Manila

EN BANC
G.R. No. 35223 September 17, 1931
THE BACHRACH MOTOR CO., INC., plaintiff-appellee,
vs.
TALISAY-SILAY MILLING CO., ET AL., defendants-appellees.
THE PHILIPPINE NATIONAL BANK, intervenor-appellant.
Roman J. Lacson for intervenor-appellant.
Mariano Ezpeleta for plaintiff-appellee.
Nolan and Hernaez for defendants-appellees Talisay-Silay Milling Co. and Cesar Ledesma.
ROMUALDEZ, J .:
This proceeding originated in a complaint filed by the Bachrach Motor Co., Inc., against the Talisay-
Silay Milling Co., Inc., for the delivery of the amount P13,850 or promissory notes or other
instruments or credit for that sum payable on June 30, 1930, as bonus in favor of Mariano Lacson
Ledesma; the complaint further prays that the sugar central be ordered to render an accounting of
the amounts it owes Mariano Lacson Ledesma by way of bonus, dividends, or otherwise, and to pay
the plaintiff a sum sufficient to satisfy the judgment mentioned in the complaint, and that the sale
made by said Mariano Lacson Ledesma be declared null and void.
The Philippine National Bank filed a third party claim alleging a preferential right to receive any
amount which Mariano Lacson Ledesma might be entitled to from the Talisay-Silay Milling Co. as
bonus, because that would be civil fruits of the land mortgaged to said bank by said debtor for the
benefit of the central referred to, and by virtue of a deed of assignment, and praying that said central
be ordered to delivered directly to the intervening bank said sum on account of the latter's credit
against the aforesaid Mariano Lacson Ledesma.
The corporation Talisay-Silay Milling Co., Inc., answered the complaint stating that of Mariano
Lacson Ledesma's credit, P7,500 belonged to Cesar Ledesma because he had purchased it, and
praying that it be absolved from the complaint and that the proper party be named so that the
remainder might be delivered.
Cesar Ledesma, in turn, claiming to be the owner by purchase in good faith an for a reconsideration
of the P7,500 which is a part of the credit referred to above, answered praying that he be absolved
from the complaint.
The plaintiff Bachrach Motor Co., Inc., answered the third party claim alleging that its credit against
Mariano Lacson Ledesma was prior and preferential to that of the intervening bank, and praying that
the latter's complaint be dismissed.
At the trial all the parties agreed to recognize and respect the sale made in favor of Cesar Ledesma
of the P7,500 part of the credit in question, for which reason the trial court dismissed the complaint
and cross-complaint against Cesar Ledesma authorizing the defendant central to deliver to him the
aforementioned sum of P7,500. And upon conclusion of the hearing, the court held that the
Bachrach Motor Co., Inc., had a preferred right to receive the amount of P11,076.02 which was
Mariano Lacson Ledesma's bonus, and it ordered the defendant central to deliver said sum to the
plaintiff.
The Philippine National Bank appeals, assigning the following alleged errors as committed by the
trial court:
1. In holding that the bonus which the Talisay-Silay Milling Co., Inc., bound itself to pay the
planters who had mortgaged their land to the Philippine National Bank to secure the payment
of the debt of said central to said bank is not civil fruits of said land.
2. In not holding that said bonus became subject to the mortgage executed by the defendant
Mariano Lacson Ledesma to the Philippine National Bank to secure the payment of his
personal debt to said bank when it fell due.
3. In holding that the assignment (Exhibit 9, P.N.B.) of said bonus made on March 7, 1930,
by Mariano Lacson Ledesma to the Philippine National Bank to be applied to the payment of
his debt to said Philippine National Bank is fraudulent.
4. In holding that the Bachrach Motor Co. Inc., in civil case No. 31597 of the Court of First
Instance of Manila levied a valid attachment upon the bonus in question.
5. In admitting and considering the supplementary complaint filed by the Bachrach Motor
Co., Inc., alleging as a cause of action the attachment of the bonus in question which said
Bachrach Motor Co., Inc., in civil case No. 31821 of the Court of First Instance of Manila
levied after the filing of the original complaint in this case, and after Mariano Lacson
Ledesma in this case had been declared in default.
6. In holding that the Bachrach Motor Co., Inc., has a preferential right to receive from the
Talisay-Silay Milling Co., Inc., the amount of P11,076.02 which is in the possession of said
corporation as the bonus to be paid to Mariano Lacson Ledesma, and in ordering the
Talisay-Silay Milling Co., Inc., to deliver said amount to the Bachrach Motor Co., Inc.
7. In not holding that the Philippine National Bank has a preferential right to receive from the
Talisay-Silay Milling Co., Inc., the amount of P11,076.02 held by said corporation as Mariano
Lacson Ledesma's bonus, and in not ordering said Talisay-Silay Milling Co., Inc., to deliver
said amount to the Philippine National Bank.
8. In not holding that the amended complaint and the supplementary complaint of the
Bachrach Motor Co., Inc., do not state facts sufficient to constitute a cause of action in favor
of the Bachrach Motor Co., Inc., and against the Talisay-Silay Milling Co., Inc., or against the
Philippine National Bank.
The appellant bank bases its preferential right upon the contention that the bonus in question is civil
fruits of the lands which the owners had mortgaged for the benefit of the central giving the bonus,
and that, as civil fruits of said land, said bonus was assigned by Mariano Lacson Ledesma on March
7, 1930, by virtue of the document Exhibit 9 of said intervening institution, which admitted in its brief
that "if the bonus in question is not civil fruits or rent which became subject to the mortgage in favor
of the Philippine National Bank when Mariano Lacson Ledesma's personal obligation fell due, the
assignment of March 7, 1930 (Exhibit 9, P.N.B.), is null and void, not because it is fraudulent, for
there was no intent of fraud in executing the deed, but that the cause or consideration of the
assignment was erroneous, for it was based upon the proposition that the bonus was civil fruits of
the land mortgaged to the Philippine National Bank." (P. 31.)
The fundamental question, then, submitted to our consideration is whether or not the bonus in
question is civil fruits.
This is how the bonus came to be granted: On December 22, 1923, the Talisay-Silay Milling Co.,
Inc., was indebted to the Philippine National Bank. To secure the payment of its debt, it succeeded
in inducing its planters, among whom was Mariano Lacson Ledesma, to mortgage their land to the
creditor bank. And in order to compensate those planters for the risk they were running with their
property under the mortgage, the aforesaid central, by a resolution passed on that same date, i.e.,
December 22, 1923, undertook to credit the owners of the plantation thus mortgaged every year with
a sum equal to two per centum of the debt secured according to yearly balance, the payment of the
bonus being made at once, or in part from time to time, as soon as the central became free of its
obligations to the aforesaid bank, and of those contracted by virtue of the contract of supervision,
and had funds which might be so used, or as soon as it obtained from said bank authority to make
such payment. (Exhibits 5, 6; P.N.B.)
Article 355 of the Civil Code considers three things as civil fruits: First, the rents of buildings; second,
the proceeds from leases of lands; and, third, the income from perpetual or life annuities, or other
similar sources of revenue. It may be noted that according to the context of the law, the phrase "u
otras analogas" refers only to rent or income, for the adjectives "otras" and "analogas" agree with the
noun "rentas," as do also the other adjectives"perpetuas" and "vitalicias." That is why we say that by
"civil fruits" the Civil Code understands one of three and only three things, to wit: the rent of a
building, the rent of land, and certain kinds of income.
As the bonus in question is not rent of a building or of land, the only meaning of "civil fruits" left to be
examined is that of "income."
Assuming that in broad juridical sense of the word "income" it might be said that the bonus in
question is "income" under article 355 of the Civil Code, it is obvious to inquire whether it is derived
from the land mortgaged by Mariano Lacson Ledesma to the appellant bank for the benefit of the
central; for it is not obtained from that land but from something else, it is not civil fruits of that land,
and the bank's contention is untenable.
It is to be noted that the said bonus bears no immediate, but only a remote accidental relation to the
land mentioned, having been granted as compensation for the risk of having subjected one's land to
a lien in favor of the bank, for the benefit of the entity granting said bonus. If this bonus be income or
civil fruits of anything, it is income arising from said risk, or, if one chooses, from Mariano Lacson
Ledesma's generosity in facing the danger for the protection of the central, but certainly it is not civil
fruits or income from the mortgaged property, which, as far as this case is concerned, has nothing to
do with it. Hence, the amount of the bonus, according to the resolution of the central granting it, is
not based upon the value, importance or any other circumstance of the mortgaged property, but
upon the total value of the debt thereby secured, according to the annual balance, which is
something quite distinct from and independent of the property referred to.
Finding no merit in this appeal, the judgment appealed from is affirmed, without express finding as to
costs. So ordered.
Johnson, Street, Malcolm, Villamor, Ostrand, Villa-Real, and Imperial, JJ., concur.


EN BANC
[G.R. No. 133879. November 21, 2001]
EQUATORIAL REALTY DEVELOPMENT, Inc., petitioner, vs. MAYFAIR
THEATER, Inc., respondent.
D E C I S I O N
PANGANIBAN, J .:
General propositions do not decide specific cases. Rather, laws are interpreted in the
context of the peculiar factual situation of each proceeding. Each case has its own flesh and
blood and cannot be ruled upon on the basis of isolated clinical classroom principles.
While we agree with the general proposition that a contract of sale is valid until rescinded, it
is equally true that ownership of the thing sold is not acquired by mere agreement, but by
tradition or delivery. The peculiar facts of the present controversy as found by this Court in an
earlier relevant Decision show that delivery was not actually effected; in fact, it was prevented
by a legally effective impediment. Not having been the owner, petitioner cannot be entitled to
the civil fruits of ownership like rentals of the thing sold. Furthermore, petitioners bad faith, as
again demonstrated by the specific factual milieu of said Decision, bars the grant of such
benefits. Otherwise, bad faith would be rewarded instead of punished.
The Case
Filed before this Court is a Petition for Review
[1]
under Rule 45 of the Rules of Court,
challenging the March 11, 1998 Order
[2]
of the Regional Trial Court of Manila (RTC), Branch 8,
in Civil Case No. 97-85141. The dispositive portion of the assailed Order reads as follows:
WHEREFORE, the motion to dismiss filed by defendant Mayfair is hereby
GRANTED, and the complaint filed by plaintiff Equatorial is hereby DISMISSED.
[3]

Also questioned is the May 29, 1998 RTC Order
[4]
denying petitioners Motion for
Reconsideration.
The Facts
The main factual antecedents of the present Petition are matters of record, because it arose
out of an earlier case decided by this Court on November 21, 1996, entitled Equatorial Realty
Development, Inc. v. Mayfair Theater, Inc.
[5]
(henceforth referred to as the mother case),
docketed as GR No. 106063.
Carmelo & Bauermann, Inc. (Carmelo) used to own a parcel of land, together with two 2-
storey buildings constructed thereon, located at Claro M. Recto Avenue, Manila, and covered by
TCT No. 18529 issued in its name by the Register of Deeds of Manila.
On June 1, 1967, Carmelo entered into a Contract of Lease with Mayfair Theater Inc.
(Mayfair) for a period of 20 years. The lease covered a portion of the second floor and
mezzanine of a two-storey building with about 1,610 square meters of floor area, which
respondent used as a movie house known as Maxim Theater.
Two years later, on March 31, 1969, Mayfair entered into a second Contract of Lease with
Carmelo for the lease of another portion of the latters property -- namely, a part of the second
floor of the two-storey building, with a floor area of about 1,064 square meters; and two store
spaces on the ground floor and the mezzanine, with a combined floor area of about 300 square
meters. In that space, Mayfair put up another movie house known as Miramar Theater. The
Contract of Lease was likewise for a period of 20 years.
Both leases contained a provision granting Mayfair a right of first refusal to purchase the
subject properties. However, on July 30, 1978 - within the 20-year-lease term -- the subject
properties were sold by Carmelo to Equatorial Realty Development, Inc. (Equatorial) for the
total sum of P11,300,000, without their first being offered to Mayfair.
As a result of the sale of the subject properties to Equatorial, Mayfair filed a Complaint
before the Regional Trial Court of Manila (Branch 7) for (a) the annulment of the Deed of
Absolute Sale between Carmelo and Equatorial, (b) specific performance, and (c)
damages. After trial on the merits, the lower court rendered a Decision in favor of Carmelo and
Equatorial. This case, entitled Mayfair Theater, Inc. v. Carmelo and Bauermann, Inc., et al.,
was docketed as Civil Case No. 118019.
On appeal (docketed as CA-GR CV No. 32918), the Court of Appeals (CA) completely
reversed and set aside the judgment of the lower court.
The controversy reached this Court via GR No. 106063. In this mother case, it denied the
Petition for Review in this wise:
WHEREFORE, the petition for review of the decision of the Court of Appeals, dated
June 23, 1992, in CA-G.R. CV No. 32918, is HEREBY DENIED. The Deed of
Absolute Sale between petitioners Equatorial Realty Development, Inc. and Carmelo
& Bauermann, Inc. is hereby deemed rescinded; Carmelo & Bauermann is ordered to
return to petitioner Equatorial Realty Development the purchase price. The latter is
directed to execute the deeds and documents necessary to return ownership to
Carmelo & Bauermann of the disputed lots. Carmelo & Bauermann is ordered to
allow Mayfair Theater, Inc. to buy the aforesaid lots for P11,300,000.00.
[6]

The foregoing Decision of this Court became final and executory on March 17, 1997. On
April 25, 1997, Mayfair filed a Motion for Execution, which the trial court granted.
However, Carmelo could no longer be located. Thus, following the order of execution of
the trial court, Mayfair deposited with the clerk of court a quo its payment to Carmelo in the sum
of P11,300,000 less P847,000 as withholding tax. The lower court issued a Deed of
Reconveyance in favor of Carmelo and a Deed of Sale in favor of Mayfair. On the basis of these
documents, the Registry of Deeds of Manila cancelled Equatorials titles and issued new
Certificates of Title
[7]
in the name of Mayfair.
Ruling on Equatorials Petition for Certiorari and Prohibition contesting the foregoing
manner of execution, the CA in its Resolution of November 20, 1998, explained that Mayfair had
no right to deduct the P847,000 as withholding tax. Since Carmelo could no longer be located,
the appellate court ordered Mayfair to deposit the said sum with the Office of the Clerk of Court,
Manila, to complete the full amount of P11,300,000 to be turned over to Equatorial.
Equatorial questioned the legality of the above CA ruling before this Court in GR No.
136221 entitled Equatorial Realty Development, Inc. v. Mayfair Theater, Inc. In a Decision
promulgated on May 12, 2000,
[8]
this Court directed the trial court to follow strictly the Decision
in GR No. 106063, the mother case. It explained its ruling in these words:
We agree that Carmelo and Bauermann is obliged to return the entire amount of
eleven million three hundred thousand pesos (P11,300,000.00) to Equatorial. On the
other hand, Mayfair may not deduct from the purchase price the amount of eight
hundred forty-seven thousand pesos (P847,000.00) as withholding tax. The duty to
withhold taxes due, if any, is imposed on the seller, Carmelo and Bauermann, Inc.
[9]

Meanwhile, on September 18, 1997 -- barely five months after Mayfair had submitted its
Motion for Execution before the RTC of Manila, Branch 7 -- Equatorial filed with the Regional
Trial Court of Manila, Branch 8, an action for the collection of a sum of money against Mayfair,
claiming payment of rentals or reasonable compensation for the defendants use of the subject
premises after its lease contracts had expired. This action was the progenitor of the present case.
In its Complaint, Equatorial alleged among other things that the Lease Contract covering the
premises occupied by Maxim Theater expired on May 31, 1987, while the Lease Contract
covering the premises occupied by Miramar Theater lapsed on March 31, 1989.
[10]
Representing
itself as the owner of the subject premises by reason of the Contract of Sale on July 30, 1978, it
claimed rentals arising from Mayfairs occupation thereof.
Ruling of the RTC Manila, Branch 8
As earlier stated, the trial court dismissed the Complaint via the herein assailed Order and
denied the Motion for Reconsideration filed by Equatorial.
[11]

The lower court debunked the claim of petitioner for unpaid back rentals, holding that the
rescission of the Deed of Absolute Sale in the mother case did not confer on Equatorial any
vested or residual proprietary rights, even in expectancy.
In granting the Motion to Dismiss, the court a quo held that the critical issue was whether
Equatorial was the owner of the subject property and could thus enjoy the fruits or rentals
therefrom. It declared the rescinded Deed of Absolute Sale as void at its inception as though it
did not happen.
The trial court ratiocinated as follows:
The meaning of rescind in the aforequoted decision is to set aside. In the case
of Ocampo v. Court of Appeals, G.R. No. 97442, June 30, 1994, the Supreme Court
held that, to rescind is to declare a contract void in its inception and to put an end as
though it never were. It is not merely to terminate it and release parties from further
obligations to each other but to abrogate it from the beginning and restore parties to
relative positions which they would have occupied had no contract ever been made.
Relative to the foregoing definition, the Deed of Absolute Sale between Equatorial
and Carmelo dated July 31, 1978 is void at its inception as though it did not happen.
The argument of Equatorial that this complaint for backrentals as reasonable
compensation for use of the subject property after expiration of the lease
contracts presumes that the Deed of Absolute Sale dated July 30, 1978 from whence
the fountain of Equatorials alleged property rights flows is still valid and existing.
xxx xxx xxx
The subject Deed of Absolute Sale having been rescinded by the Supreme Court,
Equatorial is not the owner and does not have any right to demand backrentals from
the subject property. x x x.
[12]

The trial court added: The Supreme Court in the Equatorial case, G.R. No. 106063, has
categorically stated that the Deed of Absolute Sale dated July 31, 1978 has been rescinded
subjecting the present complaint to res judicata.
[13]

Hence, the present recourse.
[14]

Issues
Petitioner submits, for the consideration of this Court, the following issues:
[15]

A.
The basis of the dismissal of the Complaint by the Regional Trial Court not only
disregards basic concepts and principles in the law on contracts and in civil law,
especially those on rescission and its corresponding legal effects, but also ignores the
dispositive portion of the Decision of the Supreme Court in G.R. No. 106063 entitled
Equatorial Realty Development, Inc. & Carmelo & Bauermann, Inc. vs. Mayfair
Theater, Inc.
B.
The Regional Trial Court erred in holding that the Deed of Absolute Sale in favor of
petitioner by Carmelo & Bauermann, Inc., dated July 31, 1978, over the premises used
and occupied by respondent, having been deemed rescinded by the Supreme Court
in G.R. No. 106063, is void at its inception as though it did not happen.
C.
The Regional Trial Court likewise erred in holding that the aforesaid Deed of
Absolute Sale, dated July 31, 1978, having been deemed rescinded by the Supreme
Court in G.R. No. 106063, petitioner is not the owner and does not have any right to
demand backrentals from the subject property, and that the rescission of the Deed of
Absolute Sale by the Supreme Court does not confer to petitioner any vested right
nor any residual proprietary rights even in expectancy.
D.
The issue upon which the Regional Trial Court dismissed the civil case, as stated in its
Order of March 11, 1998, was not raised by respondent in its Motion to Dismiss.
E.
The sole ground upon which the Regional Trial Court dismissed Civil Case No. 97-
85141 is not one of the grounds of a Motion to Dismiss under Sec. 1 of Rule 16 of the
1997 Rules of Civil Procedure.
Basically, the issues can be summarized into two: (1) the substantive issue of whether
Equatorial is entitled to back rentals; and (2) the procedural issue of whether the
court a quos dismissal of Civil Case No. 97-85141 was based on one of the grounds raised by
respondent in its Motion to Dismiss and covered by Rule 16 of the Rules of Court.
This Courts Ruling
The Petition is not meritorious.
First Issue:
Ownership of Subject Properties
We hold that under the peculiar facts and circumstances of the case at bar, as found by this
Court en banc in its Decision promulgated in 1996 in the mother case, no right of ownership was
transferred from Carmelo to Equatorial in view of a patent failure to deliver the property to the
buyer.
Rental - a Civil Fruit of Ownership
To better understand the peculiarity of the instant case, let us begin with some basic
parameters. Rent is a civil fruit
[16]
that belongs to the owner of the property producing it
[17]
by
right of accession.
[18]
Consequently and ordinarily, the rentals that fell due from the time of the
perfection of the sale to petitioner until its rescission by final judgment should belong to the
owner of the property during that period.
By a contract of sale, one of the contracting parties obligates himself to transfer ownership
of and to deliver a determinate thing and the other to pay therefor a price certain in money or its
equivalent.
[19]

Ownership of the thing sold is a real right,
[20]
which the buyer acquires only upon delivery of
the thing to him in any of the ways specified in articles 1497 to 1501, or in any other manner
signifying an agreement that the possession is transferred from the vendor to the vendee.
[21]
This
right is transferred, not by contract alone, but by tradition or delivery.
[22]
Non nudis pactis sed
traditione dominia rerum transferantur. And there is said to be delivery if and when the thing
sold is placed in the control and possession of the vendee.
[23]
Thus, it has been held that while
the execution of a public instrument of sale is recognized by law as equivalent to the delivery of
the thing sold,
[24]
such constructive or symbolic delivery, being merely presumptive, is deemed
negated by the failure of the vendee to take actual possession of the land sold.
[25]

Delivery has been described as a composite act, a thing in which both parties must join and
the minds of both parties concur. It is an act by which one party parts with the title to and the
possession of the property, and the other acquires the right to and the possession of the same. In
its natural sense, delivery means something in addition to the delivery of property or title; it
means transfer of possession.
[26]
In the Law on Sales, delivery may be either actual or
constructive, but both forms of delivery contemplate the absolute giving up of the control and
custody of the property on the part of the vendor, and the assumption of the same by the
vendee.
[27]

Possession Never Acquired by Petitioner
Let us now apply the foregoing discussion to the present issue. From the peculiar facts of
this case, it is clear that petitioner never took actual control and possession of the property sold,
in view of respondents timely objection to the sale and the continued actual possession of the
property. The objection took the form of a court action impugning the sale which, as we know,
was rescinded by a judgment rendered by this Court in the mother case. It has been held that the
execution of a contract of sale as a form of constructive delivery is a legal fiction. It holds true
only when there is no impediment that may prevent the passing of the property from the hands of
the vendor into those of the vendee.
[28]
When there is such impediment, fiction yields to reality -
the delivery has not been effected.
[29]

Hence, respondents opposition to the transfer of the property by way of sale to Equatorial
was a legally sufficient impediment that effectively prevented the passing of the property into the
latters hands.
This was the same impediment contemplated in Vda. de Sarmiento v. Lesaca,
[30]
in which the
Court held as follows:
The question that now arises is: Is there any stipulation in the sale in question from
which we can infer that the vendor did not intend to deliver outright the possession of
the lands to the vendee? We find none. On the contrary, it can be clearly seen therein
that the vendor intended to place the vendee in actual possession of the lands
immediately as can be inferred from the stipulation that the vendee takes actual
possession thereof x x x with full rights to dispose, enjoy and make use thereof in
such manner and form as would be most advantageous to herself. The possession
referred to in the contract evidently refers to actual possession and not merely
symbolical inferable from the mere execution of the document.
Has the vendor complied with this express commitment? she did not. As provided
in Article 1462, the thing sold shall be deemed delivered when the vendee is placed in
the control and possession thereof, which situation does not here obtain because from
the execution of the sale up to the present the vendee was never able to take
possession of the lands due to the insistent refusal of Martin Deloso to surrender them
claiming ownership thereof. And although it is postulated in the same article that the
execution of a public document is equivalent to delivery, this legal fiction only holds
true when there is no impediment that may prevent the passing of the property from
the hands of the vendor into those of the vendee. x x x.
[31]

The execution of a public instrument gives rise, therefore, only to a prima facie presumption
of delivery. Such presumption is destroyed when the instrument itself expresses or implies that
delivery was not intended; or when by other means it is shown that such delivery was not
effected, because a third person was actually in possession of the thing. In the latter case, the
sale cannot be considered consummated.
However, the point may be raised that under Article 1164 of the Civil Code, Equatorial as
buyer acquired a right to the fruits of the thing sold from the time the obligation to deliver the
property to petitioner arose.
[32]
That time arose upon the perfection of the Contract of Sale on July
30, 1978, from which moment the laws provide that the parties to a sale may reciprocally
demand performance.
[33]
Does this mean that despite the judgment rescinding the sale, the right to
the fruits
[34]
belonged to, and remained enforceable by, Equatorial?
Article 1385 of the Civil Code answers this question in the negative, because [r]escission
creates the obligation to return the things which were the object of the contract, together with
their fruits, and the price with its interest; x x x. Not only the land and building sold, but also
the rental payments paid, if any, had to be returned by the buyer.
Another point. The Decision in the mother case stated that Equatorial x x x has received
rents from Mayfair during all the years that this controversy has been litigated. The Separate
Opinion of Justice Teodoro Padilla in the mother case also said that Equatorial was deriving
rental income from the disputed property. Even herein ponentes Separate Concurring Opinion
in the mother case recognized these rentals. The question now is: Do all these statements
concede actual delivery?
The answer is No. The fact that Mayfair paid rentals to Equatorial during the litigation
should not be interpreted to mean either actual delivery or ipso facto recognition of Equatorials
title.
The CA Records of the mother case
[35]
show that Equatorial - as alleged buyer of the
disputed properties and as alleged successor-in-interest of Carmelos rights as lessor - submitted
two ejectment suits against Mayfair. Filed in the Metropolitan Trial Court of Manila,
the first was docketed as Civil Case No. 121570 on July 9, 1987; and the second, as Civil Case
No. 131944 on May 28, 1990. Mayfair eventually won them both. However, to be able to
maintain physical possession of the premises while awaiting the outcome of the mother case, it
had no choice but to pay the rentals.
The rental payments made by Mayfair should not be construed as a recognition of Equatorial
as the new owner. They were made merely to avoid imminent eviction. It is in this context that
one should understand the aforequoted factual statements in the ponencia in the mother case, as
well as the Separate Opinion of Mr. Justice Padilla and the Separate Concurring Opinion of the
herein ponente.
At bottom, it may be conceded that, theoretically, a rescissible contract is valid until
rescinded. However, this general principle is not decisive to the issue of whether Equatorial ever
acquired the right to collect rentals. What is decisive is the civil law rule that ownership is
acquired, not by mere agreement, but by tradition or delivery. Under the factual environment of
this controversy as found by this Court in the mother case, Equatorial was never put in actual and
effective control or possession of the property because of Mayfairs timely objection.
As pointed out by Justice Holmes, general propositions do not decide specific cases. Rather,
laws are interpreted in the context of the peculiar factual situation of each case. Each case has
its own flesh and blood and cannot be decided on the basis of isolated clinical classroom
principles.
[36]

In short, the sale to Equatorial may have been valid from inception, but it was judicially
rescinded before it could be consummated. Petitioner never acquired ownership, not because the
sale was void, as erroneously claimed by the trial court, but because the sale was not
consummated by a legally effective delivery of the property sold.
Benefits Precluded by Petitioners Bad Faith
Furthermore, assuming for the sake of argument that there was valid delivery, petitioner is
not entitled to any benefits from the rescinded Deed of Absolute Sale because of its bad
faith. This being the law of the mother case decided in 1996, it may no longer be changed
because it has long become final and executory. Petitioners bad faith is set forth in the
following pertinent portions of the mother case:
First and foremost is that the petitioners acted in bad faith to render Paragraph 8
inutile.
xxx xxx xxx
Since Equatorial is a buyer in bad faith, this finding renders the sale to it of the
property in question rescissible. We agree with respondent Appellate Court that the
records bear out the fact that Equatorial was aware of the lease contracts because its
lawyers had, prior to the sale, studied the said contracts. As such, Equatorial cannot
tenably claim to be a purchaser in good faith, and, therefore, rescission lies.
xxx xxx xxx
As also earlier emphasized, the contract of sale between Equatorial and Carmelo is
characterized by bad faith, since it was knowingly entered into in violation of the
rights of and to the prejudice of Mayfair. In fact, as correctly observed by the Court
of Appeals, Equatorial admitted that its lawyers had studied the contract of lease prior
to the sale. Equatorials knowledge of the stipulations therein should have cautioned
it to look further into the agreement to determine if it involved stipulations that would
prejudice its own interests.
xxx xxx xxx
On the part of Equatorial, it cannot be a buyer in good faith because it bought the
property with notice and full knowledge that Mayfair had a right to or interest in the
property superior to its own. Carmelo and Equatorial took unconscientious advantage
of Mayfair.
[37]
(Italics supplied)
Thus, petitioner was and still is entitled solely to the return of the purchase price it paid to
Carmelo; no more, no less. This Court has firmly ruled in the mother case that neither of them is
entitled to any consideration of equity, as both took unconscientious advantage of Mayfair.
[38]

In the mother case, this Court categorically denied the payment of interest, a fruit of
ownership. By the same token, rentals, another fruit of ownership, cannot be granted without
mocking this Courts en banc Decision, which has long become final.
Petitioners claim of reasonable compensation for respondents use and occupation of the
subject property from the time the lease expired cannot be countenanced. If it suffered any loss,
petitioner must bear it in silence, since it had wrought that loss upon itself. Otherwise, bad faith
would be rewarded instead of punished.
We uphold the trial courts disposition, not for the reason it gave, but for (a) the patent
failure to deliver the property and (b) petitioners bad faith, as above discussed.
Second Issue:
Ground in Motion to Dismiss
Procedurally, petitioner claims that the trial court deviated from the accepted and usual
course of judicial proceedings when it dismissed Civil Case No. 97-85141 on a ground not raised
in respondents Motion to Dismiss. Worse, it allegedly based its dismissal on a ground not
provided for in a motion to dismiss as enunciated in the Rules of Court.
We are not convinced. A review of respondents Motion to Dismiss Civil Case No. 97-
85141 shows that there were two grounds invoked, as follows:
(A)
Plaintiff is guilty of forum-shopping.
(B)
Plaintiffs cause of action, if any, is barred by prior judgment.
[39]

The court a quo ruled, inter alia, that the cause of action of petitioner (plaintiff in the case
below) had been barred by a prior judgment of this Court in GR No. 106063, the mother case.
Although it erred in its interpretation of the said Decision when it argued that the rescinded
Deed of Absolute Sale was void, we hold, nonetheless, that petitioners cause of action is
indeed barred by a prior judgment of this Court. As already discussed, our Decision in GR No.
106063 shows that petitioner is not entitled to back rentals, because it never became the owner of
the disputed properties due to a failure of delivery. And even assuming arguendothat there was a
valid delivery, petitioners bad faith negates its entitlement to the civil fruits of ownership, like
interest and rentals.
Under the doctrine of res judicata or bar by prior judgment, a matter that has been
adjudicated by a court of competent jurisdiction must be deemed to have been finally and
conclusively settled if it arises in any subsequent litigation between the same parties and for the
same cause.
[40]
Thus, [a] final judgment on the merits rendered by a court of competent
jurisdiction is conclusive as to the rights of the parties and their privies and constitutes an
absolute bar to subsequent actions involving the same claim, demand, or cause of action.
[41]
Res
judicata is based on the ground that the party to be affected, or some other with whom he is in
privity, has litigated the same matter in a former action in a court of competent jurisdiction, and
should not be permitted to litigate it again.
[42]

It frees the parties from undergoing all over again the rigors of unnecessary suits and
repetitive trials. At the same time, it prevents the clogging of court dockets. Equally important,
it stabilizes rights and promotes the rule of law.
We find no need to repeat the foregoing disquisitions on the first issue to show satisfaction
of the elements of res judicata. Suffice it to say that, clearly, our ruling in the mother case bars
petitioner from claiming back rentals from respondent. Although the court a quo erred when it
declared void from inception the Deed of Absolute Sale between Carmelo and petitioner, our
foregoing discussion supports the grant of the Motion to Dismiss on the ground that our prior
judgment in GR No. 106063 has already resolved the issue of back rentals.
On the basis of the evidence presented during the hearing of Mayfairs Motion to Dismiss,
the trial court found that the issue of ownership of the subject property has been decided by this
Court in favor of Mayfair. We quote the RTC:
The Supreme Court in the Equatorial case, G.R. No. 106063 has categorically stated
that the Deed of Absolute Sale dated July 31, 1978 has been rescinded subjecting the
present complaint to res judicata.
[43]
(Emphasis in the original)
Hence, the trial court decided the Motion to Dismiss on the basis of res judicata, even if it
erred in interpreting the meaning of rescinded as equivalent to void. In short, it ruled on the
ground raised; namely, bar by prior judgment. By granting the Motion, it disposed
correctly, even if its legal reason for nullifying the sale was wrong. The correct reasons are
given in this Decision.
WHEREFORE, the Petition is hereby DENIED. Costs against petitioner.
SO ORDERED.
Davide, Jr., C.J., Quisumbing, Pardo, Buena, Ynares-Santiago, and Carpio, JJ., concur.
Bellosillo, J., join the dissenting opinion of J. Sandoval-Gutierrez.
Melo, J., see concurring opinion.
Puno, and Mendoza, JJ., concur and join the concurring opinion of J. Melo.
Vitug, and Sandoval-Gutierrez, JJ., see dissenting opinion.
Kapunan, J., join the dissenting opinion of J. Vitug and Sandoval-Gutierrez.
De Leon, Jr., J., join the dissenting opinion of J. Vitug.











EN BANC
G.R. No. L-175 April 30, 1946
DAMIAN IGNACIO, FRANCISCO IGNACIO and LUIS
IGNACIOPetitioners, vs. ELIAS HILARIO and his wife
DIONISIA DRES, and FELIPE NATIVIDAD, Judge of First
Instance of Pangasinan,Respondents.
Leoncio R. Esliza for petitioners.
Mauricio M. Monta for respondents.
MORAN, C.J.: chanrobles vi rtual law li brary
This is a petition for certiorari arising from a case in the Court of First Instance of
Pangasinan between the herein respondents Elias Hilario and his wife Dionisia Dres as
plaintiffs, and the herein petitioners Damian, Francisco and Luis, surnamed Ignacio, as
defendants, concerning the ownership of a parcel of land, partly rice-land and partly
residential. After the trial of the case, the lower court, presided over by Hon. Alfonso Felix,
rendered judgment holding plaintiffs as the legal owners of the whole property but
conceding to defendants the ownership of the houses and granaries built by them on the
residential portion with the rights of a possessor in good faith, in accordance with article
361 of the Civil Code. The dispositive part of the decision, hub of this controversy, follows:
Wherefore, judgment is hereby rendered declaring:chanrobles virtual law library
(1) That the plaintiffs are the owners of the whole property described in transfer certificate
of title No. 12872 (Exhibit A) issued in their name, and entitled to the possession of the
same;chanrobles virtual law library
(2) That the defendants are entitled to hold the position of the residential lot until after they
are paid the actual market value of their houses and granaries erected thereon, unless the
plaintiffs prefer to sell them said residential lot, in which case defendants shall pay the
plaintiffs the proportionate value of said residential lot taking as a basis the price paid for
the whole land according to Exhibit B; and chanrobles virtual law library
(3) That upon defendant's failure to purchase the residential lot in question, said defendants
shall remove their houses and granaries after this decision becomes final and within the
period of sixty (60) days from the date that the court is informed in writing of the attitude
of the parties in this respect.chanroblesvirtualawlibrary chanrobles virtual law library
No pronouncement is made as to damages and costs.chanroblesvirtualawlibrary chanrobles
virtual law library
Once this decision becomes final, the plaintiffs and defendants may appear again before this
court for the purpose of determining their respective rights under article 361 of the Civil
Code, if they cannot come to an extra-judicial settlement with regard to said rights.
Subsequently, in a motion filed in the same Court of First Instance but now presided over by
the herein respondent Judge Hon. Felipe Natividad, the plaintiffs prayed for an order of
execution alleging that since they chose neither to pay defendants for the buildings nor to
sell to them the residential lot, said defendants should be ordered to remove the structure
at their own expense and to restore plaintiffs in the possession of said lot. Defendants
objected to this motion which, after hearing, was granted by Judge Natividad. Hence, this
petition by defendants praying for (a) a restraint and annulment of the order of execution
issued by Judge Natividad; (b) an order to compel plaintiffs to pay them the sum of P2,000
for the buildings, or sell to them the residential lot for P45; or (c), a rehearing of the case
for a determination of the rights of the parties upon failure of extra-judicial
settlement.chanroblesvirtualawlibrary chanrobles virtual law library
The judgment rendered by Judge Felix is founded on articles 361 and 453 of the Civil Code
which are as follows:
ART. 361. The owner of land on which anything has been built, sown or planted in good
faith, shall have the right to appropriate as his own the work, sowing or planting, after the
payment of the indemnity stated in articles 453 and 454, or to oblige the one who built or
planted to pay the price of the land, and the one who sowed, the proper
rent.chanroblesvirtualawlibrary chanrobles virtual law library
ART. 453. Necessary expenses shall be refunded to every possessor; but only the possessor
in good faith may retain the thing until such expenses are made good to
him.chanroblesvirtualawlibrary chanrobles virtual law library
Useful expenses shall be refunded to the possessor in good faith with the same right of
retention, the person who has defeated him in the possession having the option of refunding
the amount of the expenses or paying the increase in value which the thing may have
acquired in consequence thereof.
The owner of the building erected in good faith on a land owned by another, is entitled to
retain the possession of the land until he is paid the value of his building, under article 453.
The owner of the land, upon the other hand, has the option, under article 361, either to pay
for the building or to sell his land to the owner of the building. But he cannot, as
respondents here did, refuse both to pay for the building and to sell the land and compel the
owner of the building to remove it from the land where it is erected. He is entitled to such
remotion only when, after having chosen to sell his land, the other party fails to pay for the
same. But this is not the case before us.chanroblesvirtualawlibrary chanrobles virtual law
library
We hold, therefore, that the order of Judge Natividad compelling defendants-petitioners to
remove their buildings from the land belonging to plaintiffs-respondents only because the
latter chose neither to pay for such buildings not to sell the land, is null and void, for it
amends substantially the judgment sought to be executed and is, furthermore, offensive to
articles 361 and 453 of the Civil Code.chanroblesvirtualawlibrary chanrobles virtual law
library
There is, however, in the decision of Judge Felix a question of procedure which calls for the
clarification, to avoid uncertainty and delay in the disposition of cases. In that decision, the
rights of both parties are well defined under articles 361 and 453 of the Civil Code, but it
fails to determine the value of the buildings and of the lot where they are erected as well as
the periods of time within which the option may be exercised and payment should be made,
these particulars having been left for determination apparently after the judgment has
become final. This procedure is erroneous, for after the judgment has become final, no
additions can be made thereto and nothing can be done therewith except its execution. And
execution cannot be had, the sheriff being ignorant as to how, for how much, and within
what time may the option be exercised, and certainly no authority is vested in him to settle
these matters which involve exercise of judicial discretion. Thus the judgment rendered by
Judge Felix has never become final, it having left matters to be settled for its completion in
a subsequent proceeding, matters which remained unsettled up to the time the petition is
filed in the instant case.chanroblesvirtualawlibrary chanrobles virtual law library
For all the foregoing, the writ of execution issued by Judge Natividad is hereby set aside and
the lower court ordered to hold a hearing in the principal case wherein it must determine
the prices of the buildings and of the residential lot where they are erected, as well as the
period of time within which the plaintiffs-respondents may exercise their option either to
pay for the buildings or to sell their land, and, in the last instance, the period of time within
which the defendants-petitioners may pay for the land, all these periods to be counted from
the date the judgment becomes executory or unappealable. After such hearing, the court
shall render a final judgment according to the evidence presented by the
parties.chanroblesvirtualawlibrary chanrobles virtual law library
The costs shall be paid by plaintiffs-respondents.chanroblesvirtualawlibrary chanrobles
virtual law library
Ozaeta, Paras, Jaranilla, Feria, De Joya, Pablo, Perfecto, Hilado, Bengzon and Briones,
JJ., concur.













Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 72876 January 18, 1991
FLORENCIO IGNAO, petitioner,
vs.
HON. INTERMEDIATE APPELLATE COURT, JUAN IGNAO, substituted by his Legal
Heirs, and ISIDRO IGNAO, respondents.
Dolorfino and Dominguez Law Offices for petitioner.
Ambrosio Padilla, Mempin & Reyes Law Offices for private respondents.

FERNAN, C.J .:p
In this petition for review by certiorari, petitioner seeks the reversal of the decision of the Intermediate
Appellate Court (now Court of Appeals) affirming in toto the decision of the Court of First Instance of
Cavite, ordering petitioner Florencio Ignao to sell to private respondents Juan and Isidro Ignao, that part
of his property where private respondents had built a portion of their houses.
The antecedent facts are as follows:
Petitioner Florencio Ignao and his uncles private respondents Juan Ignao and Isidro Ignao were co-
owners of a parcel of land with an area of 534 square meters situated in Barrio Tabon, Municipality of
Kawit, Cavite. Pursuant to an action for partition filed by petitioner docketed as Civil Case No. N-1681, the
then Court of First Instance of Cavite in a decision dated February 6, 1975 directed the partition of the
aforesaid land, alloting 133.5 square meters or 2/8 thereof to private respondents Juan and Isidro, and
giving the remaining portion with a total area of 266.5 square meters to petitioner Florencio. However, no
actual partition was ever effected.
1

On July 17, 1978, petitioner instituted a complaint for recovery of possession of real property against
private respondents Juan and Isidro before the Court of First Instance of Cavite, docketed as Civil Case
No. 2662. In his complaint petitioner alleged that the area occupied by the two (2) houses built by private
respondents exceeded the 133.5 square meters previously alloted to them by the trial court in Civil Case
No. N-1681.
Consequently, the lower court conducted an ocular inspection. It was found that the houses of Juan and
Isidro actually encroached upon a portion of the land belonging to Florencio. Upon agreement of the
parties, the trial court ordered a licensed geodetic engineer to conduct a survey to determine the exact
area occupied by the houses of private respondents. The survey subsequently disclosed that the house
of Juan occupied 42 square meters while that of Isidro occupied 59 square meters of Florencio's land or a
total of 101 square meters.
In its decision, the trial court (thru Judge Luis L. Victor) ruled that although private respondents occupied
a portion of Florencio's property, they should be considered builders in good faith. The trial court took into
account the decision of the Court of First Instance of Cavite in the action for partition
2
and quoted:
. . . . Hence, it is the well-considered opinion of the Court that although it turned out that
the defendants had, before partition, been in possession of more than what rightfully
belongs to them,their possession of what is in excess of their rightful share can at worst
be possession in good faith which exempts them from being condemned to pay damages
by reason thereof.
3

Furthermore, the trial court stated that pursuant to Article 448 of the Civil Code, the owner of the land
(Florencio) should have the choice to either appropriate that part of the house standing on his land after
payment of indemnity or oblige the builders in good faith (Juan and Isidro) to pay the price of the land.
However, the trial court observed that based on the facts of the case, it would be useless and unsuitable
for Florencio to exercise the first option since this would render the entire houses of Juan and Isidro
worthless. The trial court then applied the ruling in the similar case of Grana vs. Court of Appeals,
4
where
the Supreme Court had advanced a more "workable solution". Thus, it ordered Florencio to sell to Juan
and Isidro those portions of his land respectively occupied by the latter. The dispositive portion of said
decision reads as follows:
WHEREFORE, judgment is hereby rendered in favor of the defendants and
(a) Ordering the plaintiff Florencio Ignao to sell to the defendants Juan and Isidro Ignao
that portion of his property with an area of 101 square meters at P40.00 per square
meter, on which part the defendants had built their houses; and
(b) Ordering the said plaintiff to execute the necessary deed of conveyance to the
defendants in accordance with paragraph (a) hereof.
Without pronouncement as to costs.
5

Petitioner Florencio Ignao appealed to the Intermediate Appellate Court. On August 27, 1985, the
Appellate Court, Second Civil Cases Division, promulgated a decision,
6
affirming the decision of the trial
court.
Hence the instant petition for review which attributes to the Appellate Court the following errors:
1. That the respondent Court has considered private respondents builders in good faith
on the land on question, thus applying Art. 448 of the Civil Code, although the land in
question is still owned by the parties in co-ownership, hence, the applicable provision is
Art. 486 of the Civil Code, which was not applied.
2. That, granting for the sake of argument that Art. 448 . . . is applicable, the respondent
Court has adjudged the working solution suggested in Grana and Torralba vs. CA. (109
Phil. 260), which is just an opinion by way of passing, and not the judgment rendered
therein, which is in accordance with the said provision of the Civil Code, wherein the
owner of the land to buy (sic) the portion of the building within 30 days from the judgment
or sell the land occupied by the building.
3. That, granting that private respondents could buy the portion of the land occupied by
their houses, the price fixed by the court is unrealistic and pre-war price.
7

The records of the case reveal that the disputed land with an area of 534 square meters was originally
owned by Baltazar Ignao who married twice. In his first marriage, he had four children, namely Justo (the
father of petitioner Florencio), Leon and private respondents Juan and Isidro. In his second marriage,
Baltazar had also four children but the latter waived their rights over the controverted land in favor of
Justo. Thus, Justo owned 4/8 of the land which was waived by his half-brothers and sisters plus his 1/8
share or a total of 5/8. Thereafter, Justo acquired the 1/8 share of Leon for P500.00 which he later sold to
his son Florencio for the same amount. When Justo died, Florencio inherited the 5/8 share of his father
Justo plus his 1/8 share of the land which he bought or a total of 6/8 (representing 400.5 square meters).
Private respondents, Juan and Isidro, on the other hand, had 1/8 share (66.75 square meters) each of the
land or a total of 133.5 square meters.
Before the decision in the partition case was promulgated, Florencio sold 134 square meters of his share
to a certain Victa for P5,000.00 on January 27, 1975. When the decision was handed down on February
6,1975, the lower court alloted 2/8 of the land to private respondents Juan and Isidro, or a total of 133.5
square meters.
It should be noted that prior to partition, all the co-owners hold the property in common dominion but at
the same time each is an owner of a share which is abstract and undetermined until partition is effected.
As cited in Eusebio vs. Intermediate Appellate Court,
8
"an undivided estate is co-ownership by the heirs."
As co-owners, the parties may have unequal shares in the common property, quantitatively speaking. But
in a qualitative sense, each co-owner has the same right as any one of the other co-owners. Every co-
owner is therefore the owner of the whole, and over the whole he exercises the right of dominion, but he
is at the same time the owner of a portion which is truly abstract, because until division is effected such
portion is not concretely determined.
9

Petitioner Florencio, in his first assignment of error, asseverates that the court a quo erred in applying
Article 448 of the Civil Code, since this article contemplates a situation wherein the land belongs to one
person and the thing built, sown or planted belongs to another. In the instant case, the land in dispute
used to be owned in common by the contending parties.
Article 448 provides:
Art. 448. The owner of the land on which anything has been built, sown or planted in
good faith, shall have the right to appropriate as his own the works, sowing or planting,
after payment of the indemnity provided for in articles 546 and 548, or to oblige the one
who built or planted to pay the price of the land, and the one who sowed, the proper rent.
However, the builder or planter cannot be obliged to buy the land if its value is
considerably more than that of the building or trees. In such case, he shall pay
reasonable rent, if the owner of the land does not choose to appropriate the building or
trees after proper indemnity. The parties shall agree upon the terms of the lease and in
case of disagreement, the court shall fix the terms thereof.
Whether or not the provisions of Article 448 should apply to a builder in good faith on a property held in
common has been resolved in the affirmative in the case of Spouses del Campo vs. Abesia,
10
wherein
the Court ruled that:
The court a quo correctly held that Article 448 of the Civil Code cannot apply where a co-
owner builds, plants or sows on the land owned in common for then he did not build,
plant or sow upon land that exclusively belongs to another but of which he is a co-owner.
The co-owner is not a third person under the circumstances, and the situation is
governed by the rules of co-ownership.
However, when, as in this case, the ownership is terminated by the partition and it
appears that the home of defendants overlaps or occupies a portion of 5 square meters
of the land pertaining to plaintiffs which the defendants obviously built in good faith, then
the provisions of Article 448 of the new Civil Code should apply. Manresa and Navarro
Amandi agree that the said provision of the Civil Code may apply even when there is a
co-ownership if good faith has been established.
11

In other words, when the co-ownership is terminated by a partition and it appears that the house of an
erstwhile co-owner has encroached upon a portion pertaining to another co-owner which was however
made in good faith, then the provisions of Article 448 should apply to determine the respective rights of
the parties.
Petitioner's second assigned error is however well taken. Both the trial court and the Appellate Court
erred when they peremptorily adopted the "workable solution" in the case of Grana vs. Court of
appeals,
12
and ordered the owner of the land, petitioner Florencio, to sell to private respondents, Juan
and Isidro, the part of the land they intruded upon, thereby depriving petitioner of his right to choose.
Such ruling contravened the explicit provisions of Article 448 to the effect that "(t)he owner of the land . . .
shall have the right to appropriate . . .or to oblige the one who built . . . to pay the price of the land . . . ."
The law is clear and unambiguous when it confers the right of choice upon the landowner and not upon
the builder and the courts.
Thus, in Quemuel vs. Olaes,
13
the Court categorically ruled that the right to appropriate the works or
improvements or to oblige the builder to pay the price of the land belongs to the landowner.
As to the third assignment of error, the question on the price to be paid on the land need not be discussed
as this would be premature inasmuch as petitioner Florencio has yet to exercise his option as the owner
of the land.
WHEREFORE, the decision appealed from is hereby MODIFIED as follows: Petitioner Florencio Ignao is
directed within thirty (30) days from entry of judgment to exercise his option to either appropriate as his
own the portions of the houses of Juan and Isidro Ignao occupying his land upon payment of indemnity in
accordance with Articles 546 and 548 of the Civil Code, or sell to private respondents the 101 square
meters occupied by them at such price as may be agreed upon. Should the value of the land exceed the
value of the portions of the houses that private respondents have erected thereon, private respondents
may choose not to buy the land but they must pay reasonable rent for the use of the portion of petitioner's
land as may be agreed upon by the parties. In case of disagreement, the rate of rental and other terms of
the lease shall be determined by the trial court. Otherwise, private respondents may remove or demolish
at their own expense the said portions of their houses encroaching upon petitioner's land.
14
No costs.
SO ORDERED.
Gutierrez, Jr., Feliciano and Bidin, JJ., concur.






Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-12812 September 29, 1959
FILIPINAS COLLEGES, INC., plaintiff-appellee,
vs.
MARIA GARCIA TIMBANG, ET AL., defendants.
------------------------------
G.R. No. L-12813 September 29, 1959
MARIA GARCIA TIMBANG, ET AL., plaintiffs.
MARIA GARICA TIMBANG, plaintiff-appellant,
vs.
MARIA GERVACIO BLAS, defendant-appellee.
De Guzman and Fernandez for appellee Filipinas Colleges, Inc.
San Huan, Africa and Benedicto for appellant Maria Garcia Timbang.
Nicanor S. Sison for appellee Maria Gervacio Blas.
BARRERA, J .:
This is an appeal taken from an order of the Court of First Instance of Manila dated May 10, 1957 (a)
declaring the Sheriff's certificate of sale covering a school building sold at public auction null and void
unless within 15 days from notice of said order the successful bidders, defendants-appellants spouses
Maria Garcia Timbang and Marcelino Timbang, shall pay to, appellee Maria Gervacio Blas directly or
through the Sheriff of Manila the sum of P5,750.00 that the spouses Timbang had bid for the building at
the Sheriff's sale; (b) declaring the other appellee Filipinas Colleges, Inc. owner of 24,500/3,285,934
undivided interest in Lot No. 2-a covered by certificate of tile No 45970, on which the building sold in the
auction sale is situated; and (c) ordering the sale in public auction of the said undivided interest of the
Filipinas Colleges, Inc., in lot No. 2-a aforementioned to satisfy the unpaid portion of the judgment in favor
of appellee Blas and against Filipinas Colleges, Inc. in the amount of P8,200.00 minus the sum of
P5,750.00 mentioned in (a) above.
The order appealed from is the result of three motions filed in the court a quo in the course of the
execution of a final judgment of the Court of Appeals rendered in 2 cases appealed to it in which the
spouses Timbang, the Filipinas Colleges, Inc., and Maria Gervacio Blas were the parties. IN that
judgment of the Court of Appeals, the respective rights of the litigants have been adjudicated as
follows:1wphl.nt
(1) Filipinas Colleges, Inc. was declared to have acquired the rights of the spouses Timbang in
and to lot No. 2-a mentioned above and in consideration thereof, Filipinas Colleges, Inc., was
ordered to pay the spouses Timbang the amount of P15,807.90 plus such other amounts which
said spouses might have paid or had to pay after February, 1953, to Hoskins and Co. Inc., agent
of the Urban Estates, Inc., original vendor of the lot. Filipinas Colleges, Inc. original vendor of the
total amount with the court within 90 days after the decision shall have become final.
(2) Maria Gervacio Blas was declared to be a builder in good faith of the school building
constructed on the lot in question and entitled to be paid the amount of P19,000.00 for the same.
Filipinas Colleges, Inc., purchaser of the said building was ordered to deliver to Blas stock
certificate (Exh. C) for 108 shares of Filipinas Colleges, Inc. with a par value of P10,800.00 and to
pay Blas the sum of P8,200.00 of the house.
(3) In case Filipinas Colleges, Inc. failed to deposit the value of the land, which after liquidation
was fixed at P32,859.34, within the 90-day period set by the court, Filipinas Colleges would lose
all its rights to the land and the spouses Timbang would then become the owners thereof. In that
eventuality, the Timbangs would make known to the court their option under Art. 448 of the Civil
Code whether they would appropriate the building in question, in which even they would have to
pay Filipinas Colleges, Inc. the sum of P19,000.00, or would compel the latter to acquire the land
and pay the price thereof.
Filipinas Colleges, Inc. having failed to pay or deposit the sum of P32,859.34 within the time prescribed,
the spouses Timbang, in compliance with the judgment of the Court of Appeals, on September 28, 1956,
made known to the court their decision that they had chosen not of appropriate the building but to compel
Filipinas Colleges, Inc., for the payment of the sum of P32,859,34. The motion having been granted, a
writ of execution was issued on January 8, 1957.
On January 16, 1957, appellee Blas in turn filed a motion for execution of her judgment of P8,200.00
representing the unpaid portion of the price of the house sold to Filipinas Colleges, Inc. Over the object of
the Timbangs, the court grated the motion and the corresponding writ of execution was issued on January
30, 1957, date of the granting of the motion for execution, Blas through counsel, sent a letter to the Sheriff
of Manila advising him of her preferential claim or lien on the house to satisfy the unpaid balance of the
purchase price thereof under Article 2242 of the Civil Code, and to withhold from the proceed of the
auction sale the sum of P8,200.00. Levy having been made on the house in virtue of the writs of
execution, the Sheriff of Manila on March 5, 1957, sold the building in public auction in favor of the
spouses Timbang, as the highest bidders, in the amount of P5,750.00. Personal properties of Filipinas
Colleges, Inc. were also auctioned for P245.00 in favor of the spouses Timbang.
As a result of these actuation, three motion were subsequently filed before the lower court:
(1) By appellee Blas, praying that the Sheriff of Manila and/or the Timbang spouses be ordered to
pay and deliver to her the sum of P5,750.00 representing the proceeds of the auction sale of the
building of Filipinas Colleges, Inc. over which she has a lien of P8,200.00 for the unpaid balance
of the purchase price thereof;.
(2) Also by the appellee Bals, praying that there being still two unsatisfied executions, one for the
sum of P32,859.34 in favor the land involved, Lot No. 2-a, be sold at public auction; and (3) By
Filipinas Colleges, Inc. praying that because its properties, the house and some personal
properties, have been auctioned for P5,750.00 and P245.00 respectively in favor of the Timbang
spouses who applied the proceeds to the partial payment of the sum of P32,859.34 value of the
land, Lot No. 2-a, it (Filipinas Colleges, Inc.) be declared part owner of said lot to the extent of the
total amount realized from the execution sale of its properties.1wphl.nt
The Timbang spouses presented their opposition to each and all of these motion. After due hearing the
lower court rendered its resolution in the manner indicated at the beginning of this decision, from which
the Timbangs alone have appealed.
In assailing the order of the court a quo directing the appellants to pay appellee Blas the amount of their
bid (P5,750.00) made at the public auction, appellants' counsel has presented a novel, albeit ingenious,
argument. It is contended that because the builder in good faith has failed to pay the price of the land
after the owners thereof exercised their option under Article 448 of the Civil Code, the builder lost his right
of retention provided in Article 546 and by operation of Article 445, the appellants as owners of the land
automatically became the owners ipso facto, the execution sale of the house in their favor was
superfluous. Consequently, they are not bound to make good their bid of P5,750.00 as that would be to
make goods to pay for their own property. By the same token, Blas claim for preference on account of the
unpaid balance of the purchase price of the house does not apply because preference applies only with
respect to the property of the debtor, and the Timbangs, owners of the house, are not the debtors of Blas.
This Court cannot accept this oversimplification of appellants' position. Article 448 and 546 of the Civil
Code defining the right of the parties in case a person in good faith builds, sows or plants on the land of
another, respectively provides:
ART. 448. The owner of the land on which anything has been built, sown or plated in good faith
shall have the right to appropriate as his own the works, sowing or planting, after payment of the
indemnify provided for in article 546 and 548, or to obligate 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 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 to option of refunding the
amount of expenses or of paying the case in value which thing may have acquired by reason
thereof.
Under the terms of these article, it is true that the owner of the land has the right to choose between
appropriating the building by reimbursing the builder of the value thereof or compelling the builder in good
faith to pay for his land. Even this second right cannot be exercised if the value of the land is considerably
more than that of the building. In addition to the right of the builder to be paid the value of his
improvement, Article 546 gives him the corollary right of retention of the property until he is indemnified by
the owner of the land. There is nothing in the language of these two article, 448 and 546, which would
justify the conclusion of appellants that, upon the failure of the builder to pay the value of the land, when
such is demanded by the land-owner, the latter becomes automatically the owner of the improvement
under Article 445. The case of Bernardo vs. Bataclan, 66 Phil., 590 cited by appellants is no authority for
this conclusion. Although it is true it was declared therein that in the event of the failure of the builder to
pay the land after the owner thereof has chosen this alternative, the builder's right of retention provided in
Article 546 is lost, nevertheless there was nothing said that as a consequence thereof, the builder loses
entirely all rights over his own building. The question is; what is the recourse or remedy left to the parties
in such eventuality where the builder fails to pay the value of the land? While the Code is silent on this
Court in the cases of Miranda vs. Fadullon, et al., 97 Phil., 801; 51 Off. Gaz., [12] 6226; Ignacio vs.
Hilario, 76 Phil., 605 and the cited case of Bernardo vs. Bataclan, supra.
In the first case, this Court has said:
A builder in good faith not be required to pay rentals. he has right to retain the land on which he
has built in good faith until he is reimbursed the expenses incurred by him. Possibly he might be
made to pay rental only when the owner of the land chooses not to appropriate the improvement
and requires the builder in good faith to pay for the land but that the builder is unwilling or unable
to pay the land, and then they decide to leave things as they are and assume the relation of
lessor and lessee, and should they disagree as to the amount of rental then they can go to the
court to fix that amount. (Emphasis supplied)
Should the parties not agree to leave things as they are and to assume the relation of lessor and lessee,
another remedy is suggested in the case of Ignacio vs. Hilario, supra, wherein the court has ruled that the
owner of the land in entitled to have the improvement removed when after having chosen to sell his land
to the other party, i.e., the builder in good faith fails to pay for the same.
A further remedy is indicated in the case of Bernardo vs. Bataclan, supra, where this Court approved the
sale of the land and the improvement in a public auction applying the proceeds thereof first to the
payment of the value of the land and the excess, if any, to be delivered to the owner of the house in
payment thereof.
The appellants herein, owners o the land, instead of electing any of the alternative above indicated chose
to seek recovery of the value of their land by asking for a writ of execution; levying on the house of the
builder; and selling the same in public auction. Sand because they are the highest bidder in their own
auction sale, they now claim they acquired title to the building without necessity of paying in cash on
account of their bid. In other words, they in effect pretend to retain their land and acquire the house
without paying a cent therefor.
This contention is without merit. This Court has already held in Matias vs. The Provincial Sheriff of Nueva
Ecija (74 Phil., 326) that while it is the inveriable practice, dictated by common sense, that where the
successful bidder is the execution creditor himself, he need not pay down the amount of the bid if it does
not exceed the amount of his judgement, nevertheless, when their is a claim by a third-party, to the
proceeds of the sale superior to his judgment credit, the execution creditor, as successful bidder, must
pay in cash the amount of his bid as a condition precedent to the issuance to him of the certificate of sale.
In the instant case, the Court of Appeals has already adjudged that appellee Blas is entitled to the
payment of the unpaid balance of the purchase price of the school building. Blas is actually a lien on the
school building are concerned. The order of the lower court directing the Timbang spouses, as successful
bidders, to pay in cash the amount of their bid in the sum of P5,750.00 is therefore correct.
With respect to the order of the court declaring appellee Filipinas Colleges, Inc. part owner of the land to
the extent of the value of its personal properties sold at public auction in favor of the Timbang, this Court
Likewise finds the same as justified, for such amount represents, in effect, a partial payment of the value
of the land. If this resulted in the continuation of the so-called involuntary partnership questioned by the
difference between P8,200.00 the unpaid balance of the purchase price of the building and the sum of
P5,750.00 amount to be paid by the Timbangs, the order of the court directing the sale of such
undivided interest of the Filipinas Colleges, Inc. is likewise justified to satisfy the claim of the appellee
Blas.
Considering that the appellant spouses Marcelino Timbang and Maria Garcia Timbang may not
voluntarily pay the sum of P5,750.00 as ordered, thereby further delaying the final termination of this
case, the first part of the dispositive portion of the order appealed from is modified in the sense that upon
failure of the Timbang spouses to pay to the Sheriff or to Manila Gervacio Blas said sum of P5,750.00
within fifteen (15) days from notice of the final judgment, an order of execution shall issue in favor of
Maria Gervasio Blas to be levied upon all properties of the Timbang spouses not exempt from execution
for the satisfaction of the said amount.
In all other respects, the appealed order of the court a quo is hereby affirmed, with costs against the
appellants.
It is so ordered.
Paras, C.J., Bengzon, Padilla, Montemayor, Bautista Angelo, Labrador, Concepcion and Endencia, JJ.,
concur.

Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. L-47475 August 19, 1988
MANOTOK REALTY, INC., petitioner,
vs.
THE HONORABLE JOSE H. TECSON, Judge of the Court of First Instance of Manila
and NILO MADLANGAWA, respondents.
Ceferino V. Argueza for petitioner.
Magtanggol C. Gunigundo for respondents.

GUTIERREZ, JR., J .:
In a complaint filed by the petitioner for recovery of possession and damages against the private
respondent, the then Court of First Instance of Manila rendered judgment, the dispositive portion of which
provides inter alia:
WHEREFORE, judgment is hereby rendered:
xxx xxx xxx
xxx xxx xxx
(c) In Civil Case No. 72872, declaring the defendant Nilo Madlangawa as a builder or
possessor in good faith; ordering the plaintiff to recognize the right of said defendant to
remain in Lot No. 345, Block 1, of the Clara Tambunting Subdivision until after he shall
have been reimbursed by the plaintiff the sum of P7,500.00, without pronouncement as to
costs. (p. 24, Rollo)
Not satisfied with the trial court's decision, the petitioner appealed to the Court of Appeals and upon
affirmance by the latter of the decision below, the petitioner elevated its case to this Court.
On July 13, 1977, we issued a resolution dated July 11, 1977 denying the petitioner's petition for lack of
merit. Hence, on August 5, 1977, the petitioner filed with the trial court, presided over by respondent
Judge Jose H. Tecson, a motion for the approval of petitioner's exercise of option and for satisfaction of
judgment, praying that the court issue an order: a) approving the exercise of petitioner's option to
appropriate the improvements introduced by the private respondent on the property; b) thereafter, private
respondent be ordered to deliver possession of the property in question to the petitioner.
On October 7, 1977, the respondent judge issued the disputed order, to wit:
Acting on the motion for approval of plaintiffs exercise of option and for satisfaction of
judgment filed by the plaintiff, and the opposition thereto interposed by the defendant,
both through counsels, and after a judicious review of all the facts and circumstances
obtaining in this case, in the light of statutory provisions (Art. 6, New Civil Code) and
jurisprudential doctrines (Vide, Benares v. Capitol Subdivision, Inc., L-7330 (Nov. 29,
1960), and considering further the definitive ruling of our Supreme Tribunal in the case of
Jose C. Cristobal v. Alejandro Melchor, G.R. No. L-43203 promulgated on July 29, 1977,
wherein the Court says:
"This Court, applying the principle of equity, need not be bound to a rigid application of
the law but rather its action should conform to the conditions or exigencies of a given
problem or situation in order to grant relief that it will serve the ends of justice."
xxx xxx xxx
the Court is of the considered view that under the peculiar circumstances which supervened after the
institution of this case, like, for instance, the introduction of certain major repairs of and other substantial
improvements on the controverted property, the instant motion of the plaintiff is not well-taken and
therefore not legally proper and tenable.
WHEREFORE, and for lack of merit, the instant motion for approval of the plaintiff's fai-rn
of option and for satisfaction of judgment should be, as hereby it is, denied. (pp. 45-46,
Rollo)
After a denial of its motion for reconsideration, the petitioner filed the present petition for mandamus
alleging that the respondent judge committed grave abuse of discretion in denying his motion to exercise
option and for execution of judgment on the grounds that under Articles 448 and 546 of the Civil Code,
the exercise of option belongs to the owner of the property, who is the petitioner herein, and that upon
finality of judgment, the prevailing party is entitled, as a matter of right, to its execution which is only a
ministerial act on the part of the respondent judge.
On April 15, 1978, the private respondent filed his comment on the petition alleging that the same has
already become moot and academic for two reasons: first, fire gutted not only the house of the private
respondent but the majority of the houses in Tambunting Estate; and second, as a result of the said fire,
the then First Lady and Metro Manila Governor Imelda R. Marcos has placed the disputed area under her
Zonal Improvement Project, thereby allowing the victims of the fire to put up new structures on the
premises, so that the willingness and readiness of the petitioner to exercise the alleged option can no
longer be exercised since the subject-matter thereof has been extinguished by the fire. Furthermore, the
President of the Philippines has already issued a Presidential Decree for the expropriation of certain
estates in Metro Manila including the Tambunting Estate. Therefore, the beneficient and humanitarian
purpose of the Zonal Improvement Project and the expropriation proceeding would be defeated if
petitioner is allowed to exercise an option which would result in the ejectment of the private respondent.
On December 28, 1980, Presidential Decree (P.D.) No. 1669 was issued providing for the expropriation of
the Tambunting Estate. However, this decree was challenged before this Court in G.R. No, 55166 entitled
The "Elisa R. Manotok, et al. v. National Housing Authority, et al." Hence, we decided to hold the decision
on this petition pending the resolution of the above entitled case.
On May 21, 1987, the Court rendered a decision in the Elisa Manotok case (Manotok v. National Housing
Authority, 150 SCRA 89) ruling that P.D. 1669 is unconstitutional for being violative of the due process
clause. Thus, since the present petition has not been rendered moot and academic by the decision in
said case, we will now decide on its merits.
As stated earlier, the petitioner argues that since the judgment of the trial court has already become final,
it is entitled to the execution of the same and that moreover, since the house of the private respondent
was gutted by fire, the execution of the decision would now involve the delivery of possession of the
disputed area by the private respondent to the petitioner.
We find merit in these arguments.
When the decision of the trial court became final and executory, it became incumbent upon the
respondent judge to issue the necessary writ for the execution of the same. There is, therefore, no basis
for the respondent judge to deny the petitioner's motion to avail of its option to approriate the
improvements made on its property.
In the case of Duenas v. Mandi (151 SCRA 530, 545), we said:
xxx xxx xxx
...Likewise settled is the rule that after a judgment has become final, no additions can be
made thereto, and nothing can be done therewith except its execution, otherwise there
would be no end to legal processes. (Fabular v. Court of Appeals, 11 9 SCRA 329)
Neither can the respondent judge deny the issuance of a writ of execution because the private
respondent was adjudged a builder in good faith or on the ground of "peculiar circumstances which
supervened after the institution of this case, like, for instance, the introduction of certain major repairs of
and other substantial improvements..." because the option given by law either to retain the premises and
pay for the improvements thereon or to sell the said premises to the builder in good faith belongs to the
owner of the property. As we have in Quemel v. Olaes (1 SCRA 1159,1163):
xxx xxx xxx
...The plaintiffs claim that their second cause of action is based on Article 448 in
connection with Art. 546, of the new Civil Code. A cursory reading of these provisions,
however, will show that they are not applicable to plaintiff's case. Under Article 448, the
right to appropriate the works or improvements or to oblige the one who built or planted to
pay the price of the land' belongs to the owner of the land. The only right given to the
builder in good faith is the right to reimbursement for the improvements; the builder,
cannot compel the owner of the land to sell such land to the former. ...
Again, in the recent case of Paz Mercado, et al. v. Hon. Court of Appeals, et al., (G.R. No. L- 44001, June
10, 1988), we said:
... To be deemed a builder in good faith, it is essential that a person assert title to the land
on which he builds; i.e., that he be a possessor in concept of owner (Art. 525, Civil Code;
Lopez, Inc. v. Phil. Eastern Trading Co., Inc., 98 Phil. 348) and that he be unaware 'that
there exists in his title or mode of acquisition any flaw which invalidates it.' (Art. 526, Civil
Code; Granados v. Monton, 86 Phil. 42; Arriola v. Gomez de la Serna, 14 Phil. 627; See
also Manotok Realty, Inc. v. C.A., 134 SCRA 329, citing Caram v. Laureta, 103 SCRA 7)
It is such a builder in good faith who is given the 1ight to retain the thing, even as against
the real owner, until he has been reimbursed in full not only for the necessary expenses
but also for useful expenses. (Art. 546, Civil Code; Policarpio v. CA., 129 SCRA 51;
Sarmiento v. Agana, 129 SCRA 1221; cf, Queto v. C.A., 122 SCRA 206) ...
Furthermore, the private respondent's good faith ceased after the filing of the complaint below by the
petitioner. In the case of Mindanao Academy, Inc. v. Yap (13 SCRA 190,196), we ruled:
xxx xxx xxx
...Although the bad faith of one party neutralizes that of the other and hence as between
themselves their rights would be as if both of them had acted in good faith at the time of
the transaction, this legal fiction of Yap's good faith ceased when the complaint against
him was filed, and consequently the court's declaration of liability for the rents thereafter
is correct and proper . A possessor in good faith is entitled to the fruits only so long as his
possession is not legally interrupted, and such interruption takes place upon service of
judicial summons (Arts. 544 and 1123, Civil Code).
Thus, the repairs and improvements introduced by the said respondents after the complaint was filed
cannot be considered to have been built in good faith, much less, justify the denial of the petitioner's fai-rn
of option.
Since the improvements have been gutted by fire, and therefore, the basis for private respondent's right
to retain the premises has already been extinguished without the fault of the petitioner, there is no other
recourse for the private respondent but to vacate the premises and deliver the same to herein petitioner.
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is GRANTED and the respondent judge is
hereby ordered to immediately issue a writ of execution ordering the private respondent to vacate the
disputed premises and deliver possession of the same to the petitioner.
SO ORDERED.
Fernan, C.J., Feliciano, Bidin and Cortos, JJ., concur.














Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-43456 May 6, 1935
CATALINO BATACLAN, petitioner,
vs.
THE COURT OF FIRST INSTANCE OF CAVITE and VICENTE SANTO DOMINGO
BERNARDO, respondents.
Nicolas Santiago for petitioner.
Pedro de Leon for respondent Santo Domingo Bernardo.
No appearance for the other respondent.
VICKERS, J .:
This is a petition for a writ of certiorari to annul an order of the Court of First Instance of Cavite issued on
April 24, 1934 for the sale at public auction of the land which was the subject of civil case No. 2428 of
said court between the respondent, Vicente Santo Domingo Bernardo, as plaintiff, and the petitioner
herein, Catalino Bataclan, as defendant.
The dispositive part of the decision in that case is as follows:
Por las consideraciones expuestas, se declara al demandante Vicente Santo Domingo Bernardo
dueo y con derecho a la posesion del terreno que se describe en la demanda, y al demandado
Catalino Bataclan con derecho a que el demandante le pague la suma de P1,642 por gastos
utiles hechos de buena fe en el terreno, y por el cerco y ponos de coco y abca existentes en el
mismo, y con derecho, ademas, a retener la posesion del terreno hasta que se le pague dicha
cantidad. El demandante puede optar, en el plazo de treinta dias, a partir de la fecha en que
fuere notificado de la presente, por pagar esa suma la demandado, haciendo asi suyos el cerco y
todas las plantaciones existentes en el terreno, u obligar al demandado a pagarle el precio del
terreno, a eazon de trescientos pesos la hectarea. En el caso de que el demandante optara (por)
que el demandado le pagara el precio del terreno, el demandado efectuara el pago en el plazo
convenido por las partes o que sera fijado por el Juzgado. Sin costas.
On appeal to this court the value of the land containing 90 hectares was reduced from P300 to P200 a
hectare, and the value of the improvements made by the defendant thereon was increased from P1,642
to P2,212. The decision of the lower court was affrimed in all other respects. (G.R. No. 37319.)
1

The plaintiff in that case, Vicente Santo Domingo Bernardo, elected to compel the defendant, Catalino
Bataclan, to pay him the value of the land, P18,000. Petitioner alleges that he filed a motion on January
12, 1934 praying that he be granted a period of fifteen years in which to pay said sum of P18,000; that
said motion was never granted or denied, but on April 24, 1934 the court issued an order directing that
the land be sold at public auction and that out of the proceeds of the sale the sum of P18,000 be paid to
the plaintiff in addition to the legal expenses of the sale, and that the remainder to the amount of P2,212
be paid to the defendant.
It appears, however, from the order of Judge Leopoldo Rovira of January 24, 1934 that the plaintiff
informed the court that he elected to compel the defendant to pay him the value of the land, and that the
defendant appeared in court and stated that he did not have any money; that the court then granted the
plaintiff thirty days in which to pay the defendant the sum of P2,212, and ordered that if said payment was
not made the land should be sold at public auction of the payment of said sum to the defendant, the
balance after deducting the expenses of the sale to be delivered to the plaintiff.
On March 16, 1934 Judge Rovira modified his order of January 24th, and ordered that from the proceeds
of the sale the plaintiff should be paid for the land at the rate of P200 a hectare, and that the balance, if
any, should be delivered to the defendant.
On April 24, 1934 Judge Sixto de la Costa issued an order for the sale of the land at public auction in
order that the plaintiff might be paid from the proceeds the sum of P18,000 and the legal expenses of the
sale, and that from the balance, if any, P2,212 should be paid to the defendant. This is the order
complained of.
The decision of the lower court was based on article 361 of the Civil Code, which reads as follows:
Any owner of land on which anything has been built, sown, or planted, in good faith, shall be
entitled to appropriate the thing so built, sown, or planted, upon paying the compensation
mentioned in articles 453 and 454, or to compel the person who has built or planted to pay him
the value of the land or, to require the person who sowed thereon to pay the proper rent
therefore.
The contention of the petitioner is that in issuing the order of April 24, 1934 the court exceeded its
jurisdiction because it constituted an amendment to a final judgment of said court, which had been
affirmed by this court.
It is true that in the decision in question it was provided that in case the plaintiff elected to compel the
defendant to pay him the value of the land, the payment should be made within the period agreed upon
by the parties or that it would be fixed by the court; but, according to the petitioner, he asked for a period
of fifteen years in which to pay the owner of the land the value thereof; and when he appeared in court he
informed the court that he had no money with which to pay for the land. Under those circumstances, it
would have been futile for the court to grant the defendant a reasonable period of thirty or sixty days in
which to pay the plaintiff the sum of P18,000, and if there was any irregularity in the court's ordering the
sale of the property at public auction under the conditions stated in the orders of March 16, 1934 and April
24, 1934, it was not prejudicial but favorable to the petitioner, because his only right was to purchase the
land for the sum of P18,000.
Furthermore the petitioner could have appealed from the order in question, and his right to appeal was an
adequate remedy.
For the foregoing reasons, the petition is denied, with the costs against the petitioner.
Abad Santos, Hull, Butte, and Diaz, JJ., concur.





THIRD DIVISION
[G.R. No. 136456. October 24, 2000]
HEIRS OF RAMON DURANO, SR., RAMON DURANO III, AND
ELIZABETHHOTCHKISS DURANO, petitioners, vs. SPOUSES
ANGELES SEPULVEDA UY AND EMIGDIO BING SING UY,
SPOUSES FAUSTINO ALATAN AND VALERIANA GARRO,
AURELIA MATA, SILVESTRE RAMOS, HERMOGENES TITO,
TEOTIMO GONZALES, PRIMITIVA GARRO, JULIAN GARRO,
ISMAEL GARRO, BIENVENIDO CASTRO, GLICERIO BARRIGA,
BEATRIZ CALZADA, ANDREA MATA DE BATULAN, TEOFISTA
ALCALA, FILEMON LAVADOR, CANDELARIO
LUMANTAO, GAVINO QUIMBO, JUSTINO TITO, MARCELINO
GONZALES, SALVADOR DAYDAY, VENANCIA REPASO,
LEODEGARIO GONZALES, and RESTITUTA
GONZALES, respondents.
D E C I S I O N
GONZAGA-REYES, J .:
Petitioners seek the reversal of the decision of the First Division of the
Court of Appeals dated November 14, 1997 in CA-G.R. CV No. 27220,
entitled Heirs of Ramon Durano, Sr., et. al. versus Spouses Angeles
Supelveda Uy, et. al., and the resolution of the Court of Appeals dated
October 29, 1998 which denied petitioners motion for reconsideration.
The antecedents of this case may be traced as far back as August 1970; it
involves a 128-hectare parcel of land located in the barrios of Dunga and
Cahumayhumayan, Danao City. On December 27, 1973, the late
Congressman Ramon Durano, Sr., together with his son Ramon Durano III,
and the latters wife, Elizabeth Hotchkiss Durano (petitioners in the herein
case), instituted an action for damages against spouses Angeles Supelveda
Uy and Emigdio Bing Sing Uy, spouses Faustino Alatan and Valeriana Garro,
spouses Rufino Lavador and Aurelia Mata, Silvestre Ramos, Hermogenes
Tito, Teotimo Gonzales, Primitiva Garro, Julian Garro, Ismael Garro,
Bienvenido Castro, Glicerio Barriga, Beatriz Calzada, Andrea Mata de
Batulan, Teofista Alcala, Filemon Lavador, Candelario Lumantao, Gavino
Quimbo, Justino Tito, Marcelino Gonzales, Salvador Dayday, Venancia
Repaso, Leodegario Gonzales, Jose de la Calzada, Restituta Gonzales, and
Cosme Ramos (herein respondents
[1]
) before Branch XVII of the then Court of
First Instance of Cebu, Danao City.
In that case, docketed as Civil Case No. DC-56, petitioners accused
respondents of officiating a hate campaign against them by lodging
complaints in the Police Department of Danao City in August 1970, over
petitioners so-called invasion of respondents alleged properties in
Cahumayhumayan, Danao City. This was followed by another complaint sent
by respondents to the President of the Philippines in February 1971, which
depicted petitioners as oppressors, landgrabbers and usurpers of
respondents alleged rights. Upon the direction of the President, the
Department of Justice through City Fiscal Jesus Navarro and the Philippine
Constabulary of Cebu simultaneously conducted investigations on the
matter. Respondents complaints were dismissed as baseless, and they
appealed the same to the Secretary of Justice, who called for another
investigation to be jointly conducted by the Special Prosecutor and the Office
of the City Fiscal of Danao City. During the course of said joint investigation,
respondents Hermogenes Tito and Salvador Dayday again lodged a
complaint with the Office of the President, airing the same charges of
landgrabbing. The investigations on this new complaint, jointly conducted by
the 3
rd
Philippine Constabulary Zone and the Citizens Legal Assistance Office
resulted in the finding that (petitioners) should not be held answerable
therefor.
[2]

Petitioners further alleged in their complaint before the CFI that during the
course of the above investigations, respondents kept spreading false rumors
and damaging tales which put petitioners into public contempt and ridicule.
[3]

In their Answer, respondents lodged their affirmative defenses, demanded
the return of their respective properties, and made counterclaims for actual,
moral and exemplary damages. Respondents stated that sometime in the
early part of August 1970 and months thereafter they received mimeographed
notices dated August 2, 1970 and signed by the late Ramon Durano, Sr.,
informing them that the lands which they are tilling and residing in, formerly
owned by the Cebu Portland Cement Company (hereafter, Cepoc), had
been purchased by Durano & Co., Inc. The notices also declared that the
lands were needed by Durano & Co. for planting to sugar and for roads or
residences, and directed respondents to immediately turn over the said lands
to the representatives of the company. Simultaneously, tall bamboo poles with
pennants at the tops thereof were planted in some areas of the lands and
metal sheets bearing the initials RMD were nailed to posts.
As early as the first week of August 1970, and even before many of the
respondents received notices to vacate, men who identified themselves as
employees of Durano & Co. proceeded to bulldoze the lands occupied by
various respondents, destroying in their wake the plantings and improvements
made by the respondents therein. On some occasions, respondents alleged,
these men fired shots in the air, purportedly acting upon the instructions of
petitioner Ramon Durano III and/or Ramon Durano, Jr. On at least one
instance, petitioners Ramon Durano III and Elizabeth Hotchkiss Durano were
seen on the site of the bulldozing operations.
On September 15, 1970, Durano & Co. sold the disputed property to
petitioner Ramon Durano III, who procured the registration of these lands in
his name under TCT No. T-103 and TCT No. T-104.
Respondents contended that the display of force and the known power
and prestige of petitioners and their family restrained them from directly
resisting this wanton depredation upon their property. During that time, the
mayor of Danao City was Mrs. Beatriz Durano, wife of Ramon Durano, Sr. and
mother of petitioner Ramon Durano III. Finding no relief from the local police,
who respondents said merely laughed at them for daring to complain against
the Duranos, they organized themselves and sent a letter to then President
Ferdinand Marcos reporting dispossession of their properties and seeking a
determination of the ownership of the land. This notwithstanding, the
bulldozing operations continued until the City Fiscal was requested by the
Department of Justice to conduct an investigation on the matter. When, on
July 27, 1971, the City Fiscal announced that he would be unable to conduct a
preliminary investigation, respondents urged the Department of Justice to
conduct the preliminary investigation. This was granted, and the investigations
which spanned the period March 1972 to April 1973 led to the conclusion that
respondents complaint was untenable.
[4]

In their counterclaim, respondents alleged that petitioners acts deprived
most of them of their independent source of income and have made destitutes
of some of them. Also, petitioners have done serious violence to respondents
spirit, as citizens and human beings, to the extent that one of them had been
widowed by the emotional shock that the damage and dispossession has
caused.
[5]
Thus, in addition to the dismissal of the complaint, respondents
demanded actual damages for the cost of the improvements they made on the
land, together with the damage arising from the dispossession itself; moral
damages for the anguish they underwent as a result of the high-handed
display of power by petitioners in depriving them of their possession and
property; as well as exemplary damages, attorneys fees and expenses of
litigation.
Respondents respective counterclaims --- referring to the improvements
destroyed, their values, and the approximate areas of the properties they
owned and occupied --- are as follows:
a) TEOFISTA ALCALA - Tax Declaration No. 00223; .2400 ha.; bulldozed on August,
10, 1970. Improvements destroyed consist of 47 trees, 10 bundles beatilis firewood
and 2 sacks of cassava, all valued at P5,437.00.(Exh. B, including submarkings)
b) FAUSTINO ALATAN and VALERIANA GARRO - Tax Declaration No. 30758; .2480
ha.; Tax Declaration No. 32974; .8944 ha.; Tax Declaration No. 38908; .8000 ha.;
Bulldozed on September 9, 1970; Improvements destroyed consist of 682 trees, a
cornfield with one cavan per harvest 3 times a year, valued at
P71,770.00; Bulldozed on March 13, 1971; 753 trees, 1,000 bundles beatilis
firewood every year, valued at P29,100.00; Cut down in the later part of March,
1971 - 22 trees, 1,000 bundles beatilis firewood every year, 6 cavans corn harvest
per year, valued at P1,940.00 or a total value of P102,810.00. (Exh. C, including
submarkings)
c) ANDREA MATA DE BATULAN - Tax Declaration No. 33033; .4259 has.; bulldozed
on September 11, 1970. Improvements destroyed consist of 512 trees and 15 sacks
cassava all valued at P79,425.00. (Exh. D, including submarkings)
d) GLICERIO BARRIGA - Tax Declaration No. 32290; .4000 ha.; bulldozed on
September 10, 1990. Improvements destroyed consist of 354 trees, cassava field if
planted with corn good for one liter, 30 cavans harvest a year of corn, and one
resthouse, all valued at P35,500.00. (Exh. E, including submarkings)
e) BEATRIZ CALZADA - Tax Declaration No. 03449; .900 ha.; Bulldozed on June 16,
1971. Improvements destroyed consist of 2,864 trees, 1,600 bundles of beatilis
firewood, 12 kerosene cans cassava every year and 48 cavans harvest a year of
corn all valued at P34,800.00. (Exh. F, including submarkings)
f) BIENVENIDO CASTRO - Tax Declaration No. 04883; .6000 ha.; bulldozed on
September 10, 1970. Improvements destroyed consist of 170 trees, 10 sacks
cassava every year, 500 bundles beatilis firewood every year, 60 cavans corn
harvest per year, all valued at (5,550.00. (Exh. G, including submarkings)
g) ISMAEL GARRO - Tax Declaration No. 7185; 2 has. Bulldozed in August,
1970. Improvements destroyed consist of 6 coconut trees valued at
P1,800.00. Bulldozed on February 3, 1971 - improvements destroyed consist of 607
trees, a corn field of 5 cavans produce per harvest thrice a year, all valued at
P67,890.00. (Exh. H, including submarkings)
h) JULIAN GARRO - Tax Declaration No. 28653; 1 ha.; Bulldozed in the latter week of
August, 1970. Improvements destroyed consist of 365 trees, 1 bamboo grove, 1
tisa, 1,000 bundles of beatilis firewood, 24 cavans harvest a year of corn, all valued
at P46,060.00. (Exh. I, including submarkings)
i) PRIMITIVA GARRO - Tax Declaration No. 28651; .3000 ha.; Bulldozed on
September 7, 1970. Improvements destroyed consist of 183 trees, 10 pineapples, a
cassava field, area if planted with corn good for liter, sweet potato, area if planted
with corn good for liter all valued at P10,410.00. (Exh. J, including submarkings)
j) TEOTIMO GONZALES - Tax Declaration No. 38159; .8644 ha.; Tax Declaration No.
38158; .8000 ha.; Bulldozed on September 10, 1970 - improvements destroyed
consist of 460 trees valued at P20,000.00. Bulldozed on December 10, 1970 -
Improvements destroyed consist of 254 trees valued at P65,600.00 - or a total value
of P85,600.00. (Exh. K, including submarkings)
k) LEODEGARIO GONZALES - Tax Declaration No. 36884; Bulldozed on February 24,
1971. Improvements destroyed consist of 946 trees, 40 ubi, 15 cavans harvest a
year of corn, all valued at P72,270.00. (Exh. L, including submarkings)
l) FILEMON LAVADOR - Tax Declaration No. 14036; 1 ha.; Bulldozed on February 5,
1971. Improvements destroyed consist of 675 trees and 9 cavans harvest a year of
corn all valued at P63,935.00. (Exh. M, including submarkings)
m) CANDELARIO LUMANTAO - Tax Declaration No. 18791; 1.660 ha. Bulldozed on
the second week of August, 1970 - Improvements destroyed consist of 1,377 trees,
a cornfield with 3 cavans per harvest thrice a year and a copra dryer all valued at
P193,960.00. Bulldozed on February 26, 1971 - Improvements destroyed consist of
44 trees, one pig pen and the fence thereof and the chicken roost all valued
at P12,650.00. Tax Declaration No. 33159; 3.500 has. Bulldozed in the last week of
March, 1971 - Improvements destroyed consist of 13 trees valued at
P1,550.00. Bulldozed in the latter part consist of 6 Bamboo groves and Ipil-Ipil trees
valued at P700.00 with total value of P208,860.00. (Exh. N, including submarkings)
n) AURELIA MATA - Tax Declaration No. 38071; .3333 ha.; Bulldozed sometime in the
first week of March, 1971 - Improvements destroyed consist of 344 trees and 45
cavans corn harvest per year valued at P30,965.00.(Exh. Q, including submarkings)
o) GAVINO QUIMBO - Tax Declaration No. 33231; 2.0978 has.; Tax Declaration No.
24377; .4960 ha. (.2480 ha. Belonging to your defendant) Bulldozed on September
12, 1970 - Improvements destroyed consist of 200 coconut trees and 500 banana
fruit trees valued at P68,500.00. Bulldozed on consist of 59 trees, 20 sacks cassava
and 60 cavans harvest a year of corn valued at P9,660.00 or a total value of
P78,160.00. (Exh. R, including submarkings)
p) SILVESTRE RAMOS - Tax Declaration No. 24288; 1.5568 has.; Bulldozed on
February 23, 1971. - Improvements destroyed consist of 737 trees, a cornfield with
3 cavans per harvest 3 times a year and 50 bundles of beatilis firewood, all valued
at P118,170.00. (Exh. S, including submarkings)
q) MARCELINO GONZALES - Tax Declaration No. 34057; .4049 ha. Bulldozed on
March 20, 1972 - Improvements destroyed consist of 5 coconut trees and 9 cavans
harvest a year of corn valued at P1,860.00. Bulldozed on July 4, 1972 - destroying
19 coconut trees valued at P5,700.00 or a total value of P7,560.00. (Exh. U,
including submarkings)
r) JUSTINO TITO -Tax Declaration No. 38072; .2000 has.; Bulldozed on February 25,
1971 - Improvements destroyed consist of 338 trees and 5 kamongay all valued at
P29,650.00. (Exh. T, including submarkings)
s) EMIGDIO BING SING UY and ANGELES SEPULVEDA UY - Transfer Certificate of
Title No. T-35 (Register of Deeds of Danao City); 140.4395 has.; Area bulldozed-
20.000 has. Bulldozed on August 5, 6 and 7, 1970 - destroying 565 coconut trees,
2-1/2 yrs. old, 65,422 banana groves with 3,600 mango trees, 3 years old, grafted
and about to bear fruit valued at P212,260.00. Bulldozed on November 24, 1970
and on February 16, 1971 - destroying 8,520 madri-cacao trees and 24 cylindrical
cement posts boundaries valued at P18,540.00. Bulldozed on November 24, 1970 -
destroying 90 coconut trees, 3 years old cornfield at 40 cavans per harvest and at 3
harvests a year (120 cavans) valued at P31,800.00. Bulldozed on February 16,
1971 - destroying 25,727 trees and sugarcane field value P856,725.00 or a total
value of P1,123,825.00. (Exh. V, including submarkings)
t) SALVADOR DAYDAY - Tax Declaration No. (unnumbered) dated September 14,
1967; 4.000 has. Bulldozed on May 6, 1971 - destroying 576 trees, 9 cavans yearly
of corn, 30 kerosene cans of cassava yearly valued at P4,795.00. Bulldozed from
March 26, 1973 to the first week of April, 1973 - destroying 108 trees and cornland,
6 cavans harvest per year valued at P53,900.00 or a total value of
P58,695.00. (Exh. A, including submarkings)
u) VENANCIA REPASO - Tax Declaration No. 18867; 1.1667 has. Bulldozed on April
15, 1971 - Improvements destroyed were 775 trees, 500 abaca, about to be reaped,
and being reaped 3 times a year 2 bamboo groves all valued at P47,700.00. (Exh.
O, including submarkings)
v) HERMOGENES TITO - Tax Declaration No. 38009; over one (1) ha. Bulldozed in
the latter part of September, 1970 - destroying 1 coconut tree, 18 sacks of corn per
year valued at P1,020.00. Bulldozed on March 15, 1973 - destroying 2 coconut
trees, 5 buri trees, 1 bamboo grove valued at P1,400.00. Bulldozed on March 26,
1974 - destroying 3 coconut trees valued at P1,500.00 with a total value of
P3,920.00. (Exh. P, including submarkings).
[6]

On April 22, 1975, petitioners moved to dismiss their complaint with the
trial court. The trial court granted the motion to dismiss, without prejudice to
respondents right to proceed with their counterclaim.
Hence, the trial proceeded only on the counterclaim.
On September 23, 1980, this Court issued a resolution in Administrative
Matter No. 6290 changing the venue of trial in Civil Case No. DC-56 to the
Regional Trial Court of Cebu City. The change was mainly in line with the
transfer of Judge Bernardo Ll. Salas, who presided over the case in Danao
City, to Cebu City.
The parties agreed to dispense with pre-trial, and for the evidence-in-chief
to be submitted by way of affidavits together with a schedule of documentary
exhibits, subject to additional direct examination, cross examination and
presentation of rebuttal evidence by the parties.
The trial court and later, the Court of Appeals, took note of the following
portions of affidavits submitted by petitioners:
xxx City Fiscal Jesus Navarro said that in August, 1967, he issued subpoenas to
several tenants in Cahumayhumayan upon representation by Cepoc, the latter
protesting failure by the tenants to continue giving Cepoc its share of the corn
produce. He learned from the tenants that the reason why they were reluctant and as a
matter of fact some defaulted in giving Cepoc its share, was that Uy Bing Sepulveda
made similar demands to them for his share in the produce, and that they did not know
to whom the shares should be given.
xxx xxx xxx
Jesus Capitan said that he is familiar with the place Cahumayhumayan and that the
properties in said locality were acquired by Durano and Company and Ramon Durano
III, but formerly owned by Cepoc.
When the properties of Ramonito Durano were cultivated, the owners of the plants
requested him that they be given something for their effort even if the properties do
not belong to them but to Cepoc, and that he was directed by Ramonito Durano to do
a listing of the improvements as well as the owners. After he made a listing, this was
given to Ramonito who directed Benedicto Ramos to do payment.
When he was preparing the list, they did not object to the removal of the plants
because the counterclaimants understood that the lands did not belong to them, but
later and because of politics a complaint was filed, and finally that when he was doing
the listing, the improvements were even pointed to him by the counterclaimants
themselves. (Exh. 48, Records, p. 385-386).
xxx xxx xxx
Ruperto Rom said that he had an occasion to work at Cepoc from 1947 to 1950
together with Benedicto and Tomas Ramos, the latter a capataz of the Durano Sugar
Mills. Owner of the properties, subject of the complaint, was Cepoc.
The persons who eventually tilled the Cepoc properties were merely allowed to do
cultivation if planted to corn, and for Cepoc to be given a share, which condition was
complied with by all including the counterclaimants. He even possessed one parcel
which he planted to coconuts, jackfruit trees and other plants. (Exh. 51, Records, pp.
383-384)
xxx xxx xxx
Co-defendant Ramon Durano III said that he agreed with the dismissal of the
complaint because his fathers wish was reconciliation with the defendants following
the death of Pedro Sepulveda, father of Angeles Sepulveda Uy, but inspite of the
dismissal of the complaint, the defendants still prosecuted their counterclaim.
The disputed properties were owned formerly by Cepoc, and then of the latter selling
the properties to Durano and Company and then by the latter to him as of September
15, 1970. As a matter of fact, TCT T-103 and T-104 were issued to him and that from
that time on, he paid the taxes.
At the time he purchased the properties, they were not occupied by the
defendants. The first time he learned about the alleged bulldozing of the
improvements was when the defendants filed the complaint of land grabbing against
their family with the Office of the President and the attendant publicity. Precisely his
family filed the complaint against them. (Exh. 57, Records, pp. 723-730)
xxx xxx xxx
Congressman Ramon Durano said he is familiar with the properties, being owned
originally by Cepoc. Thereafter they were purchased by Durano and Company and
then sold to Ramon Durano III, the latter now the owner. He filed a motion to dismiss
the case against Angeles Sepulveda et al. as a gesture of respect to the deceased Pedro
Sepulveda, father of Angeles Sepulveda, and as a Christian, said Pedro Sepulveda
being the former Mayor of Danao, if only to stop all misunderstanding between their
families.
xxx xxx xxx
He was the one who did the discovery of the properties that belonged to Cepoc, which
happened when he was doing mining work near Cahumayhumayan and without his
knowledge extended his operation within the area belonging to Cepoc. After Cepoc
learned of the substantial coal deposits, the property was claimed by Cepoc and then a
survey was made to relocate the muniments. Eventually he desisted doing mining
work and limited himself within the confines of his property that was adjacent to
Cepocs property. All the claimants except Sepulveda Uy were occupants of the
Cepoc properties. Durano and Company purchased the property adjacent to Cepoc,
developed the area, mined the coal and had the surveyed area planted with sugar cane,
and finally the notices to the occupants because of their intention to plant sugar cane
and other crops (T.S. N. December 4, 1985, pp. 31-32, 44-54, RTC Decision, pp. 16-
19, Records, pp. 842-845).
[7]

Petitioners also presented Court Commissioner, Engineer Leonidas
Gicain, who was directed by the trial court to conduct a field survey of the
disputed property. Gicain conducted surveys on the areas subjected to
bulldozing, including those outside the Cepoc properties. The survey --- which
was based on TCT No. T-103 and TCT No. T-104, titled in the name of
Ramon Durano III, and TCT No. 35, in the name of respondent Emigdio Bing
Sing Uy --- was paid for by petitioners.
[8]

Respondents, for their part, also presented their affidavits and supporting
documentary evidence, including tax declarations covering such portions of
the property as they formerly inhabited and cultivated.
On March 8, 1990, the RTC issued a decision upholding respondents
counterclaim. The dispositive portion of said decision reads:
THE FOREGOING CONSIDERED, judgment is hereby rendered in favor of the
counter claimants and against the plaintiffs directing the latter to pay the former:
a) With respect to Salvador Dayday P 14,400.00
b) With respect to Teofista Alcala 4,400.00
c) With respect to Faustino Alatan 118,400.00
d) With respect to Andrea Mata de Batulan 115,050.00
e) With respect to Glicerio Barriga 35,500.00
f) With respect to Beatriz Galzada 70,300.00
g) With respect to Bienvenido Castro 5,000.00
h) With respect to Ismael Garro 66,060.00
i) With respect to Julian Garro 48,600.00
j) With respect to Primitiva Garro 13,000.00
k) With respect to Teotimo Gonzales 63,200.00
l) With respect to Leodegario Gonzales 85,300.00
m) With respect to Filemon Lavador 70,860.00
n) With respect to Venancia Repaso 101,700.00
o) With respect to Candelario Lumantao 192,550.00
p) With respect to Hermogenes Tito 1,200.00
q) With respect to Aurelia Mata 28,560.00
r) With respect to Gavino Quimbo 81,500.00
s) With respect to Silvestre Ramos 101,700.00
t) With respect to Justino Tito 27,800.00
u) With respect to Marcelino Gonzales 2,360.00
v) With respect to Angeles Supelveda 902,840.00
P120,000.00 should be the figure in terms of litigation expenses and a separate
amount of P100,000.00 as attorneys fees.
Return of the properties to Venancia Repaso, Hermogenes Tito and Marcelino
Gonzales is hereby directed.
With respect to counter claimant Angeles Sepulveda Uy, return of the property to her
should be with respect to the areas outside of the Cepoc property, as mentioned in the
sketch, Exhibit 56-A.
Finally with costs against the plaintiffs.
SO ORDERED.
[9]

The RTC found that the case preponderated in favor of respondents, who
all possessed their respective portions of the property covered by TCT Nos. T-
103 and T-104 thinking that they were the absolute owners thereof. A number
of these respondents alleged that they inherited these properties from their
parents, who in turn inherited them from their own parents. Some others came
into the properties by purchase from the former occupants thereof. They and
their predecessors were responsible for the plantings and improvements on
the property. They were the ones who sought for the properties to be tax-
declared in their respective names, and they continually paid the taxes
thereto. Respondents maintained that they were unaware of anyone claiming
adverse possession or ownership of these lands until the bulldozing
operations in 1970.
As for Venancia Repaso, Hermogenes Tito and Marcelino Gonzales, the
Court found that the properties they laid claim to were not part of the land that
was purchased by Durano & Co. from Cepoc. Thus, it found the bulldozing of
these lands by petitioners totally unjustified and ordered not only the total
reimbursement of useful and necessary expenses on the properties but also
the return of these properties to Repaso, Tito and Gonzales, respectively. As
for all the other respondents, the RTC found their possession of the properties
to be in the concept of owner and adjudged them to be builders in good
faith.Considering that petitioners in the instant case appropriated the
improvements on the areas overran by the bulldozers, the RTC ruled that
(t)he right of retention to the improvements necessarily should be secured (in
favor of respondents) until reimbursed not only of the necessary but also
useful expenses.
[10]

On the matter of litigation expenses and attorneys fees, the RTC
observed that the trial period alone consisted of forty (40) trial dates spread
over a period of sixteen (16) years. At the time, respondents were represented
by counsel based in Manila, and the trial court took into consideration the
travel, accommodation and miscellaneous expenses of their lawyer that
respondents must have shouldered during the trial of the case.
Dissatisfied, petitioners appealed the RTC decision to the Court of
Appeals, which, in turn, affirmed the said decision and ordered the return of
the property to all the respondents-claimants, in effect modifying the RTC
decision which allowed return only in favor of respondents Repaso, Tito and
Gonzales.
In its decision, the Court of Appeals upheld the factual findings and
conclusions of the RTC, including the awards for actual damages, attorneys
fees and litigation expenses, and found additionally that the issuance of TCT
Nos. T-103 and T-104 in the name of Ramon Durano III was attended by
fraud. Evaluating the evidence before it, the Court of Appeals observed that
the alleged reconstituted titles of Cepoc over the property, namely, TCT No.
(RT-38) (T-14457) -4 and TCT No. (RT-39) (T-14456) -3 (Exhibits 19 and
20 of this case), which were claimed to be the derivative titles of TCT Nos.
T-103 and T-104, were not submitted in evidence before the RTC. Thus, in an
Order dated June 15, 1988, the RTC ordered Exhibits 19 and 20 deleted
from petitioners Offer of Exhibits. The Court of Appeals further noted that
even among the exhibits subsequently produced by petitioners before the
RTC, said Exhibits 19 and 20 were still not submitted.
[11]
Moreover, Cepoc
had no registered title over the disputed property as indicated in TCT Nos. T-
103 and T-104. Thus:
TRANSFER CERTIFICATE OF TITLE
NO. - 103 -
xxx xxx
IT IS FURTHER CERTIFIED that said land was originally registered on the N.A. day
of N.A., in the year nineteen hundred and N.A. in Registration Book
No. N.A. page N.A. of the Office of the Register of Deeds of N.A., as Original
Certificate of Title No. N.A., pursuant to a N.A. patent granted by the President of the
Philippines, on the N.A. day of N.A., in the year nineteen hundred and N.A., under
Act No. N.A.
This certificate is a transfer from Transfer Certificate of Title No. (RT-39) (T-14456) -
3 which is cancelled by virtue hereof in so far as the above described land is
concerned.
xxx xxx
TRANSFER CERTIFICATE OF TITLE
NO. T - 104 -
xxx xxx
IT IS FURTHER CERTIFIED that said land was originally registered on the N.A. day
of N.A., in the year nineteen hundred and N.A. in Registration Book
No. N.A. page N.A. of the Office of the Register of Deeds of N.A., as Original
Certificate of Title No. N.A., pursuant to a N.A. patent granted by the President of the
Philippines, on the N.A. day of N.A., in the year nineteen hundred and N.A., under
Act No. N.A.
This certificate is a transfer from Transfer Certificate of Title No. (RT-38) (T-14457) -
4 which is cancelled by virtue hereof in so far as the above described land is
concerned.
[12]

From the foregoing, the Court of Appeals concluded that the issuance of
the TCT Nos. T-103 and T-104 in favor of petitioner Ramon Durano III was
attended by fraud; hence, petitioners could not invoke the principle of
indefeasibility of title. Additionally, the Court of Appeals found that the alleged
Deed of Absolute Sale, undated, between Cepoc Industries, Inc. and Durano
& Co. was not notarized and thus, unregistrable.
The Court of Appeals went on to state that while, on the one hand, no
valid issuance of title may be imputed in favor of petitioners from the private
Deed of Sale and the alleged reconstituted titles of Cepoc that were not
presented in evidence, respondents, in contrast --- who although admittedly
had no registered titles in their names --- were able to demonstrate
possession that was public, continuous and adverse --- or possession in the
concept of owner, and which was much prior (one or two generations back for
many of respondents) to the claim of ownership of petitioners.
Thus, the Court of Appeals ordered the return of the properties covered by
TCT Nos. T-103 and T-104 to all respondents who made respective claims
thereto. Corollarily, it declared that petitioners were possessors in bad faith,
and were not entitled to reimbursement for useful expenses incurred in the
conversion of the property into sugarcane lands. It also gave no merit to
petitioners allegation that the actual damages awarded by the trial court were
excessive, or to petitioners argument that they should not have been held
personally liable for any damages imputable to Durano & Co.
Following is the dispositive portion of the decision of the Court of Appeals:
WHEREFORE, the appealed decision of the lower court in Civil Case No. DC-56 is
hereby AFFIRMED with MODIFICATION ordering the return of the respective
subject properties to all the defendants-appellees, without indemnity to the plaintiffs-
appellants as regards whatever improvements made therein by the latter. In all other
respects, said decision in affirmed.
Costs against plaintiffs-appellants.
SO ORDERED.
[13]

On October 29, 1998, the Court of Appeals denied petitioners motion for
reconsideration for lack of merit. Hence, this petition.
Petitioners assign the following errors from the CA decision:
1. The Court of Appeals erred in granting relief to the respondents who did not appeal
the decision of the lower court.
2. The Court of Appeals erred in collaterally attacking the validity of the title of
petitioner Ramon Durano III.
3. The respondents should not have been adjudged builders in good faith.
4. The petitioners should not be held personally liable for damages because of the
doctrine of separate corporate personality.
5. It was an error to hold that the respondents had proved the existence of
improvements on the land by preponderance of evidence, and in awarding
excessive damages therefor.
6. It was error to direct the return of the properties to respondents Venancia Repaso,
Hermogenes Tito and Marcelino Gonzales.
7. The award of litigation expenses and attorneys fees was erroneous.
8. The petitioners are not possessors in bad faith.
On their first assignment of error, petitioners contend that before the Court
of Appeals, they only questioned that portion of the RTC decision which
directed the return of the properties to respondents Repaso, Tito and
Gonzales. They argued that the return of the properties to all the other
respondents by the Court of Appeals was erroneous because it was not
among the errors assigned or argued by petitioners on appeal. Besides, since
respondents themselves did not appeal from the RTC decision on the issue of
return of the physical possession of the property, it is understood that
judgment as to them has already become final by operation of law. To support
its argument, petitioners cited the cases of Madrideo vs. Court of
Appeals
[14]
and Medida vs. Court of Appeals
[15]
, which held that whenever an
appeal is taken in a civil case an appellee who has not himself appealed
cannot obtain from the appellate court any affirmative relief other than the
ones granted in the decision of the court below.
Rule 51 of the New Rules of Civil Procedure provides:
Sec. 8. Questions that may be decided. --- No error which does not affect the
jurisdiction over the subject matter or the validity of the judgment appealed from
or the proceedings therein will be considered unless stated in the assignment of
errors, or closely related to or dependent on an assigned error and properly argued
in the brief, save as the court may pass upon plain errors and clerical errors.
We find untenable petitioners argument that since no party (whether
petitioners or respondents) appealed for the return of the properties to
respondents other than Repaso, Tito and Gonzales, that portion of the RTC
decision that awards damages to such other respondents is final and may no
longer be altered by the Court of Appeals. A reading of the provisions of
Section 8, Rule 51, aforecited, indicates that the Court of Appeals is not
limited to reviewing only those errors assigned by appellant, but also those
that are closely related to or dependent on an assigned error.
[16]
In other
words, the Court of Appeals is imbued with sufficient discretion to review
matters, not otherwise assigned as errors on appeal, if it finds that their
consideration is necessary in arriving at a complete and just resolution of the
case. In this case, the Court of Appeals ordered the return of the properties to
respondents merely as a legal consequence of the finding that respondents
had a better right of possession than petitioners over the disputed properties,
the former being possessors in the concept of owner. Thus, it held ---
Plaintiffs-appellants have to return possession of the subject property, not only to
defendants-appellees Venancia Repaso, Hermogenes Tito and Marcelino Gonzales but
to all other defendants-appellees herein, by virtue of the latters priority in time of
declaring the corresponding portions of the subject properties in their name and/or
their predecessors-in-interest coupled with actual possession of the same property
through their predecessors-in-interest in the concept of an owner. Plaintiffs-appellants
who had never produced in court a valid basis by which they are claiming possession
or ownership over the said property cannot have a better right over the subject
properties than defendants-appellees.
[17]

Moreover, petitioners reliance on the Madrideo and Medida cases is
misplaced. In the Madrideo case, the predecessors-in-interest of the Llorente
Group sold the disputed property to the Alcala Group, who in turn sold the
same to the spouses Maturgo. The RTC adjudged the spouses Maturgo
purchasers in good faith, such that they could retain their title to the property,
but held that the Lllorente Group was unlawfully divested of its ownership of
the property by the Alcala Group. The Alcala Group appealed this decision to
the Court of Appeals, who denied the appeal and ordered the reinstatement in
the records of the Registry of Deeds of the Original Certificates of Title of the
predecessors-in-interest of the Llorente Group. In setting aside the decision of
the Court of Appeals, this Court held that no relief may be afforded in favor of
the Llorente Group to the prejudice of the spouses Maturgo, who --- the Court
carefully emphasized --- were third parties to the appeal, being neither
appellants nor appellees before the Court of Appeals, and whose title to the
disputed property was confirmed by the RTC. The application of the ruling
in Madrideo to the instant case bears no justification because it is clear that
petitioners, in appealing the RTC decision, impleaded all the herein
respondents.
Meanwhile, in the Medida case, petitioners (who were the appellees
before the Court of Appeals) sought the reversal of a finding of the RTC
before the Supreme Court. The Court explained that since petitioners failed to
appeal from the RTC decision, they --- as appellees before the Court of
Appeals --- could only argue for the purpose of sustaining the judgment in
their favor, and could not ask for any affirmative relief other than that granted
by the court below. The factual milieu in Medida is different from that of the
instant case, where the return of the properties to respondents was not an
affirmative relief sought by respondents but an independent determination of
the Court of Appeals proceeding from its findings that respondents were long-
standing possessors in the concept of owner while petitioners were builders in
bad faith. Certainly, under such circumstances, the Court of Appeals is not
precluded from modifying the decision of the RTC in order to accord complete
relief to respondents.
Moving now to the other errors assigned in the petition, the return of the
properties to respondents Repaso, Tito and Gonzales was premised upon the
factual finding that these lands were outside the properties claimed by
petitioners under TCT Nos. T-103 and T-104. Such factual finding of the RTC,
sustained by the Court of Appeals, is now final and binding upon this Court.
In respect of the properties supposedly covered by TCT Nos. T-103 and T-
104, the Court of Appeals basically affirmed the findings of the RTC that
respondents have shown prior and actual possession thereof in the concept of
owner, whereas petitioners failed to substantiate a valid and legitimate
acquisition of the property --- considering that the alleged titles of Cepoc from
which TCT Nos. T-103 and T-104 were supposed to have derived title were
not produced, and the deed of sale between Cepoc and Durano & Co. was
unregistrable.
The records clearly bear out respondents prior and actual possession;
more exactly, the records indicate that respondents possession has ripened
into ownership by acquisitive prescription.
Ordinary acquisitive prescription, in the case of immovable property,
requires possession of the thing in good faith and with just title,
[18]
for a period
of ten years.
[19]
A possessor is deemed to be in good faith when he is not
aware of any flaw in his title or mode of acquisition of the property.
[20]
On the
other hand, there is just title when the adverse claimant came into
possession of the property through one of the modes for acquiring ownership
recognized by law, but the grantor was not the owner or could not transmit
any right.
[21]
The claimant by prescription may compute the ten-year period by
tacking his possession to that of his grantor or predecessor-in-interest.
[22]

The evidence shows that respondents successfully complied with all the
requirements for acquisitive prescription to set in. The properties were
conveyed to respondents by purchase or inheritance, and in each case the
respondents were in actual, continuous, open and adverse possession of the
properties. They exercised rights of ownership over the lands, including the
regular payment of taxes and introduction of plantings and
improvements. They were unaware of anyone claiming to be the owner of
these lands other than themselves until the notices of demolition in 1970 ---
and at the time each of them had already completed the ten-year prescriptive
period either by their own possession or by obtaining from the possession of
their predecessors-in-interest. Contrary to the allegation of petitioners that the
claims of all twenty-two (22) respondents were lumped together and
indiscriminately sustained, the lower courts (especially the RTC) took careful
consideration of the claims individually, taking note of the respective modes
and dates of acquisition. Whether respondents predecessors-in-interest in
fact had title to convey is irrelevant under the concept of just title and for
purposes of prescription.
Thus, respondents counterclaim for reconveyance and damages before
the RTC was premised upon a claim of ownership as indicated by the
following allegations:
(Y)our defendants are owners and occupants of different parcels of land located in
Barrio Cahumayhumayan, your defendants having occupied these parcels of land
for various periods by themselves or through their predecessors-in-interest, some
for over fifty years, and some with titles issued under the Land Registration
Act; xxxxx
[23]

Respondents claim of ownership by acquisitive prescription (in respect of
the properties covered by TCT Nos. T-103 and T-104) having been duly
alleged and proven, the Court deems it only proper that such claim be
categorically upheld. Thus, the decision of the Court of Appeals insofar as it
merely declares those respondents possessors in the concept of owner is
modified to reflect the evidence on record which indicates that such
possession had been converted to ownership by ordinary prescription.
Turning now to petitioners claim to ownership and title, it is uncontested
that their claim hinges largely on TCT Nos. T-103 and T-104, issued in the
name of petitioner Ramon Durano III. However, the validity of these
certificates of title was put to serious doubt by the following: (1) the certificates
reveal the lack of registered title of Cepoc to the properties;
[24]
(2) the alleged
reconstituted titles of Cepoc were not produced in evidence; and (3) the deed
of sale between Cepoc and Durano & Co. was unnotarized and thus,
unregistrable.
It is true that fraud in the issuance of a certificate of title may be raised
only in an action expressly instituted for that purpose,
[25]
and not collaterally as
in the instant case which is an action for reconveyance and damages. While
we cannot sustain the Court of Appeals finding of fraud because of this
jurisdictional impediment, we observe that the above-enumerated
circumstances indicate none too clearly the weakness of petitioners evidence
on their claim of ownership. For instance, the non-production of the alleged
reconstituted titles of Cepoc despite demand therefor gives rise to a
presumption (unrebutted by petitioners) that such evidence, if produced,
would be adverse to petitioners.
[26]
Also, the unregistrability of the deed of sale
is a serious defect that should affect the validity of the certificates of
title. Notarization of the deed of sale is essential to its registrability,
[27]
and the
action of the Register of Deeds in allowing the registration of the
unacknowledged deed of sale was unauthorized and did not render validity to
the registration of the document.
[28]

Furthermore, a purchaser of a parcel of land cannot close his eyes to facts
which should put a reasonable man upon his guard, such as when the
property subject of the purchase is in the possession of persons other than
the seller.
[29]
A buyer who could not have failed to know or discover that the
land sold to him was in the adverse possession of another is a buyer in bad
faith.
[30]
In the herein case, respondents were in open possession and
occupancy of the properties when Durano & Co. supposedly purchased the
same from Cepoc. Petitioners made no attempt to investigate the nature of
respondents possession before they ordered demolition in August 1970.
In the same manner, the purchase of the property by petitioner Ramon
Durano III from Durano & Co. could not be said to have been in good faith. It
is not disputed that Durano III acquired the property with full knowledge of
respondents occupancy thereon. There even appears to be undue haste in
the conveyance of the property to Durano III, as the bulldozing operations by
Durano & Co. were still underway when the deed of sale to Durano III was
executed on September 15, 1970. There is not even an indication that Durano
& Co. attempted to transfer registration of the property in its name before it
conveyed the same to Durano III.
In the light of these circumstances, petitioners could not justifiably invoke
the defense of indefeasibility of title to defeat respondents claim of ownership
by prescription. The rule on indefeasibility of title, i.e., that Torrens titles can
be attacked for fraud only within one year from the date of issuance of the
decree of registration, does not altogether deprive an aggrieved party of a
remedy at law. As clarified by the Court in Javier vs. Court of Appeals
[31]
---
The decree (of registration) becomes incontrovertible and can no longer be
reviewed after one (1) year from the date of the decree so that the only remedy of
the landowner whose property has been wrongfully or erroneously registered in
anothers name is to bring an ordinary action in court for reconveyance, which is
an action in personam and is always available as long as the property has not
passed to an innocent third party for value. If the property has passed into the
hands of an innocent purchaser for value, the remedy is an action for damages.
In the instant case, respondents action for reconveyance will prosper, it
being clear that the property, wrongfully registered in the name of petitioner
Durano III, has not passed to an innocent purchaser for value.
Since petitioners knew fully well the defect in their titles, they were
correctly held by the Court of Appeals to be builders in bad faith.
The Civil Code provides:
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 of 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.
Art. 451. In the cases of the two preceding articles, the landowner is entitled to
damages from the builder, planter or sower.
Based on these provisions, the owner of the land has three alternative
rights: (1) to appropriate what has been built without any obligation to pay
indemnity therefor, or (2) to demand that the builder remove what he had built,
or (3) to compel the builder to pay the value of the land.
[32]
In any case, the
landowner is entitled to damages under Article 451, abovecited.
We sustain the return of the properties to respondents and the payment of
indemnity as being in accord with the reliefs under the Civil Code.
On petitioners fifth assignment of error that respondents had not proved
the existence of improvements on the property by preponderance of evidence,
and that the damages awarded by the lower courts were excessive and not
actually proved, the Court notes that the issue is essentially
factual. Petitioners, however, invoke Article 2199 of the Civil Code which
requires actual damages to be duly proved. Passing upon this matter, the
Court of Appeals cited with approval the decision of the RTC which stated:
The counter claimants made a detail of the improvements that were damaged. Then
the query, how accurate were the listings, supposedly representing damaged
improvements. The Court notes, some of the counter claimants improvements in the
tax declarations did not tally with the listings as mentioned in their individual
affidavits. Also, others did not submit tax declarations supporting identity of the
properties they possessed. The disparity with respect to the former and absence of tax
declarations with respect to the latter, should not be a justification for defeating right
of reimbursement. As a matter of fact, no controverting evidence was presented by the
plaintiffs that the improvements being mentioned individually in the affidavits did not
reflect the actual improvements that were overran by the bulldozing operation. Aside
from that, the City Assessor, or any member of his staff, were not presented as
witnesses. Had they been presented by the plaintiffs, the least that can be expected is
that they would have enlightened the Court the extent of their individual holdings
being developed in terms of existing improvements. This, the plaintiffs defaulted. It
might be true that there were tax declarations, then presented as supporting documents
by the counter claimants, but then mentioning improvements but in variance with the
listings in the individual affidavits. This disparity similarly cannot be accepted as a
basis for the setting aside of the listing of improvements being adverted to by the
counter claimants in their affidavits. This Court is not foreclosing the possibility that
the tax declarations on record were either table computations by the Assessor or his
deputy, or tax declarations whose entries were merely copied from the old tax
declarations during the period of revision. (RTC Decision, p. 36, Records, p. 862)
[33]

The right of the owner of the land to recover damages from a builder in
bad faith is clearly provided for in Article 451 of the Civil Code. Although said
Article 451 does not elaborate on the basis for damages, the Court perceives
that it should reasonably correspond with the value of the properties lost or
destroyed as a result of the occupation in bad faith, as well as the fruits
(natural, industrial or civil) from those properties that the owner of the land
reasonably expected to obtain. We sustain the view of the lower courts that
the disparity between respondents affidavits and their tax declarations on the
amount of damages claimed should not preclude or defeat respondents right
to damages, which is guaranteed by Article 451. Moreover, under Article 2224
of the Civil Code:
Temperate or moderate damages, which are more than nominal but less than
compensatory damages, may be recovered when the court finds that some
pecuniary loss has been suffered but its amount cannot, from the nature of the
case, be proved with certainty.
We also uphold the award of litigation expenses and attorneys fees, it
being clear that petitioners acts compelled respondents to litigate and incur
expenses to regain rightful possession and ownership over the disputed
property.
[34]

The last issue presented for our resolution is whether petitioners could
justifiably invoke the doctrine of separate corporate personality to evade
liability for damages. The Court of Appeals applied the well-recognized
principle of piercing the corporate veil, i.e., the law will regard the act of the
corporation as the act of its individual stockholders when it is shown that the
corporation was used merely as an alter ego by those persons in the
commission of fraud or other illegal acts.
The test in determining the applicability of the doctrine of piercing the veil
of corporate fiction is as follows:
1. Control, not mere majority or complete stock control, but complete domination, not
only of finances but of policy and business practice in respect to the transaction
attacked so that the corporate entity as to this transaction had at the time no
separate mind, will or existence of its own;
2. Such control must have been used by the defendant to commit fraud or wrong, to
perpetuate the violation of a statutory or other positive legal duty, or dishonest and
unjust acts in contravention of plaintiffs legal rights; and
3. The aforesaid control and breach of duty must proximately cause the injury or unjust
loss complained of.
The absence of any one of these elements prevents piercing the corporate veil. In
applying the instrumentality or alter ego doctrine, the courts are concerned with
reality and not form, with how the corporation operated and the individual defendants
relationship to that operation.
[35]

The question of whether a corporation is a mere alter ego is purely one of
fact.
[36]
The Court sees no reason to reverse the finding of the Court of
Appeals. The facts show that shortly after the purported sale by Cepco to
Durano & Co., the latter sold the property to petitioner Ramon Durano III, who
immediately procured the registration of the property in his name. Obviously,
Durano & Co. was used by petitioners merely as an instrumentality to
appropriate the disputed property for themselves.
WHEREFORE, the instant petition is DENIED. The decision of the Court
of Appeals is MODIFIED to declare respondents with claims to the properties
covered by Transfer Certificate of Title Nos. T-103 and T-104 owners by
acquisitive prescription to the extent of their respective claims. In all other
respects, the decision of the Court of Appeals is AFFIRMED. Costs against
petitioners.
SO ORDERED.
Melo, (Chairman), Vitug, and Panganiban, JJ., concur.
Purisima, J., no part.



LLABI/SYNOPSIS
SECOND DIVISION
[G.R. No. 125683. March 2, 1999]
EDEN BALLATAN and SPS. BETTY MARTINEZ and CHONG CHY
LING, petitioners, vs. COURT OF APPEALS, GONZALO GO,
WINSTON GO, LI CHING YAO, ARANETA INSTITUTE OF
AGRICULTURE and JOSE N. QUEDDING, respondents.
D E C I S I O N
PUNO, J .:
This is a petition for review on certiorari of the decision of the Court of Appeals dated
March 25, 1996 in CA-G.R. CV No. 32472 entitled "Eden Ballatan, et. al., plaintiffs-appellees v.
Gonzalo Go and Winston Go, appellants and third-party plaintiffs-appellants v. Li Ching
Yao, et.al., third-party defendants."
[1]

The instant case arose from a dispute over forty-two (42) square meters of residential land
belonging to petitioners. The parties herein are owners of adjacent lots located at Block No. 3,
Poinsettia Street, Araneta University Village, Malabon, Metro Manila. Lot No. 24, 414 square
meters in area, is registered in the name of petitioners Eden Ballatan and spouses Betty Martinez
and Chong Chy Ling.
[2]
Lots Nos. 25 and 26, with an area of 415 and 313 square meters
respectively, are registered in the name of respondent Gonzalo Go, Sr.
[3]
On Lot No. 25,
respondent Winston Go, son of Gonzalo Go, Sr., constructed his house. Adjacent to Lot No. 26
is Lot No. 27, 417 square meters in area, and is registered in the name of respondent Li Ching
Yao.
[4]

In 1985, petitioner Ballatan constructed her house on Lot No. 24. During the construction,
she noticed that the concrete fence and side pathway of the adjoining house of respondent
Winston Go encroached on the entire length of the eastern side of her property.
[5]
Her building
contractor informed her that the area of her lot was actually less than that described in the
title. Forthwith, Ballatan informed respondent Go of this discrepancy and his encroachment on
her property. Respondent Go, however, claimed that his house, including its fence and pathway,
were built within the parameters of his father's lot; and that this lot was surveyed by Engineer
Jose Quedding, the authorized surveyor of the Araneta Institute of Agriculture (AIA), the owner-
developer of the subdivision project.
Petitioner Ballatan called the attention of the AIA to the discrepancy of the land area in her
title and the actual land area received from them. The AIA authorized another survey of the land
by Engineer Jose N. Quedding.
In a report dated February 28, 1985, Engineer Quedding found that the lot area of petitioner
Ballatan was less by a few meters and that of respondent Li Ching Yao, which was three lots
away, increased by two (2) meters. Engineer Quedding declared that he made a verification
survey of Lots Nos. 25 and 26 of respondents Go in 1983 and allegedly found the boundaries to
have been in their proper position. He, however, could not explain the reduction in Ballatan's
area since he was not present at the time respondents Go constructed their boundary walls.
[6]

On June 2, 1985, Engineer Quedding made a third relocation survey upon request of the
parties. He found that Lot No. 24 lost approximately 25 square meters on its eastern boundary,
that Lot No. 25, although found to have encroached on Lot No. 24, did not lose nor gain any
area; that Lot No. 26 lost some three (3) square meters which, however, were gained by Lot No.
27 on its western boundary.
[7]
In short, Lots Nos. 25, 26 and 27 moved westward to the eastern
boundary of Lot No. 24.
On the basis of this survey, on June 10, 1985, petitioner Ballatan made a written demand on
respondents Go to remove and dismantle their improvements on Lot No. 24. Respondents Go
refused. The parties, including Li Ching Yao, however, met several times to reach an agreement
on the matter.
Failing to agree amicably, petitioner Ballatan brought the issue before the
barangay. Respondents Go did not appear. Thus, on April 1, 1986, petitioner Ballatan instituted
against respondents Go Civil Case No. 772-MN for recovery of possession before the Regional
Trial Court, Malabon, Branch 169. The Go's filed their "Answer with Third-Party Complaint"
impleading as third-party defendants respondents Li Ching Yao, the AIA and Engineer
Quedding.
On August 23, 1990, the trial court decided in favor of petitioners. It ordered the Go's to
vacate the subject portion of Lot No. 24, demolish their improvements and pay petitioner
Ballatan actual damages, attorney's fees and the costs of the suit. It dismissed the third-party
complaint against: (1) AIA after finding that the lots sold to the parties were in accordance with
the technical description and verification plan covered by their respective titles; (2) Jose N.
Quedding, there being no privity of relation between him and respondents Go and his erroneous
survey having been made at the instance of AIA, not the parties; and (3) Li Ching Yao for failure
to prove that he committed any wrong in the subject encroachment.
[8]
The court made the
following disposition:
"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the
defendants, ordering the latter:
1. To demolish and remove all improvements existing and encroaching on plaintiff's
lot;
2. To clear, vacate and deliver possession of the encroached area to the plaintiffs;
3. To pay plaintiffs jointly and severally the following:
a) P7,800.00 for the expenses paid to the surveyors;
b) P5,000.00 for plaintiffs' transportation;
4. To pay plaintiffs, jointly and severally, attorney's fees equivalent to 25% of the
current market value of the subject matter in litigation at the time of execution; and
5. To pay the costs of suit.
The third-party complaint filed by third-party plaintiff Gonzalo Go and Winston Go
against third-party defendants Araneta Institute of Agriculture, Jose N. Quedding and
Li Ching Yao is hereby DISMISSED, without pronouncement as to costs.
SO ORDERED."
Respondents Go appealed. On March 25, 1996, the Court of Appeals modified the decision
of the trial court. It affirmed the dismissal of the third-party complaint against the AIA but
reinstated the complaint against Li Ching Yao and Jose Quedding. Instead of ordering
respondents Go to demolish their improvements on the subject land, the appellate court ordered
them to pay petitioner Ballatan, and respondent Li Ching Yao to pay respondents Go, a
reasonable amount for that portion of the lot which they encroached, the value to be fixed at the
time of taking. It also ordered Jose Quedding to pay respondents Go attorney's fees of P5,000.00
for his erroneous survey. The dispositive portion of the decision reads:
"WHEREFORE, premises considered, the decision appealed from is hereby
AFFIRMED insofar as the dismissal of the third-party complaint against Araneta
Institute of Agriculture is concerned but modified in all other aspects as follows:
1) Defendants-appellants are hereby ordered to pay plaintiffs-appellees the reasonable
value of the forty-two (42) square meters of their lot at the time of its taking;
2) Third-party defendant Li Ching Yao is hereby ordered to pay defendants-appellants
the reasonable value of the thirty-seven (37) square meters of the latter's lot at the time
of its taking; and
3) Third-party defendant Jose N. Quedding is hereby ordered to pay to defendants-
appellants the amount of P5,000.00. as attorney's fees.
LET THE RECORD of the case be remanded to the Regional Trial Court of Malabon
for further proceedings and reception of evidence for the determination of the
reasonable value of Lots Nos. 24 and 26.
SO ORDERED."
[9]

Hence, this petition. Petitioners allege that:
"RESPONDENT COURT OF APPEALS ERRED ON QUESTIONS OF LAW AND
GRAVELY ABUSED ITS DISCRETION AMOUNTING TO LACK OF
JURISDICTION WHEN:
1. IT APPLIED EQUITY OR EQUITABLE SOLUTIONS TO THE INSTANT
CASE IN UTTER DISREGARD AND IN VIOLATION OR GROSS IGNORANCE
OF EXISTING LAWS AND JURISPRUDENCE VESTING BASIC PROPERTY
RIGHTS TO HEREIN PETITIONERS. RESPONDENT COURT HAS NO POWER
TO APPLY/USE EQUITY IN THE PRESENCE OF EXISTING LAWS TO THE
CONTRARY.
2. UNDER THE GUISE OF APPLYING EQUITY BUT IN EFFECT A VERY
APPARENT PARTIALITY AND FAVOR TO RESPONDENTS GO, IT ORDERED
PAYMENT OF THE ENCROACHED AREA AT THE VALUE AT THE TIME OF
ITS TAKING AND NOT THE VALUE AT THE TIME OF PAYMENT, THEREBY
ENRICHING THE GO'S BUT DEPRIVING PETITIONERS OF THE FRUITS OR
INCREASE IN VALUE OF THEIR PROPERTY TO WHICH THEY ARE
ENTITLED UNDER THE LAW AS THE REGISTERED OWNERS WITH
TORRENS TITLE IN THEIR NAMES.
3. WHEN IT DID NOT DISMISS THE THIRD-PARTY COMPLAINT DUE TO
NON-PAYMENT OF ANY FILING OR DOCKET FEE.
4. WHEN IT DENIED PETITIONERS THE RECOVERY OF THE NECESSARY
EXPENSES IN PROTECTING THEIR RIGHTS IN THIS CASE."
[10]

Petitioners question the admission by respondent Court of Appeals of the third-party
complaint by respondents Go against the AIA, Jose Quedding and Li Ching Yao. Petitioners
claim that the third-party complaint should not have been considered by the Court of Appeals for
lack of jurisdiction due to third-party plaintiffs' failure to pay the docket and filing fees before
the trial court.
The third-party complaint in the instant case arose from the complaint of petitioners against
respondents Go. The complaint filed was for accion publiciana, i.e., the recovery of possession
of real property which is a real action. The rule in this jurisdiction is that when an action is filed
in court, the complaint must be accompanied by the payment of the requisite docket and filing
fees.
[11]
In real actions, the docket and filing fees are based on the value of the property and the
amount of damages claimed, if any.
[12]
If the complaint is filed but the fees are not paid at the
time of filing, the court acquires jurisdiction upon full payment of the fees within a reasonable
time as the court may grant, barring prescription.
[13]

Where the fees prescribed for the real action
have been paid but the fees of certain related damages are not, the court, although having
jurisdiction over the real action, may not have acquired jurisdiction over the accompanying claim
for damages.
[14]
Accordingly, the court may expunge those claims for damages, or allow, on
motion, a reasonable time for amendment of the complaint so as to allege the precise amount of
damages and accept payment of the requisite legal fees.
[15]
If there are unspecified claims, the
determination of which may arise after the filing of the complaint or similar pleading, the
additional filing fee thereon shall constitute a lien on the judgment award.
[16]
The same rule also
applies to third-party claims and other similar pleadings.
[17]

In the case at bar, the third-party complaint filed by respondents Go was incorporated in
their answer to the complaint. The third-party complaint sought the same remedy as the principal
complaint but added a prayer for attorney's fees and costs without specifying their amounts, thus:
"ON THE THIRD PARTY COMPLAINT
1. That summons be issued against Third-Party Defendants Araneta Institute of
Agriculture, Jose N. Quedding and Li Ching Yao;
2. That after hearing, they be sentenced to indemnify the Third-Party Plaintiffs for
whatever is adjudged against the latter in favor of the Plaintiffs;
3. That Third-Party Defendants be ordered to pay attorney's fees as may be proved
during trial;
4. That Third-Party Defendants be ordered to pay the costs.
Other just and equitable reliefs are also prayed for."
[18]

The Answer with Third-Party Complaint was admitted by the trial court without the
requisite payment of filing fees, particularly on the Go's prayer for damages.
[19]
The trial court did
not award the Go's any damages. It dismissed the third-party complaint. The Court of Appeals,
however, granted the third-party complaint in part by ordering third-party defendant Jose N.
Quedding to pay the Go's the sum of P5,000.00 as attorney's fees.
Contrary to petitioners' claim, the Court of Appeals did not err in awarding damages despite
the Go's failure to specify the amount prayed for and pay the corresponding additional filing fees
thereon. The claim for attorney's fees refers to damages arising after the filing of the complaint
against the Go's. The additional filing fee on this claim is deemed to constitute a lien on the
judgment award.
[20]

The Court of Appeals found that the subject portion is actually forty-two (42) square meters
in area, not forty-five (45), as initially found by the trial court; that this forty-two (42) square
meter portion is on the entire eastern side of Lot No. 24 belonging to petitioners; that on this said
portion is found the concrete fence and pathway that extends from respondent Winston Go's
house on adjacent Lot No. 25; that inclusive of the subject portion, respondents Go did not gain
nor lose any portion of Lots Nos. 25 and 26; that instead, Lot No. 27, on which respondent Li
Ching Yao built his house, encroached on the land of respondents Go, gaining in the process
thirty-seven (37) square meters of the latter's land.
[21]

We hold that the Court of Appeals correctly dismissed the third-party complaint against
AIA. The claim that the discrepancy in the lot areas was due to AIA's fault was not proved. The
appellate court, however, found that it was the erroneous survey by Engineer Quedding that
triggered these discrepancies. And it was this survey that respondent Winston Go relied upon in
constructing his house on his father's land. He built his house in the belief that it was entirely
within the parameters of his father's land. In short, respondents Go had no knowledge that they
encroached on petitioners' lot. They are deemed builders in good faith
[22]
until the time petitioner
Ballatan informed them of their encroachment on her property.
[23]

Respondent Li Ching Yao built his house on his lot before any of the other parties did.
[24]
He
constructed his house in 1982, respondents Go in 1983, and petitioners in 1985.
[25]
There is no
evidence, much less, any allegation that respondent Li Ching Yao was aware that when he built
his house he knew that a portion thereof encroached on respondents Go's adjoining land. Good
faith is always presumed, and upon him who alleges bad faith on the part of a possessor rests the
burden of proof.
[26]

All the parties are presumed to have acted in good faith. Their rights must, therefore, be
determined in accordance with the appropriate provisions of the Civil Code on property.
Article 448 of the Civil Code provides:
"Art. 448. The owner of the land on which anything has been built, sown or planted in
good faith, shall have the right to appropriate as his own the works, sowing or
planting, after payment of the indemnity provided for in Articles 546 and 548,
[27]
or to
oblige the one who built or planted to pay the price of the land, and the one who
sowed the proper rent. However, the builder or planter cannot be obliged to buy the
land if its value is considerably more than that of the building or trees. In such case,
he shall pay reasonable rent, if the owner of the land does not choose to appropriate
the building or trees after proper indemnity. The parties shall agree upon the terms of
the lease and in case of disagreement, the court shall fix the terms thereof."
The 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, and in the proper case, expenses
for pure luxury or mere pleasure. 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 stands to
the builder, planter or sower, is given to the owner of the land.
[28]

Article 448 has been applied to improvements or portions of improvements built by
mistaken belief on land belonging to the adjoining owner.
[29]
The facts of the instant case are
similar to those in Cabral v. Ibanez,
[30]
to wit:
"[P]laintiffs Geronima Zabala and her husband Justino Bernardo, constructed their
house in the belief that it was entirely within the area of their own land without
knowing at that time that part of their house was occupying a 14-square meter portion
of the adjoining lot belonging to the defendants, and that the defendants Bernardo M.
Cabral and Mamerta M. Cabral were likewise unaware of the fact that a portion of
plaintiff's house was extending and occupying a portion of their lot with an area of 14
square meters. The parties came to know of the fact that part of the plaintiff's house
was occupying part of defendant's land when the construction of plaintiff's house was
about to be finished, after a relocation of the monuments of the two properties had
been made by the U.S. Army through the Bureau of Lands, according to their
'Stipulation of Facts,' dated August 17, 1951.
On the basis of these facts, we held that:
"The Court, therefore, concludes that the plaintiffs are builders in good faith and the
relative rights of the defendant Mamerta Cabral as owner of the land and of the
plaintiffs as owners of the building is governed by Article 361 of the Civil Code (Co
Tao v. Joaquin Chan Chico, 46 Off. Gaz.5514). Article 361 of the old Civil Code has
been reproduced with an additional provision in Article 448 of the new Civil Code,
approved June 18, 1949."
[31]

Similarly, in Grana and Torralba v. Court of Appeals,
[32]
we held that:
"Although without any legal and valid claim over the land in question, petitioners,
however, were found by the Court of Appeals to have constructed a portion of their
house thereon in good faith. Under Article 361 of the old Civil Code (Article 448 of
the new), the owner of the land on which anything has been built in good faith shall
have the right to appropriate as his own the building, after payment to the builder of
necessary or useful expenses, and in the proper case, expenses for pure luxury or mere
pleasure, or to oblige the builder to pay the price of the land. Respondents, as
owners of the land, have therefore the choice of either appropriating the portion
of petitioners' house which is on their land upon payment of the proper
indemnity to petitioners, or selling to petitioners that part of their land on which
stands the improvement. It may here be pointed out that it would be impractical
for respondents to choose to exercise the first alternative, i.e., buy that portion of
the house standing on their land, for in that event the whole building might be
rendered useless. The more workable solution, it would seem, is for respondents
to sell to petitioners that part of their land on which was constructed a portion of
the latter's house. If petitioners are unwilling or unable to buy, then they must
vacate the land and must pay rentals until they do so. Of course, respondents
cannot oblige petitioners to buy the land if its value is considerably more than
that of the aforementioned portion of the house. If such be the case, then
petitioners must pay reasonable rent. The parties must come to an agreement as
to the conditions of the lease, and should they fail to do so, then the court shall fix
the same."
[33]

In light of these rulings, petitioners, as owners of Lot No. 24, may choose to purchase the
improvement made by respondents Go on their land, or sell to respondents Go the subject
portion. If buying the improvement is impractical as it may render the Go's house useless, then
petitioners may sell to respondents Go that portion of Lot No. 24 on which their improvement
stands. If the Go's are unwilling or unable to buy the lot, then they must vacate the land and,
until they vacate, they must pay rent to petitioners. Petitioners, however, cannot compel
respondents Go to buy the land if its value is considerably more than the portion of their house
constructed thereon. If the value of the land is much more than the Go's improvement, then
respondents Go must pay reasonable rent. If they do not agree on the terms of the lease, then
they may go to court to fix the same.
In the event that petitioners elect to sell to respondents Go the subject portion of their lot, the
price must be fixed at the prevailing market value at the time of payment. The Court of Appeals
erred in fixing the price at the time of taking, which is the time the improvements were built on
the land. The time of taking is determinative of just compensation in expropriation
proceedings. The instant case is not for expropriation. It is not a taking by the state of private
property for a public purpose upon payment of just compensation. This is a case of an owner
who has been paying real estate taxes on his land but has been deprived of the use of a portion of
this land for years. It is but fair and just to fix compensation at the time of payment.
[34]

Article 448 and the same conditions abovestated also apply to respondents Go as owners and
possessors of their land and respondent Li Ching Yao as builder of the improvement that
encroached on thirty-seven (37) square meters of respondents Go's land.
IN VIEW WHEREOF, the decision of respondent Court of Appeals is modified as follows:
(1) Petitioners are ordered to exercise within thirty (30) days from finality of this decision
their option to either buy the portion of respondents Go's improvement on their Lot No. 24, or
sell to said respondents the portion of their land on which the improvement stands. If petitioners
elect to sell the land or buy the improvement, the purchase price must be at the prevailing market
price at the time of payment. If buying the improvement will render respondents Go's house
useless, then petitioners should sell the encroached portion of their land to respondents Go. If
petitioners choose to sell the land but respondents Go are unwilling or unable to buy, then the
latter must vacate the subject portion and pay reasonable rent from the time petitioners made
their choice up to the time they actually vacate the premises. But if the value of the land is
considerably more than the value of the improvement, then respondents Go may elect to lease the
land, in which case the parties shall agree upon the terms of the lease. Should they fail to agree
on said terms, the court of origin is directed to fix the terms of the lease.
From the moment petitioners shall have exercised their option, respondents Go shall pay
reasonable monthly rent up to the time the parties agree on the terms of the lease or until the
court fixes such terms.
(2) Respondents Go are likewise directed to exercise their rights as owners of Lots Nos. 25
and 26, vis-a-vis respondent Li Ching Yao as builder of the improvement that encroached on
thirty seven (37) square meters of respondents Go's land in accordance with paragraph one
abovementioned.
(3) The Decision of the Court of Appeals ordering Engineer Quedding, as third-party
defendant, to pay attorney's fees of P5,000.00 to respondents Go is affirmed. The additional
filing fee on the damages constitutes a lien on this award.
(4) The Decision of the Court of Appeals dismissing the third-party complaint against
Araneta Institute of Agriculture is affirmed.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Quisumbing, and Buena, JJ., concur.