: "En resumen, segn el Cdigo, las servidumbres reales se constituyen.: "Las continuas y aparentes por ttulo, por prescripcin de veinte anos y por la existencia de un signo aparente de servidumbre, en el supuesto y condiciones del art. 541. "Las continuas no aparentes y las discontinues, sean o no aparentes por ttulo y por escritura del reconocimiento del dueo del predio sirviente o por sentencia firme, que se consideran como medios supletorios del ttulo. "Las aparentes, aunque sean discontinuas, se adquieren tambin por la existencia de un signo aparente en el supuesto y condiciones del articulo 541." "To sum up, according to the Code, real easements are constituted: "Continuous and apparent, by title, by prescription for twenty years and by the existence of an apparent sign of easement, in the case and under the conditions of Art. 541. "Continuous non-apparent and discontinuous, whether apparent or not, by title and by deed of recognition by the owner of the servient estate or by final judgment, which are considered as suppletory means of title.

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"Apparent easements, although discontinuous, are also acquired by the existence of an apparent sign in the case and under the conditions of Art. 541." In the Sentence of the Supreme Tribunal of Spain dated November 7, 1911, it was held that under article 541 of the Civil Code, the visible and permanent sign of an easement "is the title that characterizes its existence" ("es el ttulo caracteristico de su existencia.") It will thus be seen that under article 541 the existence of the apparent sign in the instant case, to wit, the four windows under consideration, had for all legal purposes the same character and effect as a title of acquisition of the easement of light and view by the respondents upon the death of the original owner, Maria Florentino. Upon the establishment of that easement of light and view, the concomitant and concurrent easement of altius non tollendi was also constituted, the heir of the camarin and its lot, Maria Encarnacion Florentino, not having objected to the existence of the windows. The theory of article 541, of making the existence of the apparent sign equivalent to a title, when nothing to the contrary is said or done by the two owners, is sound and correct, because as it happens in this case, there is an implied contract between them that the easements in question should be constituted. Analyzing article 541 further, it seems that its wording is not quite felicitous when it says that the easement should continue. Sound juridical thinking rejects such an idea because, properly speaking, the easement is not created till the division of the property, inasmuch as a predial or real easement is one of the rights in another's property, or jura in re aliena and nobody can have an easement over his own property, nemini sua res servit. In the instant case, there-fore, when the original owner, Maria Florentino, opened the windows which received light and air from another lot belonging to her, she was merely exercising her right of dominion. Consequently, the moment of the constitution of the easement of light and view, together with that of altius non tollendi, was the time of the death of the original owner of both properties. At that point, the requisite that there must be two proprietorsone of the dominant estate and another of the servient estatewas fulfilled. (Article 530, Civil Code.) Upon the question of the time when the easement in article 541 is created, Manresa presents a highly interesting theory, whether one may agree with it or not. He says: "La servidumbre encubierta, digmoslo as, por la unidad de dueo, se hace ostensible, se revela con toda su verdadera importancia al separarse la

propiedad de las fincas o porciones de finca que respectivamente deben representar el papel de predios sirviente y dominante." "The concealed easement, as it were by the oneness of the owner, becomes visible, and is revealed in all its importance when the ownership of the estate or portions of the estate which respectively should play the role of servient and dominant estates is divided."

Such a view cannot be fully accepted because before the division of the estate there is only a service in fact but not an easement in the strictly juridical sense between the two buildings or parcels of land. We come now to the case of Cortes vs. Yu-Tibo, 2 Phil., 24, decided in 1903, Mr. Justice, later Chief Justice, Mapa speaking for the Court. Counsel for petitioner contends that the doctrine in that case is controlling in the present one. If the essential facts of ftie two cases were the same, there is no doubt but that the early opinion would be decisive inasmuch as it is by its cogent reasoning one of the landmarks in Philippine jurisprudence. However, the facts and theories of both cases are fundamentally dissimilar. What is more, as will presently be explained, that very deci-sion makes a distinction between that case and the situation provided for in article 541. In that case, Cortes sought an injunction to restrain Yu-Tibo from continuing the con-struction of certain buildings. Cortes' wife owned a house in Manila which had windows that had been in existence since 1843. The defendant, who occupied a house on the adjoining lot, commenced to raise the roof of the house in such a manner that one-half of the; windows in the house owned by plaintiff's wife had been covered. This Court, in affirming the judgment of the lower court which dissolved the preliminary injunction, held that the opening of windows through one's own wall does not in itself create an easement, because it is merely tolerated by the owner of the adjoin-ing lot, who may freely build upon his land to the extent of covering the windows, under article 581, and that this kind of easement is negative which can be acquired through prescription by counting the time from the date when the owner of the dominant estate in a formal manner forbids the owner of the servient estate from obstructing the light, which had not been done by the plaintiff in this case. It will thus be clear that one of the essential differences between that case and the present is that while the Yu-Tibo case involved acquisition of easement by prescription, in the present action the question is the acquisition of easement by title, or its equivalent, under article 541. Therefore, while a formal prohibition
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was necessary in the former case in order to start the period of prescription, no such act is necessary here because the existence of the apparent sign when Maria Florentino died was sufficient title in itself to create the easement. Another difference is that while in the Yu-Tibo case, there were two different owners of two separate houses from the beginning, in the present case there was only one origi-nal owner of the two structures. Each proprietor in the YuTibo case was merely exercising his rights of dominion, while in the instant case, the existence of the apparent sign upon the death of the original owner ipso facto burdened the land belonging to petitioner's predecessor in interest, with the easements of light and view and altius non tollendi in virtue of article 541. The very decision in Cortes vs. Yu-Tibo distinguishes that case from the situation foreseen in article 541. Said this Court in that case: "It is true that the Supreme Court of Spain, in its decisions of February 7 and May 5, 1896, has classified as positive easements of light which were .the object of the suits in which these decisions were rendered in cassation, and from these it might be believed at first glance, that the former holdings of the supreme court upon this subject had been overruled. But this is not so, as a matter of fact, inasmuch as there is no conflict between these decisions and the former decisions above cited. "In the first of the suits referred to, the question turned upon two houses which had formerly belonged to the same owner, who established a service of light on one of them for the benefit of the other. These properties were sub-sequently conveyed to two different persons, but at the time of the separation of the property nothing was said as to the discontinuance of the easement, nor were the windows which constituted the visible sign thereof removed. The new owner of the house subject to the easement endeavored to free it from the incumbrance, notwithstanding the fact that the easement had been in existence for thirty-five years, and alleged that the owner of the dominant estate had not performed any act of opposition which might serve as a starting point for the acquisition of a prescriptive title. The supreme court, in deciding this case, on the 7th of February, 1896, held that the easement in this particular case was positive, because it consisted in the active enjoy-ment of the light. This doctrine is doubtless based upon article 541 of the Code, which is of the following tenor: 'The existence of apparent sign of an easement between two tenements, established by the owner of both of them, shall be considered, should one be sold, as a title for the active and passive continuance of the easement, unless,

at the time of the division of the ownership of both tenements, the con-trary should be expressed in the deed of conveyance of either of them, or such sign is taken away before the execu-tion of such deed.' "The word 'active' used in the decision quoted in classify-ing the particular enjoyment of light referred to therein, presupposes on the part of the owner of the dominant estate a right to such enjoyment arising, in the particular cases passed upon by that decision, from the voluntary act of the original owner of the two houses, by which he imposed upon one of them an easement for the benefit of the other. It is well known that easements are established, among other cases, by the will of the owners. (Article 536 of the Code.) It was an act which was, in fact, respected and acquiesced in by the new owner of the servient estate, since he pur-chased it without making any stipulation against the ease-ment existing thereon, but, on the contrary, acquiesced in the continuance of the apparent sign thereof. As is stated in the decision itself, 'It is a principle of law that upon a division of a tenement among various persons in the absence of any mention in the contract of a mode of enjoy-ment different from that to which the former owner was accustomedsuch easements as may be necessary for the continuation of such enjoyment are understood to subsist.' It will be seen, then, that the phrase 'active enjoyment' involves an idea directly opposed to the enjoyment which is the result of a mere tolerance on the part of the adjacent owner, and which, as it is not based upon an absolute, en-forceable right, may be considered as of a merely passive character." (2 Phil., 29-31). Finally, the Yu-Tibo case was decided upon the theory of the negative easement of altius now tollendi, while the instant case is predicated on the idea of the positive easement of light and view under article 541. On this point, suffice it to quote from Manresa's work. He says: "Que en las servidumbres cuyo aspecto positivo aparece enlazado al negativo, asi como al efecto de la prescripci ha de considerarse preferente el aspecto negativo, al .efecto del art. 541 basta atender al aspecto positivo, y as la existencia de huecos o ventanas entre dos fincas que fueron de un mismo dueo es bastante para considerar establecidas, al separarse la propiedad de esas fincas, las servidumbres de luces o vistas, y con ellas las de no edificar o no levantar ms alto, porque sin stas no prodrian existir aqullas." "That in easements whose positive aspect appears tied up with the negative aspect, just as for the purposes of prescription the negative aspect has to be considered preferential, so for the purposes of Article 541 it is sufficient to view
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the positive aspect, and therefore the existence of openings or windows between two estates which belonged to the same owner is sufficient to establish, when the owner-ship of these estates is divided, the easements of light or view, and with them the easements of altius non tollendi because without the latter, the former cannot exist." There are several "decisions of the Supreme Court of Spain which have applied Article 541. Some of them are those of February 7,1896; February 6,1904; May 29,1911; and November 17,1911. The sentence of February 7, 1896, dealt with windows established in one house by the original owner of two houses. When he died, the two houses were adjudicated to different heirs. The court held that there was an easement of light. "Considerando que, segn lo establecido por este Supremo Tribunal en repetidas sentencias, y consignado, muy principalmente, en la dictada en 21 de Octubre de 1892, lo pre-ceptuado en la ley 14, ttulo 31 de la Partida 3.a, al tratar del modo de constituirse las servidumbres, no sta en oposicin con el principio mediante el que, dividida una finca entre diversas personas, sin que en el contrato se mencione cosa alguna acerca de un modo de aprovechamiento distinto del que usaba el primitivo dueno de ella, se entienden subsistentes las servidumbres necesarias para que aquel pueda tener lugar. "Considerando que ese principio y jurisprudencia han obtenido nueva sancin, puesto que a ellos obedece el concepto claro y concrete del articulo 541 del Cdigo Civil, aplicable al caso, * * *" (Riuz, C6digo Civil, Vol. V, pp. 349-350). "Considering that, according to what has been established by this Supreme Tribunal in repeated sentences, and principally declared in the sentence promulgated on October 21, 1892, the provision of law 14, title 31 of Partida 3 in treating of the mode of constituting easements, is not con-trary lo the principle that when an estate is divided between different persons, and in the contract nothing is said about a mode of enjoyment different from that used by the origi-nal owner thereof, the necessary easements for said mode of enjoyment are understood to be subsisting; "Considering that such principle and jurisprudence have obtained a new sanction, for due to them is the clear and concrete concept of Article 541 applicable to the case * * * ."

Therefore, considering that Maria Florentino died in 1892, according to a finding of fact by the Court of Appeals, there is an easement of light and view in favor of the respondents' property under article 541 of the Civil Code. II But granting, arguendo, that Maria Florentino died in 1885, as contended by petitioner, nevertheless the same principle enunciated in article 541 of the Spanish Civil Code was already an integral part of the Spanish law before the promulgation of the Civil Code in 1889, and, therefore, even if the case should be governed by the Spanish law prior to the Civil Code, the easement in question would also have to be upheld. That the law before the Civil Code was the same as at present is shown by the following: 1. Under Law 14, Title 31, Partida 3, this easement was constituted by an implied contract among the heirs of Maria Florentino. 2. Granting for the sake of argument that this easement was not created through an implied contract according to Law 14, Title 31, Partida 3, yet that provision of the Partidas was not inconsistent with the principle in question, so that there was a gap in the Partidas which the Supreme Court of Spain filled up from the Roman Law and modern civil codes, by recognizing the existence of this kind of ease-ment. 3. Law 17, Title 31, Partida 3 regarding the extinguish-ment df an easement did not prohibit the easement in the instant case. Therefore, we should adhere to the decisions of the Supreme Court of Spain which maintain this ease-ment under the Spanish law prior to the Civil Code. 4. Other considerations show that the principle of appar-ent sign as announced by the Supreme Tribunal of Spain is not incompatible with, the Partidas. First, as to the implied contract. Law 14, Title 31, Partida 3 provided that easements were acquired by con-tract, by will and by prescription. Upon the death of the original owner, Maria Florentino, the four windows under consideration already existed and were visible. One of the heirs, Maria Encarnacion Florentino, to whom the camarin and its lot had been devised, having failed to object to the same, knowingly consented to their continuance. Nor did Gabriel and Jose Florentino (devisees of the house that had the four windows) permanently close the windows. There was consequently an implied agreement between her and the devisees of the house with the four windows
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to the effect that the service of these windows would continue, thus creating the easement of light and view and the concomitant easement of altius non tollendi. Hence, the ease-ment in question was acquired by Gabriel and Jose Floren-tino through contract under Law 14, Title 31, Partida 3. Secondly, with respect to the doctrine of the Supreme Tribunal of Spain. In a series of decisions of that court, it was held that Law 14, Title 31, Partida 3 was not opposed to the easement under review. One of those decisions is that of November 7,1883, which held: "Considerando que, segn la doctrina establecida por este Tribunal Supremo, lo dispuesto en la ley 14, tt. 31, Partida 3a, que trata de cmo se constituyen las servidumbres, no se opone al principio de que dividido un predio entre dos diferentes personas, sin que se establezca en el contrato un modo de disfrute diferente del que usaba el primitivo dueo de la totalidad, se entienden subsistentes las servidumbres necesarias para verificarlo, y que el signo aparente de ellas es un titulo para que continen si al tiempo de la divisin de la propiedad no se expresa lo contrario, que es lo que acontece en el presente caso, puesto que la finca adjudicada en pago a Juan Prez Charueco, objeto de este pleito, al fallecimiento de aquel se dividi entre sus hijos Juan y Maria Francisca, sin establecerse novedad alguna respecto a la manera de su disfrute, * * *" Other decisions of the Supreme Tribunal of Spain to the same effect are those of September 14, 1867 and June 7, 1883. (See Scaevola, "Cdigo Civil Comentado" vol. 10, pp. 272-274.) So that, granting for the sake of argument, that the easement was not created through an implied contract according to Law 14, Title 31, Partida 3, yet that provision of the Partidas, according to decisions of the Supreme Tribunal of Spain, was not inconsistent with the principle in question. The problem in this case not having been fore-seen in Law 14, Title 31, Partida 3, there was a gap in the old legislation, which the Supreme Tribunal of Spain filled up from the Roman Law and from modern Civil Codes. The principle in question was deeply rooted in the Roman Law. It is from the Roman Law that the Supreme Tribunal of Spain obtained this principle, in order to solve a question not provided for by the Partidas, whose main source was also the Roman law. In other words, the Partidas being silent on the point under consideration, the Supreme Tri-bunal of Spain resorted to the authoritative voice of the Roman law from which the Law of the Partidas had derived its inspiration.

The following quotations from the Spanish version of the Roman Law Digest will prove the assertions just made: "Si te vendiere una cierta parte de mi fundo, te corresponder tamben el derecho de acueducto (4), aunque muchas veces la conduccin sea causa de la otra parte del mismo fundo." (Digesto.Lib. VIII, Tit. Ill, Ley XXV.) "Aquel que tena dos casas bajo un mismo techo corrido, leg entrambas diversos sujetos. Respond que en razn que el techo puede pertenecer dos de suerte tal que sean de cada uno ciertas y determinadas partes de l; no tenan accin reciproca para prohibir que las vigas de las unas casas estuvieren dentro de las otras." (Digesto.Lib. VIII, Tit. II, Ley XXXVI, p. 246). "Una testadora tena unas casas unidas un fundo que leg; se pregunt: si estas no siguieren al fundo legado, y el legatario vindicase st: tal fundo deber alguna servidumbre las casas? bien si el legatario reclamare que se le diere el fundo en virtud de fideicomiso su favor, debern acaso los herederos reservar alguna servidumbre favor de las casas? Respond que deban hacerlo." (Digesto.Lib. VIII, Tit. V, Ley XX, p. 256). Among the modern civil codes which contain the rule in question are those of France, Belgium, Holland, Portugal, Mexico and Chile. It is presumed that the Supreme Tribunal of Spain had also in mind at least one of them when it decided cases involving this principle before the promulga-tion of the Spanish Civil Code. When, therefore, Maria Florentino died (supposing she died in 1885), the status of the Spanish law was in favor of the doctrine in question. We cannot change it because it was in full force at the time of the alleged date of Maria Florentino's death. We cannot reject a doctrine established by the Spanish Supreme Tribunal as an integral part of the Spanish law before the promulgation of the Civil Code in 1889. And we know that jurisprudencein the sense of court decisionsis one of the sources of the law. Thirdly, concerning Law 17, Title 31, Partida 3. It is true that the eminent jurist, Manresa, is of the opinion that "el precepto del art. 541 no solo no exista en huestra antigua legislacin, sino que poda deducirse claramente lo contrario de la ley 17, tit. 31, Partida 3.a * * *." However, a careful reading of this provision of the Partidas reveals that the same did not militate against the creation of an easement by an apparent sign if nothing was said or done when the property is divided. Law 17, Title 31, Partida 3, reads as follows:
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"Partida 3.a tit XXXI, ley 17.Perderse podran aun las servidumbres en dos maneras, sin aquellas que de susodichos. La una es, quitndola el seor de aquella cosa, a quien deban la servidumbre, si fuere toda suya: ms si la casa o heredad de muchos debiesen la servidumbre, no la puede el uno quitar tan solamente, sin otorgamiento de los otros. La otra manera por que se pierde, es sta: as como cuando aquel cuya es la cosa que debe la servidumbre, comprala otra en que la haba ganada. Que por razn de la compra, que se ayunta la una cosa con la otra de su seorio, pierdese la servidumbre. Y maguer la enajene despus o la tenga para s, de all adelante nunca debe ser demandada, ni es obligada la cosa que asi es comprada a aquella servi-dumbre. Fueras ende, si despes de eso f uese puesta nueva-mente." (Scaevola, Cdigo Civil, Tomo X, p. 326). This law regulates the extinguishment of an easement by merger of the dominant and the servient estates. Speaking of this law of the Partidas and of article 546, par. 1, of the Civil Code, both of which refer to merger of the two estates, Scaevola says: (p. 319, vol. 10) "Si el fundo gravado pasa ser propiedad del dueo del dominante viceversa, la servidumbre cesa ipso facto, por no haber ya dualidad de predios, por no ser necesario el uso la prohibicin, en cuanto como propietario de ambos predios puede su dueo servirse de ellos en tal concepto." Inasmuch as through merger, the easement is ipso facto extinguished, there is nothing strange or extraordinary in the provision of the law 17 that "de all adelante nunca debe ser demandada, ni es obligada la cosa que as es comprada a aquella servidumbre. Fueras ende si despus de eso fuese puesta nuevamente." But there is a world of difference between extinguishment of an easement by merger of the two estates and the constitution of an easement by an apparent sign when nothing is done or said upon the division of the property. Law 17, title 31, Partida 3, having in mind only the modes of extinguishment, the legislator did not intend to cover the question involved in the present case, which refers to the creation of an easement. What, then, are the differences between the extinguishment of an easement by merger under Law 17, title 31, Partida 3, and the constitution of an easement in this case, both before and after the Civil Code went into effect?

First, in merger under Law 17, Title 31, Partida 3, there were from the very beginning, already two separate estates, the dominant and the servient estates, whereas in this case, there was only one estate. Second, in merger under said Law 17, there were already two owners, whereas in this case, there was only one owner, Maria Florentino. Third, in merger under Law 17, there was already an easement in the legal sense, whereas in the instant case, there was only a service between the two lots, (while Maria Florentino was living) but there was as yet no easement from the juridical viewpoint. 4. Other considerations prove that the principle of apparent sign as enunciated by the Supreme Tribunal of Spain is not inconsistent with the Partidas. These considerations are: 1. Article 537, Civil Code, provides that continuous and apparent easements are acquired by title, or by prescription. However, side by side with that article is article 541 which contemplates an easement upon division of an estate, unless a stipulation to the contrary is agreed upon, or the sign is destroyed. Bearing in mind that title" includes a con-tract, our view is that if Article 537 and 541 of the Civil Code can stand together, there is no reason why Law 14, title 31, Partida 3, whereby easements are acquired by contract, by will and by prescription should be considered incompatible with the easement under review. 2. Article 546, par. 1 of the Civil Code ordains that by merger of the two estates in the same owner an easement is extinguished. Yet, coexistent with such provision is that of article 541 regarding the apparent sign which is a title for the easement. If these two principles can and do stand together under the Civil Code, the doctrine laid down by the Supreme Tribunal of Spainbefore the Civil Code was in force about the effect of an apparent sign can also stand together with Law 17, title 31, Partida 3 declaring the ex-tinguishment of an easement by merger. 3. Under article 546, par. 1 of the Civil Code, merger extinguishes an easement. So in case the estate is again divided by purchase, etc., the easement is not, under the Civil Code automatically revived. That is the same provision of law 17, title 31, Partida 3, which does not reject the principle in question, just as article 546, par. 1 of the Civil Code does not reject article 541 about an apparent sign.
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III. Aside from the foregoing reasons that support the easement under consideration, the same has been acquired by respondents through prescription. The easement involved in this case is of two aspects: light and view and altius non tollendi. These two aspects necessarily go together because an easement of light and view prevents the owner of the servient estate from building to a height that will obstruct the windows. This court in Cortes vs. Yu-Tibo, supra, held that the easement con-cerned when there is an apparent sign established by the owner of two estates is positive. Manresa is of the same opinion, supra. This being so, and inasmuch as the original heirs of Maria Florentino succeeded to these two estates either in 1885 or in 1892 and as petitioner bought one of the lots in 1911, the prescriptive period under any legislation that may be appliedthe Partidas, Civil Code or Code of Civil Procedurehas elapsed without the necessity of formal prohibition on the owner of the servient estate. The respondent's action was brought in 1938. The prescrip-tive period under the Partidas was 10 years between per-sons who were present, and 20 years between absentees. (4 Manresa, 605). According to article 537 of the Civil Code, continuous and apparent easements may be acquired by prescription for 20 years. Under sections 40 and 41 of the Code of Civil Procedure, the period is 10 years. IV. The petitioner maintains that he is an innocent purchaser for value of the lot and camarin thereon, and that he was not bound to know the existence of the easement because the mere opening of windows on one's own wall, does not ipso facto create an easement of light. Such contention might perhaps be in point if the estates had not originally belonged to the same owner, who opened the windows. But the petitioner was in duty bound to inquire into the significance of the windows, particularly because in the deed of sale, it was stated that the seller had inherited the property from her aunt, Maria Florentino. Referring to the Sentence of the Supreme Court of Spain dated February 7, 1896, which applied Article 541, this Court in the case of Cortes vs. Yu-Tibo already cited, said that the establishment of the easement "was an act which was in fact respected and acquiesced in by the new owner of the servient estate, since he purchased it without making any stipulation against the easement existing thereon, but on the contrary, acquiesced in the continuance of the apparent sign thereof." (p. 31). Moreover, it has been held that

purchasers of lands burdened with apparent easements do not enjoy the rights of third persons who acquire property, though the burden is not recorded. (Sentence of the Su-preme Tribunal of Spain, April 5, 1898). V. Let us now discuss the case from the standpoint of justice and public policy. First.When Maria Encarnacion Florentino, as one of of the devisees, accepted the camarin and the lot, she could not in fairness receive the benefit without assuming the burden of the legacy. That burden consisted of the service in fact during the lifetime of the original owner, which service became a true easement upon her death. Second.According to Scaevola, the reason for the prin-ciple in question is that there is a tacit contract. He says in vol. 10, p. 277: "An hay ms: hay, en nuestro entender, no s1o pre-suncin de voluntad del enajenante, sea del dueo de las fincas que estuvieren confundidas, sino convencin, siquiera sea tcita, entre el vendedor y al adquirente de la finca vendida. Puesto que pudiendo estipular la no existencia de la servidumbre, nada dicen nada hacen, fuerza es presumir que ei segundo (comprador) acepta el estado jurdico creado por el primero (vendedor)." It is not just to allow Maria Encarnacion Florentino or her successor in interest to repuidate her own undertaking, implied, it is true, but binding nevertheless. This easement is therefore a burden which Maria Encarnacion Florentino and her successor in interest willingly accepted. They cannot now murmur against any inconvenience consequent upon their own agreement. Third. During the construction of the new house by the petitioner, the respondents filed an action to stop the work. But petitioner continued the construction, so that when the Court of First Instance was ready to pass upon the preliminary injunction, the work had almost been finished. Petitioner, therefore, cannot complain if he is now ordered to tear down part of the new structure so as not to shut off the light from respondents' windows. Fourth. When petitioner bought this lot from the original coheir, Maria Encarnacion Florentino, the windows on respondents' house were visible. It was petitioner's duty to inquire into the significance of those windows. Having failed to do so, he cannot now question the easement against the property which he purchased.
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Fifth. No enlightened concept of ownership can shut out the idea of restrictions thereon, such as easements. Absolute and unlimited dominion is unthinkable because it would destroy and defeat itself, inasmuch as proper enjoyment of property requires mutual service and forbearance among the adjoining estates. It is thus that easements, whether created by law or established by will of the par-ties, must perforce exist side by side with ownership. As Sanchez Roman, says, "Estos derechos restrictivos del dominio, como pudiramos llamar a las servidumbres, aparecen en el orden jurdico por razones de necesidad y utilidad o comodidad, y tienen. su causa, unas veces en el mismo derecho de propiedad, por la voluntad del propietario, que impone, en uso de su derecho, esas restricciones a sus cosas, o en motivos de inters pblico, que las hacen necesa-rias a los fines cojectivos." (Vol. 3, p. 484). This idea of easements can never become obsolete in the face of modern progress. On the contrary, its need is all the more pressing and evident, considering that this mutual assistance and giving way among estates is demanded by the complexities of modern conditions, such as those which obtain in large cities where buildings, large and small, are so close together. VI. Recapitulating, we believe the easement of light and view has been established in favor of the property of respondents, for these reasons: 1. Maria Florentino having died in 1892, according to a finding of fact of the Court of Appeals, which we cannot review, Article 541 of the Civil Code is applicable to this case. 2. Granting, arguendo, that Maria Florentino died in 1885, nevertheless the same principle embodied in article 541 of the Civil Code was already an integral part of the Spanish law before the promulgation of the Civil Code in 1889, and therefore, even if the instant case should be governed by the Spanish law prior to the Civil Code, the easement in question would also have to be upheld. 3. The easement under review has been acquired by re-spondents through prescription. 4. The petitioner was not an innocent purchaser, as he was in duty bound to inquire into the significance of the windows. 5. Justice and public policy are on the side of the respond-ents.

Wherefore, the judgment appealed from should be and is hereby affirmed, with costs against the petitioner. So ordered. Yulo, C. J., Moran Imperial,1 and Hantiveras,1 J.J., concur. Ozaeta, J., dissenting:

I regret to say that the omnibus opinion of the majority is a straddle over the baseless finding that Maria Florentino died in 1892 and the assumption that she died in 1885. Since she could not have died twiceand the date of her demise was properly raised as an issue in this casethe equivocal position thus taken rests on no solid factual foundation. Straddling and tottering as it is on shaky ground, the opinion as a whole appears to me untenable and its validity ques-tionable. Did Maria Florentino pass away in 1892? or in 1885? If she died in 1892, then Part II of the opinion based on the assumption that she died in 1885 is a mere obiter dictum; and if she died in 1885, then Part I of the opinion based on the assumption that she died In 1892 is likewise a mere obiter dictum. Thus it is not permissible for the Court to straddle the issue. There is absolutely no basis in the evidence for the finding that Maria Florentino died in 1892. Indeed in its find-ings of fact the Court of Appeals made no mention of the date of Maria Florentino's demise, but in its conclusion of law the year she died was incidentally mentioned in the following manner: "* * * Habiendo pasado la propiedad de la casa de mampostera a los demandantes, a la muerte de Mari Florentino, ocurrida en 1892 (el demandado sostiene que fue con anterioridad a 1889), no hay duda ninguna de que los demandantes adquirieron la servidumbre de luces y vistas sobre el camarn del demandado mediante ttulo y por prescripcin (Art. 537)." The indirect statement to the effect that Maria Florentino died in 1892 was not based on any evidence but solely on the conjecture indulged in by counsel for the respondents in his brief: that she must have died in the year 1892 because the respondent Gabriel Florentino testified during the trial as to facts of his own personal knowledge, and since he was fifty-eight years old when he testified in 1938, it must be presumed that he was at least twelve years old when his aunt Maria Florentino died, and that therefore the death of the latter must have occurred in the year 1892. Such deductions were absurd on their face and the Court of Ap-peals clearly committed an error of law in adopting them. A finding of fact must be based on competent proofsnot on a mere conjecture.

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The respondents themselves alleged under oath in their original as well as in their amended complaint (but were silent as to this in their second amended complaint) that the death of Maria Florentino occurred in the year 1888. No evidence was presented during the trial as to said date, but nevertheless the trial court applied the Civil Code. The petitioner as appellant before the Court of Appeals contended that the Partidas and not the Civil Code was the law applicable. It was then that respondents (appel-lees below) tried to show by deduction'and conjecture that Maria Florentino must have died in 1892. To rebut that, appellant and his attorney made inquiries as to the true date of Maria Florentine's demise and discovered from the church record of burials as well as from her gravestone that she died on September 7, 1885, and was buried on the fol-lowing day, September 8, 1885. They alleged in their af-fidavit that they had been unable to ascertain that date before on account of the misleading allegation in appellees' complaint that Maria Florentino died in 1888. A certified copy of the partida de entierro as well as a photograph of the gravestone showing the inscription of the date of Maria Florentine's death, were offered by appellant in a motion for new trial filed in the Court of Appeals on March 4, 1940; and on March 14, 1940, the Court of Appeals or-dered that said motion, together with the exhibits accom-panying it, "be attached to the record and brought to the attention of the Court when the case is considered on its merits." Nevertheless the Court of Appeals either ignored or overlooked said motion and the documentary evidence accompanying it when it considered and decided the case on the merits. Under section 2 of Rule 55, as well as under section 497 of Act No. 190, the court should have considered the new evidence together with that adduced in the trial below. Thus, I think it cannot be doubted that Maria Florentino died on September 7, 1885, more than four years before the Civil Code took effect. The majority seem to feel bound by the conjecture indulged in by the respondents and adopted by the Court of Appeals that Maria Florentino died in 1892, considering it as a finding of fact by the Court of Appeals. I beg to differ. A statement of fact not based on any proof what-ever should not be accepted by this Court, especially when, as in this case, it is indubitably shown to be contrary to the truth. It is said that the church record of Maria Florentino's burial and the photograph of her gravestone showing the inscription: "D. O. M. AQUI YACEN LOS RESTOS MORTALES DE

D. BONIFACIO F. ANASTASIO FALLECI EN 26 DE OCTUBRE DE 1890 Y SU ESPOSA Da MARIA FLORENTINO QUE MURI EN 7 DE SETIEMBRE DE 1885. RECUERDO DE Da ENCARNACION FLORENTINO" are not newly discovered evidence because they "could have been discovered by petitioner before the trial in the Court of First Instance by the exercise of due diligence." I dis-agree again. There was no incentive on the part of the petitioner to look for evidence of the exact date of Maria Florentino's demise while the case was being tried in the court below, for the respondents themselves alleged under oath in their original and amended complaints that she died in 1888, i.e., before the Civil Code took effect, and introduced no evidence whatever that she died after 1889. It was only when the respondents in their brief before the Court of Appeals tried to show by mental acrobatism that she must have died in 1892 in order to justify the application of the Civil Code, that the petitioner became interested in finding out the exact date of her death in order to impugn that contention. Under the circumstances, I entertain no doubt that the proofs offered may be con-sidered newly discovered within the purview of our pro-cedural law. After all, the rules of evidence are but a means to an endto help establish the truth. To illustrate the irrationality of applying the rules of evidence too rigidly, let us suppose that an accused has been convicted of murder jtnd sentenced to death, but during the pendency of his appeal his counsel discovers that the alleged victim is living and in good health, and counsel offers to prove that fact and even presents the "murdered" man in person before the court. Should this Court reject the offer of proof and affirm the death sentence simply because the appellant cWd have discovered the existence of the alleged victim by the exer-cise of due diligence? Judging from the opinion of the major-ity in this case, it should. What a travesty on justice! As a last argument on this point the majority say:
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"Lastly, the issue as to the date of Maria Florentino's death cannot be raised for the first time on appeal. Peti-tioner did not in the trial court allege or prove this point. He presented this issue for the first time in the Court of Appeals. (Sec. 497, Act 190.)" That is incorrect. Plaintiffs had the burden of proof. They are the ones who invoke the Civil Code. It was up to them to prove that the transaction took place after 1889. They realized that only during the appeal and, to supply their omission and even contradict their own sworn allegation, they resorted to amazing deductions from the age of one wit-ness. So it was the respondents who "presented this issue for the first time in the Court of Appeals." The petitioner had the right to meet it then and there. Since I cannot ignore the glaring fact that Maria Floren-tino died not in 1892 but in 1885, I cannot give my assent to the application of article 541 of the Civil Code to the controversy between the parties. I therefore regard all the profuse discussions of the law and citations of jurisprudence found in Part I of the majority opinion as purely academic. Part II of the opinion is based on the assumption that Maria Florentino died in 1885. Here I agree with my esteemed colleagues on the factual basis but not on the legal conclusions. The transitory provisions of the Civil Code, Rules 1 and 2, provide that "rights vested under the legislation prior to this Code by virtue of acts which transpired while it was in force, shall be governed by such prior legislation even if the code, should otherwise provide with respect thereto, or should not recognize such rights"; and that "acts and contracts executed under the prior legislation, and which are valid in accordance therewith, shall produce all their effects as by such prior law provided, subject to the limitations established by these rules." The prior legislation referred to, insofar as this case is concerned, was none other than the Partidas. How were easements acquired under the Partidas? In three ways only: By contract, by testament, or by pre-scription. (See law 14, title 31, Partida 3.) There was no provision in the Partidas similar to article 541 of the Civil Code regarding the creation or acquisition of an easement thru the establishment of an apparent sign thereof by the owner of two estates. In their second alternative opinion the majority say that the easement in question was constituted by an implied contract among the heirs of Maria Florentino under law 14, title 31, Partida 3. The law cited mentions "contract"

and not "implied contract." As a source of right or obligation, "contract" is entirely different from "implied contract." The former is based upon the mutual consent of the parties, supported by a lawful consideration, and with a definite subject matter, as, for instance, a contract of lease (articles 1254 and 1261, Civil Code); while the latter is merely imposed or implied by law from an act performed or committed by one of the parties without the consent and even against the will of the other, as, for instance, the obligation of an embezzler to indemnify his victim and the right of the latter to demand such idemnity. The mere fact that one has used the property of another by tolerance or implied consent of the latter can never give rise to an implied contract under which the former may assert and enforce a right to the continued use of that property against the owner. Next it is said: "Granting for the sake of argument that this easement was not created through an implied contract according to Law 14, Title 31, Partida 3, yet that provision of the Partidas was not inconsistent with the principle in question, so that there was a gap in the Partidas which the Supreme Court of Spain filled up from the Roman Law and modern codes by recognizing the existence of this kind of easement." (The principle referred to is that em-bodied in article 541 of the Civil Code.) Under this alternative argument it is admitted that the Partidas (the pre-Civil Code legislation) contained no pro-vision similar to article 541 of the Civil Code and hence it was necessary (?) to import a principle from the Roman Law in order to fill "a gap in the old legislation" as was done by the Supreme Court of Spain. In the last analysis, the alternative opinion applies to this case not the previous legislation as required by the Civil Code transitory provi-sion but a principle of law imported from ancient Rome. I disagree as to the necessity for such importation and "filling the gap" in order to do justice to the parties in this case. Let us consider the facts: Before Maria Florentino died on September 7, 1885, she owned a parcel of land in the commercial center of Vigan on which were built a house and a camarin. The camarin was one story and the house two stories high. Naturally, it was convenient for her to open windows on that side of the house overlooking the camarin so long as she did not decide to rebuild and raise the latter. The pivotal question is, Did those windows constitute an apparent sign of easement of light and view in favor of the house and against the camarin under the legislation in force here at that time, so that upon the subsequent divi-sion of the two estates that sign would constitute a title of and create such an
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easement? The negative answer is inescapable because the Partidas, unlike the Civil Code, contained no provision supporting the affirmative. But my learned colleagues, emulating the Supreme Court of Spain in similar cases, apply a principle of the Roman Law to "fill the gap" and justify the affirmative. The practical result of such "filling the gap" is to give retroactive effect to article 541 of the Civil Code, in violation of the transitory provi-sion. The laws of Spain did not ex proprio vigore apply to the Philippines. They had to be expressly extended here by Royal Decrees. Witness the Civil Code, the Partidas, etc. That being so, the opinions of the Supreme Court of Spain could not and did not have the force of law in the Philippines. For this reason, I cannot agree with what the majority say that "we cannot reject a doctrine estab-lished by the Spanish Supreme Tribunal as an integral part of the Spanish law before the promulgation of the Civil Code in 1889." "I know of no Royal Decree making such doctrine an integral part of the Spanish law in the Philippines. If we do not apply article 541 of the Civil Codeand we cannot apply it because Maria Florentino died in 1885 there is really a gap in the case for the respondents, but none in the case for the petitioner.1 Under the Partidas, or rather in the absence of an express provision therein similar to article 541, the petitioner should win; and since the par-ties litigant herein are entitled to have their case decided in accordance with the pre-Civil Code legislation in force in the Philippines as provided in the transitory provisions, since that legislation without any "gap-filling" is in favor of the petitioner, and since to "fill the gap" would prejudice him and unduly favor the respondents, the Court should abstain from so doing as a matter of law and justice. I repeat that as a matter of law and justice the Court should not go out of its way to "fill a gap in the Partidas" by resorting to a principle in the Roman Law which was not a part of the law of this country at the time the transactions involved took place, and for which reason it could not have been in the mind of the parties. How can we charge Maria Florentino with knowledge of that principle of the Roman Law, or even of the decisions of the Spanish Supreme Court, when she constructed the windows in question? How can we make that principle binding upon her heirs, or assume that they acted in accord-ance therewith, when they took possession of their respec-tive hereditary portions upon her death on September 7, 1885 ? Who knows but that had they been apprised of such a principle of Roman Law and told that it would be held binding on them they would have closed the windows in question or made an agreement regarding its continuance as long as the camarin was not rebuilt ?

It is argued that, as the Supreme Court of Spain has held, the principle in question is not inconsistent with the provisions of the Partidas regarding the modes of acquiring and extinguishing easements. To that I reply: Is the Court authorized to amend the law by adding thereto a provision not inconsistent therewith and, what is worse, make the amendment retroactive? The Supreme Court of Spain of the last century apparently thought so, but as I cannot agree with it I must disregard its voice and follow the light of my own reason in the premises. By adopting and follow-ing the doctrine of the Supreme Court of Spain the majority of this Court have, I fear, established here a pernicious precedent. Hereafter no one in this country can safely rely on our codes and statutes as enacted by our own legisla-ture, for the court may at any time read into them any provision or principle of law of any other jurisdiction even of ancient and archaic Romeso long as such provi-sion or principle is not inconsistent therewith; altho, if we would stop and reflect for a moment, we should realize that, logically and legally speaking, any provision not in-cluded in the law must necessarily be considered incon-sistent with the legislative will, for the legislature has not seen fit to incorporate it therein. "That is unfair! It is absurd! No court would do that!" you would protest. Then, I ask, "why do you do it in the instant case?" As a third alternative opinion (Part III) the majority hold that the easement in question has been acquired by respondents thru prescription. This opinion, however, is predicated upon the assumption that the opening of the windows in question constituted an apparent sign of the positive easement of light and view, thus making the period of prescription run from the date of the demise of the origi-nal owner. But as we have seen, that assumption is wrong because it is promised upon the improper and unlawful application of either article 541 or its equivalent principle derived from the Roman Law and adopted by the Supreme Court of Spain. Without such assumption, the period of prescription in this case commenced to run only from Jan-uary, 1938, when the petitioner began the construction of the new house and when it is supposed the respondents for the first time made a formal prohibition against the petitioner's raising his building and obstructing respond-ents' light and view, in accordance with the Yu-Tibo case cited in the majority opinion. Hence I think the prescrip-tion theory is also untenable. "Filling the gap" is particularly unfortunate and disastrous in the present case because as a consequence the petitioner will be compelled to tear down a portion of his newly built strong-material house, which in the present emergency, for lack of building materials, he will be unable to repair or patch up, thus not only causing him unnecessary loss and hardship but also leaving
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the torn-off new building for the public to gape at and be scandalized with. The good Ilocanos would perhaps not be able to understand why, on top of wanton and horrible daily destructions by bombs now savagely going on in this wartorn world, the Court should find it necessary to add another without any apparent substantial or material benefit to anybody. "Verily," they would say, "this is a mad world!" In this age of fluorescent lights and air conditioning devices, the concommitant easements of light and view and altius non tollendi would seem to be only a deterrent to economic progress and should not be considered established except when the law applicable clearly so justifies.

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Amor vs. Florentino et al., 74 Phil., 403(1943)]

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[No. L-7510. March 30, 1957] CARIDAD ONGSIACO, ET AL., plaintiffs and appellants, vs. EMILIA ONGSIACO, ET AL., defendants and appellees. Appeal from an order of the Court of First Instance of Nueva Ecija (Civil Case No. 755), granting the motion to dismiss the complaint of Caridad Ongsiaco and her husband against her sister Emilia and the latter's husband. The complaint alleged three (3) causes of action. In the motion to dismiss it was alleged that all the causes of action had become barred by extinctive prescription. First Cause of Action: Alleged Revocation of the Donation. The cause of action for the revocation of the donation made by the donor, Gorgonia Vda. de Ongsiaco, accrued from the time the donee, Emilia Ongsiaco, failed to pay the yearly pension of P1,000 to the donor, and that was on September 30, 1930; hence, the action to revoke, being based on a written contract, prescribed ten years thereafter, i.e., on September 30,, 1940, under sec. 43 of Act 190, long before the present case was instituted. Second Cause of Action: Construction of Dikes Interfering with Appellants' Easement of Drainage. The basis of this cause of action can only be the legal servitude of drainage of rural estate regulated by Art. 552 of the Civil Code of 1889. Since the enjoyment of this servitude does not depend upon acts of man because descent of rain water from the higher to the lower estates is due to the force of gravity, this easement must be classed among the continuous ones (Art. 532, old Civil Code; 615, new), and it is subject to extinction by non-user for the period required by law (Art. 546), old Civil Code; Art. 631, new). The original 20-year period of extinc-tive prescription by non-user under Art. 546 of the old Code was reduced by sec. 41 of Act 190 to ten years from their violation, servitudes being clearly "interest in land." (Soriano vs. Sternberg, 41 Phil., 211-212). Since according to plaintiffs' own evidence, the dikes obstructing the overflow from their land were built in 1937 or 1938, and the present action for their destruction was filed in 1951, the lower court committed no error in holding that the easement sought to be enforced had already been extinguished, and plaintiffs' action is barred by prescription. Third Cause of Action: Fraudulent Reduction of Appellant's Share and Its Usurpation by Defendants. It is alleged that through. illegal manipulations of defendant Alzate, husband of Emilia Ongsiaco, the share of plaintiff Caridad Ongsiaco was made to include public properties, thereby reducing its area, while proportionately increasing that of defendants. When the present case was instituted in 1951, more than 20 years had run since the partition. Hence, this cause of action is barred by prescription.

Order affirmed. Reyes, J. B. L., J. ponente.

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Ongsiaco, et al. vs. Ongsiaco, et al., 101 Phil., 1196(1957)]

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G.R. No. 112331. May 29, 1996.* ANASTACIA QUIMEN, petitioner, vs. COURT OF APPEALS and YOLANDA Q. OLIVEROS, respondents.
Easements; Right of Way; Words and Phrases; Easements and Right of Way, Defined.As defined, an easement is a real right on anothers property, corporeal and immovable, whereby the owner of the latter must refrain from doing or allow somebody else to do or something to be done on his property, for the benefit of another person or tenement. It is jus in re aliena, inseparable, indivisible and perpetual, unless extinguished by causes provided by law. A right of way in particular is a privilege constituted by covenant or granted by law to a person or class of persons to pass over anothers property when his tenement is surrounded by realties belonging to others without an adequate outlet to the public highway. The owner of the dominant estate can demand a right of way through the servient estate provided he indemnifies the owner thereof for the beneficial use of his property. Same; Same; Conditions sine qua non for a valid grant of an easement of right of way.The conditions sine qua non for a valid grant of an easement of right of way are: (a) the dominant estate is surrounded by other immovables without an adequate outlet to a public highway; (b) the dominant estate is willing to pay the proper indemnity; (c) the isolation was not due to the acts of the dominant estate; and, (d) the right of way being claimed is at a point least prejudicial to the servient estate. Same; Same; Where the easement may be established on any of several tenements surrounding the dominant estate, the one where the way is shortest and will cause the least damage should be chosen but if these two circumstances do not concur in a single tenement, the way which will cause the least damage should be used, even if it will not be the shortestthe criterion of least prejudice to the servient estate must prevail over the criterion of shortest distance.Article 650 of the New Civil Code explicitly states that the easement of right of way shall be established at the point least prejudicial to the servient estate and, insofar as consistent with this rule, where the distance from the dominant estate to a public highway may be the shortest. The criterion of least prejudice to the servient estate must prevail over the criterion of shortest distance although this is a matter of judicial appreciation. While shortest distance may ordinarily imply least prejudice, it is not always so as when there are permanent structures obstructing the shortest distance; while on the other hand, the longest distance may be free of obstructions and the easiest or most convenient to pass through. In other words, where the easement may be established on any of several tenements surrounding the dominant estate, the one where the way is shortest and will cause the least damage should be chosen. However, as elsewhere stated, if these two (2) circumstances do not concur in a single tenement, the way which will cause the least damage should be used, even if it will not be the shortest. This is the test. Same; Same; As between a right of way that would demolish a store of strong materials to provide egress to a public highway, and another right of way which although longer will only require an avocado tree to be cut down, the second alternative should be preferred.In applying Art. 650 of the New Civil Code, respondent Court of Appeals declared that the proposed right of

way of Yolanda, which is one (1) meter wide and five (5) meters long at the extreme right of petitioners property, will cause the least prejudice and/or damage as compared to the suggested passage through the property of Yolandas father which would mean destroying the sari sari store made of strong materials. Absent any showing that these findings and conclusion are devoid of factual support in the records, or are so glaringly erroneous, this Court accepts and adopts them. As between a right of way that would demolish a store of strong materials to provide egress to a public highway, and another right of way which although longer will only require an avocado tree to be cut down, the second alternative should be preferred.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court. Benedicto L. Nanca for petitioner. Armando A. San Antonio for private respondent. BELLOSILLO, J.: IN EASEMENT OF RIGHT OF WAY that easement where the way is shortest and will cause least prejudice shall be chosen. However, if the two circumstances do not concur in a single tenement, the way where damage will be least shall be used even if not the shortest route.1 This is so because least prejudice prevails over shortest distance. This means that the court is not bound to establish what is the shortest distance; a longer way may be adopted to avoid injury to the servient estate, such as when there are constructions or walls which can be avoided by a round about way, or to secure the interest of the dominant owner, such as when the shortest distance would place the way on a dangerous decline. Thus we conclude from the succeeding facts: Petitioner Anastacia Quimen together with her brothers Sotero, Sulpicio, Antonio and sister Rufina inherited a piece of property situated in Pandi, Bulacan. They agreed to subdivide the property equally among themselves, as they did, with the shares of Anastacia, Sotero, Sulpicio and Rufina abutting the municipal road. The share of Anastacia, located at the extreme left, was designated as Lot No. 1448-B-1. It is bounded on the right by the property of Sotero designated as Lot No. 1448B-2. Adjoining Soteros property on the right are Lots Nos. 1448-B-3 and 1448B-4 originally owned by Rufina and Sulpicio, respectively, but which were later acquired by a certain Catalina Santos. Located directly behind the lots of Anastacia and Sotero is the share of their brother Antonio designated as Lot
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No. 1448-B-C which the latter divided into two (2) equal parts, now Lots Nos. 1448-B-6-A and 1448-B-6-B, each with an area of 92 square meters. Lot No. 1448-B-6-A is located behind Anastacias Lot No. 1448-B-1, while Lot No. 1448-B-6-B is behind the property of Sotero, father of respondent Yolanda. In February 1982 Yolanda purchased Lot No. 1448-B-6-A from her uncle Antonio through her aunt Anastacia who was then acting as his administratrix. According to Yolanda, when petitioner offered her the property for sale she was hesitant to buy as it had no access to a public road. But Anastacia prevailed upon her to buy the lot with the assurance that she would give her a right of way on her adjoining property for P200.00 per square meter. Thereafter, Yolanda constructed a house on the lot she bought using as her passageway to the public highway a portion of Anastacias property. But when Yolanda finally offered to pay for the use of the pathway Anastacia refused to accept the payment. In fact she was thereafter barred by Anastacia from passing through her property.2 In February 1986 Yolanda purchased the other lot of Antonio Quimen, Lot No. 1448-B-6-B, located directly behind the property of her parents who provided her a pathway gratis et amore between their house, extending about nineteen (19) meters from the lot of Yolanda behind the sari-sari store of Sotero, and Anastacias perimeter fence. The store is made of strong materials and occupies the entire frontage of the lot measuring four (4) meters wide and nine (9) meters long. Although the pathway leads to the municipal road it is not adequate for ingress and egress. The municipal road cannot be reached with facility because the store itself obstructs the path so that one has to pass through the back entrance and the facade of the store to reach the road. On 29 December 1987 Yolanda filed an action with the proper court praying for a right of way through Anastacias property. An ocular inspection upon instruction of the presiding judge was conducted by the branch clerk of court. The report was that the proposed right of way was at the extreme right of Anastacias property facing the public highway, starting from the back of Soteros sari sari store and extending inward by one (1) meter to her property and turning left for about five (5) meters to avoid the store of Sotero in order to reach the municipal road3 and the way was unobstructed except for an avocado tree standing in the middle.4 But on 5 September 1991 the trial court dismissed the complaint for lack of cause of action, explaining that the right of way through Soteros property was a straight path and to allow a detour by cutting through Anastacias property

would no longer make the path straight. Hence the trial court concluded that it was more practical to extend the existing pathway to the public road by removing that portion of the store blocking the path as that was the shortest route to the public road and the least prejudicial to the parties concerned than passing through Anastacias property.5 On appeal by respondent Yolanda, the Court of Appeals reversed the lower court and held that she was entitled to a right of way on petitioners property and that the way proposed by Yolanda would cause the least damage and detriment to the servient estate.6 The appellate court however did not award damages to private respondent as petitioner did not act in bad faith in resisting the claim. Petitioner now comes to us imputing ERROR to respondent Court of Appeals: (a) in disregarding the agreement of the parties; (b) in considering petitioners property as a servient estate despite the fact that it does not abut or adjoin the property of private respondent; and, (c) in holding that the one-meter by fivemeter passage way proposed by private respondent is the least prejudicial and the shortest distance to the public road. Incidentally, petitioner denies having promised private respondent a right of way. She claims that her agreement with private respondent was to provide the latter with a right of way on the other lot of Antonio Quimen under her administration when it was not yet sold to private respondent. Petitioner insists that passing through the property of Yolandas parents is more accessible to the public road than to make a detour to her property and cut down the avocado tree standing thereon. Petitioner further argues that when Yolanda purchased Lot No. 1448-B-6-B in 1986 the easement of right of way she provided her (petitioner) was ipso jure extinguished as a result of the merger of ownership of the dominant and the servient estates in one person so that there was no longer any compelling reason to provide private respondent with a right of way as there are other surrounding lots suitable for the purpose. Petitioner strongly maintains that the proposed right of way is not the shortest access to the public road because of the detour and that, moreover, she is likely to suffer the most damage as she derives a net income of P600.00 per year from the sale of the fruits of her avocado tree, and considering that an avocado has an average life span of seventy (70) years, she expects a substantial earning from it.7 But we find no cogent reason to disturb the ruling of respondent appellate court granting a right of way to private respondent through petitioners property. In
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fact, as between petitioner Anastacia and respondent Yolanda their agreement has already been rendered moot insofar as it concerns the determination of the principal issue herein presented. The voluntary easement in favor of private respondent, which petitioner now denies but which the court is inclined to believe, has in fact become a legal easement or an easement by necessity constituted by law.8 As defined, an easement is a real right on anothers property, corporeal and immovable, whereby the owner of the latter must refrain from doing or allow somebody else to do or something to be done on his property, for the benefit of another person or tenement.9 It is jus in re aliena, inseparable, indivisible and perpetual, unless extinguished by causes provided by law. A right of way in particular is a privilege constituted by covenant or granted by law10 to a person or class of persons to pass over anothers property when his tenement is surrounded by realties belonging to others without an adequate outlet to the public highway. The owner of the dominant estate can demand a right of way through the servient estate provided he indemnifies the owner thereof for the beneficial use of his property.11 The conditions sine qua non for a valid grant of an easement of right of way are: (a) the dominant estate is surrounded by other immovables without an adequate outlet to a public highway; (b) the dominant estate is willing to pay the proper indemnity; (c) the isolation was not due to the acts of the dominant estate; and, (d) the right of way being claimed is at a point least prejudicial to the servient estate.12 A cursory examination of the complaint of respondent Yolanda for a right of way13 readily shows that [E]ven before the purchase of the said parcels of land the plaintiff was reluctant to purchase the same for they are enclosed with permanent improvements like a concrete fence and store and have (sic) no egress leading to the road but because of the assurance of the defendant that plaintiff will be provided one (1) meter wide and five (5) meters long right of way in the sum of P200.00 per square meter to be taken from Anastacias lot at the side of a concrete store until plaintiff reach(es) her fathers land, plaintiff was induced to buy the aforesaid parcels of land x x x x That the aforesaid right of way is the shortest, most convenient and the least onerous leading to the road and being used by the plaintiffs predecessors-in-interest from the very inception x x x x The evidence clearly shows that the property of private respondent is hemmed in by the estates of other persons including that of petitioner; that she offered to

pay P200.00 per square meter for her right of way as agreed between her and petitioner; that she did not cause the isolation of her property; that the right of way is the least prejudicial to the servient estate.14 These facts are confirmed in the ocular inspection report of the clerk of court, more so that the trial court itself declared that [t]he said properties of Antonio Quimen which were purchased by plaintiff Yolanda Quimen Oliveros were totally isolated from the public highway and there appears an imperative need for an easement of right of way to the public highway.15 Petitioner finally insists that respondent court erroneously concluded that the right of way proposed by private respondent is the least onerous to the parties. We cannot agree. Article 650 of the New Civil Code explicitly states that the easement of right of way shall be established at the point least prejudicial to the servient estate and, insofar as consistent with this rule, where the distance from the dominant estate to a public highway may be the shortest. The criterion of least prejudice to the servient estate must prevail over the criterion of shortest distance although this is a matter of judicial appreciation. While shortest distance may ordinarily imply least prejudice, it is not always so as when there are permanent structures obstructing the shortest distance; while on the other hand, the longest distance may be free of obstructions and the easiest or most convenient to pass through. In other words, where the easement may be established on any of several tenements surrounding the dominant estate, the one where the way is shortest and will cause the least damage should be chosen. However, as elsewhere stated, if these two (2) circumstances do not concur in a single tenement, the way which will cause the least damage should be used, even if it will not be the shortest.16 This is the test. In the trial court, petitioner openly admitted Q. You testified during your direct examination about this plan, kindly go over this and please point to us in what portion of this plan is the house or store of the father of the (plaintiff)? A. This one, sir (witness pointed a certain portion located near the proposed right of way).

xxxx
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Q. Now, you will agree with me x x x x that this portion is the front portion of the lot owned by the father of the plaintiff and which was (sic) occupied by a store made up of strong materials? A. It is not true, sir. Q. What materials does (sic) this store of the father of the plaintiff made of? A. Hollow blocks and the side is made of wood, sir.

between the boundary line and the house of Yolandas father; that the vacant space ended at the left back of Soteros store which was made of strong materials; that this explained why Yolanda requested a detour to the lot of Anastacia and cut an opening of one (1) meter wide and five (5) meters long to serve as her right of way to the public highway. But notwithstanding its factual observations, the trial court concluded, although erroneously, that Yolanda was not entitled to a right of way on petitioners property since a detour through it would not make the line straight and would not be the route shortest to the public highway. In applying Art. 650 of the New Civil Code, respondent Court of Appeals declared that the proposed right of way of Yolanda, which is one (1) meter wide and five (5) meters long at the extreme right of petitioners property, will cause the least prejudice and/or damage as compared to the suggested passage through the property of Yolandas father which would mean destroying the sari sari store made of strong materials. Absent any showing that these findings and conclusion are devoid of factual support in the records, or are so glaringly erroneous, this Court accepts and adopts them. As between a right of way that would demolish a store of strong materials to provide egress to a public highway, and another right of way which although longer will only require an avocado tree to be cut down, the second alternative should be preferred. After all, it is not the main function of this Court to analyze or weigh the evidence presented all over again where the petition would necessarily invite calibration of the whole evidence considering primarily the credibility of witnesses, existence and relevancy of specific surrounding circumstances, their relation to each other, and the probabilities of the situation.18 In sum, this Court finds that the decision of respondent appellate court is thoroughly backed up by law and the evidence. WHEREFORE, no reversible error having been committed by respondent Court of Appeals, the petition is DENIED and the decision subject of review is AFFIRMED. Costs against petitioner. SO ORDERED.

xxxx Q. Just before your brother disposed that 1/2 portion of the lot in question, what right of way does (sic) he use in reaching the public road, kindly point to this sketch that he is (sic) using in reaching the public road? A. In my property, sir. Q. Now you will agree with me x x x x the main reason why your brother is (sic) using this property is because there was a store located near this portion? A.

Padilla (Chairman), Vitug, Kapunan and Hermosisima, Jr., JJ., concur. Yes, and according to the father of Yolanda there is no other way than this, sir.17 The trial court found that Yolandas property was situated at the back of her fathers property and held that there existed an available space of about nineteen (19) meters long which could conveniently serve as a right of way Petition denied, judgment affirmed. Notes.While a right of way is legally demandable, the owner of the dominant estate is not at liberty to impose one based on arbitrary choice. (Costabella Corporation vs. Court of Appeals, 193 SCRA 333 [1991])
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The use of a footpath or road may be apparent but it is not a continuous easement because its use is at intervals and depends upon the acts of man. A right of way cannot be acquired by prescription. (Abellana, Sr. vs. Court of Appeals, 208 SCRA 316 [1992]) An action to terminate the easement may be brought if there be subsequent changes in the condition of the estates involved. (Sunflower Umbrella Manufacturing Co., Inc. vs. De Leon, 237 SCRA 153 [1994]) An owner does not lose ownership of his lot by imposing on it a right of way in favor of another lot belonging to him. (Heirs of George Bofill vs. Court of Appeals, 237 SCRA 451 [1994]) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Quimen vs. Court of Appeals, 257 SCRA 163(1996)]

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No. L-57641. October 23, 1982.* ANTOLIN A. JARIOL, and PAULO S. RODRIGUEZ, In their capacities as Joint Executors of the Estate of Humiliano Rodriguez, deceased, petitioners, vs. HON. COURT OF APPEALS, DOMINO JAGDON, in his Capacity as Administrator of the Estate of Timoteo Rodriguez, deceased, CLEMENTE RODRIGUEZ, TERESITA RODRIGUEZ, JULIA RODRIGUEZ, AMPARO RODRIGUEZ, FAUSTA RODRIGUEZ, FRANCISCA VDA. DE RODRIGUEZ, INES VDA. DE RODRIGUEZ, ADDULA RODRIGUEZ, DOLORES RODRIGUEZ and JUANITA RODRIGUEZ, respondents.
Court of Appeals; Evidence; Appeal; Findings that certain persons affixed their signatures to a document are factual and binding on the Supreme Court.In the first place, it did not entirely disregard the matter of the questioned alterations and insertions. It summarized the conflicting evidence thereon, as quoted hereinabove, observing that "unrebutted was the testimony of Mrs. Casafranca that her father Humiliano Rodriguez favored the maintaining of a right of way (tsn. Javier, May 9, 1968, p. 4)." Mrs. Amparo R. Casafranca, who testified of her own knowledge, is the sister-in-law and sister, respectively, of petitioners. If Humiliano himself favored the right-ofway, petitioners, as his successors-in-interest, should be held bound by it. Respondent Court added that the Notary Public, Atty. Bernardo Solotan, who authenticated the document, also declared that the initials of Humiliano and Ines R. de Pages were authentic, and that the insertions were made at the instance of Humiliano. We view those declarations as amounting to findings of fact made by an Appellate Court, which we consider as binding on us. Same; Same; Same.And as far as Timoteo is concerned, although the Trial Court found that he did not initial the insertions, supra, there can be no denying that he would be the last to object to the easement established for it also inured to the benefit of "Lot G", which was allocated to him. Easements; Property; Where a private property has no access to a public road, it has the right of easement over adjacent servient estates as a matter of law. The partition agreement at bar merely confirmed that existing right of way.Secondly, the substantial question is whether or not "Lot G" is entitled to the easement of right of way. In point of fact, a road right of way providing access to the public road from "Lot G" existed long before the execution of the extrajudicial partition even during the lifetime of Quirino Rodriguez. The Deed of Partition merely sought to legalize and give stability to the access road already existing. That was confirmed by the testimony of Mrs. Casafranca. That is also the position taken by the other heirs who have been included as defendants-respondents. As a matter of law, considering that "Lot G" has no access to the public road, the easement is explicitly provided to the public road, the easement is explicitly provided for in Article 652 of the Civil Code, its width being determined by the needs of the servient estate pursuant to Article 651 of the same law. Same; Same; Evidence; The questioned alleged unauthorized insertions in the deed of partition merely sought to confirm an existing right of way and therefore, the Court of Appeals rightly ruled that the illegality of said insertions must be construed in relation with the need for its continued existence and the law on easements.Thirdly, the justice of the situation rather than

the technicalities of the controversy should govern herein. The questioned insertions and annotations refer to an existing actual private lane." The question of legality of those insertions is linked with the need for its continued existence and the laws on easement cannot but have a definite bearing. The annotations did not "create" a right-of-way, contrary to the opinion of the Trial Court. They merely confirmed an existing one. Respondent Appellate Tribunal did not "by judicial fiat" establish a "legal easement of right of way" on Lot "F". It found that it had been pre-existing and that under the circumstances, the laws on easement were applicable. A chapel exists in the interior constructed by the deceased Quirino Rodriguez, who was also responsible for giving chapel-goers access thereto from the street. The right-of-way exists for the mutual benefit of most of the heirs of Quirino Rodriguez. As aptly stated by respondent Court "justice and equity demand that the status quo be maintained with regards to the easement of right of way."

PETITION for review on certiorari of the decision of the Court of Appeals.

The facts are stated in the opinion of the Court. Orlando Paray and Francis Zosa & Associates for petitioners. Pedro T. Garcia for respondents Domino Jagdon, Francisca Vda. de Rodriguez and Fausta Rodriguez. Domingo Quibranza for respondents Ines Vda. de Rodriguez, Abdulia Rodriguez and Juanita Rodriguez. Castor Y. Hontanosas, Sr. for respondents Clemente Rodriguez, Teresita Rodriguez, Julia Rodriguez and Amparo Rodriguez. MELENCIO-HERRERA, J.:

This is a Petition for Review on Certiorari of the Decision of the Court of Appeals in its Case No. CA-G.R. No. 47020-R. The Petition was initially denied but upon a second Motion for Reconsideration, the denial was reconsidered and it was given due course. We have found the facts to be as follows: The deceased Quirino Rodriguez left four Children: Humiliano, Timoteo, Jose, all surnamed Rodriguez, and Ines Rodriguez de Pages.

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On November 25, 1951, these heirs (Jose, then deceased, being represented by Ines Vda. de Rodriguez and his adult children Abdulia, Dolores and Juanita), entered into an extrajudicial partition to divide a parcel of land covered by Transfer Certificate of Title No. RT-345 (T-193) of the Registry of Deeds, Cebu City, in the name of the deceased. The deed was signed by two witnesses and notarized by Atty. Bernardo B. Solotan. In this agreement, the property was divided into Lots "A" to "G" inclusive. Lot "F" was adjudicated to Humiliano, and Lot "G" to Timoteo. Lot "G" has no egress to the public roads. On November 16, 1953, the original and copies of the Deed of Partition were allegedly burned when the Quirino Rodriguez Building was razed by fire. On May 22, 1956, Timoteo died and his son, Clemente Rodriguez, was appointed executor of the estate, but was later replaced by Dominino Jagdon. They are two of the private respondents herein. After Humiliano's death in 1961 or 1962, petitioners Antolin A. Jariol, his son-inlaw, and Paulo S. Rodriguez, his son, were appointed executors of his estate. On June 27, 1960, the Deed of Extra-judicial Partition, with annotations and additions on the left and right hand margins on page 4 and below the notarial acknowledgment on page 5, was registered by Clemente Rodriguez, son of Timoteo, in the Office of the Register of Deeds of Cebu. These annotations are reproduced in full hereunder: "On the left hand margin of Page 4: "That on the approved subdivision plan with reference to the existing actual private lane, Lots 802-B-2-B-2-C, 802-B-2-B-2-D, 802-B-2-B-2-B shall allot for the private lane three (3) meters each on their respective sides and thence six (6) meters for lot 802-B-2-B-2-F following the existing private lane, more particularly described at the bottom of page 5 of this document." (Italics supplied). "On the right hand margin of page 4: "That the contracting parties to the aforementioned extrajudicial partition of the estate of the deceased, Quirino Rodriguez, hereby will and bind themselves together with all the heirs, successors, and assigns to all the provisions of the said document. Below the acknowledgment of page 5: That the owners of the following lots bind themselves for their mutual benefit a perpetual easement of right of way described as follows:

Lot No. 802-B-2-B-2-GThree meters in width on the N. boundary. Lot No. 802-B-2-B-2-DThree meters in width on the S. W. boundary. Lot No. 802-B-2-B-2-CThree meters in width on the S. W. boundary. Lot No. 802-B-2-B-2-BThree meters in width on the S. W. boundary. Lot No. 802-B-2-B-2-FSix meters in width along the common boundary line of the said lots with the said boundary line as the centerline."1 It is said that

"x x x "Of the seven (7) heirs who signed at the left hand margins of pages 1, 2, 3 and 5 and at the bottom of page 4, only five (5) initials are found with the left hand margin insertion, with one 'T.R. by C.L.R.', on the right hand margin insertion only four (4) initials are found with one 'T.R. by C.L.R.', with the insertion of the bottom of page 5, only five (5) initials are found with one 'T.R. by C.L.R.', and "No signatures or initials of the two witnesses are found with any of the insertions."2 To be noted from the partition agreement is the fact that four heirs were to contribute for the easement of right-of-way three (3) meters each, while Humiliano, to whom Lot "F" appertained, was to give six meters. Upon the contention that they had discovered the annotations only in 1964, petitioners Antolin A. Jariol and Paulo S. Rodriguez, as joint executors of Humiliano's estate, together with Ines Rodriguez de Pages, filed an action with the Court of First Instance of Cebu on March 11, 1965 against respondents Dominino Jagdon as administrator of the estate of Timoteo Rodriguez, Clemente Rodriguez, Dolores Rodriguez, and Ines Vda. de Rodriguez, seeking to declare the nullity of the annotations and insertions for having been surreptitiously and maliciously added long after the execution of the principal document, and the cancellation of the easements of right of way noted as encumbrances on the Certificates of Title issued for the subdivided lots, particularly on "Lot F". It was alleged that the initials of Humiliano and Ines Rodriguez de Pages affixed to the insertions were forged as found by a handwriting expert; that not all the parties to the document had affixed their initials to the insertions; that had the annotations been made at the time of the
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execution of the document, Timoteo, who was still alive, should have signed the annotations and not his son Clemente. The Complaint was amended three times to include other heirs either as parties plaintiffs or parties defendants. During the trial, petitioners presented the deposition of Ines Rodriguez de Pages, then 81 years old, to the effect that the initials "I.R.P." appearing in the insertions were not her own. Defendants-respondents, on the other hand, sustained the genuineness and due execution of the annotations or additions and presented their own handwriting expert. They averred that the agreement merely confirmed the existing right of way. In its judgment rendered on August 22, 1968, the Trial Court concluded: "It is the conclusion of this Court therefore, that the initials of Ines Rodriguez de Pages and Humiliano Rodriguez were forged and that Clemente Rodriguez, in initialing the said insertions or additions without any power of attorney from Timoteo Rodriguez does not bind the latter. Hence, the alleged agreement creating the easement is of no force and legal effect upon the heirs of Quirino Rodriguez."3 and declared the alterations or annotations complained of illegal and unlawful and without any legal force and effect; ordered the Register of Deeds of Cebu to cancel the easement of right of war noted as encumbrances on the title; and finding that Clemente Rodriguez was responsible for the "falsification of the insertions" and the "forgery" of the initials of Humiliano and Ines Rodriguez de Pages, required defendants therein to pay actual, moral and exemplary damages as well as attorney's fees for having "abetted" the "wrondoing" of Clemente. After defendants-respondents' Motion for New Trial on the ground that the deposition of Ines R. de Pages should not have been admitted in evidence, was denied, they appealed to the Court of Appeals. On October 15, 1980, the Court of Appeals4 reversed the judgment appealed from and dismissed the Third Amended Complaint as well as all counterclaims principally on the ground that the right-of-way involved, which was a preexisting one, even prior to the extra judicial partition, sprang not from any voluntary concession but from law. Petitioners came to this Court on a Petition for Review on Certiorari asserting that respondent Appellate Court erred in skirting the issue on the genuineness and/or binding effect of the forged alterations and insertions on the Deed of

Extrajudicial Partition; and in holding that a legal easement of right-of-way automatically attaches to Lot "F" adjudicated to Humiliano, as the servient estate, which was not an issue framed by the parties on appeal. Petitioners take issue with the findings of respondent Court, which read in part: "Appellees also presented the deposition of Ines Rodriguez Pages, then aged 81, who denied the genuineness of her initials to the questioned insertions. On the other hand, appellants presented, inter alia, Atty. Bernardo Solatan, the lawyer who prepared and notarized the extrajudicial partition document; and Mrs. Amparo R. Casafranca, daughter of Humiliano Rodriguez and sister-inlaw of appellee Jariol. Atty. Solatan testified that the partition document was made under the direction of Humiliano Rodriguez (tsn-Cavalida, Jan. 15, 1968, p. 237); that he prepared the insertions at the instance of Humiliano Rodriguez (tsn-Cavalida, Jan. 15, 1968, pp. 240-242); and that the initials attributed to Humiliano Rodriguez and Ines Rodriguez de Pages were authentic. Unrebutted was the testimony of Mrs. Casafranca that her father Humiliano Rodriguez favored the maintaining of a road right of way (tsn-Javier, May 9, 1968, p. 4), and that this easement existed long before the execution of the extrajudicial partition (tsn-Javier, May 9, 1968, p. 6). Appellee Jariol confirmed that he knows of only one easement, that is, the one adjacent to his house (tsn-Iyog, May 23, 1968, p. 35). We can only conclude that the easement encumbrance inserted in the extra-judicial partition referred to the existing right-of-way to which Humiliano Rodriguez was in favor of maintaining."5 The Appellate Court then went on to state: "It cannot be denied that easements of right-of-way, being discontinuous, cannot be acquired by prescription. However, a close perusal of the subdivision plan of Lot 802-B-2-B-2 (Exh. D) reveals that Lot 802-B-2-B-2-G with an area of 1422 square meters has no access to the public roads. Corner no. 1 of this lot is almost 80 meters from Juan Luna street and about 73 meters from Colon Street, the latter through Lot No. 802-B-2-B-2-F. Under the partition agreement, Lot 802-B-2-B-2-G appertained to Timoteo Rodriguez and his heirs. A legal easement of right-of-way can therefore be established in favor of the heir to which this lot went. Section 652 of the New Civil Code reads: 'Whenever a piece of land acquired by sale, exchange or partition, is surrounded by other estates of the vendor, exchanger, or co-owner, he shall be obliged to grant a right-of-way without indemnity.' Section 651 explains: 'The width of the easement of right-of-way shall be that which is sufficient for the needs of the dominant estate, and may accordingly be changed from time to time.' From the
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foregoing discussions, it would be immaterial to delve into whether the insertions in the extrajudicial partition are illegal and unauthorized. The right of the dominant estate to demand a right-of-way springs not from any voluntary concession but from law. Appellees must provide the owners of the dominant estate (Lot 802-B-2-B-2-G in this case) egress to the public road. Had the partition been the other way around, surely appellees would want a way out to the street. Justice and equity demand that the status quo be maintained with regards to the easement of right-of-way."6 (Italics ours) Upon the foregoing exposition, we find that there is no substantial justification for setting aside the aforequoted findings of respondent Court. In the first place, it did not entirely disregard the matter of the questioned alterations and insertions. It summarized the conflicting evidence thereon, as quoted hereinabove, observing that "unrebutted was the testimony of Mrs. Casafranca that her father Humiliano Rodriguez favored the maintaining of a right-of-way (tsn.Javier, May 9, 1968, p. 4)." Mrs. Amparo R. Casafranca, who testified of her own knowledge, is the sister-in-law and sister, respectively, of petitioners. If Humiliano himself favored the right-of-way, petitioners, as his successors-ininterest, should be held bound by it. Respondent Court added that the Notary Public, Atty. Bernardo Solotan, who authenticated the document, also declared that the initials of Humiliano and Ines R. de Pages were authentic, and that the insertions were made at the instance of Humiliano. We view those declarations as amounting to findings of fact made by an Appellate Court, which we consider as binding on us. And as far as Timoteo is concerned, although the Trial Court found that he did not initial the insertions, supra, there can be no denying that he would be the last to object to the easement established for it also inured to the benefit of "Lot G". which was allocated to him. Secondly, the substantial question is whether or not "Lot G" is entitled to the easement of right of way. In point of fact, a road right of way providing access to the public road from "Lot G" existed long before the execution of the extrajudicial partition even during the lifetime of Quirino Rodriguez. The Deed of Partition merely sought to legalize and give stability to the access road already existing. That was confirmed by the testimony of Mrs. Casafranca. That is also the position taken by the other heirs who have been included as defendants-respondents. As a matter of law, considering that "Lot G" has no access to the public road, the easement is explicitly provided for in Article 652 of the Civil Code7, its width being determined by the needs of the servient estate pursuant to Article 6518 of the same law.

Thirdly, the justice of the situation rather than the technicalities of the controversy should govern herein. The questioned insertions and annotations refer to an "existing actual private lane." The question of legality of those insertions is linked with the need for its continued existence and the laws on easement cannot but have a definite bearing. The annotations did not "create" a right-of-way, contrary to the opinion of the Trial Court. They merely confirmed an existing one. Respondent Appellate Tribunal did not "by judicial fiat" establish a "legal easement of right-of-way" on Lot "F". It found that it had been pre-existing and that under the circumstances, the laws on easement were applicable. A chapel exists in the interior constructed by the deceased Quirino Rodriguez, who was also responsible for giving chapel-goers access thereto from the street.9 The right-of-way exists for the mutual benefit of most of the heirs of Quirino Rodriguez. As aptly stated by respondent Court "justice and equity demand that the status quo be maintained with regards to the easement of right of way." With the conclusions arrived at, the Resolution, dated June 30, 1982, giving due course to this Petition must be set aside and this Petition denied. WHEREFORE, let this Petition for Review be, as it is, hereby denied for lack of merit. Costs against petitioners. SO ORDERED. Teehankee (Chairman), Plana, Vasquez, Relova and Gutierrez, Jr., concur. Petition denied. o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Jariol vs. Court of Appeals, 117 SCRA 913(1982)]

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[No. 10372. December 24, 1915.] DOMINGO LAO and ALBINA DE LOS SANTOS, applicants and appellants, vs. THE HEIRS OF LORENZA ALBURO, objectors and .appellees.
1.EASEMENTS; PARTY WALLS.The easement of party walls is presumed in a wall separating two adjoining buildings, unless there is a title, some exterior indication, or proof to the contrary. (Art. 572, Civil Code.) 2.ID.; ID.A wall separating two adjoining buildings, built on the land on which one of these buildings stands, is not a party wall when there is a drain along its top to carry away the water from the roof and eaves of the building belonging to the owner of the land on which the wall is erected; and also when a part of the wall is covered by the roof of the said building, the construction of which demonstrates that the wall belongs exclusively to the owner of the building of which it forms part. The fact that some of the timbers of the adjoining building were surreptitiously inserted in the disputed wall is not sufficient to warrant a finding that the wall was thereby converted into a party wall, because there are various indications that it belongs exclusively to the owner of the building, which conflict with the claim of an easement of party walls.

On May 8, 1914, counsel for the said husband and wife filed a written application in the Court of Land Registration for the registration of four parcels of land, together with the buildings thereon, of which they claimed to be the absolute owners. The first of said parcels, Lot No. 1, comprising a house and three other buildings known as accesorias, all of strong materials, is situated in Calle Juan Luna, formerly Calle Jolo or Anloague of the district of Binondo, and has an area of 175.08 square meters; the second parcel, Lot No. 2, comprising a house of strong materials erected thereon, likewise situated in Calle Juan Luna, formerly Calle Jolo or Anloague, Binondo, is 212.05 square meters in area; the third parcel of land, Lot No. 3, comprising two houses and sheds of strong materials is located in Calle Elcano, San Nicolas, Binondo, and measures 596.06 square meters in area; and the fourth parcel of land, Lot No. 2, containing two buildings of strong materials, one of them of three stories, situated in Calle Elcano, San Nicolas, Binondo, 813.01 square meters in area. The street numbers of the two latter properties appear in the said judgment, and their boundaries are given in both the said plan No. 1 and in their respective technical descriptions. The application recites that the first of the four abovementioned properties was appraised in the last assessment, the land at P4,664 and the buildings at P4,000; the second parcel, the land at P5,492 and the buildings at P3,600; the third parcel, the land at P6,329 and the buildings at P4,000; and the fourth parcel, the land at P8,529 and the buildings at P22,500; and that the said properties are all unencumbered and no one has any right or share therein except the applicants, who acquired them by purchase, the first parcel from Felix Zalvidea, by a public instrument of June 11, 1912; the second parcel, from Clara Lichauco and her husband Catalino Arevalo, by a public instrument of September 12, 1912; the third parcel, from Antonio Abraham Brimo, by a public instrument of March 28, 1911; and the fourth parcel, from Marcela Lao, by a public instrument of April 17, 1914. The application recites the names of the tenants who occupy the first three properties and states that the applicants occupy the fourth. The names and addresses of the owners or proprietors of the adjoining properties are also given. After due service of notice, counsel for the administrator of the estate of the deceased Lorenza Alburo filed in court a written objection, alleging that in the part of the application relative to the second parcel of the plan No. 1, a stone wall shown in that plan to be northeast of the said parcel had been improperly included; that this wall had belonged to the said Lorenza Alburo, for it had existed since March 8, 1881; that the principal timbers of the building that had belonged to the said deceased had rested on it for more than thirty-five years,
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APPEAL from a judgment of the Court of Land Registration. Ostrand, J. The facts are stated in the opinion of the court. Medina, Gabriel & Diaz for appellants. Buenaventura Reyes for appellees. TORRES, J.:

This appeal by bill of exceptions was taken from the judgment of August 17, 1914, in which the honorable judge of the Court of Land Registration decreed that, after the description of the parcel of land No. 2 should have been amended in the manner indicated, the parcels of land in the case at bar should be registered in the name of the applicants, Domingo Lao and his wife Albina de los Santos. It was held in this decree that the wall, called a stone wall in the plan of the said parcel No. 2, was a party wall between the said parcel and the property adjoining it on the northwest. Counsel for the applicants excepted to this finding and moved. for a new trial. His motion was overruled, whereupon the applicants excepted and duly filed their bill of exceptions, which was approved and transmitted to this court.

and the latter's successors had been and were now in the quiet, peaceable and uninterrupted possession of the said wall. At the trial of the case both parties thereto introduced documentary and oral evidence, and the judge of the Court of Land Registration made a personal inspection of the wall in question and of the respective properties of the applicants and the objectors. In the judgment appealed from it is held that the applicants, Domingo Lao and Albina de los Santos, conclusively and satisfactorily proved that they were, and had been for about forty years, the lawful owners and possessors of the four properties sought to be registered; wherefore the court decreed the registration thereof in their names, but ordered that record be made in the decree that the wall marked on the plan of the parcel No. 2 as a stone wall was a party wall. Hence the question to be decided relates solely to the matter of the said wall of the property designated as parcel No. 2the subject matter of the objection filed by the administrator of the estate of the deceased Lorenza Alburo, owner of the property adjoining that designated on the said plan as parcel No. 2 inasmuch as the said administrator alleges in his objection that the said stone wall forms a part of the property that belonged to the said deceased while the applicants claim that this wall is theirs, being a part of the strong-material house constructed on the said parcel of land, Lot No. 2 according to the plan, Exhibit A. Article 572 of the Civil Code provides that the easement of party walls is presumed, unless there is a title or exterior mark or proof to the contrary in the dividing walls of adjoining buildings up to the common point of elevation. As the court held in the judgment appealed from that the wall which lies between the properties of the applicants and the objectors was a party wall, and as the applicants appealed from this ruling, it devolves upon us to decide whether it is in fact a party wall, as counsel for the administrator of the estate of the deceased Alburo or for her heirs finally admitted that it was in assenting to that decision, although he averred in his written objection that it was the exclusive property of the objectors; or whether, on the contrary, this wall is a part of property marked No. 2 on the plan Exhibit A, as the applicants claim. Article 573 of the Civil Code also declares that it shall be understood that there are exterior signs which conflict with the easement of party wall, when, among other circumstances, the entire wall is built on one of the lots and not on the line dividing the two adjoining parcels; when the dividing wall, being constructed of stone and cement, has stones projecting at intervals from the

surface on one side only and not on the other; and when it supports joists, beams, floors, and the roof timbers of one of the houses but not of the adjoining building. The record shows it to have been duly proven that the enclosing wall of Lot No. 2 of the plan Exhibit A, belonging to the applicants, is much higher than the adjoining building of the objectors; that along the top of the said wall there is a gutter which catches the rain water from the eaves of the roof of the applicants' building and carries it thence to Calle Juan Luna through an iron pipe f astened to the said wall; that one-half of the top of the said wall is covered by the roof of the applicants' building; that the supports of the said wall project toward the side of the applicants' land and that none of the buttresses are on the side of the objectors' lot; that the stones of the wall in dispute are bound or inset in the rear enclosing wall of the applicants' property in such wise that the two walls that inclose the lot form but a single construction, the exterior signs of which show that the wall in question is not a party wall, but that it forms a part of the applicants' building and belongs to them. Besides the signs just referred to, the evidence also shows that on the objectors' land and flanking the disputed wall there is another and lower wall which has no connection with the one in question. Cayetano Argelles, a master builder, who climbed to the top of the wall in question and examined it, testified that the aforesaid drain caught the rain water from the eaves of the applicants' roof, and that from the outside the division or space between the applicants' wall and the wall on the objectors' land could be seen; that the lower part of this latter wall had two archlike hollows; that according to the testimony of the objector, Irineo Mendoza, the latter wall was that of an old building that had belonged to the said deceased and was destroyed by an earthquake; and that in the rear of the objectors' land were the ruins of a wall which had also flanked the wall in dispute, and these ruins, according to the said witness Mendoza were what was left of the wall of a latrine formerly existing there. These exterior signs contrary to the existence of a partywall easement cannot be offset by the circumstance that the disputed wall projects into Calle Juan Luna 74 centimeters farther than the applicants' building, and neither can the fact that the face of this projecting wall is on the same street line as the objectors' building, for the reason that, in view of the said signs contrary to the existence of the easement of party wall, the projection of the wall does not prove that it was a party wall belonging in common to the applicants and the objectors and that the latter shared in the ownership thereof.
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The objectors have not proved that a part or one-half of the wall in litigation was erected on the land that belonged to the deceased Lorenza Alburo. The fact that the owners of the objectors' property may have surreptitiously inserted some of the timbers or joists of their building in the wall belonging to the applicants is not enough to convert this latter into a party wall, when there are so many exterior signs to indicate the exclusive ownership of the wall and to conflict with the existence of the easement that the objectors endeavor to establish. The wall in litigation is f ully proven by the record to belong exclusively to the applicants. All of the applicants' properties, including the wall in question, should theref ore be registered. For the foregoing reasons the judgment appealed from is affirmed, but the decree of registration of the property designated as Lot No. 2 shall include the disputed wall as belonging exclusively to the applicants, and that part of the judgment appealed from in which it was held that the said wall is a party wall is hereby reversed; without special finding as to costs. So ordered. Arellano, C. J., Johnson, Carson, Moreland, Trent, and Araullo JJ., concur. Judgment modified. ____________

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Lao and De los Santos vs. Heirs of Alburo., 33 Phil. 48(1915)]

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[No. 911. March 12. 1903.] MAXIMO CORTES, plaintiff and appellant, vs. JOSE PALANCA Yu-TIBO, defendant and appellee.
1.REAL PROPERTY; EASEMENTS; LIGHT AND AIR.The easement of light in the case of windows opened in one's own wall is negative, and can not be acquired by prescription except where sufficient time of possession has elapsed after the owner of the dominant estate, by a formal act, has prohibited the owner of the servient estate from doing something which would be lawful but for the easement. 2.ID.; ID.; ID.Different doctrines are applicable to the acquisition of easements in favor of windows opened in one's own wall and of those opened in a party wall. In the latter case the express or implied consent of the part owner affords a basis for the acquisition of a prescriptive title. 3.ID.; ID.; ID.Different doctrines are applicable to the acquisition of casements in favor of windows opened in one's own wall and those opened in the wall of a neighbor; in the latter case prescription commences to run from the date of the opening of the windows and ripens into title when the specified time has elapsed without opposition on the part of the owner of the wall. 4.ID.; ID.; ID.The judgment of the supreme court of Spain of February 7, 1896, is distinguishable on the ground that the easement there in question, created by the owner of both dominant and servient estates, was positive because it consisted of the active enjoyment of the light as opposed to mere tolerance on the part of an adjoining owner of windows opened in one's own wall. 5.ID.; ID.; ID.With reference to the law of easements of light and air there is no distinction to be made between ordinance windows and others. 6.ID.; ID.; ID.A, watershed protecting a window from sun and rain is a mere accessory thereto and follows the condition of the window itself. 7.ID.; ID.; VIEW.Article 582 of the Civil Code, pertaining to easement of view from windows, balconies, or similar projections, has no application to a protecting shed over a window. 8.ID.; ID.; ID.Article 585 of the Civil Code is applicable only to cases in which an easement has been acquired and can not be cited in support of a contention that an easement exists. 9.PLEADING AND PRACTICE; APPEAL; VALUE IN CONTROVERSY.Where the litigation involves an easement in favor of one certain piece of property worth less than $25,000, the Supreme Court of the United States can have no jurisdiction on appeal, since the easement alone can not be worth more than the entire property. 10.ID.; ID.; ID.Where the value of the property in controversy does not equal $25,000, the fact that plaintiff has similar claims to other property not in controversy whose value exceeds

$25,000 can not be considered in the allowance of an appeal to the Supreme Court of the United States.

APPEAL from a judgment of the Court of First Instance of Manila. The facts are stated in the opinion of the court. Felipe G. Calderon, for appellant. Simplicio del Rosario, for appellee. MAPA, J.:

This suit was brought to obtain an injunction, in accordance with the provisions of sections 162 to 172 of the Code of Civil Procedure, for the purpose of restraining the continuation of certain buildings commenced by the defendant. The court below issued a preliminary injunction during the trial, but, upon rendering final judgment, dissolved the injunction, with the costs against the plaintiff. The latter excepted to this judgment and assigns error. In the trial the following facts were admitted without contradiction: (1) That house No. 65 Calle Rosario, this city, property of the wife of the plaintiff, has certain windows therein, through which it receives light and air, said windows opening on the adjacent house, No. 63 of the same street; (2) that these windows have been in existence since the year 1843, and (3) that the defendant, the tenant of the said house No. 63, has commenced certain work with the view to raising the roof of the house in such a manner that onehalf of one of the windows in said house No. 65 has been covered, thus depriving the building of a large part of the air and light formerly received through the window. In its decision the court below practically finds the preceding facts, and further finds that the plaintiff has not proven that he has, by any formal act, prohibited the owner of house No. 63 from making improvements of any kind therein at any time prior to the complaint. The contention of the plaintiff is that by the constant and uninterrupted use of the windows referred to above during a period of fifty-nine years he acquired by prescription an easement of light in favor of the house No. 65, and as a servitude upon house No. 63, and, consequently, has acquired the right to restrain the making of any improvements in the latter house which might in any manner be prejudicial to the enjoyment of the said easement. He contends that
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the easement of light is positive; and that therefore the period of possession for the purposes of the acquisition of a prescriptive title is to begin from the date on which the enjoyment of the same commenced, or, in other words, applying the doctrine to this case, from the time that said windows were opened with the knowledge of the owner of the house No. 63, and without opposition on his part. The defendant, on the contrary, contends that the easement is negative, and that therefore the time for the prescriptive acquisition thereof must begin from the date on which the owner of the dominant estate may have prohibited, by a formal act, the owner of the servient estate from doing something which would be lawful but for the existence of the easement. The court below in its decision held that the easement of light is negative, and this ruling has been assigned by the plaintiff as error to be corrected by this court. A building may receive light in various manners in the enjoyment of an easement of light, because the openings through which the light penetrates may be made in one's own wall, in the wall of one's neighbor, or in a party wall. The legal doctrine applicable in either one of these cases is different, owing to the fact that, although anyone may open windows in his own wall, no one has a right to do so in the wall of another without the consent of the owner, and it is also necessary, in accordance with article 580 of the Civil Code, to obtain the consent of the other cowner when the opening is to be made in a party wall. This suit deals with the first case; that is, windows opened in a wall belonging to the wife of the plaintiff, and it is this phase of the easement which it is necessary to consider in this opinion. When a person opens windows in his own building he does nothing more than exercise an act of ownership inherent in the right of property, which, under article 348 of the Civil Code, empowers him to deal with his property as he may see fit, with no limitations other than those established by law. By reason of the fact that such an act is performed wholly on a thing which is wholly the property of the one opening the window, it does not in itself establish any easement, because the property is used by its owner in the exercise of dominion, and not as the exercise of an easement: "For a man" says law 13, title 31, third partida, "should not use that which belongs to him as if it were a service only, but as his own property" Coexistent with this right is the right of the owner of the adjacent property to cover up such windows by building on his own land or raising a wall contiguously to the wall in which the windows are opened (art. 581 of the same

Code), by virtue of the reciprocity of rights which should exist between abutting owners, and which would cease to exist if one could do what he pleased on his property and the other could not do the same on his. Hence it is that the use of the windows opened in a wall on one's own property, in the absence of some covenant or express agreement to the contrary, is regarded as an act of mere tolerance on the part of the owner of the abutting property (judgments of the supreme court of Spain of the 17th of May, 1876; 10th of May, 1884; 30th of May, 1890), and does not create any right to maintain the windows to the prejudice of the latter (judgment of the supreme court of Spain of the 13th of June, 1877). The mere toleration of such an act does not imply on the part of the abutting owner a waiver of his right to freely build upon his land as high as he may see fit, nor does it avail the owner of the windows for the effects of possession according to article 1942 of the Civil Code, because it is a mere possession at will. From all this it follows that the easement of light with respect to the openings made in one's own edifice does not consist precisely in the fact of opening them or using them, inasmuch as they may be covered up at any time by the owner of the abutting property, and, as Manresa says in his commentaries on the Civil Code, "there is no true easement as long as the right to impede its use exists" The easement really consists in prohibiting or restraining the adjacent owner from doing anything which may tend to cut off or interrupt the light; in short, it is limited to the obligation of not impeding the light (ne luminibus officiatur). The latter coincides in its effects, from this point of view, with the obligation of refraining from increasing the height of a building (altius non tollendi), which, although it constitutes a special easement, has for its object, at times, the prevention of any interruption of the light enjoyed by the adjacent owner. It will be readily observed that the owner of the servient estate subject to such an easement is under no obligation whatsoever to allow anything to be done on his tenement, nor to do anything there himself, but is simply restrained from doing anything thereon which may tend to cut off the light from the dominant estate, which he would undoubtedly be entitled to do were it not for the existence of the easement. If, then, the first condition is that which is peculiar to positive easements, and the second condition that which is peculiar to negative easements, according to the definition of article 533 of the Civil Code, it is our opinion that the easement of lights in the case of windows opened in one's own wall is of a negative character, and, as such, can not be acquired by prescription under article 538 of the Civil Code, except by counting the time of possession from the date on which the owner of the dominant estate may, by a formal act, have prohibited the owner of the servient estate from doing something which it would be lawful for him to do were it not for the easement.
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The supreme court of Spain, in its decisions upon this subject, has established these principles by a long line of cases. In its judgment of May, 14, 1861, the said court holds that "the prescription of the easement of lights does not take place unless there has been some act of opposition on the part of the person attempting to acquire such a right against the person attempting to obstruct its enjoyment." "The easements of light and view," says the judgment of March 6, 1875, "because they are of a negative character, can not be acquired by a prescriptive title, even if continuous, or although they may have been used for more than twenty-eight years, if the indispensable requisite for prescription is absent, which is the prohibition on the one part, and the consent on the other, of the freedom of the tenement which it is sought to charge with the easement." In its judgment of June 13, 1877, it is also held that use does not confer the right to maintain lateral openings or windows in one's own wall to the prejudice of the owner of the adjacent tenement, who, being entitled to make use of the soil and of the space above it, may, without restriction, build on his line or increase the height of existing buildings, unless he has been "forbidden to increase the height of his buidings and to thus cut off the light" and such prohibition has been consented to and the time fixed by law subsequently expired. The court also holds that it is error to give the mere existence or use of windows in a wall standing wholly on the land of one proprietor the creative force of a true easement, although they may have existed from time immemorial. Finally, the judgments of the 12th of November, 1889, and the 31st of May, 1890, hold that "as this supreme court has decided, openings made in walls standing wholly on the land of one proprietor and which overlook the land of another exist by mere tolerance in the absence of an agreement to the contrary, and can not be acquired by prescription, except by computing the time from the execution of some act of possession which tends to deprive the owner of the tenement affected of the right to build thereon." Various other judgments might be cited, but we consider that those above mentioned are sufficient to demonstrate the uniformity of the decisions upon this point. It is true that the supreme court of Spain, in its decisions of February 7 and May 5, 1896, has classified as positive easements of lights which were the object of the suits in which these decisions were rendered in cassation, and from these it might be believed at first glance that the former holdings of the supreme court upon this subject had been overruled. But this is not so, as a matter of fact, inasmuch as there is no conflict between these decisions and the former decisions above cited. In the first of the suits referred to, the question turned upon two houses which had formerly belonged to the same owner, who established a service of light on one of them for the benefit of the other. These properties were subsequently

conveyed to two different persons, but at the time of the separation of the property nothing was said as .to the discontinuance of the easement, nor were the windows which constituted the visible sign thereof removed. The new owner of the house subject to the easement endeavored to free it from the incumbrance, notwithstanding the fact that the easement had been in existence for thirty-five years, and alleged that the owner of the dominant estate had not performed any act of opposition which might serve as a starting point for the acquisition of a prescriptive title. The supreme court, in deciding this case, on the 7th of February,, 1890, held that the easement in this particular case was positive, because it consisted in the active enjoyment of the light. This doctrine is doubtless based upon article 541 of the Code, which is of the following tenor: "The existence of apparent sign of an easement between two tenements, established by the owner of both of them, shall be considered, should one be sold, as a title for the active and passive continuance of the easement, unless, at the time of the division of the ownership of both tenements, the contrary should be expressed in the deed of conveyance of either of them, or such sign is taken away before the execution of such deed. The word "active" used in the decision quoted in classifying the particular enjoyment of light referred to therein, presupposes on the part of the owner of the dominant estate a right to such enjoyment arising, in the particular case passed upon by that decision, from the voluntary act of the original owner of the two houses, by which he imposed upon one of them an easement for the benefit of the other. It is well known that easements are established, among other cases, by the will of the owners. (Article 536 of the Code.) It was an act which was, in fact, respected and acquiesced in by the new owner of the servient estate, since he purchased it without making any stipulation against the easement existing thereon, but, on the contrary, acquiesced in the continuance of the apparent sign thereof. As is stated in the decision itself, "lt is a principle of law that upon a division of a tenement among various persons in the absence of any mention in the contract of a mode of enjoyment different from that to which the former owner was accustomedsuch easements as may be necessary for the continuation of such enjoyment are understood to subsist." It will be seen, then, that the phrase "active enjoyment" involves an idea directly opposed to the enjoyment which is the result of a mere tolerance on the part of the adjacent owner, and which, as it is not based upon an absolute, enforceable right, may be considered as of a merely passive character. Therefore, the decision in question is not in conflict with the former rulings of the supreme court of Spain upon the subject, inasmuch as it deals with an easement of light established by the owner of the servient estate, and
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which continued in force after the estate was sold, in accordance with the special provisions of article 541 of the Civil Code. Nor is the other decision cited, of May 5, 1896, in 1-011flict with the doctrine above laid down, because it refers to windows opened in a party wall, and not in a wall the sole and exclusive property of the owner of the dominant tenement, as in the cases referred to by the other decisions, and as in the case at bar. The reason for the difference of the doctrine in the one and the other case is that no part owner can, without the consent of the other, make in a party wall a window or opening of any kind, as provided by article 580 of the Civil Code. The very fact of making such openings in such a wall might, therefore, be the basis for the acquisition of a prescriptive title without the necessity of any active opposition, because it always presupposes the express or implied consent of the other part owner of the wall, which consent, in turn, implies the voluntary waiver of the right of such part owner to oppose the making of such openings or windows in such a wall. With respect to the provisions of law 15, title 31, third partida, which the appellant largely relied upon in his oral argument before the court, far from being contrary to it, is entirely in accord with the doctrine of the decisions above referred to. This law provides that "if anyone shall open a window in the wall of his neighbor, through which the light enters his house," by this sole fact he shall acquire a prescriptive title to the easement of light, if the time fixed in the same law (ten years as to those in the country and twenty years as to absentees) expires without opposition on the part of the owner of the wall; but, with the exception of this case, that is to say, when the windows are not opened in the wall of the neighbor, the law referred to requires as a condition to the commencement of the running of the time for the prescriptive acquisition of the easement, that "the neighbor be prohibited from raising his house, and from thereby interrupting the light." That is to say, he must be prohibited from exercising his right to build upon his land, and cover the window of the other. This prohibition, if consented to, serves as a starting point for the prescriptive acquisition of the easement. It is also an indispensable requisite, therefore, in accordance with the law of the partidas, above mentioned, that some act of opposition be performed, in order that an easement may be acquired with respect to openings made in one's own wall. For a proper understanding of this doctrine, it is well to hold in mind that the Code of the partidas, as well as the Roman law, clearly distinguishes two classes of easements with respect to the lights of houses, as may be seen in law 2 of title 31, of the third partida. One of them consists in "the right to pierce

the wall of one's neighbor to open a window through which the light may enter one's house" (equivalent to the so-called easement of luminum of the Romans) ; the other is "the easement which one house enjoys over another, whereby the latter can not at any time be raised to a greater height than it had at the time the easement was established, to the end that the light be not interrupted." (Ne luminibus officiatur.) For the prescriptive acquisition of the former the time must begin, as we have seen, from the opening of the window in the neighbor's wall. As to the second, the time commences from the date on which he was "prevented from raising his house." Some of the judgments which establish the doctrine above laid down were rendered by the supreme court of Spain interpreting and applying the above-cited law 15, title 31, partida 3, and therefore they can not in any sense be regarded as antagonistic to the law itself. The question as to whether the windows of the house of the plaintiff are, or are not, so-called regulation windows, we consider of but little importance in this case, both because the authority of the decisions of the law of the partidas, above cited, refers to all kinds of windows, and not to regulation windows solely, and because the record does not disclose, nor has the appellant even stated, the requirements as to such regulation windows under the law in operation prior to the Civil Code, which he asserts should be applied and on which he relies to demonstrate that he has acquired by prescription the easement in question. With respect to the watershed which, according to the plaintiff, exists over the window in question, the record does not disclose that the same has been destroyed by the defendant, He expressly denies it on page 7 of his brief, and affirms (p. 8) that the tenant of the appellant's property himself removed it, by reason of the notice served on him; on the other hand, the judgment of the court below contains no findings with respect to this fact, nor does it disclose the former existence of any such watershed. Furthermore, the opinion which we have formed with respect to this matter, in so far as we are able to understand the merits of the case, is that this shed was a mere accessory of the window, apparently having no other purpose than that of protecting it against the inclemency of the weather; this being so, we are of opinion that it should follow the condition of the window itself, in accordance with the legal maxim that the accessory always follows the principal. The appellant contends that the shed should be regarded as a projection within the provisions of article 582 of the Code; but it is sufficient to observe that this article speaks of windows with direct views, balconies, or similar projections, in order to conclude that the article does not refer to such watersheds, which have not the slightest degree of similarity to balconies, nor are they constructed for the purpose of obtaining the viewthis being the subject-matter which this
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article expressly purports to controlinasmuch as such sheds have rather the effect of limiting the scope of the view than of increasing it. The fact that the defendant did not cover the windows of the other house adjacent to No. 63 at the time he covered the windows of the appellant, a fact which the latter adduces as proof of the recognition on the part of the former of the prescriptive acquisition of the easement of the light in favor of that house, which, according to his statement, is under precisely the same conditions as the house of the plaintiff, does not necessarily imply, in our opinion, any such recognition, as it might be the result of a mere tolerance on the part of the defendant. Certainly the fact of his tolerating the use by the owner of that house of such windows, supposing the facts to be as stated, does not carry with it as a result an obligation to exercise the same forbearance with respect to the plaintiff; but whatever may be the legal status of the windows in the house referred to with respect to the house No. 63, we can not pass upon the point, nor can we form suppositions concerning the matter for the purpose of drawing conclusions of any kind therefrom to support our opinion, for the simple reason that it is not a point at issue in this case, and more especially because the defendant not only denied the existence of the alleged easement of light in favor of the house referred to, but, on the contrary, he affirms that demand has been made that the windows in said house be closed, as may be seen on page 8 of his brief. The point discussed in this trial being whether the plaintiff has acquired the easement which he seeks to enforce over the house of which the defendant is tenant, it is evident that the provisions of article 585 of the Civil Code can not be invoked without taking for granted the very point at issue. This article refers to cases in which, under any title, the right has been acquired to have direct views, balconies, or belvederes over contiguous property. The existence of such a right being the very point at issue, the supposition upon which the article rests is lacking, and it is therefore not in point. As a result of the opinion above expressed, we hold: 1. That the easement of light which is the object of this litigation is of a negative character, and therefore pertains to the class which can not be acquired by prescription as provided by article 538 of the Civil Code, except by counting the time of possession from the date on which the owner of the dominant estate has, in a formal manner, forbidden the owner of the servient estate to do an act which would be lawful were it not for the easement.

2. That, in consequence thereof, the plaintiff, not having exceuted any formal act of opposition to the right of the owner of house No. 63 Calle Rosario (of which the defendant is tenant), to make therein improvements which might obstruct the light of house No. 65 of the same street, the property of the wife of the appellant, at any time prior to the complaint, as found by the court below in the judgment assigned as error, he has not acquired, nor could he acquire by prescription, such easement of light, no matter how long a time might have elapsed since the windows were opened in the wall of the said house No. 65, because the period which the law demands for such prescriptive acquisition could not have commenced to run, the act with which it must necessarily commence not having been performed. Therefore, we affirm the judgment of the court below and condemn the appellant to the payment of all damages caused to the plaintiff, and to the payment of the costs of this appeal. So ordered. Arellano, C. J., Cooper, Willard, and Ladd, JJ., concur. Torres, J., did not sit in this case. Judgment affirmed. ON MOTION FOR A REHEARING. The plaintiff asks for a rehearing of the decision of the court of March 12th last upon the ground that the same contains error: First, because the decision holds that the window opened in the plaintiff's own wall and the watershed do not constitute the continuous and apparent easements of prospect, light, and ventilation, or jus projitiendi and jus spillitiendi, this ruling being in opposition to the provisions of laws 12, 14, and 15, title 31, third partida, and articles 530, 532, 533, 537, 538, 582, and 585 of the Civil Code. This allegation is entirely unfounded, inasmuch as the decision of the court contains no declaration as to whether the windows and watershed do or do not constitute continuous and apparent easements, or jus projitiendi and jus spillitiendi. These questions were not drawn into issue by the complaint, and therefore any decision thereon one way or the other would have been mere dicta. What the court did hold was that the easement of light, when it is sought to claim such benefit from a window opened in one's own wall, as does the appellant with respect to the tenement of the defendant, belongs to the class of
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negative easements, and that on that account the time of possession for prescriptive acquisition of the title thereto must be counted, not from the time of the opening of the windows, but from the time at which the owner thereof has executed some act of opposition tending to deprive the owner of the servient tenement of his right, under the law, to build upon it to such height as he might see fit in the legitimate use of his rights of ownership. With respect to the watershed, the court held that the shed in question in the case is not included within the class of projections referred to in article 582 of the Civil Code, and certain it is that neither this article nor any of the other provisions of law cited by the appellant in his motion papers establish any doctrine contrary to that laid down in the decision, either with regard to the watershed or with respect to the windows. It is not necessary to say anything further upon this point. It is sufficient to read the text of the laws cited to reach the conclusion that the assertion made by the appellant in his motion papers is entirely gratuitous. Article 582 provides that windows with direct views, balconies, or other similar projections opening upon the tenement of one's neighbor are not permissible unless there are two meters distance between the wall in which such openings are constructed and the adjacent tenement From this the appellant draws the conclusion that he who opens windows in his own wall without respecting the distance mentioned does not exercise an act of ownership, as stated in the decision, inasmuch as he violates an express provision of the law. The conclusion reached is evidently false. The appellant confounds the facts with the lawan act of ownership with the right of ownership. The owner of a thing does not cease to be such owner because in his manner of use or enjoyment thereof he violates some provision of law. The acts which he performs, in our opinion, even if abusive or contrary to law, are in a strict sense acts of ownership, acts in the exercise of dominion, because this character is not derived from a greater or less degree of compliance with the provisions of law, but from the existence of the status of owner on the part of the person who exercises such acts. In order that the act perf ormed by the owner of a wall in opening windows therein be a true act of ownership it is a matter of indifference whether or not the distance prescribed by article 582 of the Code has been respected, although, considered from a legal point of view, it might be an illegal act, as not complying with the conditions imposed by law. The doctrine laid down by law 13, title 31, partida 3, cited in the decision, to the effect that "a man should not use that which belongs to him as if it were a service only, but as his own property" is of general application, and does not refer to the easements which a property owner may establish for the benefit of

his heirs, as is erroneously believed by the appellant. The very same law provides that easements which "a man imposes upon his house must be for the benefit of the tenement or thing of another, and not that of his own tenement;" and this is because things are of service to their owner by reason of dominion, and not in the exercise of a right of easement. "Res sua," says a legal maxim, "nemini jure servitutis servit." The provision of article 1942 of the Civil Code to the effect that acts which are merely tolerated produce no effect with respect to possession is applicable as much to the prescription of real rights as to the prescription of the fee, it being a glaring and self-evident error to affirm the contrary, as does the appellant in his motion papers. Possession is the f undamental basis of the prescription. Without it no kind of prescription is possible, not even the extraordinary. Consequently, if acts of mere tolerance produce no effect with respect to possession, as that article provides, in conformity with article 444 of the same Code, it is evident that they can produce no effect with respect to prescription, whether ordinary or extraordinary. This is true whether the prescriptive acquisition be of a fee or of real rights, for the same reason holds in one and the other case; that is, that there has been no true possession in the legal sense of the word. Hence, it is because the use of windows in one's own wall is the result of a mere tolerance that the supreme court of Spain, in its judgment of June 13, 1877, has held that such user lacks the creative force of a true easement, although continued from time immemorial. The citation of article 1959 of the Civil Code and of law 21, title 29, partida 3, made by the petitioner, is therefore not in point, because both of these provisions of law, which refer to the extraordinary period of prescription, presuppose possession as a necessary requisite, even if without either just title or good faith. The second error assigned is that in the decision the court holds that the gravamina constituted by the window and the projection are negative easements, against the provisions of article 533, which define them as positive, which definition, he adds, is supported by the judgments of the supreme court of Spain of February 7 and May 5, 1896, cited in paragraph 12 of the said decision, which judgments declare that the easement resulting from a window is positive. It is not true that article 533 of the Civil Code says that the easement of light is positive, because it does nothing more than give in general terms the definition of positive easements and negative easements, without attempting to specify whether the easement of lights pertains to the first or to the second class. We have declared that the easement is negative, having in mind this very definition
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of the Code and the doctrine established by the judgments of the supreme court of Spain which have been cited in our opinion. The interpretation which the appellant attempts to give the article of the Civil Code cited is evidently erroneous, and, consequently, the citation made by him in support of his contention is not in point. Our opinion of the true extent and meaning of the judgments of the supreme court of Spain of February 7 and May 5, 1896, has been already sufficiently explained, and it is therefore unnecessary to go into the subject again here. We refer to our decision with respect to what was said therein upon this subject. The decision of the court does not contain the declaration, as gratuitously assumed by the appellant, that the easement resulting from a projection is of a negative character; nor, in fact, had we any occasion to make such a declaration, in view of the nature of the issues raised and discussed during the trial. What we did, indeed, hold was that the watershed mentioned in the complaint, the purpose of which was simply to protect the window in question from sun and rain, was a mere accessory to that window, and that in no case could it be considered as a projection within the provisions of article 582 of the Civil Code, as so erroneously contended by the appellant at the trial. We find nothing in his motion papers which can in any way weaken this holding. The third error assigned is that the court holds that the easement of light, as negative, can not be acquired by prescription except by counting the period of possession from the time at which the owner of the servient tenement has been prohibited from making improvements which might interfere with said easement, contrary to the provisions of law 14, title 31, partida 3, and articles 538 and 585 of the Civil Code, which establish the contrary. This assertion is entirely destitute of foundation, inasmuch as neither in the law of the partidas nor in the articles of the Civil Code mentioned is to be found the doctrine which the appellant arbitrarily seeks to deduce from them. It is sufficient to read the text to reach the conclusion that the assertion is wholly gratuitous. The fourth error assigned is that the court holds that the watershed, as being an accessory of the window, can not in itself constitute an easement, this being contrary to the provisions of articles 582 and 585 of the Civil Code, and law 2, title 31, partida 3, which do not make any such distinction. Neither of the laws cited speaks expressly of watersheds. We have held that article 582 refers solely to windows, balconies, and other similar projections,

and that the watershed in question does not pertain to this class of projections, our holding being based upon the reasons given in our decision. The appellant advances no argument worthy of serious consideration, and therefore we continue to believe that our opinion in this matter is strictly in accordance with the law. The appellant has attached to his motion for a rehearing two judgments, one rendered by the Royal Audiencia of Manila September 6, 1877, and the other by the supreme court of Spain on the 22d of February, 1892, and we think it well to say a few words concerning them. In the opinion of the appellant these judgments support the theory contended for by him at the trial, that the easement of lights is positive and not negative. His error in so believing is evident, inasmuch as neither of the judgments referred to establishes any such doctrine. On the contrary, it appears clear, from the first of these judgments, that the easement referred to is negative in the opinion of the court which rendered it. This appears from the eighth conclusion of law therein, which is literally as follows: "From the evidence introduced by the defendant, and even from the testimony of witnesses of the plaintiff, it has been proven that since 1828 the house in question has suffered no change or alteration in its roof, which projects over Cosio's lot, which constitutes the active opposition necessary in order to acquire by prescription the right to the light" It will be seen, then, that the latter part of the preceding transcript of the conclusion of law lays down precisely the same doctrine as that expressed in our decisionthat active opposition is a necessary condition for prescriptive acquisition of an easement of light. And this also demonstrates conclusively that the court which rendered the judgment referred to considered the easement to be negative, inasmuch as positive easements do not require any active opposition as a basis for their prescriptive acquisition, such an act being solely necessary to the prescription of negative easements. It would appear, judging from his allegations as a whole, that the appellant conf uses positive easements with continuous easements, and the judgment referred to, in fact, declares in its fourth conclusion of law that the easement of light is continuous. If this were really so the error of the appellant would be manifest, because continuity is not a quality exclusively peculiar to positive easements; there are negative easements which are also continuous. Hence it is that the Civil Code, after classifying easements, in article 532, as continuous and discontinuous, classifies them also as positive and negative (art. 533), thus giving to understand that this latter classification depends upon other characteristics entirely distinct from the continuity or discontinuity of
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easements. If all continuous easements were positive and all discontinuous easements were negative, then the express division of easements into positive and negative made by the Code, after establishing the division of the same as continuous or discontinuous, would be entirely unnecessary, as they would be entirely merged or included in the latter classification. It is sufficient to read the text of the Code to understand beyond the possibility of a doubt that a negative easement may be continuous, and that a positive easement may be discontinuous, according to the special nature of each one. With respect to the second judgmentthe judgment of the supreme court of Spain of February 22, 1892it is certainly difficult to understand how the appellant could have imagined that he had found therein the slightest ground for his contention, inasmuch as it lays down no doctrine which relates even by inference to the subject of easements, and simply holds, in the first of only two paragraphs in which its conclusions are contained, that "judgments should be clear, precise, and responsive to the complaint and the issues properly raised at the trial;" and in the second, that "the judgment appealed was contradictory as to the questions it decides, because it makes certain declarations favorable to some of the contentions in the plaintiff's complaint and then gives judgment for the defendant, without making any distinction." It was for this reason alone, and for no other, that the judgment appealed was reversed and annulled. In the judgment rendered by the same supreme court upon the merits of the case, as a result of this decision in cassation, no other doctrine is laid down than that "the judgment must be that the defendant comply with those claims advanced by the complaint to which he has consented, and that he must be discharged as to those allegations which have been denied by him and which have not been proved by the plaintiff." There is not one word in these judgments which says that the easement of lights is positive, nor that a watershed constitutes a true projection within the meaning attached to this word in article 582 of the Civil Code, as has been vainly contended by the appellant in the trial. Therefore the appellant's motion for a rehearing of the decision of March 12, 1903, is denied. Arellano, C. J., Cooper, Willard, and Ladd, JJ., concur. Torres and McDonough, JJ., did not sit in this case. Rehearing denied.

ON MOTION FOR WRIT OF ERROR TO REMOVE THE CASE TO THE SUPREME COURT OF THE UNITED STATES. WlLLARD, J.:

The application to this court for the allowance of a writ of error or appeal for the purpose of removing this case to the Supreme Court of the United States is denied. Section 10 of the act of Congress of July 1, 1902, is as follows: "SEC. 10. That the Supreme Court of the United States shall have jurisdiction to review, revise, reverse, modify, or affirm the final judgments and decrees of the Supreme Court of the Philippine Islands in all actions, cases, causes, and proceedings now pending therein or hereafter determined thereby in which the Constitution or any statute, treaty, title, right, or privilege of the United States is involved, or in causes in which the value in controversy exceeds twenty-five thousand dollars, or in which the title or possession of real estate exceeding in value the sum of twenty-five thousand dollars, to be ascertained by the oath of either party or of other competent witnesses, is involved or brought in question; and such final judgments or decrees may and can be reviewed, revised, reversed, modified, or affirmed by said Supreme Court of the United States on appeal or writ of error by the party aggrieved, in the same manner, under the same regulations, and by the same procedure, as far as applicable, as the final judgments and decrees of the circuit courts of the United States." There is no question in the case relating to the Constitution or any statute of the United States. The evidence submitted by the applicant shows that the value of his property over which this litigation turns is $11,867.70, money of the United States. The fact that the plaintiff owns other houses in different parts of the city as to which he claims an easement of light similar to the one claimed in this case, that the decision in this case destroys all of these claimed easements, and that the value of those other houses exceeds $25,000, gold, is not important. The test is the value of the matter in controversy. The matter in controversy here was the easement of light and air over the property No. 63 Calle del Rosario and in favor of house No. 65. That easement could not be worth more than the house itself.

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The easements in favor of other houses of the plaintiff over other lots than No. 63 were not in controversy in this suit. (Town of Elgin vs. Marshall, 106 U. S., 578.) So ordered. Arellano, C. J., Torres, Cooper, Mapa, and Ladd, JJ., concur. McDonough; J., did not sit in this case. Writ of error denied. _______________

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[No. 3598. July 24, 1908.] MIGUEL FABIE y GUTIERREZ, petitioner and appellee, vs. JULITA LICHAUCO AND THE CHILDREN OF FRANCISCO L. ROXAS, respondents and appellants.
1.REALTY; INCUMBRANCES ; PRESUMPTION.lt is a settled rule that real estate shall be presumed to be free from incumbrance unless and until the contrary is shown. (Decisions of the supreme court of Spain of April 7, 1864, and December 13, 1865.) 2.ID.; EASEMENTS.When the construction of windows and balconies does not constitute an actual invasion of the rights of another, but is a lawful exercise of an inherent right, the easement of light and view is negative. 3.ID.; ID.; BURDEN of PROOFOne who opposes the registration of title to land upon which he claims an easement in the name of another. basing his claim on the provisions of article 541 of the Civil Code must show that the apparent sign of the easement, upon which he relies, was in existence at the time the servitude was established 4.ID.; ID.; PRESCRIPTION.When an easement of light and view is negative, the period for prescription begins to run from the date on which the owner of the dominant estate, by a formal act, prohibited the owner of the servient estate to do something which he might properly do if the easement did not exist. (Art. 538, Civil Code.)

said claim was modified in part during the course of the litigation as far as it referred to Julita Lichauco, who finally reduced her opposition (fol. 138) to the easement of right of way and of light and view. In the judgment appealed from it is held that the easement of right of way exists in favor of the respective properties of Julita Lichauco and Hijos de Roxas, and the latter are further entitled to the easement of drainage. The claim of both respondents as to other easements was dismissed. (a) Opposition made by Julita Lichauco. This opponent invokes as the only legal foundation for her claim the provisions of article 541 of the Civil Code. The language of said provision is as follows: The existence of an apparent sign of an easement between two estates established by the owner of both shall be considered, should one of them be alienated, as a title, in order that the easement may continue actively and passively, unless, at the time of the division of the ownership of both estates, the contrary should be expressed in the instrument of alienation of either of them, or if said sign is removed before the execution of the instrument. It is alleged by Lichauco, as a material fact for applying the above legal provision, that her property, as well as that of the petitioner, came from Juan Bautista Santa Coloma, the original owner of both estates, who, at the time of constructing them, established upon the latter estate, not only an easement of right of way, which the petitioner admits, but also the easement of light and view which she claims; and that when both properties were alienated, that of the petitioner on the 28th of November, 1848, and that of the respondent (Julita Lichauco) on the 31st of October of the same year, the apparent sign of the existence of said easement was not removed, nor was it expressed in the instrument of alienation of the estates that such easements should be abolished. The apparent sign of the easements claimed in this case is made to consist of a gallery with windows through which light is admitted. In her written opposition Lichauco states that the said gallery is supported on columns erected on the ground belonging to the petitioner, and on the first page of her brief submitted to this court she again states that the balcony of her building is supported by uprights erected on land owned by the petitioner. The parties to the suit having admitted the actual existence of the aforesaid gallery, the question now to be decided is whether or not it existed when the ownership of the two estates of Juan Bautista Santa Coloma was divided by
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APPEAL from a judgment of the Court of Land Registra-tion. (No. 1464. August 22, 1906.) The facts are stated in the opinion of the court. Ledesma & Sumulong, and Del-Pan, Ortigas & Fisher, for appellants. Rosado, Sanz & for appellee. MAPA, J.:

This is an appeal from a judgment of the Court of Land Registration. The petitioner applied for the registration of his property, situated at 22 Calle San Jacinto, district of Binondo, Manila, free from all incumbrances, with the exception of an easement of right of way which he recognizes as existing in favor of the estates of the respondents Lichauco and Hijos de Roxas, which adjoin the property of the petitioner on the right and left of its entrance, respectively. In addition to the said easement of right of way the respondents claim that of light, view, and drainage in favor of their respective properties;

the alienation of the one which now belongs to the respondent (Lichauco) and which was the first sold on October 31, 1848. The instrument of sale (fol. 78) presented by said respondent contains a description of said house such as it was at that time, and after setting forth the boundaries thereof, states that the house is built of stone and mortar, and that it is erected upon the lot of the owner, and has a frontage of twenty and onefourth varas and three and a half inches, with a depth of thirty-one and onefourth varas. Converting the varas into meters and disregarding the centimeters, it results that said house had a frontage of 16 meters, equivalent to the twenty and one-fourth varas and three and a half inches stated in the instrument when it was alienated for the first time in October, 1848. Twenty years thereafterthat is, on the 13th of September, 1869the house was surveyed and appraised by Architect Luciano Oliver at the request of the person who then owned it, and in the certificate issued by the said architect (fol. 94) it is set forth that the house measures 16 meters on the front facing Calle San Jacinto which confirms and corroborates the measurement stated in the aforesaid instrument. Now then, according to the plan on folio 137, Exhibit I of the respondent (Lichauco), the house has now a frontage of 18 meters and 60 centimeters, of which 16 meters and 60 centimeters correspond to the main part of the same, and 1 meter and 90 centimeters to the gallery in question. It results, therefore, that at the present day, the house has nearly 2 meters more frontage than when it was alienated by Santa Coloma, the original owner thereof, or rather by the executors of his estate on the 31st of October, 1848. According to this it is evident that the front line of the house was increased by about 2 meters after the same was sold by Santa Coloma, and it also seems clear to us that it is the gallery mentioned above which constitutes the increase, both because it measures 1 meter and 90 centimeters, which, with a difference of a few centimeters, exactly represents such excess, and because it has neither been alleged nor claimed by the said respondent, that the rest which forms the main part of the house has suffered any alteration in its frontage since the year 1848. There is furthermore another detail in support of said conclusion. As stated by the respondent, the gallery is supported by columns erected on the lot of the petitioner, so that it is not merely a body projecting over the said lot without materially resting thereon but a construction erected and having foundations in the lot of the petitioner, inasmuch as the columns that support the said gallery are planted therein. Therefore, at the present day the house is erected partly on land belonging to the owner and partly, the gallery, over a lot belonging to

another; that is, over that of the petitioner. When it was sold in October, 1848, no portion of the house occupied the lot last mentioned, but the entire building was erected over a lot belonging to the owner as set forth in the instrument of sale. To the foregoing considerations the following may be added in conclusion: In view of the fact that the two buildingsnamely, that of the petitioner and that of the respondentoriginally belonged to the same owner, and on the supposition that the gallery did already exist and that, as stated, it is supported on columns erected in the lot now owned by the petitioner, it is not an easy matter to explain how it was that when the ownership of the two properties was separated the house of the respondent, of which the said gallery forms a part, was sold to one person while the lot over which said gallery is erected or in which its columns are embedded was sold to a different person. It would be a logical and natural thing to suppose that in the sale of the gallery the land occupied by the same would have been included in order to avoid the division of the ownership of the ground and the superficies, that is, the lot and that which is erected upon it. The necessity for such division does not appear nor can any reasonable justification therefor be discovered in the present case. On the other hand, in none of the numerous papers )resented by the respondent is there any mention made of the gallery in question, notwithstanding the fact that in some of them the house of the respondent (Lichauco) is minutely described. And it does not seem that this is due to mere carelessness or inadvertence, or that it was considered unnecessary to mention said gallery, inasmuch as a deliberate, careful, and repeated mention is made of the other gallery on -the side of the house facing the street, as may be seen from several of the other documents above alluded to, among which are the certificate issued by Architect Luciano Oliver on September 13, 1869, (fol. 94), the instrument of : sale executed in favor of Manuel Gonzalez Junquito (fol. 104), and the mortgage deed of the same date in favor of the Obras Pias (fol. 116). In each of the said documents the statement is made that the house has a corridor supported on columns on Calle San Jacinto, while nothing is said, even incidentally, regarding the other corridor or gallery that now exists over the lot of the petitioner. In our opinion there is no reason why in the description of the house, as made by various persons at different times, mention should always have been made of only one of the galleries, the other being entirely ignored, if both had really existed on the respective dates of the documents above referred to.

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And it is useless to say, as argued by the respondent in her brief, that Architect Olivers certificate, from which the description made in the subsequent documents was taken. contained but a superficial description of the property without details of its four sides. For said reason she states that the fact that no mention is made of the balcony or gallery in question is of no importance, as the said certificate deals with the value of the property only, it being well known that such a work is performed taking into account all the details and circumstance, which may increase or decrease the value of the same. Hence, the re pondent goes on to say, that mention was made, by architect of the veranda facing the street for the distinguishing between the one built on private land and the one which was built over land belonging to the city. For the very same reason she should have mentioned also the veranda built over the lot of the petitioner, if it had been in existence, especially as the value of a property erected on land belonging to the owner is not the same as that which is constructed on land owned by another person. The omission of this detail in such a document wherein in order to omit nothing mention is even made of a well and stable both of which are unimportant portions of a building; such an omission, we say, added to the reasons given above, induces us to come to the conclusion, as a result of the documentary evidence adduced at the trial, that the gallery in question did not exist at the time when the house of the respondent was alienated by its original owner, Santa Coloma, in October, 1848. This conclusion is not weakened by the expert testimony offered by the respondent, the only testimony which she introduced aside from the documentary evidence already mentioned. As the judgment appealed from properly states, even if the forty or fifty years of existence of the house referred to, according to the unanimous reckoning of the experts offered by said party is accepted, yet, we do not reach the year 1848, more than fifty-seven years back, when the separation of the ownership of said house and that of the petitioner took place; such date constitutes the essential and culminating point of the question. Moreover, it does not appear that said experts, who, among other things, base their opinion on the condition of the building and its materials, have made a careful and sufficient examination and survey of the latter. This is evidenced by the fact that one of them, Enrique Lafuente, states, on folio 146, that the columns which support the gallery facing the street are built of stone, and that those of the other gallery over the lot of the petitioner are of wood; while according to another, Ramon Herrera Davila, (fol. 152) both sets of columns are built of stone, and the third, Jose Perez Siguenza (fol. 157), affirms that they are all built of wood, those facing the street as well as those embedded in the land of the petitioner.

Furthermore, all the. experts discuss and reason, and render their opinion as if the house was in the same condition as when sold by Santa Coloma in 1848, when it seems certain and unquestionable that long after the said year it underwent, or must have undergone, very important repairs of an essential nature. This is shown by the letter written by Manuel Gonzalez Junquito, who owned it at the time, to his attorney in fact under date of March 25, 1889, and was incorporated in the instrument of sale executed by said attorney in fact of the owner in favor of the respondent. In said letter Junquito states that the house was converted into a heap of ruins, and that (undoubtedly for the said reason) during three years it had 11 ot yielded him a single cent; for this reason he prayed his said attorney to see the way to sell it by all means at the best price obtainable * * * It was thus that the said house whieh, as stated by Junquito in the same letter, had cost him 15,000 pesos was sold to the respondent for only 8,000. If in 1889 the house was a heap of ruins, it seems to us too hazardous to certify solely in view of its present condition, after undergoing repairs or having been practically rebuilt, the real condition in which it was in 1848that is, forty years before it became ruinedespecially since, as the petitioners expert properly states, in the repair or rebuilding of the property old or used materials may have been employed which would give it the appearance of being older than it actually is. The respondent states in her brief, as though intending to prove the great antiquity of the gallery in question, that, notwithstanding the fact that the petitioner acquired his property before she acquired the adjoining building, he has not been able to testify that the said gallery was built by Julita Lichauco or by her predecessor after he had purchased his property, nor has it been proven that since that time or at any time previous thereto there had been any disagreement between the owners of the two properties on account of the gallery in question. Such allegation absolutely lacks foundation, (1) because it is not true that the petitioner acquired his property prior to the time when Julita Lichauco acquired hers, but entirely on the contrary since the petitioner purchased his property on the 9th of May, 1894, and the respondent acquired hers on the 25th of October, 1889, that is, five .years previously; and (2) because the burden is not on the petitioner to prove at what time the gallery in controversy was constructed inasmuch as he limits himself to sustaining and defending the freedom of his property, denying the easements of light and view that the respondent pretends to impose over it. It is a settled doctrine of law that a property is assumed to be free from all incumbrance unless the contrary is proved. (Decisions of the supreme court of Spain of April 7, 1864, and December 13, 1865.) The respondent who claims the said easements, basing her claim on the provisions of article 541 of .the Civil Code, is obliged to prove
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that the aforementioned gallery, in which the apparent sign of the easement is made to consist in the present case, existed at the time the ownership of her property and that of the petitioner were separated, in October, 1848. And inasmuch as this issue has not been proved, the claim of the respondent as to the easements of light and view, which the petitioner does not admit, must of necessity be dismissed. (b) Opposition of the heirs of Francisco L. Roxas. The real terms of this opposition do not appear well defined. As the Court of Land Registration says in the judgment appealed from, when this party appeared at the trial it stated (fol. 71) that it had no opposition to offer and only desired that the matter of the easement of right of way, acknowledged by the petitioner, be clearly established, and that the other rights of easement which their property holds over the former be respected, not specifying, however, either at the time or during the course of the proceedings as to which of said easements they referred when appearing. Hence the questions raised by these respondents do not appear as clearly determined. In the absence of due specification of the said points, and inferring it only from the language of the agreement submitted by the parties to the suit, the Court of Land Registration assumed that beyond the acknowledged easement of the right of way, the respondents claimed those of light, view, and drainage, and on such supposition entered judgment in connection with said easements only. Upon moving for a new hearing the respondent alleged as a foundation therefor, as stated in the overruling thereof (p. 9 of the bill of exceptions), that the easement with reference to balconies had not been acknowledged, and now in setting forth their injuries before this court they speak of the eaves * * *. Admitting, for the sake of argument, that all of the above questions were duly set up and discussed in the court below, the fact is that in the judgment appealed from no other easements than those with reference to right of way and drainage from the roof have been allowed in favor of the property of the respondents; therefore, the easements of light, view, and balconies remain in dispute in the present instance. The easement with reference to eaves mentioned also in the brief of the respondents should, in our opinion, be discarded inasmuch as it is included in this case in the easement of drainage from the roof acknowledged in the judgment appealed from. (P. 7 of the bill of exceptions.) The Court of Land Registration in order to dismiss the opposition with reference to the easement of light and view bases its decision on the fact that,

the same being negative, according to article 533 of the Civil Code, because the owner of the servient estate is prohibited to do something which he could lawfully do if the easement did not exist, the time of possession for prescription (and it is a matter of prescription for the reason that the respondents hold no title) should begin to run, not from the date of the existence of the windows or balconies, but from the day when the owner of the dominant estate, by means of a formal act, might have prohibited the owner of the servient estate to do something which he could properly execute if the easement did not exist; this was never carried out by the opponents or by their principals as agreed to by the parties at the hearing. In rebuttal of this portion of the judgment the respondents state in their brief as follows: We agree with the trial court that as a general rule the easement with reference to view is a negative one * * *; but we understand that there are cases in which the easement is positive because it imposes on the owner of the servient estate the obligation to allow the owner of the dominant estate to do on the property of the former something which the latter could not lawfully do if the easement did not exist, * * * such as happens in the present case in which the windows have a balcony projecting over the lot of the petitioner. In the case at bar there exists the positive fact of windows with projecting balconies opening over the land of the servient estate which is not a right inherent to the dominion of the owner of the dominant estate, but a real invasion of the right of another, a positive act which limits the dominion of the owner of the servient estate which, constituting an easement, imposes on him the obligation to permit the owner of the dominant estate to have such windows with balconies projecting over his estate. According to this no question is raised by the respondents as to the legal nature of the easement of view (in their brief the easement of light is ignored) which they acknowledge for the reason that, in general, it is a negative one although in their opinion there are exceptions where it acquires the nature of a positive easement, among them, when as in the present case, view is obtained by means of windows with balconies projecting over the adjoining estate. On page 4 of their brief they state that the latter fact was agreed to by the parties, which is tacitly contradicted by the petitioner when denying, on page 14 of his brief, that the word balconies was used in the agreement as synonymous with projecting windows and differing from windows, for although, according to the said agreement, they overlook the lot of the petitioner, they are not, however,

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over the same, nor is the contrary claimed in connection therewith by the representative of the respondents. In reference to the above question the said agreement of facts reads as follows: "(1) That house No. 114, Calle San Jacinto, district of Binondo, this city, owned by the children of Francisco L. Roxas, adjoining the property of the petitioner, underwent alterations in the early part of the year 1882, and ever since that time it exists as it appears now with windows and views overlooking the lot of the petitioner, with. balconies and eaves from which rainfall drops on the aforesaid lot. It seems evident under the terms of this agreement, that the house of the respondents has balconies, it being immaterial for our point of view that the word balconies be taken as synonymous with windows or projections, since whether it be the one or the other the truth is that the agreement does not state that such balconies are over the lot of the petitioner or overlooking it, as claimed by the respondents. Neither would this follow from the mere fact that the said balconies jut out, because the projecting parts of a building may be constructed, and as a matter of fact they are generally constructed, over the area of their own ground without invading the limits of the adjoining land. What actually- falls over the estate of the petitioner according to the agreement is the water dropping from the projecting eaves of the respondents house, which is precisely the fact that has originated the easement of drainage from the roof acknowledged in favor of said house; projecting eaves, thus the agreement reads, from which part of its water falls -on said lot. Notwithstanding the fact that the word eaves, in the language of the agreement, is preceded by the word balconies, upon both being united by the copulative conjunction and, it becomes evident that the words in italics do not refer nor could they refer to the balconies for the simple reason that their object is not to shed the water, a thing which on the contrary, is done by the eaves. And that it is the water and not the balconies of the house of the respondents which falls over or overlooks the lot of the petitioner, is further evidenced by the language of the other clauses of the agreement in which the ideas are expressed with precision, from which it may be seen that the proposition over is always in relation to the fall of the water and not to the balconies. Thus, for example, clause 2 reads that it does not appear if the construction of said windows, balconies, and projecting eaves, as well as that part of the water from the roof of the said house, fall on, the lot now owned by Don Miguel Fabie

* * *." And this very same thing is twice repeated in clause 3, that on the part of the children of Francisco L. Roxas there has not been an act of opposition to prevent Miguel Fabie * * * work that may obstruct the light, remove the windows or balconies and projecting eaves of the said house which now belongs to the children of Francisco L. Roxas, or prevent a portion of the water from the roof of the same from falling on the lot of Miguel Fabie * * *, neither has there been on the part of the said Fabie * * * any act to obstruct said light or windows, preventing the continuance of the balconies and projecting eaves, or that part of the water from the roof of the house falling * * * on his lot. Therefore, it does not appear from the agreement, which is the only evidence we have before us, no other having been offered at the hearing, that the house of the respondents has balconies over the land of the petitioner; and as it is, since it has not been positively shown that the said balconies exceed the limit of the lot owned by the former, nor less that they invade the atmospheric area of the lot belonging to the latter, it follows that, even in accordance with the theory maintained by the respondents with which, on account of its lack of basis, we consider it unnecessary to deal herein as to its other aspect, the easement of view, which might result in such case from the existence of the balconies alluded to, would be negative and not a positive one, because the erection of the same would not constitute, according to their own statement, an invasion of the right of another, but the lawful exercise of the right inherent to the dominion of the respondents to construct within their own lot. And as said easement is negative, it can not have prescribed in favor of the property of the respondents in the absence of any act of opposition, according to the agreement, by which they or their principals would have prohibited the petitioner or his principals to 27

VOL. 11, JULY 25, 1908 27 UNITED STATES VS, MARASIGAN. do any work which might obstruct the balconies in question, inasmuch as said act of opposition is what constitutes the necessary and indispensable point of departure for computing the time required by law for the prescription of negative easements. (Art. 538, Civil Code.)
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After the foregoing it is not necessary to say anything further to show the impropriety of the claim of the respondents in connection with the other easement of balconies (projiciendi). They claim this easement on the supposition that the balconies of their house are or look over the lot of the petitioner; therefore, considering that this fact has not been proven, as shown heretofore, said pretension fails and can not prosper in any way. It is unnecessary to discuss the questions of law to which said fact might give rise had it been duly proven at the hearing. For the reason above set forth, the judgment appealed from is affirmed in all its parts with the costs of this instance against the appellants. So ordered. Arellano, C.J., Torres, Carson, Willard, and Tracey, JJ., concur. Judgment affirmed. _________

Copyright 2012 Central Book Supply, Inc. All rights reserved. [FABIE VS. LICHAUCO ET AL., 11 Phil. 14(1908)]

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No. L-20786. October 30, 1965. IN RE: PETITION FOR CANCELLATION OF CONDITION ANNOTATED ON TRANSFER CERTIFICATE OF TITLE No. 54417, QUEZON CITY, DRA. RAFAELA V. TRIAS, married to MANUEL SIA RAMOS, petitioner-appellee, vs. GREGORIO ARANETA, INC. oppositor-appellant.
Subdivision lots; Sales; Prohibition against establishment of factories in residential area; Effect of zoning ordinance.The sellers of subdivision lots may validly insert in their contracts of sale a prohibition against the establishment of factories in the district where the lots are located, The existence of a zoning ordinance prohibiting factories in the area is immaterial.

not a surplusage; and (e) that the Court had no jurisdiction to act on the petition, Upon denial of its motion to reconsider, Gregorio Araneta, Inc. appealed to this Court. There are no issues of fact. The parties agree: (1) that the lot was part of a subdivision and originally belonged to J.M. Tuason & Co. Inc. which corporation upon selling it (thru Araneta Inc.) to a purchaser (Garcia Mateo and Deogracias Lopez), imposed the prohibition; that such prohibition was accordingly printed on the back of the transfer certificate issued to the purchaser; (2) after several transfers, always subject to the prohibition, Rafaela acquired the lot, again subject to the limitation which was repeated on the back of her certificate; (3) that upon receiving her certificate, she noticed the prohibition; and so, arguing that it infringes the owner's right to use her land, she asked for its cancellation; (4) as already stated, she obtained relief. The questions at issue here are: (a) the validity of the prohibition or limitation; (b) the effect of the zoning ordinance. Such prohibition is similar to other conditions imposed by sellers of subdivision lots upon purchasers thereof, in and around Manila. It is in reality an easement,1 which every owner of real estate may validly impose under Art. 594 of the Civil Code or under Art. 688 of the New Civil Code, which provides that "the owner of a piece of land may establish thereon the easements which he may deem suitable, x x x provided he does not contravene the law, public policy or public order". No law has been cited outlawing this condition or limitation, which evidently was imposed by the owner of the subdivision to establish a residential section in that area, for the purpose of assuring purchasers of the lots therein that the peace and quiet of the place will not be disturbed by the noise or smoke of factories in the vicinity. The limitation is essentially a contractual obligation which the seller, Tuason & Co., Inc. (thru Araneta Inc.) imposed, and the purchaser agreed to accept. Of course, it restricts the free use of the parcel of land by the purchaser. However, "while the courts have manifested some disfavor of covenants restricting the use of property, they have generally sustained them where reasonable, and not contrary to public policy x x x." (14 Am. Jur. 616.).

APPEAL from an order of the Court of First Instance of Rizal (Quezon City Branch), Caluag, J. The facts are stated in the opinion of the Court. Yatco & Yatco for petitioner-appellee. Araneta & Araneta for oppositor-appellant. BENGZON, C.J.: In May 1963, Rafaela Trias, married, filed in the Rizal court of first instance, a petition to cancel from her Torrens certificate of title, the annotation appearing on its back which reads as follows: ''5. That no factories will be permitted in this section." She alleged she was the registered owner of this lot in Quezon City; that she wanted the cancellation, not for the purpose of erecting a factory thereon, but merely to facilitate approval of a loan she had applied for; that the restriction was illegal, because it impaired the owner's dominical rights; and that it was a mere surplusage anyhow, because there are zoning ordinances prohibiting establishment of factories in that district. Acting on the petition, the court granted it, endorsing her views, particularly the one referring to surplusage due to a zoning ordinance. Two weeks later, Gregorio Araneta, Inc. moved for reconsideration of the order, alleging: (a) that the condition had been inserted in the title pursuant to a contract of sale between it and Rafaela's predecessor-in-interest; (b) that it received no timely notice of petition; (c) that the order disregards contractual rights and obligations; (d) that the prohibition against factories was valid, and

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"The validity of building restrictions limiting buildings to residences, x x x restrictions as to the character or lo cation of buildings or structures to be erected on the land x x x x has been sustained, (14 Am. Jur. 617, citing cases.) Now, it is proper for Tuason & Co., Inc. (thru Araneta, Inc.) to oppose the elimination of the condition from the certificate of title, because, if it is erased, a purchaser who gets a new certificate of title without the annotation, will hold the lot free from the encumbrance, and might build a factory there.2 As declared by sec. 39 of Act 496 as amended, "every purchaser of registered land x x x shall hold the same free from all encumbrances except those noted in said certificate." The existence of a zoning ordinance prohibiting factories in the area is immaterial. The ordinance might be repealed at any time; and if so repealed, this prohibition would not be enforceable against new purchasers of the land, who may be ignorant thereof. The same remark applies to Rafaela's promise not to build a factory on the lot: new owners might not be bound. A problem might arise if and when the ordinance is amended so as to convert the area into an industrial zoneimpliedly permitting factories. Probably, the limitation might still bind the lot owner (with annotation) ; but it is not the present issue, and we do not now decide it. IN THIS VIEW OF THE CASE, it becomes unnecessary to take up the other questions discussed by appellant, regarding notice and jurisdiction. Neither do we pass on the point raised by appellee concerning appellant's personality to object to the cancellation; because anyway, the proper party in interest (J.M. Tuason & Co., Inc.) could be impleaded as substitute party on appeal. (Alonzo v. Villamor, 16 Phil. 315). The appealed order is reversed, and the petition to cancel is denied, with costs against petitioner. So ordered. Bautista Angelo, Concepcion, Dizon, Regala, Makalintal, Bengzon, J.P., and Zaldivar, JJ., concur. Reyes, J.B.L., J., took no part. Order reversed. Copyright 2012 Central Book Supply, Inc. All rights reserved. [Trias vs. Gregorio Araneta, Inc., 15 SCRA 241(1965)]
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No. L-62050. November 25, 1983.* JOSE PEPITO TIMONER, petitioner, vs. THE PEOPLE OF THE PHILIPPINES AND THE HONORABLE COURT OF APPEALS, IV DIVISION,
respondents. Criminal Law; Grave Coercion; Civil Law; Nuisance; Abatement of public nuisance without judicial proceedings; Municipal Mayor not criminally liable when he acted in good faith in authorizing the fencing of a barbershop for being a public nuisance because it occupied a portion of the sidewalk of the poblacions main thoroughfare.But even without this judicial pronouncement, petitioner could not have been faulted for having fenced off said barbershop. Paragraph 3, Article 699 of the Civil Code authorizes the abatement of a public nuisance without judicial proceedings. The remedies against a public nuisance are: [1] A prosecution under the Penal Code or any local ordinance; or [2] A civil action; or [3] Abatement, without judicial proceedings. In the case at bar, petitioner, as mayor of the town, merely implemented the aforesaid recommendation of the Municipal Health Officer. Having then acted in good faith in the performance of his duty, petitioner incurred no criminal liability. Same; Same; Grave coercion, nature and elements of; Mayor not guilty of grave coercion as the element that the restraint made by the Mayor upon complainant, owner of the barbershop, was not made under authority of law or in the exercise of a lawful right, is absent in case at bar. Grave coercion is committed when a person who, without authority of law, shall by means of violence, prevent another from doing something not prohibited by law or compel to do something against his will, either it be right or wrong. The three elements of grave coercion are : [1] that any person be prevented by another from doing something not prohibited by law, or compelled to do something against his will, be it right or wrong; [2] that the prevention or compulsion be effected by violence, either by material force or such display of it as would produce intimidation and control the will of the offended party, and [3] that the person who restrained the will and liberty of another had no right to do so, or, in other words, that the restraint was not made under authority of law or in the exercise of a lawful right. The third element being absent in the case at bar, petitioner cannot be held guilty of grave coercion.

Petition for review of the affirmance in toto by the Court of Appeals, now the Intermediate Appellate Court, of the judgment of conviction handed down by the then Municipal Court of Daet, Camarines Norte, in Criminal Case No. 4281, entitled People of the Philippines vs. Jose Timoner, finding petitioner guilty of the crime of grave coercion, as follows: WHEREFORE, this Court finds the accused JOSE PEPITO TIMONER guilty beyond reasonable doubt of the crime of Grave Coercion as penalized under Art. 286 of the Revised Penal Code, and hereby sentences the said accused pursuant to the provision of Rule 64, Par. 3, to suffer SIX MONTHS OF IMPRISONMENT OF ARRESTO MAYOR IN ITS MAXIMUM PERIOD, to pay a fine of P300.00 and to pay the offended party in the amount of P5,000.00 as damages, without subsidiary liability in case of insolvency. The other accused SAMUEL MORENA and ERNESTO QUIBRAL are hereby ordered ACQUITTED. The salient facts are not disputed. At about 10:00 in the evening of December 13, 1971, petitioner, then Mayor of Daet, Camarines Norte, accompanied by two uniformed policemen, Samuel Morena and Ernesto Quibral, and six laborers, arrived in front of the stalls along Maharlika highway, the main thoroughfare of the same town. Upon orders of petitioner, these laborers proceeded to nail together rough lumber slabs to fence off the stalls which protruded into the sidewalk of the Maharlika highway. Among the structures thus barricaded were the barbershop of Pascual Dayaon, the complaining witness, and the store belonging to one Lourdes Pia-Rebustillos. These establishments had been recommended for closure by the Municipal Health Officer, Dra. Alegre, for noncompliance with certain health and sanitation requirements. Thereafter, petitioner filed a complaint in the Court of First Instance of Camarines Norte against Lourdes Pia-Rebustillos and others for judicial abatement of their stalls. The complaint, docketed as Civil Case No. 2257, alleged that these stalls constituted public nuisances as well as nuisances per se. Dayaon was never able to reopen his barbershop business. Subsequently, petitioner and the two policemen, Morena and Quibral, were charged with the offense of grave coercion before the Municipal Court of Daet. As already noted, the said court exonerated the two policemen, but convicted petitioner of the crime charged as principal by inducement. On appeal, the Court of Appeals affirmed in full the judgment of the trial court. Hence, the present recourse. Petitioner contends that the sealing off of
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PETITION to review the decision of the Court of Appeals.

The facts are stated in the opinion of the Court. Marciano C. Dating, Jr. and Jose S. Fuentebella for petitioner. The Solicitor General for respondents. ESCOLIN, J.:

complainant Dayaons barbershop was done in abatement of a public nuisance and, therefore, under lawful authority. We find merit in this contention. Unquestionably, the barbershop in question did constitute a public nuisance as defined under Article Nos. 694 and 695 of the Civil Code, to wit: ART. 694. A nuisance is any act, omission, establishment, business, condition of property, or anything else which: (1) Injures or endangers the health or safety of others; or (2) Annoys or offends the senses; or (3) Shocks, defies or disregards decency or morality; or (4) Obstructs or interferes with the free passage of any public highway or street, or any body of water; or (5) Hinders or impairs the use of property. ART. 695. Nuisance is either public or private. A public nuisance affects a community or neighborhood or any considerable number of persons, although the extent of the annoyance, danger or damage upon individuals may be unequal. A private nuisance is one that is not included in the foregoing definition. The barbershop occupied a portion of the sidewalk of the poblacions main thoroughfare and had been recommended for closure by the Municipal Health Officer. In fact, the Court of First Instance of Camarines Norte, in its decision in Civil Case No. 2257, declared said barbershop as a nuisance per se. Thus: Under the facts of the case, as well as the law in point, there is no semblance of any legality or right that exists in favor of the defendants to build a stall and conduct their business in a sidewalk, especially in a highway where it does not only constitute a menace to the health of the general public passing through the street and also of the unsanitary condition that is bred therein as well as the unsightly and ugly structures in the said place. Moreover, even if it is claimed and pretended that there was a license, permit or toleration of the defendants makeshift store and living quarters for a number of years does not lend legality to an act which is a nuisance per se. Such nuisance affects the community or neighborhood or any considerable number of persons and the general public which posed a danger to the people in general passing and using that place,

for in addition, this is an annoyance to the public by the invasion of its rights the fact that it is in a public place and annoying to all who come within its sphere [Baltazar vs. Carolina Midland, Ry. Co., 54 S.C. 242, 32 S.B. 258, cited in 11 Tolentinos Civil Code of the Philippines, p. 375; Kapisanan Lingkod ng Bayan, Inc. vs. Lacson, CA-G.R. No. 27260-R, March 25, 1964; 61 O.G. 2487]. x x x x x x

IN VIEW OF THE FOREGOING, the Court hereby declares that the structures subject of this complaint as well as those occupied by the impleaded defendants are nuisances per se, and therefore orders the defendants to demolish the stall and vacate the premises immediately x x x. But even without this judicial pronouncement, petitioner could not have been faulted for having fenced off said barbershop. Paragraph 3, Article 699 of the Civil Code authorizes the abatement of a public nuisance without judicial proceedings. ART. 699. The remedies against a public nuisance are: [1] A prosecution under the Penal Code or any local ordinance; or [2] A civil action; or [3] Abatement, without judicial proceedings. In the case at bar, petitioner, as mayor of the town, merely implemented the aforesaid recommendation of the Municipal Health Officer. Having then acted in good faith in the performance of his duty, petitioner incurred no criminal liability. Grave coercion is committed when a person who, without authority of law, shall by means of violence, prevent another from doing something not prohibited by law or compel to do something against his will, either it be right or wrong.1 The three elements of grave coercion are: [1] that any person be prevented by another from doing something not prohibited by law, or compelled to do something against his will, be it right or wrong; [2] that the prevention or compulsion be effected by violence, either by material force or such display of it as would produce intimidation and control the will of the offended party, and [3] that the person who restrained the will and liberty of another had no right to do so, or, in other words, that the restraint was not made under authority of law or in the exercise of a lawful right.2

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The third element being absent in the case at bar, petitioner cannot be held guilty of grave coercion. WHEREFORE, the decision of the Court of Appeals in CA-G.R. No. 19534-CR, is hereby set aside and petitioner is acquitted of the crime charged. Costs de oficio. SO ORDERED. Makasiar (Chairman), Aquino, Concepcion, Jr., Guerrero, Abad Santos and De Castro, JJ., concur. Decision set aside. Notes.A noise may constitute an actionable nuisance, but it must be a noise which affects injuriously the health or comfort of ordinary people in the vicinity to an unreasonable extent. (Velasco vs. Manila Electric Co., 40 SCRA 342.) A public nuisance per se may be abated without judicial proceedings under the Civil Code. (Homeowners Assn. of El Deposito vs. Lood, 47 SCRA 174.) The police power of the State justifies the abatement or destruction by summary proceedings of public nuisances per se. (Ibid.) Action to avoid possible nuisance is premature when the bidding for materials for the incinerator is still going on and where no incinerator has yet actually existed. (San Rafael Homeowners Assn. vs. City of Manila, 46 SCRA 40.) As a general rule, everyone is bound to bear the habitual or customary inconveniences that result from the proximity of others, and so long as this level is not surpassed, he may not complain against them. (Velasco vs. Manila Electric Co., 40 SCRA 342.) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Timoner vs. People, 125 SCRA 830(1983)]

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G.R. No. 118114. December 7, 1995.* TEODORO ACAP, petitioner, vs. COURT OF APPEALS and EDY DE LOS REYES, respondents.
Property; Ownership; An asserted right or claim to ownership or a real right over a thing arising from a juridical act, however justified, is not per se sufficient to give rise to ownership over the resthat right or title must be completed by fulfilling certain conditions imposed by law; While title is the juridical justification, mode is the actual process of acquisition or transfer of ownership over a thing in question.In the first place, an asserted right or claim to ownership or a real right over a thing arising from a juridical act, however justified, is not per se sufficient to give rise to ownership over the res. That right or title must be completed by fulfilling certain conditions imposed by law. Hence, ownership and real rights are acquired only pursuant to a legal mode or process. While title is the juridical justification, mode is the actual process of acquisition or transfer of ownership over a thing in question. Same; Same; Under Article 712 of the Civil Code, the modes of acquiring ownership are generally classified into two (2) classes, namely, the original mode and the derivative mode. Under Article 712 of the Civil Code, the modes of acquiring ownership are generally classified into two (2) classes, namely, the original mode (i.e., through occupation, acquisitive prescription, law or intellectual creation) and the derivative mode (i.e., through succession mortis causa or tradition as a result of certain contracts, such as sale, barter, donation, assignment or mutuum). Same; Same; Sales; Succession; Contract of Sale and Declara-tion of Heirship and Waiver of Rights, Distinguished.In the case at bench, the trial court was obviously confused as to the nature and effect of the Declaration of Heirship and Waiver of Rights, equating the same with a contract (deed) of sale. They are not the same. In a Contract of Sale, one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other party to pay a price certain in money or its equivalent. Upon the other hand, a declaration of heirship and waiver of rights operates as a public instrument when filed with the Registry of Deeds whereby the intestate heirs adjudicate and divide the estate left by the decedent among themselves as they see fit. It is in effect an extrajudicial settlement between the heirs under Rule 74 of the Rules of Court. Same; Same; Same; Same; There is a marked difference between a sale of hereditary rights and a waiver of hereditary rights; A stranger to succession cannot conclusively claim ownership over a lot on the sole basis of a waiver document which does not recite the elements of either a sale, or a donation, or any other derivative mode of acquiring ownership.Hence, there is a marked difference between a sale of hereditary rights and a waiver of hereditary rights. The first presumes the existence of a contract or deed of sale between the parties. The second is, technically speaking, a mode of extinction of ownership where there is an abdication or intentional relinquishment of a known right with knowledge of its existence and intention to relinquish it, in favor of other persons who are co-heirs in the succession. Private respondent, being then a stranger to the succession of Cosme Pido, cannot conclusively claim ownership

over the subject lot on the sole basis of the waiver document which neither recites the elements of either a sale, or a donation, or any other derivative mode of acquiring ownership. Same; Same; Land Titles; Adverse Claims; Words and Phrases; A notice of adverse claim is nothing but a notice of a claim adverse to the registered owner, the validity of which is yet to be established in court at some future date.A notice of adverse claim, by its nature, does not however prove private respondents ownership over the tenanted lot. A notice of adverse claim is nothing but a notice of a claim adverse to the registered owner, the validity of which is yet to be established in court at some future date, and is no better than a notice of lis pendens which is a notice of a case already pending in court. Same; Same; Same; Same; Where a persons right or interest in a lot in question remains an adverse claim, the same cannot by itself be sufficient to cancel the OCT to the land.It is to be noted that while the existence of said adverse claim was duly proven, there is no evidence whatsoever that a deed of sale was executed between Cosme Pidos heirs and private respondent transferring the rights of Pidos heirs to the land in favor of private respondent. Private respondents right or interest therefore in the tenanted lot remains an adverse claim which cannot by itself be sufficient to cancel the OCT to the land and title the same in private respondents name.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court. Francisco B. Cruz for petitioner. Cerewarlito V. Quebrar for private respondent. PADILLA, J.:

This is a petition for review on certiorari of the decision1 of the Court of Appeals, 2nd Division, in CA-G.R. No. 36177, which affirmed the decision2 of the Regional Trial Court of Himamaylan, Negros Occidental holding that private respondent Edy de los Reyes had acquired ownership of Lot No. 1130 of the Cadastral Survey of Hinigaran, Negros Occidental based on a document entitled Declaration of Heirship and Waiver of Rights, and ordering the dispossession of petitioner as leasehold tenant of the land for failure to pay rentals. The facts of the case are as follows:
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The title to Lot No. 1130 of the Cadastral Survey of Hinigaran, Negros Occidental was evidenced by OCT No. R-12179. The lot has an area of 13,720 sq. meters. The title was issued and is registered in the name of spouses Santiago Vasquez and Lorenza Oruma. After both spouses died, their only son Felixberto inherited the lot. In 1975, Felixberto executed a duly notarized document entitled Declaration of Heirship and Deed of Absolute Sale in favor of Cosme Pido. The evidence before the court a quo established that since 1960, petitioner Teodoro Acap had been the tenant of a portion of the said land, covering an area of nine thousand five hundred (9,500) square meters. When ownership was transferred in 1975 by Felixberto to Cosme Pido, Acap continued to be the registered tenant thereof and religiously paid his leasehold rentals to Pido and thereafter, upon Pidos death, to his widow Laurenciana. The controversy began when Pido died intestate and on 27 November 1981, his surviving heirs executed a notarized document denominated as Declaration of Heirship and Waiver of Rights of Lot No. 1130 Hinigaran Cadastre, wherein they declared, to quote its pertinent portions, that: x x x Cosme Pido died in the Municipality of Hinigaran, Negros Occidental, he died intestate and without any known debts and obligations which the said parcel of land is (sic) held liable. That Cosme Pido was survived by his/her legitimate heirs, namely: LAURENCIANA PIDO, wife, ELY, ERVIN, ELMER, and ELECHOR all surnamed PIDO; children; That invoking the provision of Section 1, Rule 74 of the Rules of Court, the above-mentioned heirs do hereby declare unto [sic] ourselves the only heirs of the late Cosme Pido and that we hereby adjudicate unto ourselves the abovementioned parcel of land in equal shares. Now, therefore, We LAURENCIANA,3 ELY, ELMER, ERVIN and ELECHOR all surnamed PIDO, do hereby waive, quitclaim all our rights, interests and participation over the said parcel of land in favor of EDY DE LOS REYES, of legal age, (f)ilipino, married to VIRGINIA DE LOS REYES, and resident of Hinigaran, Negros Occidental, Philippines. x x x4 (Italics supplied) The document was signed by all of Pidos heirs. Private respondent Edy de los Reyes did not sign said document.

It will be noted that at the time of Cosme Pidos death, title to the property continued to be registered in the name of the Vasquez spouses. Upon obtaining the Declaration of Heirship with Waiver of Rights in his favor, private respondent Edy de los Reyes filed the same with the Registry of Deeds as part of a notice of an adverse claim against the original certificate of title. Thereafter, private respondent sought for petitioner (Acap) to personally inform him that he (Edy) had become the new owner of the land and that the lease rentals thereon should be paid to him Private respondent further alleged that he and petitioner entered into an oral lease agreement wherein petitioner agreed to pay ten (10) cavans of palay per annum as lease rental. In 1982, petitioner allegedly complied with said obligation. In 1983, however, petitioner refused to pay any further lease rentals on the land, prompting private respondent to seek the assistance of the then Ministry of Agrarian Reform (MAR) in Hinigaran, Negros Occidental. The MAR invited petitioner to a conference scheduled on 13 October 1983 Petitioner did not attend the conference but sent his wife instead to the conference During the meeting, an officer of the Ministry informed Acaps wife about private respondents ownership of the said land but she stated that she and her husband (Teodoro) did not recognize private respondents claim of ownership over the land. On 28 April 1988, after the lapse of four (4) years, private respondent filed a complaint for recovery of possession and damages against petitioner, alleging in the main that as his leasehold tenant, petitioner refused and failed to pay the agreed annual rental of ten (10) cavans of palay despite repeated demands. During the trial before the court a quo, petitioner reiterated his refusal to recognize private respondents ownership over the subject land. He averred that he continues to recognize Cosme Pido as the owner of the said land, and having been a registered tenant therein since 1960, he never reneged on his rental obligations. When Pido died, he continued to pay rentals to Pidos widow. When the latter left for abroad, she instructed him to stay in the landholding and to pay the accumulated rentals upon her demand or return from abroad. Petitioner further claimed before the trial court that he had no knowledge about any transfer or sale of the lot to private respondent in 1981 and even the following year after Laurencianas departure for abroad. He denied having entered into a verbal lease tenancy contract with private respondent and that assuming that the said lot was indeed sold to private respondent without his knowledge, R.A. 3844, as amended, grants him the right to redeem the same
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at a reasonable price. Petitioner also bewailed private respondents ejectment action as a violation of his right to security of tenure under P.D. 27. On 20 August 1991, the lower court rendered a decision in favor of private respondent, the dispositive part of which reads: WHEREFORE, premises considered, the Court renders judgment in favor of the plaintiff, Edy de los Reyes, and against the defendant, Teodoro Acap, ordering the following, to wit: 1. Declaring forfeiture of defendants preferred right to issuance of a Certificate of Land Transfer under Presidential Decree No. 27 and his farmholdings; 2. Ordering the defendant Teodoro Acap to deliver possession of said farm to plaintiff, and; 3. Ordering the defendant to pay P5,000.00 as attorneys fees, the sum of P1,000.00 as expenses of litigation and the amount of P10,000.00 as actual damages.5 In arriving at the above-mentioned judgment, the trial court stated that the evidence had established that the subject land was sold by the heirs of Cosme Pido to private respondent. This is clear from the following disquisitions contained in the courts six (6) page decision: There is no doubt that defendant is a registered tenant of Cosme Pido. However, when the latter died their tenancy relations changed since ownership of said land was passed on to his heirs who, by executing a Deed of Sale, which defendant admitted in his affidavit, likewise passed on their ownership of Lot 1130 to herein plaintiff (private respondent). As owner hereof, plaintiff has the right to demand payment of rental and the tenant is obligated to pay rentals due from the time demand is made. x x x6 xxx xxx xxx

1130 and that he, as tenant, should pay rentals to private respondent and that failing to pay the same from 1983 to 1987, his right to a certificate of land transfer under P.D. 27 was deemed forfeited. The Court of Appeals brushed aside petitioners argument that the Declaration of Heirship and Waiver of Rights (Exhibit D), the document relied upon by private respondent to prove his ownership to the lot, was excluded by the lower court in its order dated 27 August 1990. The order indeed noted that the document was not identified by Cosme Pidos heirs and was not registered with the Registry of Deeds of Negros Occidental. According to respondent court, however, since the Declaration of Heirship and Waiver of Rights appears to have been duly notarized, no further proof of its due execution was necessary. Like the trial court, respondent court was also convinced that the said document stands as prima facie proof of appellees (private respondents) ownership of the land in dispute. With respect to its non-registration, respondent court noted that petitioner had actual knowledge of the subject sale of the land in dispute to private respondent because as early as 1983, he (petitioner) already knew of private respondents claim over the said land but which he thereafter denied, and that in 1982, he (petitioner) actually paid rent to private respondent. Otherwise stated, respondent court considered this fact of rental payment in 1982 as estoppel on petitioners part to thereafter refute private respondents claim of ownership over the said land. Under these circumstances, respondent court ruled that indeed there was deliberate refusal by petitioner to pay rent for a continued period of five years that merited forfeiture of his otherwise preferred right to the issuance of a certificate of land transfer. In the present petition, petitioner impugns the decision of the Court of Appeals as not in accord with the law and evidence when it rules that private respondent acquired ownership of Lot No. 1130 through the aforementioned Declaration of Heirship and Waiver of Rights. Hence, the issues to be resolved presently are the following:

Certainly, the sale of the Pido family of Lot 1130 to herein plaintiff does not of itself extinguish the relationship. There was only a change of the personality of the lessor in the person of herein plaintiff Edy de los Reyes who being the purchaser or transferee, assumes the rights and obligations of the former landowner to the tenant Teodoro Acap, herein defendant.7 Aggrieved, petitioner appealed to the Court of Appeals, imputing error to the lower court when it ruled that private respondent acquired ownership of Lot No.

1. WHETHER OR NOT THE SUBJECT DECLARATION OF HEIRSHIP AND WAIVER OF RIGHTS IS A RECOGNIZED MODE OF ACQUIRING OWNERSHIP BY PRIVATE RESPONDENT OVER THE LOT IN QUESTION. 2. WHETHER OR NOT THE SAID DOCUMENT CAN BE CONSIDERED A DEED OF SALE IN FAVOR OF PRIVATE RESPONDENT OF THE LOT IN QUESTION.
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Petitioner argues that the Regional Trial Court, in its order dated 7 August 1990, explicitly excluded the document marked as Exhibit D (Declaration of Heirship, etc.) as private respondents evidence because it was not registered with the Registry of Deeds and was not identified by anyone of the heirs of Cosme Pido. The Court of Appeals, however, held the same to be admissible, it being a notarized document, hence, a prima facie proof of private respondents ownership of the lot to which it refers. Petitioner points out that the Declaration of Heirship and Waiver of Rights is not one of the recognized modes of acquiring ownership under Article 712 of the Civil Code. Neither can the same be considered a deed of sale so as to transfer ownership of the land to private respondent because no consideration is stated in the contract (assuming it is a contract or deed of sale). Private respondent defends the decision of respondent Court of Appeals as in accord with the evidence and the law. He posits that while it may indeed be true that the trial court excluded his Exhibit D which is the Declaration of Heirship and Waiver of Rights as part of his evidence, the trial court declared him nonetheless owner of the subject lot based on other evidence adduced during the trial, namely, the notice of adverse claim (Exhibit E) duly registered by him with the Registry of Deeds, which contains the questioned Declaration of Heirship and Waiver of Rights as an integral part thereof. We find the petition impressed with merit. In the first place, an asserted right or claim to ownership or a real right over a thing arising from a juridical act, however justified, is not per se sufficient to give rise to ownership over the res. That right or title must be completed by fulfilling certain conditions imposed by law. Hence, ownership and real rights are acquired only pursuant to a legal mode or process. While title is the juridical justification, mode is the actual process of acquisition or transfer of ownership over a thing in question.8 Under Article 712 of the Civil Code, the modes of acquiring ownership are generally classified into two (2) classes, namely, the original mode (i.e., through occupation, acquisitive prescription, law or intellectual creation) and the derivative mode (i.e., through succession mortis causa or tradition as a result of certain contracts, such as sale, barter, donation, assignment or mutuum).

In the case at bench, the trial court was obviously confused as to the nature and effect of the Declaration of Heirship and Waiver of Rights, equating the same with a contract (deed) of sale. They are not the same. In a Contract of Sale, one of the contracting parties obligates himself to transfer the ownership of and to deliver a determinate thing, and the other party to pay a price certain in money or its equivalent.9 Upon the other hand, a declaration of heirship and waiver of rights operates as a public instrument when filed with the Registry of Deeds whereby the intestate heirs adjudicate and divide the estate left by the decedent among themselves as they see fit. It is in effect an extrajudicial settlement between the heirs under Rule 74 of the Rules of Court.10 Hence, there is a marked difference between a sale of hereditary rights and a waiver of hereditary rights. The first presumes the existence of a contract or deed of sale between the parties.11 The second is, technically speaking, a mode of extinction of ownership where there is an abdication or intentional relinquishment of a known right with knowledge of its existence and intention to relinquish it, in favor of other persons who are co-heirs in the succession.12Private respondent, being then a stranger to the succession of Cosme Pido, cannot conclusively claim ownership over the subject lot on the sole basis of the waiver document which neither recites the elements of either a sale,13 or a donation,14 or any other derivative mode of acquiring ownership. Quite surprisingly, both the trial court and public respondent Court of Appeals concluded that a sale transpired between Cosme Pidos heirs and private respondent and that petitioner acquired actual knowledge of said sale when he was summoned by the Ministry of Agrarian Reform to discuss private respondents claim over the lot in question. This conclusion has no basis both in fact and in law. On record, Exhibit D, which is the Declaration of Heirship and Waiver of Rights was excluded by the trial court in its order dated 27 August 1990 because the document was neither registered with the Registry of Deeds nor identified by the heirs of Cosme Pido. There is no showing that private respondent had the same document attached to or made part of the record. What the trial court admitted was Annex E, a notice of adverse claim filed with the Registry of Deeds which contained the Declaration of Heirship with Waiver of rights and was annotated at the back of the Original Certificate of Title to the land in question.

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A notice of adverse claim, by its nature, does not however prove private respondents ownership over the tenanted lot. A notice of adverse claim is nothing but a notice of a claim adverse to the registered owner, the validity of which is yet to be established in court at some future date, and is no better than a notice of lis pendens which is a notice of a case already pending in court.15 It is to be noted that while the existence of said adverse claim was duly proven, there is no evidence whatsoever that a deed of sale was executed between Cosme Pidos heirs and private respondent transferring the rights of Pidos heirs to the land in favor of private respondent. Private respondents right or interest therefore in the tenanted lot remains an adverse claim which cannot by itself be sufficient to cancel the OCT to the land and title the same in private respondents name. Consequently, while the transaction between Pidos heirs and private respondent may be binding on both parties, the right of petitioner as a registered tenant to the land cannot be perfunctorily forfeited on a mere allegation of private respondents ownership without the corresponding proof thereof. Petitioner had been a registered tenant in the subject land since 1960 and religiously paid lease rentals thereon. In his mind, he continued to be the registered tenant of Cosme Pido and his family (after Pidos death), even if in 1982, private respondent allegedly informed petitioner that he had become the new owner of the land. Under the circumstances, petitioner may have, in good faith, assumed such statement of private respondent to be true and may have in fact delivered 10 cavans of palay as annual rental for 1982 to private respondent. But in 1983, it is clear that petitioner had misgivings over private respondents claim of ownership over the said land because in the October 1983 MAR conference, his wife Laurenciana categorically denied all of private respondents allegations. In fact, petitioner even secured a certificate from the MAR dated 9 May 1988 to the effect that he continued to be the registered tenant of Cosme Pido and not of private respondent. The reason is that private respondent never registered the Declaration of Heirship with Waiver of Rights with the Registry of Deeds or with the MAR. Instead, he (private respondent) sought to do indirectly what could not be done directly, i.e., file a notice of adverse claim on the said lot to establish ownership thereover.

It stands to reason, therefore, to hold that there was no unjustified or deliberate refusal by petitioner to pay the lease rentals or amortizations to the landowner/agricultural lessor which, in this case, private respondent failed to establish in his favor by clear and convincing evidence.16 Consequently, the sanction of forfeiture of his preferred right to be issued a Certificate of Land Transfer under P.D. 27 and to the possession of his farmholdings should not be applied against petitioners, since private respondent has not established a cause of action for recovery of possession against petitioner. WHEREFORE, premises considered, the Court hereby GRANTS the petition and the decision of the Court of Appeals dated 1 May 1994 which affirmed the decision of the RTC of Himamaylan, Negros Occidental dated 20 August 1991 is hereby SET ASIDE. The private respondents complaint for recovery of possession and damages against petitioner Acap is hereby DISMISSED for failure to properly state a cause of action, without prejudice to private respondent taking the proper legal steps to establish the legal mode by which he claims to have acquired ownership of the land in question. SO ORDERED. Davide, Jr., Bellosillo, Kapunan and Hermosisima, Jr., JJ., concur. Petition granted. Judgment set aside, complaint for recovery of possession dismissed. Notes.The right to a persons succession are transmitted from the moment of his death and do not vest in his heirs until such time. (Locsin vs. Court of Appeals, 206 SCRA 383 [1992]) In proceeding with the actual partition of the properties mentioned in the deed of extrajudicial partition, the parties are duty bound to abide by the mutual waiver of rights agreed upon in the document. (Divina vs. Court of Appeals, 220 SCRA 597 [1993]) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Acap vs. Court of Appeals, 251 SCRA 30(1995)]
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G.R. No. 148775. January 13, 2004.* SHOPPERS PARADISE REALTY & DEVELOPMENT CORPORATION, petitioner, vs. EFREN P. ROQUE, respondent.
Civil Law; Property; Donation; In donations of immovable property, the law requires for its validity that it should be contained in a public document, specifying therein the property donated and the value of the charges which the donee must satisfy; It is enough, between the parties to a donation of an immovable property, that the donation be made in a public document but, in order to bind third persons, the donation must be registered in the Registry of Property.The existence, albeit unregistered, of the donation in favor of respondent is undisputed. The trial court and the appellate court have not erred in holding that the non-registration of a deed of donation does not affect its validity. As being itself a mode of acquiring ownership, donation results in an effective transfer of title over the property from the donor to the donee. In donations of immovable property, the law requires for its validity that it should be contained in a public document, specifying therein the property donated and the value of the charges which the donee must satisfy. The Civil Code provides, however, that titles of ownership, or other rights over immovable property, which are not duly inscribed or annotated in the Registry of Property (now Registry of Land Titles and Deeds) shall not prejudice third persons. It is enough, between the parties to a donation of an immovable property, that the donation be made in a public document but, in order to bind third persons, the donation must be registered in the Registry of Property (Registry of Land Titles and Deeds). Same; Same; Land Registration; Where a party has knowledge of a prior existing interest which is unregistered at the time he acquired a right thereto, his knowledge of that prior unregistered interest would have the effect of registration as regards to him.A person dealing with registered land may thus safely rely on the correctness of the certificate of title issued therefor, and he is not required to go beyond the certificate to determine the condition of the property but, where such party has knowledge of a prior existing interest which is unregistered at the time he acquired a right thereto, his knowledge of that prior unregistered interest would have the effect of registration as regards to him. Same; Same; Agency; The lease of real property for more than one year is considered not merely an act of administration but an act of strict dominion or of ownership; A special power of attorney is thus necessary for its execution through an agent.In a contract of agency, the agent acts in representation or in behalf of another with the consent of the latter. Article 1878 of the Civil Code expresses that a special power of attorney is necessary to lease any real property to another person for more than one year. The lease of real property for more than one year is considered not merely an act of administration but an act of strict dominion or of ownership. A special power of attorney is thus necessary for its execution through an agent. Same; Estoppel; Essential elements of estoppel in pais, in relation to the party sought to be estopped and with respect to the party claiming estoppel.The essential elements of estoppel in pais, in relation to the party sought to be estopped, are: 1) a clear conduct amounting to false representation or concealment of material facts or, at least, calculated to convey the impression

that the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to assert; 2) an intent or, at least, an expectation, that this conduct shall influence, or be acted upon by, the other party; and 3) the knowledge, actual or constructive, by him of the real facts. With respect to the party claiming the estoppel, the conditions he must satisfy are: 1) lack of knowledge or of the means of knowledge of the truth as to the facts in question; 2) reliance, in good faith, upon the conduct or statements of the party to be estopped; and 3) action or inaction based thereon of such character as to change his position or status calculated to cause him injury or prejudice.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court. Picazo, Buyco, Tan, Fider and Santos for petitioner. Martin D. Pantaleon for respondent. VITUG, J.:

On 23 December 1993, petitioner Shoppers Paradise Realty & Development Corporation, represented by its president, Veredigno Atienza, entered into a twenty-five year lease with Dr. Felipe C. Roque, now deceased, over a parcel of land, with an area of two thousand and thirty six (2,036) square meters, situated at Plaza Novaliches, Quezon City, covered by Transfer of Certificate of Title (TCT) No. 30591 of the Register of Deeds of Quezon City in the name of Dr. Roque. Petitioner issued to Dr. Roque a check for P250,000 00 by way of reservation payment. Simultaneously, petitioner and Dr Roque likewise entered into a memorandum of agreement for the construction, development and operation of a commercial building complex on the property. Conformably with the agreement, petitioner issued a check for another P250,000.00 downpayment to Dr. Roque. The contract of lease and the memorandum of agreement, both notarized, were to be annotated on TCT No. 30591 within sixty (60) days from 23 December 1993 or until 23 February 1994. The annotations, however, were never made because of the untimely demise of Dr. Felipe C. Roque. The death of Dr. Roque on 10 February 1994 constrained petitioner to deal with respondent Efren P. Roque, one of the surviving children of the late Dr. Roque, but the negotiations broke down due to some disagreements. In a letter, dated
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3 November 1994, respondent advised petitioner to desist from any attempt to enforce the aforementioned contract of lease and memorandum of agreement. On 15 February 1995, respondent filed a case for annulment of the contract of lease and the memorandum of agreement, with a prayer for the issuance of a preliminary injunction, before Branch 222 of the Regional Trial Court of Quezon City. Efren P. Roque alleged that he had long been the absolute owner of the subject property by virtue of a deed of donation inter vivos executed in his favor by his parents, Dr. Felipe Roque and Elisa Roque, on 26 December 1978, and that the late Dr. Felipe Roque had no authority to enter into the assailed agreements with petitioner. The donation was made in a public instrument duly acknowledged by the donor-spouses before a notary public and duly accepted on the same day by respondent before the notary public in the same instrument of donation. The title to the property, however, remained in the name of Dr. Felipe C. Roque, and it was only transferred to and in the name of respondent sixteen years later, or on 11 May 1994, under TCT No. 109754 of the Register of Deeds of Quezon City. Respondent, while he resided in the United States of America, delegated to his father the mere administration of the property. Respondent came to know of the assailed contracts with petitioner only after retiring to the Philippines upon the death of his father. On 9 August 1996, the trial court dismissed the complaint of respondent; it explained: Ordinarily, a deed of donation need not be registered in order to be valid between the parties. Registration, however, is important in binding third persons. Thus, when Felipe Roque entered into a lease contract with defendant corporation, plaintiff Efren Roque (could) no longer assert the unregistered deed of donation and say that his father, Felipe, was no longer the owner of the subject property at the time the lease on the subject property was agreed upon. The registration of the Deed of Donation after the execution of the lease contract did not affect the latter unless he had knowledge thereof at the time of the registration which plaintiff had not been able to establish. Plaintiff knew very well of the existence of the lease. He, in fact, met with the officers of the defendant corporation at least once before he caused the registration of the deed of donation in his favor and although the lease itself was not registered, it remains valid considering that no third person is involved. Plaintiff cannot be the third person because he is the successor-in-interest of his father, Felipe Roque, the lessor, and it is a rule that contracts take effect not only between the parties themselves but also between their assigns and heirs (Article 1311,

Civil Code) and therefore, the lease contract together with the memorandum of agreement would be conclusive on plaintiff Efren Roque. He is bound by the contract even if he did not participate therein. Moreover, the agreements have been perfected and partially executed by the receipt of his father of the downpayment and deposit totaling to P500,000.00.1 The trial court ordered respondent to surrender TCT No. 109754 to the Register of Deeds of Quezon City for the annotation of the questioned Contract of Lease and Memorandum of Agreement. On appeal, the Court of Appeals reversed the decision of the trial court and held to be invalid the Contract of Lease and Memorandum of Agreement. While it shared the view expressed by the trial court that a deed of donation would have to be registered in order to bind third persons, the appellate court, however, concluded that petitioner was not a lessee in good faith having had prior knowledge of the donation in favor of respondent, and that such actual knowledge had the effect of registration insofar as petitioner was concerned. The appellate court based its findings largely on the testimony of Veredigno Atienza during cross-examination, viz: Q. Aside from these two lots, the first in the name of Ruben Roque and the second, the subject of the construction involved in this case, you said there is another lot which was part of the development project? A. Yes, this was the main concept of Dr. Roque so that the adjoining properties of his two sons, Ruben and Cesar, will comprise one whole. The other whole property belongs to Cesar. Q. You were informed by Dr. Roque that this property was given to his three (3) sons; one to Ruben Roque, the other to Efren, and the other to Cesar Roque? A. Yes. Q. You did the inquiry from him, how was this property given to them? A. By inheritance. Q. Inheritance in the form of donation? A. I mean inheritance.

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Q. What I am only asking you is, were you told by Dr. Felipe C. Roque at the time of your transaction with him that all these three properties were given to his children by way of donation? A. What Architect Biglang-awa told us in his exact words: Yang mga yan pupunta sa mga anak. Yong kay Ruben pupunta kay Ruben. Yong kay Efren palibhasa nasa America siya, nasa pangalan pa ni Dr. Felipe C. Roque.

x x x

xxx

xxx

Q. When was the information supplied to you by Biglang-awa? Before the execution of the Contract of Lease and Memorandum of Agreement? A. Yes. Q. That being the case, at the time of the execution of the agreement or soon before, did you have such information confirmed by Dr. Felipe C. Roque himself? A. Biglang-awa did it for us. Q. But you yourself did not? A. No, because I was doing certain things. We were a team and so Biglangawa did it for us. Q. So in effect, any information gathered by Biglang-awa was of the same effect as if received by you because you were members of the same team? A. Yes.2 In the instant petition for review, petitioner seeks a reversal of the decision of the Court of Appeals and the reinstatement of the ruling of the Regional Trial Court; it argues that the presumption of good faith it so enjoys as a party dealing in registered land has not been overturned by the aforequoted testimonial evidence, and that, in any event, respondent is barred by laches and estoppel from denying the contracts. The existence, albeit unregistered, of the donation in favor of respondent is undisputed. The trial court and the appellate court have not erred in holding that the non-registration of a deed of donation does not affect its validity. As being itself a mode of acquiring ownership, donation results in an effective

transfer of title over the property from the donor to the donee.3 In donations of immovable property, the law requires for its validity that it should be contained in a public document, specifying therein the property donated and the value of the charges which the donee must satisfy.4 The Civil Code provides, however, that titles of ownership, or other rights over immovable property, which are not duly inscribed or annotated in the Registry of Property (now Registry of Land Titles and Deeds) shall not prejudice third persons.5 It is enough, between the parties to a donation of an immovable property, that the donation be made in a public document but, in order to bind third persons, the donation must be registered in the Registry of Property (Registry of Land Titles and Deeds).6 Consistently, Section 50 of Act No. 496 (Land Registration Act), as so amended by Section 51 of P.D. No 1529 (Property Registration Decree), states: SECTION 51. Conveyance and other dealings by registered owner.An owner of registered land may convey, mortgage, lease, charge or otherwise deal with the same in accordance with existing laws. He may use such forms of deeds, mortgages, leases or other voluntary instruments as are sufficient in law. But no deed, mortgage, lease, or other voluntary instrument, except a will purporting to convey or affect registered land shall take effect as a conveyance or bind the land, but shall operate only as a contract between the parties and as evidence of authority to the Register of Deeds to make registration. The act of registration shall be the operative act to convey or affect the land insofar as third persons are concerned, and in all cases under this Decree, the registration shall be made in the office of the Register of Deeds for the province or city where the land lies. (emphasis supplied) A person dealing with registered land may thus safely rely on the correctness of the certificate of title issued therefor, and he is not required to go beyond the certificate to determine the condition of the property7 but, where such party has knowledge of a prior existing interest which is unregistered at the time he acquired a right thereto, his knowledge of that prior unregistered interest would have the effect of registration as regards to him.8 The appellate court was not without substantial basis when it found petitioner to have had knowledge of the donation at the time it entered into the two agreements with Dr. Roque. During their negotiation, petitioner, through its representatives, was apprised of the fact that the subject property actually belonged to respondent.

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It was not shown that Dr. Felipe C. Roque had been an authorized agent of respondent. In a contract of agency, the agent acts in representation or in behalf of another with the consent of the latter.9 Article 1878 of the Civil Code expresses that a special power of attorney is necessary to lease any real property to another person for more than one year. The lease of real property for more than one year is considered not merely an act of administration but an act of strict dominion or of ownership. A special power of attorney is thus necessary for its execution through an agent. The Court cannot accept petitioners argument that respondent is guilty of laches. Laches, in its real sense, is 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 a presumption that the party entitled to assert it either has abandoned or declined to assert it.10 Respondent learned of the contracts only in February 1994 after the death of his father, and in the same year, during November, he assailed the validity of the agreements. Hardly, could respondent then be said to have neglected to assert his case for an unreasonable length of time. Neither is respondent estopped from repudiating the contracts. The essential elements of estoppel in pais, in relation to the party sought to be estopped, are: 1) a clear conduct amounting to false representation or concealment of material facts or, at least, calculated to convey the impression that the facts are otherwise than, and inconsistent with, those which the party subsequently attempts to assert; 2) an intent or, at least, an expectation, that this conduct shall influence, or be acted upon by, the other party; and 3) the knowledge, actual or constructive, by him of the real facts.11 With respect to the party claiming the estoppel, the conditions he must satisfy are: 1) lack of knowledge or of the means of knowledge of the truth as to the facts in question; 2) reliance, in good faith, upon the conduct or statements of the party to be estopped; and 3) action or inaction based thereon of such character as to change his position or status calculated to cause him injury or prejudice.12 It has not been shown that respondent intended to conceal the actual facts concerning the property; more importantly, petitioner has been shown not to be totally unaware of the real ownership of the subject property. Altogether, there is no cogent reason to reverse the Court of Appeals in its assailed decision.

WHEREFORE, the petition is DENIED, and the decision of the Court of Appeals declaring the contract of lease and memorandum of agreement entered into between Dr. Felipe C. Roque and Shoppers Paradise Realty & Development Corporation not to be binding on respondent is AFFIRMED. No costs. SO ORDERED. Sandoval-Gutierrez, Corona and Carpio-Morales, JJ., concur. Petition denied, judgment affirmed. Note.Where a plaintiff has impleaded a party as a defendant, he cannot subsequently question the latters standing in court. (Ortigas & Co., Ltd. vs. Court of Appeals, 346 SCRA 748 [2000]) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Shoppers Paradise Realty & Development Corporation vs. Roque, 419 SCRA 93(2004)]

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G.R. No. 133705. March 31, 2005.* C-J YULO & SONS, INC., petitioner, vs. ROMAN CATHOLIC BISHOP OF SAN PABLO, INC., respondent.
Civil Law; Property; Donations; Donations, according to its purpose or cause, may be categorized as: (1) pure or simple; (2) remuneratory or compensatory; (3) conditional or modal; and (4) onerous.Donations, according to its purpose or cause, may be categorized as: (1) pure or simple; (2) remuneratory or compensatory; (3) conditional or modal; and (4) onerous. A pure or simple donation is one where the underlying cause is plain gratuity. This is donation in its truest form. On the other hand, a remuneratory or compensatory donation is one made for the purpose of rewarding the donee for past services, which services do not amount to a demandable debt. A conditional or modal donation is one where the donation is made in consideration of future services or where the donor imposes certain conditions, limitations or charges upon the donee, the value of which is inferior than that of the donation given. Finally, an onerous donation is that which imposes upon the donee a reciprocal obligation or, to be more precise, this is the kind of donation made for a valuable consideration, the cost of which is equal to or more than the thing donated. Of all the foregoing classifications, donations of the onerous type are the most distinct. This is because, unlike the other forms of donation, the validity of and the rights and obligations of the parties involved in an onerous donation is completely governed not by the law on donations but by the law on contracts. Same; Same; Same; Revocation; Considering that the donees acts did not detract from the very purpose for which the donation was made but precisely to achieve such purpose, a lack of prior written consent of the donor would only constitute casual breach of the deed, which will not warrant the revocation of the donation.As in Silim, the three (3) lease contracts herein entered into by the donee were for the sole purpose of pursuing the objective for which the donation was intended. In fact, such lease was authorized by the donor by express provision in the deed of donation, albeit the prior written consent therefor of the donor is needed. Hence, considering that the donees acts did not detract from the very purpose for which the donation was made but precisely to achieve such purpose, a lack of prior written consent of the donor would only constitute casual breach of the deed, which will not warrant the revocation of the donation.

Appealed to this Court by way of a petition for review on certiorari are the Decision1 dated December 19, 1997 and Resolution2 dated April 30, 1998 of the Court of Appeals in CA-G.R. CV No. 45392, reversing an earlier decision of the Regional Trial Court at Calamba, Laguna, Branch 34, which ruled in favor of the herein petitioner C-J Yulo & Sons, Inc., in a suit for revocation of donation with reconveyance of title, thereat commenced by the petitioner against the herein respondent, Roman Catholic Bishop of San Pablo, Inc. The facts are not at all disputed: On September 24, 1977, petitioner donated unto respondent a parcel of land at Canlubang, Calamba, Laguna with an area of 41,117 square meters and registered in its name under Transfer Certificate of Title (TCT) No. T-82803. The deed of donation which also bears the acceptance of the donee recites the considerations therefor and the conditions thereto attached, to wit: WHEREAS, Donee is a religious corporation engaged in much (sic) humanitarian Christian work in Laguna and elsewhere, educating and forming the young, caring for the infirm and the aged in the fulfillment of its mission; WHEREAS, Donor recognizes the need for a privately endowed institution that will care for the homeless and destitute old people in the community, as well as the other senior citizens who for some reason or other find themselves without family with whom to live the last years of their life: WHEREFORE, Donor is willing, in order to help establish and support such an institution to donate the land necessary for its housing, as well as an area of land whereon it may raise crops for its support and for the sustenance of its residents; WHEREAS, Donee is willing and able, with the wanted help of Donor and of other benefactors, to establish, operate and maintain such a home for the aged. NOW, THEREFORE, in consideration of all the foregoing premises, Donor hereby transfers and conveys to Donee by way of donation all its rights, title and interest in that certain parcel of land covered by TCT No. T-82803 of the Land Records of Laguna, the technical descriptions of which are recited above, subject to the following conditions and covenants, each of which is a material consideration for this Deed:
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PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court. Yulo, Aliling & Associates for petitioner. Padilla Law Office for respondent. GARCIA, J.:

1. So much of the land as may be necessary shall be used for the construction of a home for the aged and infirm, regardless of religion or creed, but preferably those coming from Canlubang, Calamba, Laguna; provided that retired and/or aged priests may be admitted to the home; and provided further that any senior citizen from the area who has retired from business or work may likewise be admitted to the home, subject to the payment to the institution of such sum as he may afford for his support. 2. A Green Belt that is 15 meters wide shall be established and maintained by the Donor along the length of the land to separate and insulate it from the projected highway. 3. Such part of land as may not be needed for the residence and the Green Belt shall be devoted by Donee with the help of such residents of the home as are able, to the raising of agricultural crops for the consumption of the residents of the home, and of such other crops that may be sold to defray the cost of running the home and feeding its residents; provided, that should the area later become so fully urbanized as to make this limitation on use economically, impractical, any portion of the land may, with the written consent of the Donor, be put to commercial use by the Donee by leasing the same for wholesome and socially-acceptable activities; provided further that the rentals from such commercial leases shall be used, first, to meet the expenses of the home; second, to enlarge its population and expand its facilities; and finally for other charitable purposes in Laguna, in that order. 4. Donee acknowledges that Donors generous act will greatly aid Donee in accomplishing its mission on earth, and, recognizing the generosity of the Yulo family as the reason for such act, Donee undertakes to cause every year the celebration of masses for the intention of the various members of the family of Mr. Jose Yulo, Sr., on festive and solemn occasions in the said family. 5.Except with prior written consent of the Donor or its successor, the Donee shall not use the land except for the purpose as provided above in paragraph 1 hereof, nor sell or dispose the land for any reason whatsoever, nor convey any portion of the same except in lease for commercial use as provided above in paragraph 3 hereof, otherwise the said land with all real improvements thereon shall revert in trust to the Donor for prompt disposition in favor of some other charitable organization that Donor may deem best suited to the care of the aged. (Italics supplied).

On the basis of the same deed, TCT No. T-82803 of the donor was cancelled and replaced by TCT No. T-91348 in the name of donee Roman Catholic Bishop of San Pablo, Inc. Thereafter, or sometime in 1980, the donee, for purposes of generating funds to build the perimeter fence on the donated property and the construction of a nucleus building for the aged and the infirm, leased a portion of the donated property to one Martin Gomez who planted said portion with sugar cane. There is no dispute that the lease agreement was entered into by the donee without the prior written consent of the donor, as required in the deed of donation. The lease to Gomez ended in 1985. The following year, 1986, a portion of the donated property was again leased by the donee, this time to one Jose Bostre who used the leased area as a ranch. As explained by the donee, it entered into a lease agreement with Bostre to protect the premises from vandals and for the electrification of the nucleus building of the home for the aged and in the infirm, which was named as Casa dela Merced. As before, however, the donee executed the lease contract without the prior written consent of the donor. After the termination of the Bostre lease agreement, the donee, for the third time, leased a portion of the donated property to one Rudy Caballes who used the leased area for fattening cattles. The donee explained that the lease agreement with Bostre was also for the purposes of generating funds for the completion of Casa dela Merced. Again, however, the donee did not secure the prior written consent of the donor. Hence, on September 20, 1990, pursuant to a board resolution, the donor, through its president Miguel A. Yulo, addressed a letter to the donee informing the latter that it was revoking the donation in accordance with Section 5 of the deed due to the donees non-compliance with and material breach of the conditions thereunder stipulated. In the same letter, the donor requested for the turn-over of the donees TCT No. T-91348 over the donated property. In a reply-letter dated November 5, 1990, the donee, through Bishop Pedro N. Bantigue, D.D., denied any material breach of the conditions of the deed of donation and manifested its continued and faithful compliance with the provisions thereof. In the same letter, the donee refused the turnover of its title to the donor. It was against the foregoing backdrop of events when, on November 19, 1990, in the Regional Trial Court at Calamba, Laguna the donor, alleging non647 | P r o p e r t y

compliance with and violation by the donee of the conditions of the deed of donation, filed its complaint in this case against donee Roman Catholic Archbishop of San Pablo, Inc., therein reciting the imputed non-compliance and violations by the donee of the terms and conditions of the deed of donation, as follows: a) non-construction of the home for the aged and infirmed in the lot despite the lapse of a reasonable and considerable length of time; b) present land use of the area is a cattle farm, the owner of which has a lease contract with the donee; and c) no prior written consent of the donor has been obtained for the present and actual use of the property donated, and accordingly prayed that the subject deed of donation be adjudged revoked and void and the donee ordered to return and/or reconvey the property donated. In its answer, defendant donee alleged that it was doing its best to comply with the provisions of the deed of donation relative to the establishment of the home for the aged and the infirm, adding that the leases of portions of the land were with the express, albeit unwritten consent, of Jesus Miguel Yulo himself. In the same answer, defendant donee interposed the defense that the donors cause of action for revocation, if any, had already prescribed because the leases were known to the latter since 1980. In a decision dated December 22, 1995, the trial court rendered judgment for donor-plaintiff C-J Yulo & Sons, Inc., thus: WHEREFORE, judgment is hereby rendered for plaintiff and against the defendant, declaring the Deed of Donation dated September 24, 1977 (Exh. C) REVOKED, affirming plaintiffs revocation of the same in the letter dated September 20, 1990 (Exh. D). Defendant and all persons claiming rights under them are hereby ordered to immediately vacate the premises of the donated property and to hand over to plaintiff the peaceful possession of the aforesaid premises. To avoid multiplicity of suits, the Register of Deeds of Calamba, Laguna, is hereby ordered to require the defendant to surrender Transfer Certificate of Title No. T-91348 (Exh. B) and thereafter cancel the same and issue, upon

payment of the required fees, a new Transfer Certificate of Title in favor of plaintiffs, with cost against the defendant. SO ORDERED. Therefrom, donee-defendant Roman Catholic Bishop of San Pablo, Inc., went to the Court of Appeals in CA-G.R. CV No. 45392. In the herein assailed Decision dated December 19, 1997,3 the Court of Appeals reversed that of the trial court and upheld the donation in question, to wit: WHEREFORE, the decision of the trial court dated December 22, 1993 is hereby REVERSED and the donation dated September 24, 1977 (Exhibit C) which conveyed title to the donated property in the appellees name is hereby UPHELD. SO ORDERED. Its motion for reconsideration having been denied by the same court in its Resolution of April 30, 1998,4 donor C-J Yulo & Sons, Inc., has come to this Court via the present recourse on its sole submission that THE RULING OF THE COURT OF APPEALS (THAT THE REVOCATION OF THE DONATION BY PETITIONER WAS IMPROPER) IS CONTRARY TO LAW AND APPLICABLE JURISPRUDENCE. We DENY. The Court of Appeals sustained the trial courts finding that the donation is an onerous one since the donee was burdened with the establishment on the donated property of a home for the aged and the infirm. It likewise agreed with the trial court that there were violations of the terms and conditions of the deed of donation when the donee thrice leased a portion of the property without the prior written consent of the donor. Likewise upheld by the appellate court is the ruling of the trial court that the prescriptive period of the donors right to revoke the donation is ten (10) years based on Article 1144 of the Civil Code, instead of four (4) years per Article 764 of the same Code, and therefore the action for revocation filed by the petitioner is not barred by prescription. Even then, the Court of Appeals reversed the trial courts decision, the reversal being premised on the appellate courts finding that the breaches thrice committed by the respondent were merely casual breaches which nevertheless
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did not detract from the purpose of which the donation was made: the establishment of a home for the aged and the infirm. We agree. Petitioner contends that the case at bar is similar to the 1995 case of Central Philippine University vs. Court of Appeals,5 where the donee failed for more than 50 years to establish, as required, a medical school on the land donated, and where this Court declared the donation to have been validly revoked. To the mind of the Court, what is applicable to this case is the more recent [2001] case of Republic vs. Silim,6 where respondent Silim donated a 5,600square meter parcel of land in favor of the Bureau of Public Schools, Municipality of Malangas, Zamboanga del Sur with the condition that the said property should be used exclusively and forever for school purposes only. Although a school building was constructed on the property through the efforts of the Parent-Teachers Association of Barangay Kauswagan, the funds for a Bagong Lipunan school building could not be released because the government required that it be built on a one-hectare parcel of land. This led the donee therein to exchange the donated property for a bigger one. In Silim, the Court distinguished the four (4) types of donations: Donations, according to its purpose or cause, may be categorized as: (1) pure or simple; (2) remuneratory or compensatory; (3 )conditional or modal; and (4) onerous. A pure or simple donation is one where the underlying cause is plain gratuity. This is donation in its truest form. On the other hand, a remuneratory or compensatory donation is one made for the purpose of rewarding the donee for past services, which services do not amount to a demandable debt. A conditional or modal donation is one where the donation is made in consideration of future services or where the donor imposes certain conditions, limitations or charges upon the donee, the value of which is inferior than that of the donation given. Finally, an onerous donation is that which imposes upon the donee a reciprocal obligation or, to be more precise, this is the kind of donation made for a valuable consideration, the cost of which is equal to or more than the thing donated. Of all the foregoing classifications, donations of the onerous type are the most distinct. This is because, unlike the other forms of donation, the validity of and the rights and obligations of the parties involved in an onerous donation is completely governed not by the law on donations but by the law on contracts. In this regard, Article 733 of the New Civil Code provides:

ARTICLE 733. Donations with onerous cause shall be governed by the rules on contracts, and remuneratory donations by the provisions of the present Title as regards that portion which exceeds the value of the burden imposed. The donation involved in the present controversy is one which is onerous since there is a burden imposed upon the donee to build a school on the donated property. Here, the Court of Appeals correctly applied the law on contracts instead of the law on donations because the donation involved in this case is onerous, saddled as it is by a burden imposed upon the donee to put up and operate a home for the aged and the infirm. We thus quote with approval the terse ruling of the appellate court in the challenged decision: First, the violations of the conditions of the donation committed by the donee were merely casual breaches of the conditions of the donation and did not detract from the purpose by which the donation was made, i.e., for the establishment of a home for the aged and the infirm. In order for a contract which imposes a reciprocal obligation, which is the onerous donation in this case wherein the donor is obligated to donate a 41,117 square meter property in Canlubang, Calamba, Laguna on which property the donee is obligated to establish a home for the aged and the infirm (Exhibit C), may be rescinded per Article 1191 of the New Civil Code, the breach of the conditions thereof must be substantial as to defeat the purpose for which the contract was perfected (Tolentino, Civil Code of the Philippines, Vol. IV, pp. 179-180; Universal Food Corp. v. Court of Appeals, 33 SCRA 1, 18; Ocampo v. Court of Appeals, 233 SCRA 551, 562). Thus, in the case of Ocampo v. C.A. (ibid.), citing the case of Angeles v. Calasanz (135 SCRA 323, 330), the Supreme Court ruled: The right to rescind the contract for non-performance of one of its stipulations x x x is not absolute. In Universal Food Corp. v. Court of Appeals (33 SCRA 1) the Court stated that: The general rule is that rescission of a contract will not be permitted for a slight or casual breach, but only for such substantial and fundamental breach as would defeat the very object of the parties in making the agreement (Song Fo & Co. v. Hawaiian-Philippine Co., 47 Phil. 821, 827). The question of whether a breach of a contract is substantial depends upon the attendant circumstances (Corpus v. Hon. Alikpala, et al., L-23707 & L-23720, Jan. 17, 1968).

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The above ruling of the Court of Appeals is completely in tune with this Courts disposition in Republic vs. Silim, supra. The donor therein sought to revoke the donation on the ground that the donee breached the condition to exclusively and forever use the land for school purpose only, but this Court ruled in favor of the donee: Without the slightest doubt, the condition for the donation was not in any way violated when the lot donated was exchanged with another one. The purpose for the donation remains the same, which is for the establishment of a school. The exclusivity of the purpose was not altered or affected. In fact, the exchange of the lot for a much bigger one was in furtherance and enhancement of the purpose of the donation. The acquisition of the bigger lot paved way for the release of funds for the construction of Bagong Lipunan school building which could not be accommodated by the limited area of the donated lot. As in Silim, the three (3) lease contracts herein entered into by the donee were for the sole purpose of pursuing the objective for which the donation was intended. In fact, such lease was authorized by the donor by express provision in the deed of donation, albeit the prior written consent therefor of the donor is needed. Hence, considering that the donees acts did not detract from the very purpose for which the donation was made but precisely to achieve such purpose, a lack of prior written consent of the donor would only constitute casual breach of the deed, which will not warrant the revocation of the donation. Besides, this Court cannot consider the requirement of a prior written consent by the donor for all contracts of lease to be entered into by the donee as an absolute ground for revocation of the donation because such a condition, if not correlated with the purpose of the donation, would constitute undue restriction of the donees right of ownership over the donated property. Instructive on this point is the ruling of this Court in The Roman Catholic Archbishop of Manila vs. Court of Appeals,7 viz.: Donation, as a mode of acquiring ownership, results in an effective transfer of title over the property from the donor to the donee. Once a donation is accepted, the donee becomes the absolute owner of the property donated. Although the donor may impose certain conditions in the deed of donation, the same must not be contrary to law, morals, good customs, public order and public policy.

xxx In the case at bar, we hold that the prohibition in the deed of donation against the alienation of the property for an entire century, being an unreasonable emasculation and denial of an integral attribute of ownership, should be declared as an illegal or impossible condition within the contemplation of Article 727 of the Civil Code. Consequently, as specifically stated in said statutory provision, such condition shall be considered as not imposed. No reliance may accordingly be placed on said prohibitory paragraph in the deed of donation. The net result is that, absent said proscription, the deed of sale supposedly constitutive of the cause of action for the nullification of the deed of donation is not in truth violative of the latter, hence, for lack of cause of action, the case for private respondents must fail. If petitioner would insist that the lack of prior written consent is a resolutory condition that is absolute in character, the insistence would not stand the validity test under the foregoing doctrine. What would have been casual breaches of the terms and conditions of the donation, may, in that event, even be considered as no breach at all when the Court strikes down such absolute condition of prior written consent by the donor in all instances without any exception whatsoever. The Court, however, understands that such a condition was written with a specific purpose in mind, which is, to ensure that the primary objective for which the donation was intended is achieved. A reasonable construction of such condition rather than totally striking it would, therefore, be more in accord with the spirit of the donation. Thus, for as long as the contracts of lease do not detract from the purpose for which the donation was made, the complained acts of the donee will not be deemed as substantial breaches of the terms and conditions of the deed of donation to merit a valid revocation thereof by the donor. Finally, anent petitioners contention that the Court of Appeals failed to consider that respondent had abandoned the idea of constructing a home for the aged and infirm, the explanation in respondents comment is enlightening. Petitioner relies on Bishop Bantigues letter8 dated June 21, 1990 as its basis for claiming that the donee had altogether abandoned the idea of constructing a home for the aged and the infirm on the property donated. Respondent, however, explains that the Bishop, in his letter, written in the vernacular, expressed his concern that the surrounding area was being considered to be re-classified into an industrial zone where factories are expected to be put up. There is no question that this will definitely be disadvantageous to the health of the aged and the infirm. Thus, the Bishop asked permission from the donor for
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a possible exchange or sale of the donated property to ultimately pursue the purpose for which the donation was intended in another location that is more appropriate. The Court sees the wisdom, prudence and good judgment of the Bishop on this point, to which it conforms completely. We cannot accede to petitioners view, which attributed the exact opposite meaning to the Bishops letter seeking permission to sell or exchange the donated property. In Silim, supra, this Court ruled that such exchange does not constitute breach of the terms and conditions of the donation. We see no reason for the Court to think otherwise in this case. To insist that the home for the aged and infirm be constructed on the donated property, if the industrialization indeed pushes through, defies rhyme and reason. Any act by the donor to prevent the donee from ultimately achieving the purpose for which the donation was intended would constitute bad faith, which the Court will not tolerate. WHEREFORE, the instant petition is DENIED and the assailed decision of the Court of Appeals AFFIRMED in toto. No pronouncement as to costs. SO ORDERED. Panganiban (Chairman), Sandoval-Gutierrez, Corona and Carpio-Morales, JJ., concur. Petition denied, judgment affirmed in toto. Note.A valid donation once accepted becomes irrevocable except on account of officiousness, failure by the donee to comply with the charges imposed in the donation or ingratitude. (Gestopa vs. Court of Appeals, 342 SCRA 105 [2000]) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [C-J Yulo & Sons, Inc. vs. Roman Catholic Bishop of San Pablo, Inc., 454 SCRA 279(2005)]

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G.R. No. 164748. January 27, 2006.* THE SECRETARY OF EDUCATION and DR. BENITO TUMAMAO, Schools Division Superintendent of Isabela, petitioners, vs. HEIRS OF RUFINO DULAY, SR., represented by IGNACIA VICENTE, RUFINO DULAY, JR., SUSANA DULAY, ADELAIDA DULAY, LUZVIMINDA DULAY and CECILIA DULAY, respondents.
Civil Law; Donations; Civil Procedure; The issue of whether or not petitioner DECS was able to comply with the condition imposed in the deed of donation is one of fact. Under Rule 45 of the 1997 Rules of Civil Procedure, only questions of law may be raised in a petition for review on certiorari, for the simple reason that the Supreme Court is not a trier of facts.The issue of whether or not petitioner DECS was able to comply with the condition imposed in the deed of donation is one of fact. There is a question of fact when the doubt or difference arises as to the truth or falsehood of alleged facts or when the query necessarily solicits calibration of the whole evidence considering mostly the credibility of witnesses, existence and relevancy of specific surrounding circumstances, their relation to each other and to the whole and probabilities of the situation. Under Rule 45 of the 1997 Rules of Civil Procedure, only questions of law may be raised in a petition for review on certiorari, for the simple reason that this Court is not a trier of facts. It is not for the Court to calibrate the evidence on record, as this is the function of the trial court. Although there are well-defined exceptions to the rule, nevertheless, after a review of the records, we find no justification to depart therefrom. Moreover, the trial courts findings of facts, as affirmed by the appellate court on appeal, are binding on this Court, unless the trial and appellate courts overlooked, misconstrued or misinterpreted facts and circumstances of substance which, if considered, would change the outcome of the case. The case has been reviewed thoroughly, and we find no justification to reverse the CA decision. Same; Same; Contracts; It must be stressed that the donation is onerous because the DECS, as donee, was burdened with the obligation to utilize the land donated for school purposes. Under Article 733 of the New Civil Code, a donation with an onerous cause is essentially a contract and is thus governed by the rules on contract.We reject the contention of the OSG that respondents cause of action is already barred by prescription under Article 764 of the New Civil Code, or four years from the non-compliance with the condition in the deed of donation. Since such failure to comply with the condition of utilizing the property for school purposes became manifest sometime in 1988 when the DECS utilized another property for the construction of the school building, the four-year prescriptive period did not commence on such date. Petitioner was given more than enough time to comply with the condition, and it cannot be allowed to use this fact to its advantage. It must be stressed that the donation is onerous because the DECS, as donee, was burdened with the obligation to utilize the land donated for school purposes. Under Article 733 of the New Civil Code, a donation with an onerous cause is essentially a contract and is thus governed by the rules on contract. Same; Same; Same; It has been 16 years since the execution of the deed of donation. Petitioner DECS failed to use the property for the purpose specified in the deed of donation. In fine, petitioner DECS has no use for the property, hence, the same shall be reverted to the

respondents.It has been 16 years since the execution of the deed of donation. Petitioner DECS failed to use the property for the purpose specified in the deed of donation. The property remained barren and unutilized. Even after respondents sought the return of the property before the courts, petitioner DECS still failed to draw up plans to use the property for school purposes. In fine, petitioner DECS has no use for the property; hence, the same shall be reverted to the respondents.

PETITION for review on certiorari of a decision of the Court of Appeals. The facts are stated in the opinion of the Court. The Solicitor General for petitioners. Elmer C. Labog for respondents. CALLEJO, SR., J.:

This is a petition for review on certiorari of the Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 78314 which affirmed the Decision2 of the Regional Trial Court (RTC) of Santiago City, Isabela, Branch 35, in Civil Case No. 35-2397. The spouses Rufino Dulay, Sr. and Ignacia Vicente were the owners of a parcel of land located in Rizal, Santiago, Isabela, with an area of 29,002 square meters. The lot was covered by Original Certificate of Title No. P-6776. On August 3, 1981, the spouses Dulay executed a deed of donation3 over a 10,000-square-meter portion of their property in favor of the Ministry of Education and Culture (now the Department of Education, Culture and Sports [DECS]). The deed provided, among others: That for and in consideration of the benefits that may be derived from the use of the above described property which is intended for school purposes, the said DONORS do by by (sic) these presents TRANSFER AND CONVEY by way of DONATION unto the DONEE, its successors and assigns, the above property to become effective upon the signing of this document.4 The property was subdivided. On April 13, 1983, Transfer Certificate of Title (TCT) No. T-1433375 covering the portion identified as Lot 8858-A was issued in the name of the Ministry of Education and Culture, represented by Laurencio C. Ramel, the Superintendent of Schools of Isabela. However, the property was not used for school purposes and remained idle.
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Sometime in 1988, the DECS, through its Secretary, started construction of the Rizal National High School building on a parcel of land it acquired from Alejandro Feliciano. The school site was about 2 kilometers away from the land donated by the spouses Dulay. In a letter6 to the DECS Secretary dated August 19, 1994, the spouses Dulay requested that the property be returned to them considering that the land was never used since 1981, or a period of more than 13 years. On August 28, 1994, the Barangay Council of Rizal, Santiago City issued Resolution No. 397 recognizing the right of the donors to redeem the subject parcel of land because of the DECS failure to utilize it for the intended purpose. It further resolved that the Rizal National High School no longer needed the donated land considering its distance from the main campus and [the] failure to utilize the property for a long period of time. On December 22, 1994, Rufino Dulay, Sr. passed away at the age of 80.8 His heirs sought the help of the Sangguniang Panlungsod of Santiago City via an undated letter9 requesting the approval of a resolution allowing them to redeem the donated property. The Sangguniang Panlungsod denied the request inasmuch as the city government was not a party to the deed of donation.10 On August 31, 1997, the heirs of Dulay, Sr., herein respondents, filed a complaint for the revocation of the deed of donation and cancellation of TCT No. T-143337 before the RTC of Santiago City, Isabela, Branch 35, against the DECS Secretary and Dr. Benito Tumamao, the Schools Division Superintendent of Isabela. Respondents alleged that there was a condition in the deed of donation: that the DECS, as donee, utilize the subject property for school purposes, that is, the construction of a building to house the Rizal National High School. Respondents alleged that the DECS did not fulfill the condition and that the land remained idle up to the present. Respondents also averred that the donation inter vivos was inofficious, since the late Rufino Dulay, Sr. donated more than what he could give by will. Petitioners, through the Office of the Solicitor General (OSG), interposed the following defenses: (a) the DECS complied with said condition because the land was being used by the school as its technology and home economics laboratory; (b) the donation was not inofficious for the donors were the owners of five other parcels of land, all located at Rizal, Santiago City; (c) the DECS acquired the disputed property by virtue of purchase made on December 8, 1997 by the barangay of Rizal, Santiago City in the amount of P18,000.00 as

certified by its former Barangay Captain, Jesus San Juan;11 and (d) the action of the respondents had prescribed. The OSG also claimed that students planted a portion of the land with rice, mahogany seedlings, and fruit-bearing trees; the produce would then be sold and the proceeds used for the construction of a school building on the subject property. In their Reply,12 respondents denied that the donated land was being used as a technology and home economics laboratory, and averred that there were no improvements on the property. Moreover, the fact that rice was planted on the lot was contrary to the intended purpose of the donation. The respondents likewise denied that the property had been sold to the barangay. While the other properties of the late donor had been sold, the deeds thereon had not been registered, and the tax declarations not yet transferred in the names of the purchasers. Thereafter, trial ensued. On March 6, 2001, an ocular inspection of the property was conducted by the parties and their respective counsels, including the Presiding Judge. It was confirmed that the land was barren, save for a small portion which was planted with palay. A demolished house was also found in the periphery of the donated lot.13 On December 26, 2002, the trial court rendered its decision in favor of respondents. The fallo reads: WHEREFORE, in the light of the foregoing considerations, the Court hereby DECLARES the deed of donation, Exhibit A, executed by the late Rufino Dulay, Sr. and his wife Ignacia Vicente over a portion of the land covered by O.C.T. No. P-6776 and now covered by T.C.T. No. T-143337 in the name of the donee Department of Education and Culture as REVOKED. The defendant DECS is ORDERED to execute the deed of reconveyance of the land in favor of the plaintiffs heirs of Rufino Dulay, Sr. SO ORDERED.14 In revoking the deed of donation, the trial court ruled that the donation was subject to a resolutory condition, namely, that the land donated shall be used for school purposes. It was no longer necessary to determine the intended school purpose because it was established that the donee did not use the land. Thus, the condition was not complied with since the property was donated in July 1981. Moreover, the DECS did not intend to use the property for school purposes because a school had already been built and established in another lot located in the same barangay, about two kilometers away from
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the subject land. Finally, the trial court rejected petitioners contention that the donation was inofficious. Aggrieved, the OSG appealed the decision to the CA. On July 30, 2004, the appellate court rendered judgment affirming the decision. The court held that the DECS failed to comply with the condition in the donation, that is, to use the property for school purposes. The CA further ruled that the donation was onerous considering that the donee was burdened with the obligation to utilize the land for school purposes; therefore, the four-year prescriptive period under Article 764 of the New Civil Code did not apply. Moreover, the CA declared that a deed of donation is considered a written contract and is governed by Article 1144 of the New Civil Code, which provides for a 10-year prescriptive period from the time the cause of action accrues. According to the CA, the respondents cause of action for the revocation of the donation should be reckoned from the expiration of a reasonable opportunity for the DECS to comply with what was incumbent upon it. Petitioners filed a motion for reconsideration, which the CA denied. Petitioners seek relief from this Court via petition for review on certiorari, contending that: I. THE DEPARTMENT OF EDUCATION, THROUGH THE RIZAL NATIONAL HIGH SCHOOL, HAD COMPLIED WITH THE CONDITION IMPOSED IN THE DEED OF DONATION. RESPONDENTS RIGHT TO SEEK THE REVOCATION OF THE DEED OF DONATION, IF THERE BE ANY, IS ALREADY BARRED BY PRESCRIPTION AND LACHES.15

certiorari, for the simple reason that this Court is not a trier of facts. It is not for the Court to calibrate the evidence on record, as this is the function of the trial court. Although there are well-defined exceptions to the rule, nevertheless, after a review of the records, we find no justification to depart therefrom. Moreover, the trial courts findings of facts, as affirmed by the appellate court on appeal, are binding on this Court, unless the trial and appellate courts overlooked, misconstrued or misinterpreted facts and circumstances of substance which, if considered, would change the outcome of the case. The case has been reviewed thoroughly, and we find no justification to reverse the CA decision. Petitioners, through the OSG, maintain that the condition (to use the property for school purposes) is not limited to the construction of a school building, but includes utilizing it as a technology and home economics laboratory where students and teachers plant palay, mahogany seedlings, and fruit-bearing trees. The OSG insists that the donee did not specify in the deed that the property should be used for the construction of a school building. According to the OSG, the proceeds of the harvest were used and are still being used by the Rizal National High School for the construction and improvement of its present school site. Moreover, it was verified that there was palay planted on the donated property during the ocular inspection on the property. In their comment on the petition, respondents dispute petitioners contentions, and aver that no evidence was presented to prove that, indeed, palay, mahogany seedlings and fruit-bearing trees were planted on the property. Respondents also emphasized that when the trial court inspected the subject property, it was discovered to be barren and without any improvement although some portions thereof were planted with palay. Petitioners even failed to adduce evidence to identify the person who planted the palay. The contention of petitioners has no merit. As gleaned from the CA decision, petitioners failed to prove that the donated property was used for school purposes as indicated in the deed of donation: We find it difficult to sustain that the defendant-appellants have complied with the condition of donation. It is not amiss to state that other than the bare allegation of the defendant-appellants, there is nothing in the records that could concretely prove that the condition of donation has been complied with by the defendant-appellants. In the same breadth, the planting of palay on the land donated can hardly be considered and could not have been the school purposes referred to and intended by the donors when they had donated the
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II.

The Court shall resolve the issues raised by petitioners seriatim. The donee failed to comply with the condition imposed in the deed of donation The issue of whether or not petitioner DECS was able to comply with the condition imposed in the deed of donation is one of fact. There is a question of fact when the doubt or difference arises as to the truth or falsehood of alleged facts or when the query necessarily solicits calibration of the whole evidence considering mostly the credibility of witnesses, existence and relevancy of specific surrounding circumstances, their relation to each other and to the whole and probabilities of the situation.16 Under Rule 45 of the 1997 Rules of Civil Procedure, only questions of law may be raised in a petition for review on

land in question. Also, the posture of the defendant-appellants that the land donated is being used as technology and home economics laboratory of the Rizal National High School is far from being the truth considering that not only is the said school located two kilometers away from the land donated but also there was not even a single classroom built on the land donated that would reasonably indicate that, indeed, classes have been conducted therein. These observations, together with the unrebutted ocular inspection report made by the trial court which revealed that the land donated remains idle and without any improvement thereon for more than a decade since the time of the donation, give Us no other alternative but to conclude that the defendantappellants have, indeed, failed to comply with what is incumbent upon them in the deed of donation.17 In its Order18 dated March 6, 2001, the RTC reiterated that during the ocular inspection of the property conducted in the presence of the litigants and their counsel, it observed that the land was barren; there were no improvements on the donated property though a portion thereof was planted with palay [and a demolished house built in 1979.] Moreover, petitioners failed to adduce a shred of evidence to prove that the palay found in the property was planted by DECS personnel or at its instance or even by students of the Rizal National High School. No evidence was adduced to prove that there were existing plans to use the property for school purposes. Petitioners even debilitated their cause when they claimed in the trial court that the barangay acquired the property by purchase, relying on the certification of former Barangay Captain Jesus San Juan. The right to seek the revocation of donation had not yet prescribed when respondents filed their complaint

given more than enough time to comply with the condition, and it cannot be allowed to use this fact to its advantage. It must be stressed that the donation is onerous because the DECS, as donee, was burdened with the obligation to utilize the land donated for school purposes. Under Article 733 of the New Civil Code, a donation with an onerous cause is essentially a contract and is thus governed by the rules on contract.19 We fully agree with the ruling of the appellate court: x x x With this, [we] decline to apply the four-year prescriptive period for the revocation of donation provided under Article 764 of the New Civil Code and instead apply the general rules on contracts since Article 733 of the same Code, specifically provided that onerous donations shall be governed by the rules on contracts. Corollarily, since a deed of donation is considered a written contract, it is governed by Article 1144 of the New Civil Code, which provides that the prescriptive period for an action arising from a written contract is ten (10) years from the time the cause of action accrues. In the case of donation, the accrual of the cause of action is from the expiration of the time within which the donee must comply with the conditions or obligations of the donation. In the instant case, however, it must be noted that the subject donation fixed no period within which the donee can comply with the condition of donation. As such, resort to Article 1197 of the New Civil Code is necessary. Said article provides that if the obligation does not fix a period, but from its nature and the circumstances it can be inferred that a period was intended, the courts may fix the duration thereof. Indeed, from the nature and circumstances of the condition of the subject donation, it can be inferred that a period was contemplated by the donors. The donors could not have intended their property to remain idle for a very long period of time when, in fact, they specifically obliged the defendantappellants to utilize the land donated for school purposes and thus put it in good use. x x x20 In Central Philippine University v. Court of Appeals,21 a case squarely in point, we have established that the legal possibility of bringing the action begins with the expiration of a reasonable opportunity for the donee to fulfill what has been charged upon it by the donor. Likewise, we held that even if Article 1197 of the New Civil Code provides that the courts may fix the duration when the obligation does not determine the period but from its nature and circumstances it can be inferred that a period was intended, the general rule cannot be applied because to do so would be a mere technicality and would serve no

Anent the second issue, we reject the contention of the OSG that respondents cause of action is already barred by prescription under Article 764 of the New Civil Code, or four years from the non-compliance with the condition in the deed of donation. Since such failure to comply with the condition of utilizing the property for school purposes became manifest sometime in 1988 when the DECS utilized another property for the construction of the school building, the four-year prescriptive period did not commence on such date. Petitioner was

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other purpose than to delay or lead to an unnecessary and expensive multiplication of suits.22 Altogether, it has been 16 years since the execution of the deed of donation. Petitioner DECS failed to use the property for the purpose specified in the deed of donation. The property remained barren and unutilized. Even after respondents sought the return of the property before the courts, petitioner DECS still failed to draw up plans to use the property for school purposes. In fine, petitioner DECS has no use for the property; hence, the same shall be reverted to the respondents. WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 78314 dated July 30, 2004 is AFFIRMED. SO ORDERED. Panganiban (C.J., Chairperson), Ynares-Santiago, Austria-Martinez and Chico-Nazario, JJ., concur. Petition denied, judgment affirmed. Note.Once the donation is accepted, it is generally considered irrevocable and the donee becomes the absolute owner of the property, except on account of officiousness, failure by the donee to comply with charge imposed in the donation, or ingratitude. (Heirs of Rosendo Sevilla Florencio vs. Heirs of Teresa de Leon, 425 SCRA 447 [2004]) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Secretary of Education, The vs. Heirs of Rufino Dulay, Sr., 480 SCRA 452(2006)]

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[No. 9449. February 12, 1915.] BONIFACIA MANALO, as administratrix of the estate of the deceased Placida Manalo, plaintiff and appellant, vs. GREGORIO DE MESA, defendant and appellee.
1.DONATION FOR CONSIDERATION; LAW GOVERNING THE CONTRACT.A donation of realty conditioned that the donees would meet and bear the expenses that might be incurred by reason of the donor's death and burial, must be classified as a donation for a valuable consideration, and therefore, under the provisions of article 622 of the Civil Code, governed in its nature, conditions and effects by the laws of contracts. The provisions of said code, particularly article 633, which provides that as a general rule a donation of realty must be made in a public instrument in order to be valid, cannot be applied thereto. 2.ID. ; ID.The provisions of the Civil Code regulating the form of contracts in general do not require that the stipulations between the parties be recorded in a public instrument, for an oral contract is valid and effective and produces all its effects in law. With greater reason is this the case where the contract is recorded in a private instrument, especially when article 1225 of that code assigns to a private instrument duly authenticated the same value as a public instrument, as between those who signed it and their successors in interest; and therefore a donation for a valuable consideration partakes of the nature and conditions of a contract and is subject to the laws of contracts, as provided in article 622 of the Civil Code. (Sec. 335, Code of Civil Procedure; arts. 1261, 1278, 1279, and 1280, Civil Code; decisions of the supreme court of Spain, July 4, 1899, and October 19, 1901; Sison vs. Ramos, 13 Phil. Rep,, 54; Carlos vs. Ramil, 20 Phil. Rep., 183.)

APPEAL from a judgment of the Court of First Instance of Laguna. Jocson, J. The facts are stated in the opinion of the court. Eduardo Gutierrez Repide and Arsenio Locsin for appellant. Pedro Guevara, for appellee. TORRES, J.:

On March 16, 1912, counsel for the plaintiff Bonifacia Manalo, as administratrix of the estate of the deceased Placida Manalo, filed a written complaint in the Court of First Instance of Laguna, alleging as her first cause of action that the deceased Placida Manalo had been the owner of two parcels of land, each planted with 300 coco palms, which she had inherited from her deceased parents and which were located in the barrio of Palita, municipality of Alaminos, the area and boundaries of said lands being stated in the complaint; that in 1904 the defendant Gregorio de Mesa had usurped said two parcels of land, thereby depriving the plaintiff, as administratrix of the property of the deceased Placida Manalo, of possession and enjoyment thereof, and had refused to deliver them to the plaintiff in spite of repeated requests that he do so. As a second cause of action it was alleged that ever since the said year, when the defendant had illegally entered into possession of those parcels of land he had been harvesting the products thereof, thereby causing to the plaintiff damages which since the usurpation have amounted to the sum of P1,600 and which still continue at the rate of P16.66 a month. It was therefore prayed that judgment be rendered for ownership and possession of the said lands by directing the defendant to vacate said two parcels and deliver them to the plaintiff as judicial administratrix of the property of the deceased Placida Manalo; that said defendant pay to the plaintiff as damages the sum of P1,600, with legal interest from the filing of the complaint, and also the sum of P16.66 a month until the property described in the complaint be delivered to her; also that the defendant be enjoined from entering upon the above-described land and from taking its products or anything else belonging to the property; and that the def endant be sentenced to pay the costs of the case. The demurrer filed to the foregoing complaint was overruled, and thereupon counsel for the defendant in his answer generally and specifically denied each and all of the allegations of the complaint, alleging in special defense that the defendant was in possession of the lands described in the complaint by having acquired them by purchase, and that the lands described therein are the same which were the subject of litigation by the parties in civil case No. 1187 of the Court of First Instance of Laguna. Therefore the defendant prayed that he be absolved from the complaint, with the costs against the plaintiff. After trial of the case and the examination of the evidence adduced by both parties, the court rendered the decision hereinbefore mentioned. Plaintiff saved her exception and moved in writing for a reopening of the case and the holding of a new trial, which motion was denied, with exception on the part of the appellant. The corresponding bill of exceptions was approved and forwarded to the clerk of this court.
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This is an appeal brought up through a bill of exceptions by counsel for the plaintiff from the judgment of November 19, 1912, whereby the Honorable Vicente Jocson. judge, held that the lands described in the complaint belonged exclusively to the defendant Gregorio de Mesa and his wife, and consequently absolved them from the complaint, with the costs of the case against the plaintiff.

In these proceedings it is necessary to determine, first, the validity and efficacy of the donation of a tract of land made in the private document Exhibit 1 by the spouses Placida Manalo and Fernando Regalado in favor of the spouses Gregorio de Mesa and Leoncia Manalo; second, the authenticity and validity of the document Exhibit 2, wherein it appears that said spouses Regalado and Manalo sold and transmitted to the spouses Gregorio de Mesa and Leoncia Manalo the ownership and possession of a tract of land to which the said document refers. In the document Exhibit 1 (rec., p. 6), written in Tagalog and thereinafter translated, it appears that on May 10, 1903, the spouses Fernando Regalado and Placida Manalo, residing in the municipality of San Pablo, Laguna, declare that they are now old and incapacitated for work; that the woman has been ill for over a year and she feels that her death is approaching; that as both are without children to inherit from them, and moreover taking into consideration that their nephew and niece, the spouses Gregorio de Mesa and Leoncia Manalo, the latter of whom has lived with them from childhood and has been treated by them as a daughter, have been caring for them both up to the present time, they agree to donate to them the tract of land which they own, the location and boundaries whereof are set forth in the document; they f urther state that on account of the circumstances recited they make the donation to the exclusion of their other nephews and nieces, and they request the donees to bear such expenses as would be incurred in case the donor Placida Manalo should die. To this end title of ownership was made over to the donees with the injunction that in case any claim to said land should be set up by any brother or other nephew of the donors, said claim was to be rejected and ignored by all the authorities, for they prayed to God that He permit none of their relatives to disturb the donees' possession of the land. It is to be observed that the donation set forth in the said document is not an act of liberality performed gratuitously in favor of the donees, to which article 618 of the Civil Code refers. To judge from the voluntary statement of the donors, the donation was made on account of the services which the donee Leoncia Manalo had rendered them since her childhood and which she and her husband Gregorio de Mesa, after marriage, had continued to render to the donors. Moreover, the donor spouses ratified and agreed to the donation with the condition and obligation that the donees should meet and bear the expenses which might arise in the event of the death of the donor Placida Manalo.

She died and her body was buried in the cemetery of that town on October 9, 1903, according to the certified copy of the record of her interment, Exhibit B, page 3, and Gregorio de Mesa fulfilled the obligation conditioned in the donation by paying the expenses occasioned by her death and burial. Gregorio de Mesa so stated (p. 32) in the presence of the plaintiff Bonifacia Manalo, who did not at the time protest, nor could she impugn or contradict the statement made by the donee, De Mesa, who f urther averred that he. accepted the donation and with his wife, the other donee, entered into possession of the land donated, even in the lif etime of the donor Placida and her husband Regalado, for the donation was made on May 10, 1903, and she died on October 9 of the same year. It further appears that the donee De Mesa, while the donors were still living, after he had taken possession of the land donated, made the declaration of ownership for the assessment in June of that year and paid the land tax, according to the document Exhibit 6, page 16. From the foregoing it is seen that this donation was made for a valuable consideration, and is therefore subject to and governed in its nature, conditions and effects by the laws of contracts, in accordance with the provisions of article 622 of the Civil Code. In order to settle the question raised by the appellant that the said donation is null and void because it was not made in a public instrument in accordance with the provisions of article 633 of the Civil Code, and that it was recorded in a private document, Exhibit 1 (p. 6), was not sufficient, it is necessary to consider whether or not the donation in question is governed by the provisions of the code that treat of donations in general, or whether, being made for a valuable consideration, it falls outside them, and thus becomes subject, as stated, to the laws of contracts, under said article 622 of the code, and so on this hypothesis should have been recorded in a public instrument, as prescribed by article 633. There can be no doubt that the donation in question was made for a valuable consideration, since the donors made it conditional upon the donees' bearing the expenses that might be occasioned by the death and burial of the donor Placida Manalo, a condition and obligation which the donee Gregorio de Mesa carried out in his own behalf and for his wife Leoncia Manalo; therefore in order to determine whether or not said donation is valid and effective it should be sufficient to demonstrate that, as a contract, it embraces the conditions the law requires and is valid and effective, although not recorded in a public instrument.

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Under article 1278 of the Civil Code, contracts are binding when entered in to between the parties, whatever may be the form in which they may have been executed, provided the essential conditions required for their validity exist, as set forth in article 1261 of the same code. The donation in question was recorded in a private instrument executed by the donors and signed by three witnesses, the obligation or valuable consideration imposed upon the donee being stated therein. If, in accordance with the provisions of article 622 of the Civil Code, such a donation as this one, made for a valuable consideration, is governed by the laws of contracts, and if these laws do not require that the stipulations between the parties be recorded in a public instrument (inasmuch as a contract entered into verbally is valid and effective and produces all its consequences under the law), then with greater reason the said donation for a valuable consideration set forth in the said document Exhibit 1 (p. 6), although this was a private document, must be respected, especially when under article 1225 of the Civil Code a private instrument duly authenticated has the same force as a public instrument between those who sign it and their successors in interest. By means of the donation of the parcel of land hereinbefore mentioned, made by the donors for a valuable consideration, the former ceded or transferred the said parcel of land to the donees, and, being a contract legally entered into between the interested parties, it does not require for its validity and efficacy that it should have been recorded in a public instrument. Even though the value of the land donated does not exceed 1,500 pesetas, it is a fact that said donation was reduced to writing, at least in a private document; and theref ore it comes under the rules fixed in section 335 of the Code of Civil Procedure, since the donation f or a valuable consideration, regarded in law as a contract, was recorded in a document legalized by the donors and the signatures of three witnesses who attested the genuineness of the act performed by said donors. The supreme court of Spain, in passing upon appeals under article 1778 (1278) of the Civil Code, has in its decisions of July 4, 1899, and October 19, 1901, laid down the following principle: "Contracts are binding, whatever may be the form in which they were made, if the conditions essential f or their validity as specified in detail by article 1278 of the Civil Code concur in them; from which principle it follows that upon the validity and not upon the outward formalities required by the laws for other distinct purposes depends exclusively the efficacy of the contract between the parties thereto, who can therefore reciprocally require the fulfillment of the obligations agreed upon; and this is

confirmed by article 1279, which does not subordinate the efficacy of the contract to the execution of a public instrument, in the cases wherein the law requires it." In another decision of the same high Spanish court it is stated: "Although the provisions of article 1279 of the Civil Code, in connection with No. 1 of article 1280, do not operate against the validity of the contracts nor the validity of the acts voluntarily performed by the parties for the fulfillment thereof, even before the execution of the corresponding public instrument, yet from the moment when any of the contracting parties invoke said provisions it is evident that under them the execution of the public instrument must precede the determination of the other obligations derived from the contract." (Decision of April 17, 1897.) In the decision in the case of Sison vs. Ramos (13 Phil. Rep., 54), the following is stated: "A contract executed by both parties with all the requisites prescribed by article 1261 of the Civil Code is a perfect, effective and binding contract, although the same has been executed as a private document only. (Art. 1278.) "The legalization of a contract by a public instrument and its registration are not essential requisites, but mere conditions of form or solemnities imposed by the law in order that the said contract may be effective as against third parties, and the agreement executed in the form of a deed and inscribed in the registry may be respected, according to the doctrine laid down by the supreme court of Spain relating to the application of certain articles of the Civil Code, which is also in force in these Islands. "It is not within the scope of article 1280 of the said Code to require that a contract shall appear in a public document, in order to prove the dominion, inasmuch as, under article 1278 of the same code, all contracts which contain the conditions required f or their validity by article 1261 produce full effect as between the contracting parties without prejudice to their right to demand and obtain that they be set out in a public instrument, as provided by article 1279; the absence of said requisite can not be availed of by either of such parties and much less by a third person, to deny the existence and reality of the contract, when it is supported by elements of proof admissible in law." A donation for a valuable consideration has always been regarded, according to the provisions of law, as a genuine contract of cession or transmission of property, provided that the condition imposed by the donor upon the donee has
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been met; and so this court has held in the decision, among others, of the case of Carlos vs. Ramil (20 Phil. Rep., 183), wherein this principle was established: "When two persons advanced in years, being entirely alone and requiring the care of younger people, enter into a contract whereby it is agreed that, in consideration of such care during the lifetime of the former, they transferred their real estate to the persons thus caring for them, such a contract does not constitute a donacin remuneratoria but a donacin con causa onerosa, and is governed by the law of contracts and not that of donation." The authenticity of the document Exhibit 1, setting forth said donation, is impugned by the plaintiff, a sister of the deceased donor, yet notwithstanding that her allegations lack proof, the record contains conclusive evidence of the genuineness and legitimacy of said donation, for the plaintiff herself witnessed the execution of said document and signed it together with two other witnesses. Such is the statement of one of them, Felipe Bondad, who declares (pp. 23-27) that he is a first cousin of the donor Placida Manalo, and therefore of the plaintiff; that he was present when the said document Exhibit 1 was executed by the spouses Placida Manalo and Fernando Regalado; that the plaintiff Bonifacia Manalo and Hermenegildo Bondad were also present; that he saw the latter, as well as Bonifacia Manalo, sign; that even though the donor Placida was ill she was in her right mind and possessed of her mental faculties, and signed merely with a mark beside her name, as did also her husband Regalado as they could apparently neither write nor sign; but the plaintiff avers that her sister Placida could write, although she was unable to submit any document wherein Placida's signature appears. Furthermore, the plaintiff Bonifacia disowned the signature which appears at the bottom of the document Exhibit 1, wherefore the defendant exhibited the documents Exhibits 3 and 5, wherein appear authentic signatures of Bonifacia Manalo; he also called attention to the latter's signature affixed to the complaint Exhibit 4, for the purpose of demonstrating the authenticity and genuineness of her signature in the said document Exhibit 1. There is no ground for disturbing the lower court's finding that the signature, appearing in said document and disowned by Bonifacia Manalo, was written by her. With reference to the parcel of land sold to the defendant, indicated by the letter "A" and claimed by the plaintiff as judicial administratrix of the property of the deceased Placida Manalo, as property belonging to the intestate estate of the deceased, notwithstanding the groundless allegations of the plaintiff the record fully demonstrates that the spouses Gregorio de Mesa and Leoncia

Manalo are now the lawful owners and possessors of said parcel of land to which paragraph A of the complaint refers since they acquired it in a legal manner f rom the deceased spouses Fernando Regalado and Placida Manalo, as appears in the document Exhibit 2, written in Tagalog (p. 8) and thereinafter translated. In that document the said spouses Regalado and Manalo recite they are the owners of the said parcel of land, planted with coco palms, the location and boundaries whereof are set forth; that they had acquired it by purchase from a third party whom they name; that as they are now old and have no children to inherit from them, and as the woman is ill and needs money for her subsistence, they agree to sell said parcel of land on the east side, planted with six rows of coco palms toward the western part, to their nephew and niece, Gregorio de Mesa and his wife Leoncia Manalo for the sum of P150, there in hand delivered; that thereupon they renounced all their rights to the land thus sold unconditionally to their said nephew and niece, making delivery of the tract so that the latter might enter into possession thereof; and to that end they executed the said document on March 20, 1903, in the presence of the witnesses Crisanto de Mesa, Felipe Bondad, Gregorio Bondad, Hermenegildo Bondad, and Victor Suarez. This sale, as has been seen, took place some months before the death of the vendor Placida Manalo, who died on October 8 of the same year 1903. By virtue of the acquisition of the tract the defendant and his wife forthwith took possession thereof, made declaration of their ownership in June of 1903 for the assessment and paid the corresponding land tax, while the vendors were still living, nor did the latter declare the land to be theirs or pay the tax thereon, as the husband did for his other lands. Fernando Regalado died a year after his wife's death; and it further appears that at the date of the complaint the vendee spouses had been in possession of the land so acquired for over eight years and that, since they had entered into possession of the land they had so purchased and that which they had received under donation title, they had increased the number of coco palms growing thereon. The witness Felipe Bondad, one of those who were present at the execution of said document of sale, No. 2, confirms the authenticity thereof and the genuineness of the contract therein recorded, as well as the presence of the contracting parties and the other witnesses at the time it was drawn up; the plaintiff has not adduced any kind of evidence to demonstrate that the said document of sale is f alse and simulated. Therefore, ore, as the same is legal and authentic, it sufficiently establishes the fact and genuineness of the
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contract of sale it sets forth, by virtue whereof the owners of the land transmit to the vendee their ownership and right as owners. It is no bar to this that the document is a private one, because it evidences a perf ected contract which embraces all the conditions required by the Civil Code, and by reason of the considerations hereinbef ore set f orth it is based on positive provisions of law and juridical principles that are now established precedent. Hence, the defendant in his own behalf and for his wife now possesses under title of owner the two parcels of land improperly claimed by the plaintiff Bonifacia Manalo, since he acquired them legally and by the means established by law for transferring and acquiring ownership. For all these reasons, whereby the errors assigned to the judgment appealed from are refuted, said judgment should be affirmed, as we do affirm it, with the costs against the appellant. Arellano, C. J., Johnson and Araullo, JJ., concur. Judgment affirmed. _____________

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Manalo vs. De Mesa., 29 Phil. 495(1915)]

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[No. 17900. June 21, 1922] EUGENIO CAGAOAN, plaintiff and appellant, vs. FELIX CAGAOAN and the REGISTER OF DEEDS OF THE PROVINCE OF PANGASINAN, defendants and appellees.
1.DONATION; MORTGAGE LAW REGISTER; EFFECT OF RECORD.An ordinary donee of land who causes the donation to be f ecorded in the Mortgage Law Register in bad faith or with notice of the rights of an adverse claimant acquires no additional rights against such claimant through the inscription in the registry. 2.ID.; PRIORITY.A parcel of land was donated by a father to his son A, without delivery of actual possession. Afterwards the father donated the same land to his other son B, who immediately took possession thereof. After B had taken possession, A caused his title to be recorded in the Mortgage Law Register, having at that time full notice of the donation made to B. Held: Tiiat the title of B takes priority over that of A.

appears to have held possession of parcels Nos. 1, 2, and 3 described in his deed, at least since the year 1915, he has never had posession of parcel No. 4. Gregorio Cagaoan died on December 16, 1918. This action was brought to have Eugenio Cagaoan declared the owner of the parcel donated to him, to set aside for fraud the donation made in favor of FelixCagaoan and to have the record of the same in the registry of deeds cancelled. The defendant Felix Cagaoan has presented a cross-complaint asking that he be awarded the possession of the land, with damages for its unlawful detention by the plaintiff. The trial court rendered judgment for the defendant ordering that the plaintiff surrender possession of the parcel in question to him and pay the costs. From this judgment the plaintiff appealed. There is no doubt that Gregorio Cagaoan signed both of the deeds of gift by means of his thumb-print and that therefore both of them are authentic, but there are strong indications in the evidence that some form of deception was practised upon him at the time of the execution of the deed in favor of Felix Cagaoan and that he never intended to donate the parcel now in dispute to Felix. In fact, in view of the difficulty of obtaining direct evidence of f raud where the person deceived cannot be produced as a witness, we might, perhaps, be justified in holding that the circumstances shown by the evidence and which remain unexplained by the defendant, constitute sufficient evidence of fraud. But, be this as it may, we think the judgment of the court below must be reversed for another reason. The case seems to us to be analogous to one where the same real property has been sold by the same vendor to two different vendees. In such cases, under article 1473 of the Civil Code, the property goes to the vendee who first records his title in the registry of property. If the sale is not recorded by either vendee, the property goes to the one who first takes possession of it in good faith, and in the absence of both record and possession, to the one who presents the oldest title, .provided there is good faith. The supreme court of Spain has frequently held that inscription in the registry of property gives no preference or priority where the person relying on the inscription had full notice beforehand of the adverse claim. For instance, in sentence of July 9, 1900, the court held that "the provisions of article 34 of the Mortgage Law presuppose 'that the causes of annulment or resolution of the right of the obligor which is not recorded in the property registry were unknown to the obligee at the time of contracting, because if the latter knew those causes, he did not have the character of a third person, and the basis of that legal fiction upon which the guaranty of registry rests was lacking."
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APPEAL from a judgment of the Court of First Instance of Pangasinan. Nepomuceno, J. The facts are stated in the opinion of the court. E. G. Turner for plaintiff-appellant. C. W. Rheberg for defendant-appellee.

OSTRAND, J.: It appears from the evidence that the plaintiff and the defendant Felix Cagaoan are brothers, the sons of Gregorio Cagaoan. On November 3, 1915, Gregorio Cagaoan executed a deed of gift of four parcels of land situated in the municipality of Tayug, Province of Pangasinan, in favor of Felix Cagaoan and on October 26, 1918, he executed a similar deed in favor of Eugenio Cagaoan for a parcel of land which, apparently, is the same as that described as parcel No. 4 in the deed of gift executed in favor of Felix. Both of the deeds of gift are free from formal defects and were duly accepted by the donees. Eugenio Cagaoan went into possession of the parcel donated to him immediately after the execution of the deed of gift in his favor, but on account of variance between the land description given in the deed and that appearing in the registry, he failed to get the donation recorded with the register of deeds. The deed given Felix was duly recorded on June 10, 1919, but though he

In sentence of May 13, 1903, it was held that "there cannot be any doubt but that in accordance with the said law (the Mortgage Law) a party cannot be considered a third person who though he did not take any part in the act or contract, nevertheless had a full knowledge thereof." In sentence of May 13; 1908, it was again held that "although article 1473, in its second paragraph, creates a preference for the title of ownership of realty first registered, this provision must be understood as being based always upon the good faith required in the first paragraph thereof, and it cannot be conceived that the legislator had intended to do away with, or to sanction, bad faith by requiring compliance with a mere formality (the act of registration) which does not always control even when third persons are involved." (See also Obras Pias vs. Devera Ignacio, 17 Phil., 45.) It clearly appears that Felix Cagaoan had full notice of the plaintiff's claim to the land before he had his deed of gift recorded with the register of deeds. Under the decisions above cited he was therefore not a third person within the meaning of article 34 of the. Mortgage Law, and his position was, consequently, in no wise improved by the inscription of his document. The plaintiff Eugenio Cagaoan having first taken possession in good faith must therefore be considered to have the better right to the land in question. The judgment appealed from is therefore reversed, the plaintiff Eugenio Cagaoan is declared the owner of the land in question, the cross-complaint of the defendant Felix Cagaoan is dismissed, and it is ordered that the register of deeds cancel the inscription of the land in question in the name of Felix Cagaoan, who will pay the costs of this action in both instances. So ordered. Araullo, C. J., Malcolm, Avancea, Villamor, Johns, and Romualdez, JJ., concur. Judgment reversed. ____________

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Cagaoan vs. Cagaoan and Register of Deeds of Pangasinan, 43 Phil. 554(1922)]

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G.R. No. 140487. April 2, 2001.* REPUBLIC OF THE PHILIPPINES, petitioner, vs. LEON SILIM and ILDEFONSA MANGUBAT, respondents.
Contracts; Donations; Kinds of; Words and Phrases; Pure or Simple Donations, Remuneratory or Compensatory Donations, Conditional or Modal Donations, and Onerous Donations, Defined and Distinguished.Donations, according to its purpose or cause, may be categorized as: (1) pure or simple; (2) remuneratory or compensatory; (3) conditional or modal; and (4) onerous. A pure or simple donation is one where the underlying cause is plain gratuity. This is donation in its truest form. On the other hand, a remuneratory or compensatory donation is one made for the purpose of rewarding the donee for past services, which services do not amount to a demandable debt. A conditional or modal donation is one where the donation is made in consideration of future services or where the donor imposes certain conditions, limitations or charges upon the donee, the value of which is inferior than that of the donation given. Finally, an onerous donation is that which imposes upon the donee a reciprocal obligation or, to be more precise, this is the kind of donation made for a valuable consideration, the cost of which is equal to or more than the thing donated. Same; Same; Same; Of the different classifications of donations, onerous donations are the most distinct since, unlike the other forms of donations, the validity of and the rights and obligations of the parties involved in an onerous donation is completely governed not by the law on donations but by the law on contracts.Of all the foregoing classifications, donations of the onerous type are the most distinct. This is because, unlike the other forms of donation, the validity of and the rights and obligations of the parties involved in an onerous donation is completely governed not by the law on donations but by the law on contracts. In this regard, Article 733 of the New Civil Code provides: Art. 733. Donations with an onerous cause shall be governed by the rules on contracts, and remuneratory donations by the provisions of the present Title as regards that portion which exceeds the value of the burden imposed. Same; Same; Evidence; Pleadings and Practice; Presumptions; Where the trial court considered the written acceptance of the donation in arriving at its decision, there is the presumption that such exhibit was properly offered and admitted by the court.Private respondents, as shown above, admit that in the offer of exhibits by the defendants in the trial court, an affidavit of acceptance and/or confirmation of the donation, marked as Exhibit 8, was offered in evidence. However, private respondents now question this exhibit because, according to them there is nothing in the record that the exhibits offered by the defendants have been admitted nor such exhibit appear on record. Respondents stance does not persuade. The written acceptance of the donation having been considered by the trial court in arriving at its decision, there is the presumption that this exhibit was properly offered and admitted by the court. Estoppel by Laches; Words and Phrases.Estoppel by laches, or the negligence or omission to assert a right within a reasonable time, warrants a presumption that the party entitled to assert it either has abandoned it or declined to assert it.

Donations; The purpose of the formal requirement for acceptance of a donation is to ensure that such acceptance is duly communicated to the donor.The purpose of the formal requirement for acceptance of a donation is to ensure that such acceptance is duly communicated to the donor. Thus, in Pajarillo vs. Intermediate Appellate Court, the Court held: x x x A strict interpretation of Article 633 can lead to no other conclusion that the annulment of the donation for being defective in form as urged by the petitioners. This would be in keeping with the unmistakable language of the above-quoted provision. However, we find that under the circumstances of the present case, a literal adherence to the requirement of the law might result not in justice to the parties but conversely a distortion of their intentions. It is also a policy of the Court to avoid such an interpretation. The purpose of the formal requirement is to insure that the acceptance of the donation is duly communicated to the donor. In the case at bar, it is not even suggested that Juana was unaware of the acceptance for she in fact confirmed it later and requested that the donated land be not registered during her lifetime by Salud. Given this significant evidence, the Court cannot in conscience declare the donation ineffective because there is no notation in the extrajudicial settlement of the donees acceptance. That would be placing too much stress on mere form over substance. It would also disregard the clear reality of the acceptance of the donation as manifested in the separate instrument dated June 20, 1946, and as later acknowledged by Juan. Same; The actual knowledge by the donor of the construction and existence of the school building pursuant to the condition of the donation fulfills the legal requirement that the acceptance of the donation by the donee be communicated to the donor.In the case at bar, a school building was immediately constructed after the donation was executed. Respondents had knowledge of the existence of the school building put up on the donated lot through the efforts of the Parents-Teachers Association of Barangay Kauswagan. It was when the school building was being dismantled and transferred to the new site and when Vice-Mayor Wilfredo Palma was constructing a house on the donated property that respondents came to know of the Deed of Exchange. The actual knowledge by respondents of the construction and existence of the school building fulfilled the legal requirement that the acceptance of the donation by the donee be communicated to the donor. Same; Contracts; Administrative Law; Contracts or conveyances may be executed for and in behalf of the Government or of any of its branches, subdivisions, agencies, or instrumentalities, whenever demanded by the exigency or exigencies of the service and as long as the same are not prohibited by law.On respondents claim, which was upheld by the Court of Appeals, that the acceptance by BPS District Supervisor Gregorio Buendia of the donation was ineffective because of the absence of a special power of attorney from the Republic of the Philippines, it is undisputed that the donation was made in favor of the Bureau of Public Schools. Such being the case, his acceptance was authorized under Section 47 of the 1987 Administrative Code which states: SEC. 47. Contracts and Conveyances.Contracts or conveyances may be executed for and in behalf of the Government or of any of its branches, subdivisions, agencies, or instrumentalities, whenever demanded by the exigency or exigencies of the service and as long as the same are not prohibited by law.

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Same; Words and Phrases; Exclusively used for school purposes, Construed.What does the phrase exclusively used for school purposes convey? School is simply an institution or place of education. Purpose is defined as that which one sets before him to accomplish or attain; an end, intention, or aim, object, plan, project. Term is synonymous with the ends sought, an object to be attained, an intention, etc. Exclusive means excluding or having power to exclude (as by preventing entrance or debarring from possession, participation, or use); limiting or limited to possession, control or use. Same; The condition for the donationthat the lot be exclusively used for school purposesis not violated when the lot donated is exchanged with another one, where the purpose for the donation remains the same, which is for the establishment of a school.Without the slightest doubt, the condition for the donation was not in any way violated when the lot donated was exchanged with another one. The purpose for the donation remains the same, which is for the establishment of a school. The exclusivity of the purpose was not altered or affected. In fact, the exchange of the lot for a much bigger one was in furtherance and enhancement of the purpose of the donation. The acquisition of the bigger lot paved the way for the release of funds for the construction of Bagong Lipunan school building which could not be accommodated by the limited area of the donated lot.

donation was accepted by Gregorio Buendia, the District Supervisor of BPS, through an Affidavit of Acceptance and/or Confirmation of Donation. Through a fund raising campaign spearheaded by the Parents-Teachers Association of Barangay Kauswagan, a school building was constructed on the donated land. However, the Bagong Lipunan school building that was supposed to be allocated for the donated parcel of land in Barangay Kauswagan could not be released since the government required that it be built upon a one (1) hectare parcel of land. To remedy this predicament, Assistant School Division Superintendent of the Province of Zamboanga del Sur, Sabdani Hadjirol, authorized District Supervisor Buendia to officially transact for the exchange of the one-half (1/2) hectare old school site of Kauswagan Elementary School to a new and suitable location which would fit the specifications of the government. Pursuant to this, District Supervisor Buendia and Teresita Palma entered into a Deed of Exchange whereby the donated lot was exchanged with the bigger lot owned by the latter. Consequently, the Bagong Lipunan school buildings were constructed on the new school site and the school building previously erected on the donated lot was dismantled and transferred to the new location. When respondent Leon Silim saw, to his surprise, that Vice-Mayor Wilfredo Palma was constructing a house on the donated land, he asked the latter why he was building a house on the property he donated to BPS. Vice Mayor Wilfredo Palma replied that he is already the owner of the said property. Respondent Leon Silim endeavored to stop the construction of the house on the donated property but Vice-Mayor Wilfredo Palma advised him to just file a case in court. On February 10, 1982, respondents filed a Complaint for Revocation and Cancellation of Conditional Donation, Annulment of Deed of Exchange and Recovery of Possession and Ownership of Real Property with damages against Vice Mayor Wilfredo Palma, Teresita Palma, District Supervisor Buendia and the BPS before the Regional Trial Court of Pagadian City, Branch 21. In its Decision dated 20 August 1993, the trial court dismissed the complaint for lack of merit.2 The pertinent portion of the decision reads: Thus, it is the considered view of this Court that there was no breach or violation of the condition imposed in the subject Deed of Donation by the donee. The exchange is proper since it is still for the exclusive use for school purposes and for the expansion and improvement of the school facilities within

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court. The Solicitor General for the Republic. Gregorio A. Pizarro for respondents. KAPUNAN, J.: Before the Court is a petition for review under Rule 45 seeking the reversal of the Decision of the Court of Appeals in CA-G.R. No. 43840, entitled Leon Silim, et al. vs. Wilfredo Palma, et al., which declared null and void the donation made by respondents of a parcel of land in favor of the Bureau of Public Schools, Municipality of Malangas, Zamboanga del Sur. The antecedents of this case are as follows: On 17 December 1971, respondents, the Spouses Leon Silim and Ildefonsa Mangubat, donated a 5,600 square meter parcel of land in favor of the Bureau of Public Schools, Municipality of Malangas, Zamboanga del Sur (BPS). In the Deed of Donation, respondents imposed the condition that the said property should be used exclusively and forever for school purposes only.1 This

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the community. The Deed of Exchange is but a continuity of the desired purpose of the donation made by plaintiff Leon Silim. In sum, it may be safely stated that the aforesaid transaction of exchange is a (sic) exception to the law invoked by the plaintiffs (Art. 764, Civil Code). The donee, being the State had the greater reciprocity of interest in the gratuitous and onerous contract of donation. It would be illogical and selfish for the donor to technically preclude the donee from expanding its school site and improvement of its school facilities, a paramount objective of the donee in promoting the general welfare and interests of the people of Barangay Kauswagan. But it is a well-settled rule that if the contract is onerous, such as the Deed of Donation in question, the doubt shall be settled in favor of the greatest reciprocity of interests, which in the instant case, is the donee. x x x WHEREFORE, in view of all the foregoing, judgement is hereby rendered: 1. Dismissing the complaint for lack of merit; 2. Dismissing the counterclaim for the sake of harmony and reconciliation between the parties; 3. With costs against plaintiffs. SO ORDERED.3 Not satisfied with the decision of the trial court, respondents elevated the case to the Court of Appeals. In its Decision dated 22 October 1999, the Court of Appeals reversed the decision of the trial court and declared the donation null and void on the grounds that the donation was not properly accepted and the condition imposed on the donation was violated.4 Hence, the present case where petitioner raises the following issues: I. WHETHER THE COURT OP APPEALS ERRED IN DECLARING THE DONATION NULL AND VOID DUE TO AN INVALID ACCEPTANCE BY THE DONEE. II. WHETHER THE COURT OF APPEALS ERRED IN DECLARING THE DONATION NULL AND VOID DUE TO AN ALLEGED VIOLATION OF A CONDITION IN THE DONATION.5 The Court gives DUE COURSE to the petition.

Petitioner contends that the Court of Appeals erred in declaring the donation null and void for the reason that the acceptance was not allegedly done in accordance with Articles 7456 and 7497 of the New Civil Code. We agree. Donations, according to its purpose or cause, may be categorized as: (1) pure or simple; (2) remuneratory or compensatory; (3) conditional or modal; and (4) onerous. A pure or simple donation is one where the underlying cause is plain gratuity.8 This is donation in its truest form. On the other hand, a remuneratory or compensatory donation is one made for the purpose of rewarding the donee for past services, which services do not amount to a demandable debt.9 A conditional or modal donation is one where the donation is made in consideration of future services or where the donor imposes certain conditions, limitations or charges upon the donee, the value of which is inferior than that of the donation given.10 Finally, an onerous donation is that which imposes upon the donee a reciprocal obligation or, to be more precise, this is the kind of donation made for a valuable consideration, the cost of which is equal to or more than the thing donated.11 Of all the foregoing classifications, donations of the onerous type are the most distinct. This is because, unlike the other forms of donation, the validity of and the rights and obligations of the parties involved in an onerous donation is completely governed not by the law on donations but by the law on contracts. In this regard, Article 733 of the New Civil Code provides: Art. 733. Donations with an onerous cause shall be governed by the rules on contracts, and remuneratory donations by the provisions of the present Title as regards that portion which exceeds the value of the burden imposed. The donation involved in the present controversy is one which is onerous since there is a burden imposed upon the donee to build a school on the donated property.12 The Court of Appeals held that there was no valid acceptance of the donation because: xxx Under the law the donation is void if there is no acceptance. The acceptance may either be in the same document as the deed of donation or in a separate public instrument. If the acceptance is in a separate instrument, the donor
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shall be notified thereof in an authentic form, and his step shall be noted in both instruments. 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. (Abellera vs. Balanag, 37 Phils. 85; Alejandro vs. Geraldez, 78 SCRA 245). If the acceptance does not appear in the same document, it must be made in another. Solemn words are not necessary; it is sufficient if it shows the intention to accept. But in this case, it is necessary that formal notice thereof be given to the donor and the fact that due notice has been given it must be noted in both instruments (that containing the offer to donate and that showing acceptance). Then and only then is the donation perfected. (11 Manresa 155-11. cited in Vol. II. Civil Code of the Philippines by Tolentino.). This Court perused carefully the Deed of Donation marked as exhibit A and 1 to determine whether there was acceptance of the donation. This Court found none. We further examined the record if there is another document which embodies the acceptance, we found one. Although the Court found that in the offer of exhibits of the defendants, a supposed affidavit of acceptance and/or confirmation of the donation, marked as exhibit 8 appears to have been offered. However, there is nothing in the record that the exhibits offered by the defendants have been admitted nor such exhibits appear on record. Assuming that there was such an exhibit, the said supposed acceptance was not noted in the Deed of Donation as required under Art. 749 of the Civil Code. And according to Manresa, supra, a noted civilist, the notation is one of the requirements of perfecting a donation. In other words, without such a notation, the contract is not perfected contract. Since the donation is not perfected, the contract is therefore not valid.13 xxx We hold that there was a valid acceptance of the donation. Sections 745 and 749 of the New Civil Code provide: ART. 745. The donee must accept the donation personally, or through an authorized person with a special power for the purpose, or with a general and sufficient power; otherwise the donation shall be void.

ART. 749. In order that the donation of an immovable may be laid, it must be made in a public document, specifying therein the property donated and the value of the charge which the donee must satisfy. The acceptances 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. Private respondents, as shown above, admit that in the offer of exhibits by the defendants in the trial court, an affidavit of acceptance and/or confirmation of the donation, marked as Exhibit 8, was offered in evidence. However, private respondents now question this exhibit because, according to them there is nothing in the record that the exhibits offered by the defendants have been, admitted nor such exhibit appear on record. Respondents stance does not persuade. The written acceptance of the donation having been considered by the trial court in arriving at its decision, there is the presumption that this exhibit was properly offered and admitted by the court. Moreover, this issue was never raised in the Court of Appeals. Nowhere in their brief did respondents question the validity of the donation on the basis of the alleged defect in the acceptance thereof. If there was such a defect, why did it take respondents more than ten (10) years from the date of the donation to question its validity? In the very least, they are guilty of estoppel.14 Respondents further argue that assuming there was a valid acceptance of the donation, the acceptance was not noted in the Deed of Donation as required in Article 749 of the Civil Code, hence, the donation is void. The purpose of the formal requirement for acceptance of a donation is to ensure that such acceptance is duly communicated to the donor. Thus, in Pajarillo vs. Intermediate Appellate Court,15 the Court held: There is no question that the donation was accepted in a separate public instrument and that it was duly communicated to the donors. Even the petitioners cannot deny this. But what they do contend is that such acceptance was not noted in both instruments, meaning the extrajudicial partition itself and the instrument of acceptance, as required by the Civil Code.
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That is perfectly true. There is nothing in either of the two instruments showing that authentic notice of the acceptance was made by Salud to Juana and Felipe. And while the first instrument contains the statement that the donee does hereby accept this donation and does hereby express her gratitude for the kindness and liberality of the donor, the only signatories thereof were Felipe Balane and Juana Balane de Suterio. That was in fact the reason for the separate instrument of acceptance signed by Salud a month later. A strict interpretation of Article 633 can lead to no other conclusion that the annulment of the donation for being defective in form as urged by the petitioners. This would be in keeping with the unmistakable language of the above-quoted provision. However, we find that under the circumstances of the present case, a literal adherence to the requirement of the law might result not in justice to the parties but conversely a distortion of their intentions. It is also a policy of the Court to avoid such an interpretation. The purpose of the formal requirement is to insure that the acceptance of the donation is duly communicated to the donor. In the case at bar, it is not even suggested that Juana was unaware of the acceptance for she in fact confirmed it later and requested that the donated land be not registered during her lifetime by Salud. Given this significant evidence, the Court cannot in conscience declare the donation ineffective because there is no notation in the extrajudicial settlement of the donees acceptance. That would be placing too much stress on mere form over substance. It would also disregard the clear reality of the acceptance of the donation as manifested in the separate instrument dated June 20, 1946, and as later acknowledged by Juan. In the case at bar, a school building was immediately constructed after the donation was executed. Respondents had knowledge of the existence of the school building put up on the donated lot through the efforts of the ParentsTeachers Association of Barangay Kauswagan. It was when the school building was being dismantled and transferred to the new site and when ViceMayor Wilfredo Palma was constructing a house on the donated property that respondents came to know of the Deed of Exchange. The actual knowledge by respondents of the construction and existence of the school building fulfilled the legal requirement that the acceptance of the donation by the donee be communicated to the donor. On respondents claim, which was upheld by the Court of Appeals, that the acceptance by BPS District Supervisor Gregorio Buendia of the donation was ineffective because of the absence of a special power of attorney from the

Republic of the Philippines, it is undisputed that the donation was made in favor of the Bureau of Public Schools. Such being the case, his acceptance was authorized under Section 47 of the 1987 Administrative Code which states: SEC. 47. Contracts and Conveyances.Contracts or conveyances may be executed for and in behalf of the Government or of any of its branches, subdivisions, agencies, or instrumentalities, whenever demanded by the exigency or exigencies of the service and as long as the same are not prohibited by law. Finally, it is respondents submission that the donee, in exchanging the donated lot with a bigger lot, violated the condition in the donation that the lot be exclusively used for school purposes only. What does the phrase exclusively used for school purposes convey? School is simply an institution or place of education.16 Purpose is defined as that which one sets before him to accomplish or attain; an end, intention, or aim, object, plan, project. Term is synonymous with the ends sought, an object to be attained, an intention, etc.17 Exclusive means excluding or having power to exclude (as by preventing entrance or debarring from possession, participation, or use); limiting or limited to possession, control or use.18 Without the slightest doubt, the condition for the donation was not in any way violated when the lot donated was exchanged with another one. The purpose for the donation remains the same, which is for the establishment of a school. The exclusivity of the purpose was not altered or affected. In fact, the exchange of the lot for a much bigger one was in furtherance and enhancement of the purpose of the donation. The acquisition of the bigger lot paved the way for the release of funds for the construction of Bagong Lipunan school building which could not be accommodated by the limited area of the donated lot. WHEREFORE, the decision of the Court of Appeals is hereby REVERSED and SET ASIDE and the decision of the Regional Trial Court is REINSTATED. SO ORDERED. Davide, Jr. (C.J., Chairman), Pardo and Ynares-Santiago, JJ., concur. Puno, J., On official leave. Judgment reversed and set aside, that of the trial court reinstated.
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Notes.An unregistered deed of donation is not binding on third persons. (Sales vs. Court of Appeals, 211 SCRA 858 [1992]) Only the donor or his heirs have the personality to question the violation of any restriction in the deed of donation. (Garrido vs. Court of Appeals, 236 SCRA 450 [1994]) o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Republic vs. Silim, 356 SCRA 1(2001)]

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G.R. No. 152663. November 18, 2005.* EDGARDO D. DOLAR, petitioner, vs. BARANGAY LUBLUB (now P.D. Monfort North) of the Municipality of Dumangas, herein represented by its Punong Barangay, PEPITO DUA, PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, DUMANGAS WATER DISTRICT, 4th ILOILO MOBILE GROUP, ILOILO PROVINCIAL POLICE, ILOILO REGIONAL TRIAL COURT, BRANCH 68, respondents. Civil Law; Property; Donations; If the corresponding contract of donation
expressly provides for automatic rescission and/or reversion in case of breach of the condition therein, and the donee violates or fails to comply with the condition, the donated property reverts back automatically to the donor; Where the donee denies, the rescission or challenges the propriety thereof, then only the final award of the court can conclusively settle whether the resolution is proper or not.If the corresponding contract of donation expressly provides for automatic rescission and/or reversion in case of breach of the condition therein, and the donee violates or fails to comply with the condition, the donated property reverts back automatically to the donor. Such provision, De Luna teaches, is in the nature of an agreement granting a party the right to rescind a contract in case of breach, without need of going to court and that upon the happening of the resolutory condition or non-compliance with the conditions of the contract, the donation is automatically revoked without need of a judicial declaration to that effect. Where, however, the donee denies, as here, the rescission or challenges the propriety thereof, then only the final award of the court can, to borrow from University of the Philippines vs. De los Angeles, conclusively settle whether the resolution is proper or not. Same; Same; Same; A declaration of petitioners absolute ownership appears legally possible only when the deed of donation is contextually declared peremptorily revoked.As aptly observed by the trial court, the petitory portion of petitioners complaint in Civil Case No. 98033 seeks for a judgment declaring him the absolute owner of the donated property, a plea which necessarily includes the revocation of the deed of donation in question. Verily, a declaration of petitioner absolute ownership appears legally possible only when the deed of donation is contextually declared peremptorily revoked. Same; Same; Same; Quieting of Title; Rightful claim of respondent barangay does not constitute a cloud on the supposed title of petitioner over the same property removable by an action to quiet title.It cannot be overemphasized that respondent barangay traces its claim of ownership over the disputed property to a valid contract of donation which is yet to be effectively revoked. Such rightful claim does not constitute a cloud on the supposed title of petitioner over the same property removable by an action to quiet title. Withal, the remedy afforded in Article 476 of the Civil Code is unavailing until the donation shall have first been revoked in due course under Article 764 or Article 1144 of the Code. Same; Same; Same; Same; The rule on the imprescriptibility of actions to quiet title admits of exceptions.Lest it be overlooked, the rule on the imprescriptibility of actions to quiet title admits of exceptions. The trial court correctly mentioned one, referring to a situation where the

plaintiff in an action to quiet title is not in actual possession of the land. In the case at bench, petitioner is not in possession of the property. For sure, he is even asking in his complaint in Civil Case No. 98-033 for recovery of possession of the donated property. Same; Same; Same; As between the parties to the donation and their assigns, the registration of the deed of donation with the Registry of Deeds is not needed for its validity and efficacy. Petitioners contention that the donation was invalid because it was not registered in the Registry of Property deserves no merit. For, as between the parties to the donation and their assigns, the registration of the deed of donation with the Registry of Deeds is not needed for its validity and efficacy. In Pajarillo vs. Intermediate Appellate Court, the Court emphatically dismissed the notion that registration was necessary to make the donation a binding commitment insofar as the donor and the donee were concerned.

PETITION for review on certiorari of the orders of the Regional Trial Court of Iloilo City, Br. 38.

The facts are stated in the opinion of the Court. Norberto J. Prosecion for petitioner. Cartagena, Sombiro, Erebaren and Gallego for respondent Brgy. Lublub. Rausa-Chan, Mabasa & Associate for PLDT. Rameses M. Padilla for Dumangas-Barotac Nuevo Water District. GARCIA, J.:

Via this petition for review on certiorari under Rule 45 of the Rules of Court, petitioner Edgardo D. Dolar seeks the annulment and setting aside of the Orders dated January 3, 20021 and March 5, 20022 of the Regional Trial Court at Iloilo City, Branch 38, in its consolidated Civil Cases No. 98-033 and 00-140. The facts: Petitioner and Serafin Jaranilla were co-owners of a parcel of land with an area of 4.6 hectares, identified as Lot No. 1, Pcs-06-000744 (Lot No. 1, for brevity), situated in Brgy. Lub-lub, Municipality of Dumangas, Iloilo. Said property forms part of Lots No. 4181 and 4183 of the Dumangas Cadastre.

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On September 16, 1981, petitioner and Jaranilla donated Lot No. 1 to respondent Barangay Lublub, subject to the following conditions: A.) That the area donated shall be for the purpose of con[s]tructing building and/or establishing public plaza, sports complex, public market, health centers and the like for the use of the Barangay of Lublub l which area shall be hereinafter be known as DON VENANCIO DOLAR PLAZA and shall be so designated in a proper landmark; B.) That the construction and development of the area above-described shall be initiated and completed within five (5) years from the execution of this Deed of Donation and should the same be not made or completed then this Deed of Donation shall have no force and effect whatsoever and the ownership of the above-described property will revert back to the DONORS including all or any unfinished improvement the DONEE might have placed or constructed. C.) That . . . should the use of the area be converted to uses other than herein stipulated, then this DEED OF DONATION shall be deemed revoked and the ownership shall revert back to the DONORS .l (Underscoring added)3 Then barangay captain Jose Militar accepted the donation in behalf of Brgy. Lublub. Following the execution of the deed of donation, Brgy. Lub-lub immediately took possession of the donated property, which soon became the site of several government office buildings and recreational facilities. For what in hindsight is a typical case of complacency on the part of a government unit, respondent barangay did not have the donation registered under its name. On April 12, 1989, or almost eight (8) years from contract execution, petitioner was issued Transfer Certificate of Title (TCT) No. T-1298374 by the Registry of Deeds of Iloilo covering the donated area. Sometime in June 1989, petitioner executed another deed5 donating to Brgy. Lublub, represented by its incumbent barangay captain, the very same area he and Serafin Jaranilla had earlier donated to the same donee. The second deed of donation contained exactly the same conditions expressly set forth in the first. Barangay Lublubs peaceful possession of the donated area remained undisturbed until mother Lots No. 4181 and 4183 were included in the published list of tax delinquent properties for disposition. At the auction sale

that followed, petitioner emerged as the highest bidder and was, accordingly, awarded the property. On May 6, 1998, in the Regional Trial Court (RTC) at Iloilo City, petitioner filed against Brgy. Lublub a complaint for Quieting of Title and Recovery of Possession With Damages involving the 4.6-hectare area he had earlier donated. Basically, petitioner claimed that the donation in question had ceased to be effective, the donee barangay having failed to comply with the conditions of the donation. Impleaded as co-defendants of Brgy. Lublub were entities each occupying a portion of the donated property, such as the Philippine Long Distance Company (PLDT), the Dumangas Water District, Branch 86 of RTCIloilo and the Iloilo Provincial Police. Docketed in the trial court as Civil Case No. 98-033, the complaint alleged, inter alia, as follows: 10. That ... defendant [barangay] failed to build or establish within the period therein stipulated, a public plaza, sports complex l and like structures for the use of Barangay Lublub and neither had it designated in a proper landmark that the area donated is known as the Don Venancio Dolar Plaza 11. That l defendant barangay allowed the use of the area donated to be converted to uses other than those provided in the donation documents when it allowed entities like defendants PLDT, Dumangas Water District, PNP Mobile Force, and Branch 68 of the RTC of Iloilo, to construct buildings and occupy portions of the lot in question . . .; 12. That because of the failure of defendant barangay to declare the lot in question in its name for taxation purposes, the same was sold at public auction for non-payment of real property taxes . . . . 13. That in the light of the terms and conditions in the Deeds of Donation and actuations of the defendant barangay in relation to the property donated; the donation . . . has automatically lost its force and effect whatsoever and the ownership of the property has reverted to the plaintiff or the donation has been deemed automatically revoked . . .; 14. That the act of defendant barangay in allowing the construction of buildings by public and private entities on the donated property and holding offices therein has cast a doubt or cloud on the title of the plaintiff over the property in litigation . . . . 15. That the plaintiff, as exclusive, absolute, and registered owner of the property in question is entitled to the possession of the same.6
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In its Answer With Counterclaim,7 Brgy. Lublub, after traversing the material allegations of the complaint, alleged the following as affirmative defenses: 3.2. The said donation was made and accepted on the same public instrument duly notarized by notary public Nicolas P. Sonalan x x x 3.3. The acceptance of donation was made by then Barangay Captain of Barangay Lublub Jose Militar with authority from the barangay council; 3.4. After the said deed of donation was executed in compliance with the conditions set forth in the deed of donation and within five (5) years from its execution thereof several structures/buildings were constructed thereon for the use and benefit of Brgy. Lublub, Dumangas, Iloilo. l.; 3.5. Later on . . . (PLDT) was invited to construct an office building on subject property for the benefit and use of the residents of Barangay Lublub, Dumangas, Iloilo; 3.6. Likewise for the use and benefit of the barangay residents an office building of Dumangas Water District was constructed . . .; 3.7. Likewise l a PNP Mobile Force was put up on the said place and a PNP office, in line with this, was constructed . . .; 3.8. Likewise because of the desire of the barangay residents to make the subject property a plaza and a center place for their needs, Branch 68 of the RTC of Iloilo was established thereon. All these for the use and benefit of Barangay Lublub, now P.D. Monfort North, . . . . And, as grounds for its motion to dismiss embodied in the same answer, Brgy. Lublub raised the matter of lack of cause of action or prescription of the cause of action, if any, thus: 4.3 Plaintiff proceeded with his complaint . . . without first seeking the revocation of the deed of donation in a proper court . . . as provided for under Article 764 of the New Civil Code; 4.4 What plaintiff did was to unilaterally revoke the deed of donation l and proceeded with the filing of this case with the assumption that the deed of donation was already validly revoked. x x x. xxx xxx xxx

4.6 It must be noted that the deed of donation was executed in September 16, 1981. Even if the donee . . . failed to comply with the conditions of the deed within 5 years or until 1986, plaintiff should have sought revocation of the donation within 4 years from 1986 or until 1990 only. x x x x x x; 4.7 The deed of donation having been executed in 1981 yet, the donee . . . took possession of the same in concept of an owner, with just title, adverse, open, peaceful and continuously up to the present. Hence, even if the donation is void or conditions were not complied with, the property is now owned by the donee, l as it can be considered that it has been acquired by prescription. On top of its Answer with Counterclaim, Brgy. Lublub, this time renamed and known as Brgy. P.D. Monfort North, filed with the same branch of the court a complaint for Cancellation of Title, Reconveyance/Issuance of Title, Declaration of Nullity of Notice of Delinquency in the Payment of Real Property Tax.8 Named as defendants were petitioner and his wife, certain municipal officials of Dumangas and the Provincial Treasurer and Register of Deeds of Iloilo. In its complaint, docketed as Civil Case No. 00-140, the plaintiff barangay averred having conducted an investigation which led to the discovery that the spouses Dolar, colluding with some local officials, engineered the whole levy process which culminated in the auction sale of what is now a very valuable donated property. To Brgy. Lublubs complaint, petitioner interposed a Motion to Dismiss9 on grounds of forum shopping and litis pendentia, obviously on account of the pendency of Civil Case No. 98-033. Eventually, the two (2) cases, Civil Cases No. 98-033 and 00-140, wherein the respective principal defendants have each interposed a motion to dismiss, were consolidated. In the herein assailed Order dated January 3, 2002,10 the trial court, on the finding that petitioners action was already barred by extinctive prescription under Article 764,11 in relation to Articles 73312 and 1144 (1)13 of the Civil Code, granted the Barangays motion to dismiss in Civil Case No. 98-033 and denied petitioners similar motion in Civil Case No. 00-140, to wit: WHEREFORE, in view of all the foregoing, this Court resolved, as it hereby resolves, the pending incidents in these two cases, to wit: 1. Defendant Barangay Lublubs built-in Motion to Dismiss/Affirmative Defenses raised in its Answer in Civil Case No. 98-033, being impressed with
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merit, is granted; consequently, said Civil Case No. 98-033 l is hereby ordered dismissed; 2. Defendants-spouses Edgardo D. Dolars and Corazon Yaps Motion to Dismiss in Civil Case No. 00-140, being without merit, the same is herby denied. With this disposition, this Court shall proceed hearing Civil Case No. 00-140 entitled Barangay P.D. Monfort North, Dumangas Iloilo, etc. vs. Municipality of Dumangas, Iloilo, et al. SO ORDERED. Explains the trial court in its impugned Order of January 3, 2002: Stress should be made that the Deed of Donation executed by Edgardo D. Dolar (plaintiff in Civil Case No. 98-033) in favor of Barangay Lublub xxx clearly imposes the following conditions: xxx xxx xxx

Therefrom, petitioner directly comes to the Court on pure questions of law, submitting issues which may be formulated in the following wise: 1. Whether or not his action is one for revocation of donation instead of for quieting of title; whether or not the action for quieting has prescribed. 2. Whether or not the deed of donation in question is (a) valid for defective acceptance and/or (b) no longer effective by reason of the automatic reversion clause therein. 3. Whether or not respondent barangay had acquired the property in question by acquisitive prescription. The petition lacks merit. It bears stressing that petitioner, at the outset, predicated his action to quiet title on the ground of ineffectiveness of the donation, albeit he would later add the matter of its invalidity. Indeed, the make or break issue to be resolved and to which all others must yield turns on the validity and/or continued efficacy of the subject donation. Valid and effective, the donation virtually forecloses any claim which petitioner may have over the donated property against the donee and other occupants thereof, and his action to quiet title is virtually doomed to fail. Invalid and ineffective, however, the arena is left open for petitioner to recover ownership and possession of the donated property and have the cloud on his title thereto, if any there be, removed. According to petitioner, the subject donation is, by force of Article 74515 of the Civil Code, void, the accepting barangay captain being without sufficient authority for the purpose. On this point, petitioner cites Section 88 of Batas Pambansa Blg. 33716the law then in forceand Sections 91 and 389 the Local Government Code of 1991.17 In gist, these provisions empower the punong barangay to enter into contracts for the barangay upon authorization of the Sangguniang Barangay, or, in the alternative, the Sanggunian may authorize the barangay head to enter into contracts for the barangay. Excepting, however, respondent barangay alleged that then barangay captain Jose Militar accepted the donation in the same Deed of Donation per authority granted by the barangay council.18 The question then of whether Militar was clothed with authority to accept the donation for respondent barangay stands as disputed. Since the present recourse is interposed on pure questions of law, we need not resolve the
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Based on the foregoing conditions, . . . should the barangay donee fails (sic) to comply therewith, the donor had the right to bring action to revoke the donation (Art. 764, supra) within a period of ten (10) years after the 5-year period of noncompliance with the conditions in the deed of donation (Art. 733, supra, in relation to Art. 1144(1), supra). Since the deed of donation was executed on September 16, 1981, the 5-year period lapsed in 1986; consequently, the action to revoke should have been brought not later than 1996, however, it appears that Civil Case No. 98-033 was filed by plaintiff Dolar on May 6, 1998. Obviously, since the petitory portion of his complaint in Civil Case No. 98-033 seeks for quieting of his title over the subject property and seeks judgment declaring him to be the absolute owner thereof, plaintiff Dolar also seeks the revocation of the subject deed of donation. x x x. x x x. Accordingly, in the light of the foregoing jurisprudence, the action to revoke donation was to have been filed within ten (10) years from the time the action accrued, i.e., from the time of the noncompliance of the conditions l. In yet another Order dated March 5, 2002,14 same court denied petitioners motion for reconsideration.

factual issue regarding Militars authority, or lack of it, to accept the donation in behalf of respondent barangay. It should be pointed out, nevertheless, that petitioner is hardly the proper party to challenge the validity of the donation which is presumed to be validon the ground he presently invokes. The honor to question Militars ultra vires act, if this be the case, belongs to the Sanggunian of Barangay P.D. Monfort North. And more to the point, even assuming ex gratia argumenti petitioners legal standing to raise such a question, the final answer would still lean towards the validity of the donation. For, from the allegations of all the parties, it would appear that, through the years, the Sanggunian of Lublub as well as all the succeeding Sangunians of P.D. Monfort North neither repudiated the acceptance of the donation by Militar nor acted in a manner reflective of their opposition to the donation. On the contrary, the respondent barangay has been enjoying the material and publicservice benefits arising from the infrastructures projects put up on the subject property. In a very real sense, therefore, the Sangguniang Barangay and the good people of P.D. Monfort North, by availing themselves of such benefits for more than two decades now, effectively ratified Militars acceptance of the donation. This brings us to the question of the efficaciousness of the donation. Petitioner asserts that the 1981 and 1989 deeds of donation, pursuant to the uniform automatic rescission/ reversion clauses therein, ceased to be effective upon respondents failure to meet the conditions for which it was charged to fulfill. To petitioner, the automatic rescission/reversion clause works, in appropriate instances, to revoke the donation and revert the ownership of the donated property to the donor without the need of judicial intervention. In support of this argument, petitioner cites De Luna vs. Abrigo19 wherein this Court put to rest any lingering doubt as to the validity of a stipulation providing for the automatic reversion of the donated property to the donor upon non-compliance by the donee of the conditions or charges incumbent upon him. Cited likewise is the subsequent complementary holding in Roman Catholic Archbishop of Manila vs. Court of Appeals,20 thus: Although it is true that under Article 764 of the Civil Code an action for the revocation of a donation must be brought within four (4) years from the noncompliance of the conditions of the donation, the same is not applicable in the case at bar. The deed of donation involved herein expressly provides for automatic reversion of the property donated in case of violation of the condition therein, hence a judicial declaration revoking the same is not necessary.

De Luna and Archbishop of Manila are, to be sure, apropos. However, petitioners argument to support his thesis on the automatic rescission of the donation in question and the consequent reversion of the property to the donor is an incomplete presentation of the Courts pronouncements on the point. We shall explain. If the corresponding contract of donation expressly provides for automatic rescission and/or reversion in case of breach of the condition therein, and the donee violates or fails to comply with the condition, the donated property reverts back automatically to the donor. Such provision, De Luna teaches, is in the nature of an agreement granting a party the right to rescind a contract in case of breach, without need of going to court and that upon the happening of the resolutory condition or non-compliance with the conditions of the contract, the donation is automatically revoked without need of a judicial declaration to that effect. Where, however, the donee denies, as here, the rescission or challenges the propriety thereof, then only the final award of the court can, to borrow from University of the Philippines vs. De los Angeles,21 conclusively settle whether the resolution is proper or not. Or, in the language of Catholic Archbishop of Manila:22 The rationale for the foregoing is that in contracts providing for automatic revocation, judicial intervention is necessary not for purposes of obtaining a judicial declaration rescinding a contract already deemed rescinded by virtue of an agreement providing for rescission even without judicial intervention, but in order to determine whether or not the rescission was proper. When a deed of donation, . . . expressly provides for automatic revocation and reversion of the property donated, the rules on contract and the general rules on prescription should apply, and not Article 764 of the Civil Code. Since Article 1306 of said Code authorizes the parties to a contract to establish such stipulations, . . . not contrary to law, . . . public order or public policy, we are of the opinion that, at the very least, that stipulation of the parties providing for automatic revocation of the deed of donation, without prior judicial action for that purpose, is valid subject to the determination of the propriety of the rescission sought. Where such propriety is sustained, the decision of the court will be merely declaratory of the revocation, but it is not in itself the revocatory act. In the case at bench, it cannot be gainsaid that respondent barangay denied or challenged the purported revocation of the donation. In fact, the denial or challenge is embodied in respondent barangays complaint in Civil Case No.
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00-140 and in its Answer cum motion to dismiss in Civil Case 98-033, which similarly prayed for, among other things, the cancellation of petitioners title on the subject property. The foregoing discussion veritably disposes of the second formulated issue. Now back to the first issue. It is petitioners posture that his action in Civil Case No. 98-033 is one for quieting of title under Article 47623 of the Civil Code, not, as erroneously regarded by the trial court, an action to revoke donation under Article 764 of the Code which, insofar as pertinent, reads as follows: Article 764. The donation shall be revoked at the instance of the donor, when the donee fails to comply with any of the conditions which the former imposed upon the latter. xxx xxx xxx.

yet to be effectively revoked. Such rightful claim does not constitute a cloud on the supposed title of petitioner over the same property removable by an action to quiet title. Withal, the remedy afforded in Article 476 of the Civil Code is unavailing until the donation shall have first been revoked in due course under Article 764 or Article 1144 of the Code. Lest it be overlooked, the rule on the imprescriptibility of actions to quiet title admits of exceptions. The trial court correctly mentioned one, referring to a situation where the plaintiff in an action to quiet title is not in actual possession of the land.25 In the case at bench, petitioner is not in possession of the property. For sure, he is even asking in his complaint in Civil Case No. 98-033 for recovery of possession of the donated property. Given the above disquisition, petitioner can hardly fault the trial court for its holding that petitioners action to revoke is time-barred. As may be recalled, respondent barangay had, under the terms of the deed of donation, five (5) years from the execution of the conveying deed in September 1981, or up September 1986, within which to introduce and complete the contemplated development of the donated area. Following Article 764 of the Civil Code, petitioner had four (4) years from September 1986, or up to September 1990, within which to seek the revocation of the subject donation on the ground of breach of contract. The Court can grant that the prescription of actions for the revocation of onerous donations, as here, are governed by the general rules on prescription,26 which, in context, is Article 1144 of the Civil Code providing that actions upon a written contract shall be brought within ten (10) years from accrual of the right of action. Ten years from September 1986the date when petitioners right to revoke accruedwould be September 1996. Here, however, what partakes as petitioners suit to revoke was filed only in May 1998. In all, petitioners right of action to revoke or cancel the donation had indeed prescribed, regardless of whether the applicable legal provision is Article 764 or the favorable Article 1144 of the Civil Code. It should be stated in this regard, however, that respondent barangay had disputed the existence of the grounds upon which petitioner anchored his right to revoke, claiming it had already complied with the construction and development conditions of the donation. From the records, it would appear that respondent barangays boast of compliance is not an empty one. As we see it, the establishment on the donated area of telephone service, a water service, a police mobile force, and
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This action shall prescribe after four years from the noncompliance with the condition, may be transmitted to the heirs of the donor, and may be exercised against the donees heirs. (Italics added) Petitioners posture does not persuade. As aptly observed by the trial court, the petitory portion of petitioners complaint in Civil Case No. 98-033 seeks for a judgment declaring him the absolute owner of the donated property, a plea which necessarily includes the revocation of the deed of donation in question. Verily, a declaration of petitioner absolute ownership appears legally possible only when the deed of donation is contextually declared peremptorily revoked. Owing to the prescriptive component of Article 764 of the Civil Code, petitioners dread of the invocation and application of said provision is at once apparent as it is understandable. For, an action to revoke thereunder prescribes after four (4) years from non-compliance by the donee with any of the conditions set forth in the deed of donation. A little less than seventeen (17) years separate September 16, 1981, when the Deed of Donation was executed, from May 6, 1998, when petitioner filed his complaint in Civil Case No. 98-033. Seventeen (17) years is, in turn, too far removed, as shall be illustrated shortly, from the 4-year prescriptive period referred to in Article 764 or even from the 10-year period under Article 1144.24 It cannot be overemphasized that respondent barangay traces its claim of ownership over the disputed property to a valid contract of donation which is

a courtroom, all for the benefits of the barangay residents, substantially satisfies the terms and conditions of the subject donation. The concrete paving of roads and the construction of government offices, sports complex for public enjoyment and like infrastructures which, per respondent barangays estimate, cost not less than P25 Million,27 add persuasive dimension to the conclusion just made. Petitioners long silence vis--vis the kind of development structures that Barangay Lublub had decided to put up or allowed to be established on the subject area cannot but be taken as an indicia of his satisfaction with respondent barangays choice of public service projects. The prolonged silence was broken only after the provincial and municipal governments advertised, then sold the property in a public auction to satisfy questionable tax liabilities. Much is made by petitioner about his execution of the 1989 deed of donation, which, to him, should be utilized as a point of reference in determining the prescriptive period28 defined under either Article 764 or 1144 of the Civil Code. He states: x x x It has not been explained up to this juncture why the Deed of Donation of June 1989 l is not being mentioned or considered when it is alleged in the complaint. As will be noted in the Deed of Donation dated 1981 the property was jointly owned by plaintiff Dolar and Jarantilla, with separate title; in Annex B, the Donation of 1989 only plaintiff Dolar signed the same as the only registered owne[r] of the lot donated; x x x. As previously adverted to, the prescriptive period for violation or contravention of the terms and conditions of Annex B should be reckoned from 1994 and therefore this action filed in 1998 is within the period. With the view we take of the case, the execution of the 1989 deed of donation is really of little moment in terms of furthering petitioners cause. For, at that time, the property subject of this recourse was no longer his to donate, having earlier relinquished his ownership thereon. Nemo dat qui non habetNo one can give what he has not.29 Stated a bit differently, respondent barangays right over the donated area proceeds from the 1981 donation. The legal effects, therefore, of its action or inaction respecting the donated property should be assayed on the basis of the 1981 donation. The last issue raised pivots on whether or not respondent barangay can acquire the subject property by acquisitive prescription, the petitioners thesis being that prescription does not run against registered land.30

Petitioners point is theoretically correct and may perhaps tip the balance in his favor, but for the fact that the respondent barangay anchors its title and right over the donated lot, first and foremost, by virtue of the deed of donation. Admittedly, standing alone, adverse, continuous and long possession of a piece of real property cannot defeat the title of a registered owner. But, then, this postulate presupposes a Torrens title lawfully acquired and issued. As may be recalled, however, respondent barangay instituted Civil Case No. 00-140, supra, for Cancellation of Title, Reconveyance/Issuance of Title precisely because of the dubious manner by which petitioner allegedly acquired his TCT No. T-129837 over a lot he admits donating. Parenthetically, petitioners contention that the donation was invalid because it was not registered in the Registry of Property deserves no merit. For, as between the parties to the donation and their assigns, the registration of the deed of donation with the Registry of Deeds is not needed for its validity and efficacy. In Pajarillo vs. Intermediate Appellate Court,31 the Court emphatically dismissed the notion that registration was necessary to make the donation a binding commitment insofar as the donor and the donee were concerned. As a final consideration, let it be made clear that this opinion merely resolves the question of the correctness of the dismissal by the trial court of Civil Case No. 98-033 on the basis of facts attendant thereto in the light of applicable laws and jurisprudence. It is not meant to prejudge the outcome of Civil Case No. 00-140 which, while related to Civil Case No. 98-033, tenders different issues, foremost of which is the validity of a Torrens title issued over a piece of land to one who had previously donated the same. WHEREFORE, the petition is DENIED for lack of merit. Costs against petitioner. SO ORDERED. Panganiban (Chairman), Corona and Carpio-Morales, JJ., concur. Sandoval-Gutierrez, J., On Official Leave. Petition denied. Note.As between the parties to a donation of an immovable property, all that is required is for said donation to be contained in a public document. (Gonzales vs. Court of Appeals, 358 SCRA 598 [2001])
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o0o

Copyright 2012 Central Book Supply, Inc. All rights reserved. [Dolar vs. Barangay Lublub (Now P.D. Monfort North) Municipality of Dumangas, 475 SCRA 458(2005)]

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