THIRD DIVISION

[G.R. No. 97761. April 14, 1999]

AGUEDA DE VERA, MARIO DE LA CRUZ, EVANGELINE DELA CRUZ, and EDRONEL DE LA CRUZ, petitioners,
vs. HON. COURT OF APPEALS, and RICARDO RAMOS, respondents.

DECISION
PURISIMA, J.:

At bar is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court, seeking to reverse and
set aside the Decision[1] of the Court of Appeals[2] in CA-G.R. CV No. 21507 affirming with modification the
Decision[3] dated August 2, 1988 of the Regional Trial Court, Branch 19, [4] Cauayan, Isabela, in Civil Case No. Br. II-
1861.
From the records on hand, it appears that:
On January 14, 1983, private respondent Ricardo Ramos filed a Complaint[5] against the herein petitioners for
recovery of property with damages, docketed as Civil Case No. Br II-1861 before the said court of origin.On June 29,
1983, an Amended Complaint[6] was presented the pertinent portion of which alleged:

xxx

2. That the plaintiff is the legal and absolute owner of a certain parcel of land known as Lot 2, H-4-617, and
particularly described as follows:

Bounded on the NE., by Road; on the SW, by Provincial Road; and on the W., by National Road. containing an area
of 3,670 square meters, more or less.

his title thereto being evidenced by Original Certificate of Title No. P-5619 of the Register of Deeds of Isabela;

3. That the defendants are occupying a triangular portion of the above-described property containing an area of 22
square meters, more or less, and which is bounded as follows:

On the NE., by the Road; on the SE., by Lot 3841-B of the subdivision plan, Psd 2-02-013907

wherein they have constructed a house of strong and permanent materials this year 1983 after removing their
previous building of light materials in January or February of 1970;

4. That the plaintiff has demanded that the defendants remove their improvement thereon and vacate the said
portion, ... but the defendants have refused and failed, without any just or lawful cause to do so, to the present
time; xxx

In their Answer,[7] the herein petitioners theorized, inter alia, that they have been in possession not only of 22
square meters but 70 square meters of land through their predecessor-in-interest, Teodoro de la Cruz (husband of
defendant-appellant Agueda De Vera and father of the rest of the defendants-appellants) and subsequently by
themselves, as owners, before 1956; that said 70 square meter area occupied by them is a portion of Lot 7005, Cad
211, over which their predecessor-in-interest, Teodoro de la Cruz, had, during his lifetime, a pending Miscellaneous
Sales Application which was given due course and favorably recommended by the District Land Officer for Isabela to
the Director of Lands; that Teodoro de la Cruz also declared the said land for taxation purposes and after his death,
by his heirs, and that plaintiff-appellees cause of action is already barred by prescription and/or laches.
 During the pre-trial conference on November 15, 1983, as agreed upon by the parties, the trial court appointed
the Chief of the Survey Party of the Bureau of Lands in Cauayan, Isabela, as Commissioner of the court to conduct a
relocation survey of subject property and to indicate in the survey returns or commissioners report whether or not the
land in dispute forms part of the property and road-right-of-way of the private respondent.
On April 30, 1984, the said Commissioner submitted his Report On The Result Of The Relocation Survey,
[8]
relevant portion of which, stated:

III. RESULT OF THE RELOCATION SURVEY

Attached herewith, which is made part of this report, is a Relocation Survey Plan No. 2-02-000160 duly approved by
the Regional Director, Region II, Bureau of Lands, Tuguegarao, Cagayan, showing the result of the relocation survey,
to wit:

1. Area bounded by black lines designated as Lot 9841-A, Psd-2-02-013907 a portion of Lot 7004, Cad. 211 with an
area of 22 Sq. Meters represents the land being covered by Transfer Certificate of Title No. T-133705 of the Plaintiff
Ricardo Ramos;

xxx

4. Areas designated as portions A, B and C, represents the land in question between the parties in Civil Case No. Br.
II-1861, which portions are respectively described, to wit:

a. Portion A with an area of 51 Square Meters, which is a portion of Lot 7005, Cad. 211, represents the land being
claimed by the defendants Agueda de Vera, Et al, said area allegedly being covered by Miscellaneous Sales
Application of their predecessor-in-interest the late Teodoro dela Cruz;

b. Portion B with an area of 5 Square Meters, represents that part of Lot 9841-B, Psd-2-02-013905 of Ricardo
Ramos, being occupied by the house of defendants Agueda de Vera, Et al;

c. Portion C with an area of 18 Square Meters, represents that part of Lot 9841-B, Psd-2-02-013907 of Ricardo
Ramos, being occupied by the house of defendants, Agueda de Vera, Et al;

5. Portion A being a part of Lot 7005, Cad. 211, is separate and distinct from the 22 Square Meters lot covered by
Transfer Certificate of Title No. T-133705 of the plaintiff Ricardo Ramos, said 22 Sq. Meters lot being a part of Lot
7004, Cad. 211;

xxx

7. That the adjoining boundary of Lot 9841-A, Psd-2-02-013907 on the Northwest, which appears as National Road
in Transfer Certificate of Title No. T-133705 is erroneous, considering that there is still a gap (designated as Portion A
in the attached Relocation Plan) between said Lot 9841-A and that of the 60 meters National Road-right-of-way;

xxx
On October 24, 1984, the private respondent sent in his Opposition[9] to the aforesaid Report, branding the
same as erroneous. On March 4, 1985, after the filing of private respondents Reply[10] to petitioners Rejoinder,[11] the
court of origin issued an Order,[12] holding thus:

Since the purpose of the appointment of the Court Commissioner is to determine whether or not the area occupied by
the defendants is within the titled property of the plaintiff, the relocation of the land in question became imperative. As
a matter of fact, the record shows that both parties agreed to said relocation (See order of November 15, 1983). It
must be noticed that the report of the Commissioner is adverse to the plaintiff as the formers findings show that only
a portion of 22 square meters of the plaintiffs lot is occupied by the defendants and that between the National Road
and the plaintiffs property is an area of 51 square meters (portion A) which the Commissioner found to be part of Lot
7005, Cad. 211.
Inasmuch as the plaintiff was given the full opportunity to check the accurateness of Commissioners Report and
there being no proof adduced by him that the same is erroneous, except the blue print plan of the subdivision survey
Psd-2-02-013907, the execution of which, the defendants had no participation whatsoever, the Court has no other
alternative but to reject the plaintiffs objection to said report.

WHEREFORE, in view of the foregoing considerations and finding no error in the report of the Commissioner, the
Court hereby approves the same.

SO ORDERED.(Underline supplied)

After trial on the merits, or on August 2, 1988, to be precise, the same trial court promulgated its Decision, [13] the
decretal portion of which is to the following effect:

WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered:

(1) DECLARING the plaintiff the owner of all lands adjoining Lot 9841-A in the West up to the National Road, and
ORDERING the defendants, their agents, representatives, or any person or persons acting on their authority, to
vacate the same and to deliver the possession thereof to the plaintiff;

(2) ORDERING the defedants (sic) to remove, at their expense, all improvements they have constructed or erected
thereon within thirty (30) days from the finality of this decision;

(3) ORDERING the defendants, jointly and severally, to pay the plaintiff a monthly rent of P273.70 from April 27,
1981, and an additional P724.70 a month from receipt of this decision until the possession of saidland (sic) is
delivered to the plaintiff;

(4) ORDERING the defendants, jointly and severally, to pay the plaintiff the sum of P5,000.00 as attorneys fees; and

(5) ORDERING the defendants, jointly and severally, to pay the costs.

SO ORDERED.

Not satisfied with the judgment below, petitioners elevated the case to the Court of Appeals, arguing, among
others, that: (1) the trial court erred in not dismissing the complaint on the ground of laches; (2) the trial courterred in
holding that defendants-appellants are possessors in bad faith and (3) that defendants-appellants cannot be made
liable to plaintiff-appellee for rental payments for the use of the disputed property, for attorneys fees and the costs of
suit.
On March 21, 1991, the Court of Appeals decided the case, modifying the Decision below and disposing thus:

CONFORMABLY TO THE FOREGOING, the judgment appealed from is hereby MODIFIED, dismissing plaintiff-
appellees complaint as regards Portion A, consequently deleting the monthly rents decreed by the lower court in
favor of plaintiff-appellee as regards said portion, and is AFFIRMED in all other respects.

No pronouncement as to costs.

SO ORDERED.

Undaunted, petitioners have come to this Court via the present petition; contending that:

THE DECISION DATED 13 MARCH 1991 (ANNEX A) RENDERED WITH GRAVE ABUSE OF DISCRETION BY
RESPONDENT HONORABLE COURT OF APPEALS, INSOFAR AS IT AFFIRMS THE DECISION DATED 02
AUGUST 1988 OF THE LOWER COURT, WAS PASSED ON A QUESTION OF SUBSTANCE IN A WAY NOT IN
ACCORD WITH LAW AND WITH THE APPLICABLE DECISIONS OF THIS HONORABLE COURT, CONSIDERING
THAT:
 I.

LACHES CAN DEFEAT THE TITLE OF PRIVATE RESPONDENT OVER THE PROPERTIES DESCRIBED BY
RESPONDENT HONORABLE COURT OF APPEALS AS PORTIONS B AND C OF THE DISPUTED PROPERTY
CONSIDERING THAT SAID PRIVATE RESPONDENT HAD KNOWLEDGE OF THE PRESENCE OF THE
PETITIONERS ON SAID PORTIONS OF THE PROPERTY EVEN BEFORE HE APPLIED IN 1947 FOR A
HOMESTEAD PATENT THEREFOR.

II.

PETITIONERS WERE NOT POSSESSORS IN BAD FAITH OF PORTIONS B AND C OF THE DISPUTED
PROPERTY: THUS, THEY CANNOT BE MADE LIABLE TO PRIVATE RESPONDENT FOR THEIR USE THEREOF.

The pivotal issue for determination here is: whether or not the Court of Appeals erred in adjudging the herein
petitioners as possessors and builders in bad faith of Portions B and C of the property under controversy.
Germane records on hand disclose that on September 20, 1947, private respondent Ricardo Ramos filed a
homestead application for the parcel of land in litigation here. His Homestead Application No. 4-617 was approved by
the District Land Officer on November 22, 1947. In 1949, the said private respondent had fully complied with the
cultivation and residence requirements of the Public Land Act. Thus, on December 15, 1955, Homestead Patent No.
V-62617[14] was issued to homestead applicant Ricardo Ramos, on the basis of which Original Certificate of Title No.
P-5619[15] was issued by the Register of Deeds of Isabela, covering an area of 9 hectares, 28 acres and 20 centares.
After the issuance of his Homestead Patent No. V-62617, Ricardo Ramos brought a complaint for recovery of
possession against several people before the then Court of First Instance of Isabela, docketed as Civil Case No. Br.
II-162, entitled "Ricardo Ramos vs. Eleuterio Viernes, et al. Therein, a decision for the ejectment of the said
defendants was rendered.[16]
However, a protracted litigation between Ricardo Ramos and the defendants in Civil Case No Br. II-162, led by
Jose Ganadin, ensued with the latter averring that Homestead Patent No. V-62617 and Original Certificate No. P-
5619 were obtained in violation of Section 19 of the Public Land Law, as amended by Act No. 456, and consequently,
null and void. The case eventually reached this Court which, on January 27, 1981, came out with a decision
adjudging the validity of the title of the private respondent, Ricardo Ramos.[17]
On April 27, 1981, private respondent wrote petitioners reminding them that their house is on his titled property,
and asking them, (de Veras) whether they were going to buy the portion occupied by them (de Veras) or to lease the
same on a yearly or monthly basis; otherwise, he (Ricardo Ramos) would be constrained to take proper legal action
against them. But the letter of private respondent was ignored by petitioners.
In light of the factual background of the case, the Court is of the irresistible conclusion that the principle of
laches finds no application under the premises.
Laches is the failure of or neglect for an unreasonable and unexplained length of time to do that which by
exercising due diligence, could or should have been done earlier, or to assert a right within reasonable time,
warranting a presumption that the party entitled thereto has either abandoned it or declined to assert it.[18]
Fundamentally, laches is an equitable doctrine, its application is controlled by equitable considerations.
[19]
Concomitantly, it is a better rule that courts, under the principle of equity, will not be guided or bound strictly by the
statute of limitations or the doctrine of laches when to do so, manifest wrong or injustice would result. [20]
Under the factual milieu of the case at bar, private respondents failure to assert his rights over subject parcel of
land for 23 years (1958-81) was due to the prolonged litigation he was embroiled with the herein petitioners, in Civil
Case No. Br. II -162. As the validity of his patent itself was being questioned, the cause of action of private
respondent vis-a-vis the land he acquired by homestead patent had to be kept dormant, pending determination of the
validity of the said homestead patent. Therefore, the delay is not unreasonable and considering that the essence of
laches is the unreasonableness of the delay in the prosecution or institution of a case, the principle of laches finds no
room for application here. The Court of Appeals explained thus:

xxx It is inequitous for Us to consider said 23 year period, on which plaintiff-appellees ownership over said portions
still hanged as a big question, as part of plaintiff-appellees alleged delay in enforcing his rights where the pendency
of said question precisely crippled his actions. Sans said 23 year period, plaintiff-appellee, far from being neglectful,
has been vigilant over his rights, as evidenced by his letter (1981) and the ultimate filing of the instant complaint
(1983).[21]
 Furthermore, the question of laches is addressed to the sound discretion of the court, and we find no fact or
circumstance of such substance as to disturb the lower courts finding on this point. Thus, from the foregoing, laches
cannot defeat private respondents ownership and recovery of possession of Portions B and C.
In theorizing that their possession of the land in litigation could not have been in bad faith, petitioners alleged
that their possession over Portions B and C was by virtue of a valid title, viz: the Miscellaneous Sales Application, and
in possessing the said Portions B and C, they honestly believed that the same formed part of the lot with an area of
70 square meters covered by their Miscellaneous Sales Application; private respondents knowledge that
they (petitioners) had been occupying the said portions for several years prior to his filing of the application for a
homestead patent, opens to question the validity of his homestead patent and the title derived therefrom; petitioners
reasoned out.
Article 526 of the New Civil Code, provides:

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

He is deemed a possessor in bad faith who possesses in any case contrary to the foregoing.

Mistake upon a doubtful or difficult question of law may be the basis of good faith.

In his Commentaries and Jurisprudence on the Civil Code of the Philippines, Vol. II, 1993 ed., Dr. Arturo
Tolentino opines:

In distinguishing good faith and bad faith possession, the Code refers to the manner of acquisition in general. A
possessor in good faith is one who is unaware that there exists a flaw which invalidates his acquisition of the thing.
Good faith consists in the possessors belief that the person from whom he received a thing was the owner of the
same and could convey his title. It consists in an honest intention to abstain from taking any unconscientious
advantage of another, and is the opposite of fraud. Since good faith is a state of the mind, and is not a visible,
tangible fact that can be seen or touched, it can only be determined by outward acts and proven conduct. It implies
freedom from knowledge and circumstances which ought to put a person on inquiry. xxx [22]

Records disclose that prior to the construction in 1983 of petitioners house on the land under
controversy (Portions B and C), a demand letter dated April 27, 1981 was sent by private respondent to the
petitioners, informing them that the land they were possessing and occupying is within his (private respondents) titled
property.
In the same letter, the private respondent gave petitioner Agueda de Vera the option to either pay him the value
of the property or lease the same on a yearly or monthly basis. However, the contending parties failed to reach a
compromise agreement. The lower court found, that the defendants (herein petitioners) are occupying ... an area of
22 square meters (Portions B and C),..., in which land, defendants constructed a house of strong materials
in 1983 after dismantling heir (sic) previous building erected thereon on or about January or February, 1970.[23]
The facts and circumstances aforestated are outward acts and proven conduct indicating bad faith of petitioners
as possessor and builder.
Articles 449, 450 and 451 of the New Civil Code, read:

Article 449 - He who builds ... in bad faith on the land of another, losses what is built, ... without right to indemnity.

xxx xxx xxx

Article 450 - The owner of the land on which anything has been built, ... in bad faith may demand the demolition of
the work, ... in order to replace things in their former condition at the expense of the person who built, ...; or he may
compel the builder ... to pay the price of the land, ...

- and -

Article 451 - In the cases of the two preceding articles, the landowner is entitled to damages from the builder...
 Under the aforecited Articles 449 and 450, the landowner has three alternative rights, either:
1. to appropriate what has been built without any obligation to pay indemnity therefor; or
2. to demand the builder to remove what he had built; or
3. to compel the builder to pay the value of the land.
In any event, he (landowner) is entitled to be indemnified by the builder in bad faith, pursuant to Article 451 supra.
In the case under consideration, private respondent Ricardo Ramos availed of the second alternative, [24] which
option is legally feasible under the attendant facts and circumstances.
Lastly, the land titles relied upon by herein petitioners do not suffice to establish good faith on their part. Even
the action on their public land application is only recommendatory and not yet final, as it was still subject to the
approval of the Director of Lands. The tax declarations prove only the de Veras claim of ownership, and when not
supported by other effective evidence, are no proof of the right of possession of subject realty.[25]
In contrast, Portions B and C are covered by Original Certificate of Title No. P-5619 and Transfer Certificate of
Title No. T-133705, issued in the name of private respondent Ricardo Ramos, which is conclusive as to all matters
therein contained, particularly, the identity of the owner of the land covered thereby.
All things studiedly considered, the court believes, and so holds, that the respondent court erred not in
modifying the decision of the trial court of origin in Civil Case No. Br. II-1861.
WHEREFORE, for lack of merit, the Petition is hereby DENIED and the Decision of the Court of Appeals in CA
GR CV No. 21507 AFFIRMED in toto. No pronouncement as to costs.
SO ORDERED.
Romero, (Chairman), Vitug, Panganiban, and Gonzaga-Reyes, JJ., concur.
Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. Nos. L-20300-01 April 30, 1965

ANTONINO DIZON, ADELAIDA D. REYES, CONSOLACION DEGOLLACION, ET AL., petitioners,

vs.
HON. JUAN DE G. RODRIGUEZ, as Secretary of Agriculture & Natural Resources,
HERACLITO MONTALBAN, as Acting Director of Fisheries,
MIGUEL TOLENTINO, REPUBLIC OF THE PHILIPPINES, ET AL., respondents.

-----------------------------

G.R. Nos. L-20355-56 April 30, 1965

REPUBLIC OF THE PHILIPPINES, THE SECRETARY OF AGRICULTURE & NATURAL RESOURCES, DIRECTOR OF FISHERIES, MIGUEL
TOLENTINO, and CLEMENCIA TOLENTINO, petitioners,
vs.
HON. COURT OF APPEALS, ANTONINO DIZON, ADELAIDA D. REYES, CONSOLACION DE DEGOLLACION, ARTEMIO DIZON,
AMORANDO DIZON, REMEDIOS MANAPAT SY-JUCO, and LEONILA SIOCHI GOCO,respondents.

Jalandoni and Jamir for petitioners Antonino Dizon, et al.

Office of the Solicitor General for respondents Republic, et al.
Miguel Tolentino for and in his own behalf.

BARRERA, J.:

These are separate appeals instituted by Antonino Dizon, et al. (G.R. Nos. L-20300-01) and the Republic of the Philippines, et al.
(G.R. Nos. L-20355-56), from a single decision of the Court of Appeals, as modified by its resolution of August 20, 1962, holding
that Lots Nos. 49 and 1 of subdivision plan Psd.-27941 are parts of the navigable boundary of the Hacienda Calatagan, covered
by Transfer Certificate of Title No. T-722, and declaring the occupants Dizon, et al. possessors in good faith, entitled to remain
therein until reimbursed, by the intervenor Republic of the Philippines, of the necessary expenses made on the lots in the sum
of P40,000.00 and P25,000.00, respectively.

The facts of these cases, briefly stated, are as follows:

Hacienda Calatagan owned by Alfonso and Jacobo Zobel was originally covered by TCT No. T-722. In 1938, the Hacienda
constructed a pier, called "Santiago Landing," about 600 meters long from the shore into the navigable waters of the Pagaspas
Bay, to be used by vessels loading sugar produced by the Hacienda sugar mill. When the sugar mill ceased its operation in 1948,
the owners of the Hacienda converted the pier into a fishpond dike and built additional strong dikes enclosing an area of about
30 hectares (of the Bay) and converted the same into a fishpond. The Hacienda owners also enclosed a similar area of about 37
hectares of the Bay on the other side of the pier which was also converted into a fishpond.

In 1949, the Zobels ordered the subdivision of the Hacienda by ordering the preparation of the subdivision plan Psd-27941
wherein fishpond No. 1 (with 30 hectares) was referred to as Lot No. 1 and fishpond No. 2 (with 37 hectares) was referred to as
Lot No. 49. The plan was approved by the Director of Lands, and the Register of Deeds issued, from TCT No. T-722, TCT No. 2739
for lots 49 and 1 in the name of Jacobo Zobel.

In 1950, Jacobo Zobel sold to Antonino Dizon, et al. Lot 49 for which said purchasers obtained at first TCT No. T-2740 and later T-
4718, Lot 1, on the other hand, was purchased by Carlos Goco, et al., who, in turn, sold one-half thereof to Manuel Sy-Juco, et
al. Transfer Certificate of Title No. 4159 was issued in the names of the Gocos and Sy-Jucos.
On May 24, 1952, Miguel Tolentino filed with the Bureau of Fisheries an application for ordinary fishpond permit or lease for Lot
49, and an application for a similar permit, for Lot 1, was filed by his daughter Clemencia Tolentino.

The Dizons, Sy-Jucos, and Gocos filed a protest with the Bureau of Fisheries, claiming the properties to be private land covered
by a certificate of title. This protest was dismissed by the Director of Fisheries, on the ground that the areas applied for are
outside the boundaries of TCT No. T-722 of Hacienda Calatagan. This ruling was based upon the findings of the committee
created by the Secretary of Agriculture and Natural Resources to look into the matter, that Lots 1 and 49 are not originally
included within the boundaries of the hacienda.

On October 1, 1954, the protestants Dizons, Sy-Jucos, and Gocos filed an action in the Court of First Instance of Manila (Civ. Case
No. 24237) to restrain the Director of Fisheries from issuing the fishpond permits applied for by the Tolentinos. The court
dismissed this petition for non-exhaustion of administrative remedy, it appearing that petitioners had not appealed from the
decision of the Director of Fisheries to the Secretary of Agriculture and Natural Resources. On appeal to this Court, the decision
of the lower court was sustained (G.R. No. L-8654, promulgated April 28, 1956). The protestants then filed an appeal with the
Secretary of Agriculture and Natural Resources. This time, the same was dismissed for being filed out of time.1wph1.t

On August 16, 1956, the Dizons filed Civil Case 135 and the Sy-Jucos and Gocos, Civil Case 136, in the Court of First Instance of
Batangas, to quiet their titles over Lots 49 and 1. Named defendants were the Secretary of Agriculture and Natural Resources
and applicants Tolentinos. The Republic of the Philippines was allowed to intervene in view of the finding by the investigating
committee created by the respondent Secretary, that the lots were part of the foreshore area before their conversion into
fishponds by the hacienda-owners.

On January 30, 1958, after due hearing, the Court of First Instance of Batangas promulgated a joint decision making the finding,
among others, that the subdivision plan Psd-27941 was prepared in disregard of the technical description stated in TCT No. T-
722, because the surveyor merely followed the existing shoreline and placed his monuments on the southwest lateral of Lot 49,
which was the pier abutting into the sea; and made the conclusion that Lots 1 and 49 of Psd-27941 were part of the foreshore
lands. As the certificate of title obtained by petitioners covered lands not subject to registration, the same were declared null
and void, and Lots 1 and 49 were declared properties of the public domain. Petitioners appealed to the Court of Appeals.

In its decision of October 31, 1961, as well as the resolution of August 20, 1962, the appellate court adopted the findings of the
lower court, that the lots in question are part of the foreshore area and affirmed the ruling cancelling the titles to plaintiffs.
Although in the decision of October 31, 1961, the Court of Appeals awarded to applicants Tolentinos damages in the amount of
P200.00 per hectare from October 1, 1954, when plaintiffs were notified of the denial of their protest by the Director of
Fisheries, such award was eliminated in the resolution of August 20, 1962, for the reason that plaintiffs, who relied on the
efficacy of their certificates of title, cannot be considered possessors in bad faith until after the legality of their said titles has
been finally determined. Appellants were thus declared entitled to retention of the properties until they are reimbursed by the
landowner, the Republic of the Philippines, of the necessary expenses made on the lands, in the sums of P40,000.00 (for Lot 49)
and P25,000.00 (for Lot 1). It is from this portion of the decision as thus modified that defendants Tolentinos and the intervenor
Republic of the Philippines appealed (in G.R. Nos. L-20355-56), claiming that plaintiffs' possession became in bad faith when
their protest against the application for lease was denied by the Director of Fisheries. In addition, the intervenor contends that
being such possessors in bad faith, plaintiffs are not entitled to reimbursement of the expenses made on the properties.

In G.R. Nos. L-20300-01, plaintiffs Dizon, et al., claim that the finding that the Lots in question are part of the seashore or
foreshore area was erroneous, because from defendants' own evidence, the same appear to be marshland before their
conversion into fishponds.

It is noteworthy in connection with the appeal of plaintiffs, that they do not contest the existence of the pier that was used by
the hacienda owners in the loading of their manufactured sugar to vessels. The fact that said pier jutted out 600 meters to the
sea indicates that the area over which such cemented structure spanned was part of the sea or at least foreshore land. And,
plaintiffs were not able to disprove the testimonial evidence that the fishponds in question were constructed by enclosing the
areas with dikes, using the pier as one of the ends of the fishponds. It is clear that the areas thus enclosed and converted into
fishponds were really part of the foreshore. This, and the fact that the subdivision plan Psd-27941 was found to have been
prepared not in accordance with the technical descriptions in TCT No. T-722 but in disregard of it, support the conclusion
reached by both the lower court and the Court of Appeals that Lots 49 and 1 are actually part of the territorial waters and
belong to the State. And, it is an elementary principle that the incontestable and indefeasible character of a Torrens certificate
of title does not operate when the land thus covered is not capable of registration.

On the matter of possession of plaintiffs-appellants, the ruling of the Court of Appeals must be upheld. There is no showing that
plaintiffs are not purchasers in good faith and for value. As such title-holders, they have reason to rely on the indefeasible
character of their certificates.

On the issue of good faith of the plaintiffs, the Court of Appeals reasoned out:

The concept of possessors in good faith given in Art. 526 of the Civil Code and when said possession loses this character under
Art. 528, needs to be reconciled with the doctrine of indefeasibility of a Torrens Title. Such reconciliation can only be achieved
by holding that the possessor with a Torrens Title is not aware of any flaw in his Title which invalidates it until his Torrens Title is
declared null and void by final judgment of the Courts.

Even if the doctrine of indefeasibility of a Torrens Title were not thus reconciled, the result would be the same, considering the
third paragraph of Art. 526 which provides that:

ART. 526. ...

Mistake upon a doubtful or difficult question of law may be the basis of good faith.

The legal question whether plaintiffs-appellants' possession in good faith, under their Torrens Titles acquired in good faith, does
not lose this character except in the case and from the moment their Titles are declared null and void by the Courts, a difficult
one. Even the members of this Court were for a long time divided, two to one, on the answer. It was only after several sessions,
where the results of exhaustive researches on both sides were thoroughly discussed, that an undivided Court finally found the
answer given in the next preceding paragraph. Hence, even if it be assumed for the sake of argument that the Supreme Court
would find that the law is not as we have stated it in the next preceding paragraph and that the plaintiffs-appellants made a
mistake in relying thereon, such mistake on a difficult question of law may be the basis of good faith. Hence, their possession in
good faith does not lose this character except in the case and from the moment their Torrens Titles are declared null and void by
the Courts.

Under the circumstances of the case, especially where the subdivision plan was originally approved by the Director of Lands, we
are not ready to conclude that the above reasoning of the Court of Appeals on this point is a reversible error. Needless to state,
as such occupants in good faith, plaintiffs have the right to the retention of the property until they are reimbursed the necessary
expenses made on the lands.

With respect to the contention of the Republic of the Philippines that the order for the reimbursement by it of such necessary
expenses constitutes a judgment against the government in a suit not consented to by it, suffice it to say that the Republic, on
its own initiative, asked and was permitted to intervene in the case and thereby submitted itself voluntarily to the jurisdiction of
the court.

IN VIEW OF THE FOREGOING CONSIDERATIONS, the decision appealed from is hereby affirmed in all respects, without costs. So
ordered.
THIRD DIVISION

REMINGTON INDUSTRIAL G.R. No. 171858

SALES CORPORATION,

Petitioner, Present:

Ynares-Santiago, J. (Chairperson),

- versus - Austria-Martinez,

Callejo, Sr., and

Chico-Nazario, JJ.

CHINESE YOUNG MENS

CHRISTIAN ASSOCIATION OF

THE PHIL. ISLANDS, doing Promulgated:

business under the name MANILA

DOWNTOWN YMCA,

Respondent. January 22, 2007

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

DECISION

YNARES-SANTIAGO, J.:

This Petition for Review on Certiorari[1] assails the October 17, 2005 Decision[2] of the Court of Appeals in CA-G.R. SP No. 88599,
which set aside the Decision[3] of the Regional Trial Court of Manila (RTC-Manila), Branch 25 and reinstated the June 20, 2003
Decision[4] of the Metropolitan Trial Court of Manila (MeTC-Manila), Branch 17, as well as its March 7, 2006 Resolution [5] denying
petitioners Motion for Reconsideration.

The antecedent facts show that petitioner Remington Industrial Sales Corporation (RISC) leased Units 964 and 966 on the
ground floor and Unit 963 on the second floor of a building owned by respondent Manila Downtown YMCA in Binondo,
Manila. Petitioner knocked down the partitions between the ground floor units and used the combined areas as its office,
hardware store, and display shop for steel products. The combined units also served as a passageway to Unit 963, which in turn
was utilized as petitioners staff room.

Because of a disagreement, petitioner sued respondent for the fixing of the period of the lease over the second floor unit.
[6]
Thereafter, respondent filed an action to evict[7] petitioner from said unit. The two cases were later consolidated before MeTC-
Manila, Branch 26.

Meanwhile, on June 23, 1997, petitioner filed a Petition for Consignation of Rentals for the ground floor units at another branch
of MeTC-Manila[8] because respondent allegedly refused to receive its rent payments without just cause. [9] However, during the
hearing of the consignation case, petitioner filed a formal surrender of the two ground floor units effective on July 1, 1998, [10] to
which respondent manifested a No Objection to the Turn Over or Surrender of the Leased Premises. [11] On July 9, 1998, after
petitioner delivered two checks covering the rents due the ground floor units, the trial court issued an Order [12] declaring the
consignation case closed.
Then, on August 11, 1998, the MeTC-Manila which heard the consolidated cases for the fixing of the lease period and ejectment
rendered a Decision[13] dismissing the latter and extending the period of lease over unit 963 for three years. Immediately
subsequent thereto, petitioner filed a Motion to Constitute Passageway, [14] alleging that Unit 963 does not have a direct access
to the road except by passing through the vacated ground floor units.

On October 29, 1998, the trial court issued an Order directing a commissioner to conduct an ocular inspection of the subject
building. After the commissioner had submitted a Report, [15] but without resolving the propriety of a passageway, the MeTC-
Manila forwarded the consolidated case on appeal to RTC-Manila, Branch 30, which rendered judgment granting petitioner a
longer extension period of five years and ordering respondent to provide a two-meter passageway between Units 964 and
966. Respondent filed an appeal with the Court of Appeals.[16]

On September 19, 2003, the appellate court held that the lower courts had authority to fix an extension of the lease period. It
found that although the lease contract had expired, petitioners continued occupation of Unit 963 resulted to a new lease on a
month-to-month basis which subsisted for over a year; thus, while respondent had the right to seek its termination, petitioner
was entitled to a judicial lengthening of its period based on equity. Nonetheless, the appellate court ordered petitioner to
vacate the subject premises as the continuation of the lease was no longer tenable after the lapse of six years since the parties
formal contract expired. It also noted that since the petitioner has already transferred to its own building, there is no more
reason to continue the lease. Subsequently, the Court of Appeals issued a Resolution [17]rendering petitioners Motion for
Reconsideration moot as it has vacated the subject premises. [18]

Meanwhile, respondent filed two separate actions for ejectment of petitioner from Units 964 and 966 the former before MeTC-
Manila, Branch 20[19] and the latter before MeTC-Manila, Branch 17.[20]Respondent alleged that petitioner did not actually
surrender the ground floor units on July 1, 1998; instead it padlocked the doors thereto, refused to surrender the keys, and
failed to pay rent despite demand.Both branches of MeTC-Manila separately ordered petitioner to vacate the premises and pay
reasonable rent and attorneys fees to respondent.

On appeal, the RTC-Manila, Branch 25 reversed the decision of MeTC-Manila, Branch 17, holding that:

Indeed, Remingtons act of padlocking Units 964 and 966 is an act of self-preservation. Since it continued to lease Unit 963 at the
second floor after the surrender of the ground floor units, it required YMCA to provide it with a passageway to and from the
second floor. The needed passageway was confirmed by the court-appointed commissioner in the consolidated cases for fixing
of lease period and unlawful detainer. As the lessor, it is the obligation of YMCA to make Units (sic) 963 tenantable by providing
[a] passageway to Remington. But it did not. Remington, therefore, had no choice but to keep the keys at the ground floor units
only for the purpose of going to the leased unit at the second floor. The fact of the existence of another lease unit at the second
floor is the important fact that the lower court failed to consider when it said that the continued padlocking of the subject
premises constitutes an unlawful withholding of plaintiffs property (p. 4, MTC decision). At any rate, Remington had filed in the
consignation case with Branch 24 of the MTC a motion formally surrendering Units 964 and 966 at the ground floor, with no
objection on the part of YMCA. Remington, therefore, already surrendered the possession of Units 964 and 966 to YMCA. In
fact, Branch 24 of the MTC had put an end to the issue of possession of Units 964 and 966 by considering the petition for
consignation closed. Since none of the parties questioned that order, it is now final. Consequently, this ejectment case involving
Unit 966 at the ground floor is an indirect attack on the final decision in the consignation case, a re-adjudication of similar issues
involving the ground floor units that have been decided with finality.

Consequently, YMCAs claim for back rentals from July 1, 1998 is also baseless.

WHEREFORE, the decision of the lower court dated June 20, 2003 is hereby reversed and set aside. Consequently, the complaint
for unlawful detainer involving Unit 966 at the ground floor of Manila Downtown YMCA Building, Benavidez St., Binondo, Manila
is also dismissed for lack of merit.
SO ORDERED.[21]

Respondent filed a motion for reconsideration but was denied, hence it filed a petition for review before the Court of Appeals
which reversed and set aside the October 11, 2004 Decision of the RTC-Manila and reinstated the Decision of MeTC-Manila. The
Court of Appeals held that:

x x x Despite the RTCs finding, however, the uncontroverted fact remains that RISC failed to surrender possession of the
disputed units despite having manifested its willingness to do so under the Formal Surrender of Leased Premises. There is no
escaping the fact that RISC continued to exercise control over the subject premises, which it admittedly used as a means of
ingress and egress in going to Unit 963. It has been invariably held that actual possession consists in the manifestation of acts of
dominion over property of such nature as a party would naturally exercise over his own, as when petitioner, in this particular
case, is physically in occupation of the property (Republic vs. David, 436 SCRA 577 [2004], citing Republic vs. Court of Appeals,
335 SCRA 693 [2000]), Reyes vs. Court of Appeals, 315 SCRA 626 [1999]). For one, RISCs claim of self-preservation is antithecal
to disclaiming possession of the controversial premises.

Appropriately, considering that petitioner was effectively deprived of possession of the subject units through respondents act of
padlocking the subject premises, petitioner had a cause of action to file a case for ejectment against RISC. x x x[22]

Petitioners Motion for Reconsideration was denied, hence this Petition for Review on Certiorari, raising the following issues:

1. Whether or not RISCs formal surrender on July 1, 1998 of the ground floor units, coupled with YMCAs subsequent acts,
constitutes effective surrender of those units;

2. Whether or not the use by RISCs staffs, who held office at the second floor, of the key of the ground floor door, their only
passageway to the street, is antithetical to RISC[s] surrender of the ground floor units; and

3. Whether or not respondent YMCA is guilty of forum shopping. [23]

In a contract of lease, one of the parties binds himself to give to another the enjoyment or use of a thing for a price certain, and
for a period which may be definite or indefinite.[24] Upon its termination, the lessee shall return the thing leased and the lessor
shall resume possession thereto.[25]

Under the law, possession is acquired by the material occupation of a thing or the exercise of a right, or by the fact that it is
subject to the action of our will, or by the proper acts and legal formalities established for acquiring such right. [26] In short,
possession can be either actual or merely constructive. [27]

Actual possession consists in the manifestation of acts of dominion over property of such a nature as a party would naturally
exercise over his own as when respondent himself is physically in occupation of the property, or even when another person who
recognizes the formers rights as owner is in occupancy. [28] Constructive possession on the other hand, may be had through
succession, donation, execution of public instruments, or the possession by a sheriff by virtue of a court order. [29]

In the instant case, petitioner had effectively surrendered possession of Units 964 and 966 to respondent. It must be recalled
that petitioner filed a Formal Surrender of Leased Premises effective July 1, 1998 at MeTC-Manila, Branch 24 to which
respondent manifested a No Objection to the Turn Over or Surrender of the Leased Premises at #954 [sic] and 966 Benavidez
St., Binondo, Manila. On even date and in compliance with its stated undertaking, petitioner actually emptied and vacated the
leased premises.

Respondent maintains that the padlocking of the main door of the ground floor units and the continued use thereof as
petitioners passageway to and from the second floor unit virtually denied it of its right to possess Units 964 and 966.
We find otherwise. Petitioners Formal Surrender of Leased Premises on July 1, 1998 showed its intention to relinquish in favor
of respondent its possession over Units 964 and 966. The filing of the same at MeTC-Manila, Branch 24 constitutes petitioners
constructive delivery of the said premises effective July 1, 1998. Thereafter, petitioner actually emptied and vacated the
premises. Therefore, from July 1, 1998, respondent could have taken legal and actual possession of Units 964 and
966. Respondent could have easily removed the padlock and occupied the premises in view of petitioners unconditional
surrender of the premises.

On the other hand, petitioners request for a passageway was necessary to its adequate use of Unit 963, considering that it has
no direct access to the road except through the ground floor units. However, respondent did not immediately start the
construction of a passageway. It was therefore understandable, as found by the RTC-Manila, that petitioner kept the key to the
door at the ground floor units because it was its only means of access to the road and to its rented unit at the second floor.

In view of the foregoing, the RTC-Manila properly dismissed respondents Complaint for Unlawful Detainer and claim for back
rentals of Units 964 and 966.

On the issue of forum-shopping, we find that respondent is not guilty of forum shopping when it filed the ejectment cases
despite the closure of the consignation case involving the same premises.

Forum-shopping is an act of a party against whom an adverse judgment or order has been rendered in one forum of seeking and
possibly getting a favorable opinion in another forum, other than by appeal or special civil action for certiorari. It may also be
the institution of two or more actions or proceedings grounded on the same cause on the supposition that one or the other
court would make a favorable disposition. For it to exist, there should be (a) identity of parties, or at least such parties as would
represent the same interest in both actions; (b) identity of rights asserted and relief prayed for, the relief being founded on the
same facts; and (c) identity of the two preceding particulars such that any judgment rendered in the other action will, regardless
of which party is successful, amount to res judicata in the action under consideration.[30] Where the elements of litis pendentia
are not present or where a final judgment in one case will not amount to res judicata in the other, there is no forum-shopping.
[31]

In the instant case, although the parties and the subject premises in the instant case are the same with those in Civil Case No.
155897-CV, the causes of action in both cases are separate and distinct. The present case involves ejectment of petitioner from
the leased premises, while the latter dealt with consignation of rents without any judicial ruling regarding the matter of
possession of Units 964 and 966. Hence, respondent is not guilty of forum-shopping.

WHEREFORE, the instant petition is GRANTED. The Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 88599
are SET ASIDE. The Decision of the Regional Trial Court of Manila, Branch 25 in Civil Case No. 03-107655 dismissing the unlawful
detainer case for lack of merit is hereby REINSTATED and AFFIRMED.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 182449 March 6, 2013

REPUBLIC OF THE PHILIPPINES, Petitioner,

vs.
MARTIN T. NG, Respondent.

DECISION

SERENO, CJ:

Before this Court is a Rule 45 Petition, seeking a review of the 25 March 2008 Decision 1 of the Court of Appeals (CA) in CA-
G.R. CV No. 01143, which affirmed the 23 October 2002 Amended Decision 2 of the Municipal Trial Court (MTC), Consolacion,
Cebu, in LR Case No. N-12, LRA Record No. N-67773. The MTC ordered the registration and confirmation of title over five
parcels of land claimed by respondent Martin T. Ng.

The antecedent facts are as follows: 3.

On 7 January 1997, respondent filed an application for the original registration of title over Lot Nos. 9663, 9666, 9668, 9690
and 9691, CAD 545-D (New) situated at Cansaga, Consolacion, Cebu. He claimed ownership of these five parcels of land with
a total area of 1,841 square meters. His claim was based on his purchase thereof from the vendors, who had possessed the
realties for more than thirty (30) years.

During the reception of evidence by the Clerk of Court, respondent furnished the following pieces of documentary evidence
to establish his purchase of the lots: (1) Deed of Absolute Sale between him and Eustaquio Tibon; 4 (2) Extra-judicial
Settlement of Estate & Sale between him and Olivia Sicad vda. de Ouano; 5 (3) Deed of Definite Sale by Eduardo and Virginia
Capao;6 (4) Deed of Absolute Sale between him and Victoria Capadiso; 7 and (5) Agreement of Partition between him and
Victoria Capadiso.8 In addition, he attached the numerous vintage Tax Declarations 9 dating as far back as 1948.10 These Tax
Declarations were either under the names of the vendors, the previous transferors and the original owners of the lots. The
regularity and due execution of these contracts, Tax Declarations and realty payments were never assailed by petitioner.

Respondent also submitted the following documents to prove his ownership: (1) the Department of Environment and Natural
Resources (DENR) Certification showing that the subject lots were within the alienable and disposable lands of the public
domain;11 (2) the DENR Certification stating that the lots are not covered by any other subsisting public land application; 12 and
(3) the original tracing cloth plan covering the properties. 13 Similarly, these pieces of evidence were never assailed by
petitioner.

As for testimonial evidence, respondent narrated that these lots were purchased from the aforementioned vendees and
predecessors-in-interest, who had been in possession of the lots for more than thirty (30) years. In support of his claims, he
further presented the testimony of the 77-year-old Josefa N. Fat (Fat), who lived near the subject lots.

According to Fat, she met respondent in 1993, when he brought with him workers assigned to plant trees and to fence the
property. Since then, she recounted that she saw him on the subject lots for several times.

Further, she stated that she knew the original owners and vendees of the lots, as they were her neighbors and close friends.
She also recounted that the properties were either inherited or transferred by the past owners to the vendors, who in turn
sold them to Martin T. Ng; and that there is no other person who laid claim over the lots. She ended her testimony by
asserting with certainty that the ownership and possession by respondent and his predecessors-in-interest were public,
peaceful, open, continuous, and in the concept of an owner.
After the presentation of evidence, the MTC rendered its 23 October 2002 Decision confirming respondents title to the
subject lots and ordering the registration of the title in his name.

Petitioner, as represented by the Office of the Solicitor General (OSG), appealed to the CA. In a lone assignment of error, it
averred that the trial court erred in granting Ngs application, since respondent had failed to comply with the requirements
for the original registration of title.

Petitioner contended that respondent had failed to substantiate his alleged possession and occupation. It attacked Fats
testimony as full of motherhood statements, which could not be given weight by the courts. In addition, it asserted that the
Tax Declarations attached to the application merely provided an indicia of possession, and not a conclusive proof of
ownership.

The CA affirmed the factual findings of the MTC. It appreciated the statement of Josefa Fat, who lived near the subject parcels
of land, that she knew their previous owners as her neighbors and close acquaintances. According to the appellate court, this
testimony was even corroborated by

Tax Declarations and realty tax payments, which altogether sufficiently established the possession of the realties by
respondents predecessors-in-interest.14 Hence, the CA held:15

Considering that the possession of the subject parcels of land by the applicant-appellee tacked to that of his predecessors-in-
interest, covered a period of forty-nine (49) years to the time of the filing of the application for registration in 1997, we hold
that applicant-appellee has acquired an imperfect title thereto which may be subject to confirmation and brought under the
operation of the Torrens system.

WHEREFORE , the assailed Amended Decision dated October 23, 2002 of the MTC Consolacion, Cebu, is AFFIRMED.

Aggrieved, petitioner reiterates its lone assignment of error before this Court: 16 that the CA gravely erred in affirming the trial
courts appreciation of respondents claim of ownership as one that had been established by virtue of an open, continuous,
exclusive and notorious possession of the subject lots.

RULING OF THE COURT

In a judicial confirmation of title under original registration proceedings, applicants may obtain the registration of title to land
upon a showing that they or their predecessors-in-interest have been in (1) open, continuous, exclusive, and notorious
possession and occupation of (2) agricultural lands of the public domain, (3) under a bona fide claim of acquisition or
ownership, (4) for at least 30 years immediately preceding the filing of the application for confirmation of title, except when
prevented by war or force majeure.17 The burden of proof in land registration cases rests on applicants who must show clear,
positive and convincing evidence that their alleged possession and occupation were of the nature and duration required by
law.18

In this case, what is questioned is the sufficiency of the evidence submitted to prove that the possession by respondents
predecessors-in-interest was of the nature required by the Public Land Act and the Property Registration Decree. Specifically,
respondent must prove that his predecessors-in-interest openly, continuously, exclusively, and notoriously possessed the
realties.

Possession is acquired in any of the following ways: (1) by the material occupation of the thing; (2) by the exercise of a right;
(3) by the fact that the property is subject to the action of our will; and (4) by the proper acts and legal formalities
established for acquiring the right.19 In Director of Lands v. IAC,20 we explained the nature of the possession required to
confirm ones title as follows:

Possession is open when it is patent, visible, apparent, notorious and not clandestine. It is continuous when uninterrupted,
unbroken and not intermittent or occasional; exclusive when the adverse possessor can show exclusive dominion over the
land and an appropriation of it to his own use and benefit; and notorious when it is so conspicuous that it is generally known
and talked of by the public or the people in the neighborhood. (Emphasis supplied)

In perusing the evidence submitted by respondent, petitioner claims 21 that the former merely presented (1) a witness
testimony full of motherhood statements, and (2) Tax Declarations and realty payments that do not conclusively prove
ownership. Thus, the Republic claims that the evidence of possession is insufficient.

However, as found by the courts a quo, it is clear from the records that respondent presented several pieces of documentary
evidence to prove that he openly possessed the properties. He submitted notarized Deeds of Sale, Agreements of Partition
and Extra-judicial Settlement of Estate and Sale to show the acquisition of the lands from his predecessors-in-interest. 22

Moreover, he presented Tax Declarations and realty payments showing that he and his predecessors-in-interest had been
paying real estate taxes since 1948 until the inception of this case in 1997; hence, for more than 30 years. He also submitted
the original tracing cloth plan in which the advance survey plan shows that the subject lots had previously been under the
names of the vendors, the previous transferors, and the original owners of the lots. 23

As we have ruled in Republic v. Sta. Ana-Burgos, 24 while tax declarations and realty tax payments on property are not
conclusive evidence of ownership, they are nevertheless good indicia of possession in the concept of owner, for no one in the
right frame of mind would be paying taxes for a property that is not in ones actual or at least constructive possession.

The voluntary declaration of a piece of property for taxation purposes is an announcement of ones claim against the State
and all other interested parties.25 In fact, these documents already constitute prima facie evidence of possession. 26 Moreover,
if the holders of the land present a deed of conveyance in their favor from its former owner to support their claim of
ownership, the declaration of ownership and tax receipts relative to the property may be used to prove their good faith in
occupying and possessing it.27 Additionally, when considered with actual possession of the property, tax receipts constitute
evidence of great value in support of the claim of title of ownership by prescription. 28

As for testimonial evidence, although it is unfortunate that respondents counsel failed to ask Fat specific questions as to the
fact of possession, it is evident that respondents predecessors-in-interest were the witness longtime neighbors and close
friends who lived near the subject lots. Logically, it can be inferred that respondents predecessors-in-interest materially
occupied and continuously possessed the adjoining property. Her testimony reads thus: 29

Q: Do you know a certain Nemesio Tibon?

A: Yes, sir.

Q: Why do you know him?

A: Because he was my close neighbor.

Q: In relation to Lot 9663 one of the subject lots, who is he?

A: He was the original owner of Lot No. 9663.

Q: Where is Nemesio Tibon now?

A: He is already dead.

Q: After Nemesio Tibon died, who owned and possessed Lot No. 9663?

A: It was his son, Eustaquio Tibon, who owned and possessed Lot No. 9663 after he inherited the same from Nemesio Tibon.

Q: From his son, Eustaquio Tibon, where did the property go?

A: It was owned and possessed by the applicant, Martin T. Ng, after the latter bought it from Eustaquio Tibon.
Q: Do you know a certain Diego Balaba?

A: Yes, sir.

Q: Why do you know him?

A: We were very close neighbors before.

Q: In relation to Lot No. 9666, one of the subject lots, who is he?

A: He was the original owner of Lot No. 9666.

Q: Where is Diego Balaba now?

A: He is already dead.

Q: From Diego Balaba, who owned and possessed Lot No. 9666?

A: It was the spouses Rufino Quano and Oliva Sicad who owned and possessed the same after they bought it from Diego
Balaba.

Q: How did you know about this fact?

A: As I have said, Diego Balaba was my close neighbor and I was present when the sale was made.

Q: From the spouses Rufino Quano and Oliva Sicad, who owned and possessed Lot No. 9666?

A: It was the applicant, Martin T. Ng, who owned and possessed Lot No. 9666 after the latter bought it from the spouses
Rufino Quano and Oliva Sicad.

Q: Do you know a certain Liberato Alivio?

A: Yes, sir.

Q: Why do you know him?

A: He was my neighbor and a very close friend of mine.

Q: In relation to Lot No. 9668, one of the subject lots, who is he?

A: He was the original owner of Lot No. 9668.

Q: Where is Liberato Alivio now?

A: He is already dead.

Q: After Liberato Alivio died, who owned and possessed Lot No. 9668?

A: It was owned and possessed by his wife, Cipriana Herbieto.

Q: From Cipriana Herbieto, where did Lot No. 9668 go?

A: It was owned and possessed by his son, Ireneo Alivio, who, in turn, sold the same to the spouses Eduardo Capao and
Virginia Alivio.

Q: From the spouses Eduardo Capao and Virginia Alivio, who owned and possessed Lot No. 9668?
A: It was owned and possessed by the applicant, Martin T. Ng, after the latter purchased the same from the spouses Eduardo
Capao and Virginia Alivio.

Q: Why do you know all these facts?

A: Because I am living near the land and that the previous owners of the said land were my neighbor and close friends.

Q: Do you know a certain Julian Capadiso?

A: Yes, sir.

Q: Why do you know him?

A: He was my neighbor and a very close friend.

Q: Where is Julian Capadiso now?

A: He is already dead.

Q: In relation to Lot No. 9690, one of the subject lots, who is he?

A: He was the original owner of Lot No. 9690.

Q: After Julian Capadiso died, who owned and possessed Lot No. 9690?

A: It was owned and possessed by the spouses Eustiquiano Naingue and Victoria Capadiso after the latter bought it from
Julian Capadiso.

Q: From the spouses Eustiquiano Naingue and Victoria Capadiso, where did the property go?

A: It was owned and possessed by the applicant, Martin T. Ng, after the latter bought it from the spouses Eustiquiano
Naingue and Victoria Capadiso.

Q: Why do you know all about these facts?

A: As I have said, I am living near the land and the original and previous owners of the said lot are my neighbors and close
friends.

Q: Do you know a certain Saturnino Capadiso?

A: Yes, sir.

Q: Why do you know him?

A: He was my neighbor.

Q: Where is Saturnino Capadiso now?

A: He is already dead.

Q: In relation to Lot No. 9691 one of the subject lots, who is he?

A: He was the original owner of Lot No.9691.

Q: From Saturnino Capadiso, who owned and possessed Lot No. 9691?
A: It was owned and possessed by his daughter, Victoria Capadiso after the latter inherited the same from his father,
Saturnino Capadiso.

Q: After Victoria Capadiso, who owned and possessed Lot No. 9691?

A: It was owned and possessed by the applicant, Martin T. Ng after the latter purchased the same from Victoria Capadiso.

Q: What can you say then of the ownership and possession of the applicant over the subject lots?

A: I can say with certainty that the ownership and possession of the applicant and that of his predecessors-in-interest over
the subject lots is public, peaceful, open, continuous and in concept of owners.

Atty. Seno:

That is all for the witness your Honor.

xxxx

The said witness further narrated that the lots were transferred either through a contract of sale or though succession, from
the original owners to the vendors who later became respondents predecessors-in-interest. Taken together, these acts of
transferring the property evinced the exercise of their ownership rights over the lots.

Far from giving a motherhood statement, Fat also asserted with certainty that no other person laid claim to the lots. This fact
was corroborated by the DENR Certification that the lots were not covered by any other subsisting public land application.
Accordingly, respondent supplied proof of his exclusive possession of the realties.

Therefore, given these pieces of documentary evidence consisting of muniments of title, tax declarations and realty
payments which were not disputed by petitioner; and the testimony as regards the actual possession for more than 30 years
by respondents predecessors-in-interest the OSG inaccurately portrayed respondent as merely making general submissions
in proving his claims. Rather, as found by the courts a quo, he amply established that he and his predecessors-in-interest
owned and possessed the subject lots openly, continuously, exclusively, and notoriously, as required by our registration
laws.1wphi1

For these reasons, we see no reason to reverse the congruent factual findings of the MTC and the CA.

IN VIEW THEREOF, the assailed 25 March 2008 Decision of the Court of Appeals in CA-G.R. CV No. 01143 is hereby AFFIRMED.

SO ORDERED.

MARIA LOURDES P. A. SERENO

Chief Justice,
Chairperson
THIRD DIVISION

COMMISSIONER OF INTERNAL G.R. No. 147375

REVENUE,

Petitioner, Present:

QUISUMBING, J.,

Chairperson,

- versus - CARPIO,

CARPIO MORALES,

TINGA, and

VELASCO, JR., JJ.

BANK OF THE PHILIPPINE

ISLANDS,

Respondent. Promulgated:

June 26, 2006

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

DECISION

TINGA, J.:

At issue is the question of whether the 20% final tax on a banks passive income, withheld from the bank at source, still forms
part of the banks gross income for the purpose of computing its gross receipts tax liability. Both the Court of Tax Appeals (CTA)
and the Court of Appeals answered in the negative. We reverse, in favor of petitioner, following our ruling in China Banking
Corporation v. Court of Appeals.[1]

A brief background of the tax law involved is in order.

Domestic corporate taxpayers, including banks, are levied a 20% final withholding tax on bank deposits under Section 24(e)(1)
[2]
in relation to Section 50(a)[3] of Presidential Decree No. 1158, otherwise known as the National Internal Revenue Code of 1977
(Tax Code). Banks are also liable for a tax on gross receipts derived from sources within the Philippines under Section 119[4] of
the Tax Code, which provides, thus:

Sec. 119. Tax on banks and non-bank financial intermediaries. There shall be collected a tax on gross receipts derived from
sources within the Philippines by all banks and non-bank financial intermediaries in accordance with the following schedule:

(a) On interest, commissions and discounts from lending activities as well as income from financial leasing, on the basis of
remaining maturities of instruments from which such receipts are derived.

Short-term maturity not in excess of two (2) years . . 5%

Medium-term maturity over two (2) years but not

exceeding four (4) years . . . . . . . . . . . . . 3%

Long term maturity

(i) Over four (4) years but not exceeding seven (7) years . . . . . . . . . . . . . . . . . . . . . . 1%

(ii) Over seven (7) years . . . . . . . . . . . . . . 0% (b) On dividends . . . . . . . . . . . . . . . . . . . . . . . 0%

(c) On royalties, rentals of property, real or

personal, profits from exchange and all other items treated as gross income under Section 28 of this Code . . . . . . . . . . . 5%

Provided, however, That in case the maturity period referred to in paragraph (a) is shortened thru pretermination, then the
maturity period shall be reckoned to end as of the date of pretermination for purposes of classifying the transaction as short,
medium or long term and the correct rate of tax shall be applied accordingly.

Nothing in this Code shall preclude the Commissioner from imposing the same tax herein provided on persons performing
similar banking activities.

As a domestic corporation, the interest earned by respondent Bank of the Philippine Islands (BPI) from deposits and similar
arrangements are subjected to a final withholding tax of 20%. Consequently, the interest income it receives on amounts that it
lends out are always net of the 20% withheld tax. As a bank, BPI is furthermore liable for a 5% gross receipts tax on all its
income.

For the four (4) quarters of the year 1996, BPI computed its 5% gross receipts tax payments by including in its tax base the 20%
final tax on interest income that had been withheld and remitted directly to the Bureau of Internal Revenue (BIR).

On 30 January 1996, the CTA rendered a decision in Asian Bank Corporation v. Commissioner of Internal Revenue, [5] holding that
the 20% final tax withheld on a banks interest income did not form part of its taxable gross receipts for the purpose of
computing gross receipts tax.

BPI wrote the BIR a letter dated 15 July 1998 citing the CTA Decision in Asian Bank and requesting a refund of alleged
overpayment of taxes representing 5% gross receipts taxes paid on the 20% final tax withheld at source.

Inaction by the BIR on this request prompted BPI to file a Petition for Review against the Commissioner of Internal Revenue
(Commissioner) with the CTA on 19 January 1999. Conceding its claim for the first three quarters of the year as having been
barred by prescription, BPI only claimed alleged overpaid taxes for the final quarter of 1996.

Following its own doctrine in Asian Bank, the CTA rendered a Decision,[6] holding that the 20% final tax withheld did not form
part of the respondents taxable gross receipts and that gross receipts taxes paid thereon are refundable. However, it found that
only P13,843,455.62 in withheld final taxes were substantiated by BPI; it awarded a refund of the 5% gross receipts tax paid
thereon in the amount of P692,172.78.

On appeal, the Court of Appeals promulgated a Decision [7] affirming the CTA. It cited this Courts decision in Commissioner of
Internal Revenue v. Tours Specialists, Inc.,[8] in which we held that the gross receipts subject to tax under the Tax Code do not
include monies or receipts entrusted to the taxpayer which do not belong to them and do not redound to the taxpayers benefit
in concluding that it would be unjust and confiscatory to include the withheld 20% final tax in the tax base for purposes of
computing the gross receipts tax since the amount corresponding to said 20% final tax was not received by the taxpayer and the
latter derived no benefit therefrom.[9]

The Court of Appeals also held that Section 4(e) of Revenue Regulations No. 12-80 mandates the deduction of the final tax paid
on interest income in computing the tax base for the gross receipts tax. Section 4(e) provides, thus:
Gross receipts tax on banks, non-bank financial intermediaries, financing companies, and other non-bank financial
intermediaries, not performing quasi-banking activities. The rates of taxes to be imposed on the gross receipts of such financial
institutions shall be based on all items of income actually received. Mere accrual shall not be considered, but once payment
is received on such accrual or in case of prepayment, then the amount actually received shall be included in the tax base of
such financial institutions, as provided hereunder. (Emphasis supplied.)

The present Petition for Review filed by the Commissioner seeks to annul the adverse Decisions of the CTA and the Court of
Appeals and raises the sole issue of whether the 20% final tax withheld on a banks passive income should be included in the
computation of the gross receipts tax.

In assailing the findings of the lower courts, the Commissioner makes the following arguments: (1) the term gross receipts must
be applied in its ordinary meaning; (2) there is no provision in the Tax Code or any special laws that excludes the 20% final tax in
computing the tax base of the 5% gross receipts tax; (3) Revenue Regulations No. 12-80, Section 4(e), is inapplicable in the
instant case; and (4) income need not actually be received to form part of the taxable gross receipts. Additionally, petitioner
points out that the CTA Asian Bank case cited by petitioner BPI has already been superseded by the CTA decisions in Standard
Chartered Bank v. Commissioner of Internal Revenue and Far East Bank and Trust Company v. Commissioner of Internal
Revenue, both promulgated on 16 November 2001.

The issues raised by the Commissioner have already been ruled upon in his favor by this Court in China Banking Corporation v.
Court of Appeals[10] and reiterated in Commissioner of Internal Revenue v. Solidbank Corporation[11] and more recently
in Commissioner of Internal Revenue v. Bank of Commerce.[12] Consequently, the petition must be granted.

The Tax Code does not provide a definition of the term gross receipts. [13] Accordingly, the term is properly understood in its plain
and ordinary meaning[14] and must be taken to comprise of the entire receipts without any deduction. [15] We, thus, made the
following disquisition in Bank of Commerce:[16]

The word gross must be used in its plain and ordinary meaning. It is defined as whole, entire, total, without deduction. A
common definition is without deduction. Gross is also defined as taking in the whole; having no deduction or abatement; whole,
total as opposed to a sum consisting of separate or specified parts. Gross is the antithesis of net. Indeed, in China Banking
Corporation v. Court of Appeals, the Court defined the term in this wise:

As commonly understood, the term gross receipts means the entire receipts without any deduction. Deducting any amount
from the gross receipts changes the result, and the meaning, to net receipts. Any deduction from gross receipts is inconsistent
with a law that mandates a tax on gross receipts, unless the law itself makes an exception. As explained by the Supreme Court
of Pennsylvania in Commonwealth of Pennsylvania v. Koppers Company, Inc.,

Highly refined and technical tax concepts have been developed by the accountant and legal technician primarily because of the
impact of federal income tax legislation. However, this in no way should affect or control the normal usage of words in the
construction of our statutes; and we see nothing that would require us not to include the proceeds here in question in the gross
receipts allocation unless statutorily such inclusion is prohibited. Under the ordinary basic methods of handling accounts, the
term gross receipts, in the absence of any statutory definition of the term, must be taken to include the whole total gross
receipts without any deductions, x x x. [Citations omitted] (Emphasis supplied)

Likewise, in Laclede Gas Co. v. City of St. Louis, the Supreme Court of Missouri held:

The word gross appearing in the term gross receipts, as used in the ordinance, must have been and was there used as the direct
antithesis of the word net. In its usual and ordinary meaning gross receipts of a business is the whole and entire amount of the
receipts without deduction, x x x. On the contrary, net receipts usually are the receipts which remain after deductions are made
from the gross amount thereof of the expenses and cost of doing business, including fixed charges and depreciation. Gross
receipts become net receipts after certain proper deductions are made from the gross. And in the use of the words gross
receipts, the instant ordinance, of course, precluded plaintiff from first deducting its costs and expenses of doing business, etc.,
in arriving at the higher base figure upon which it must pay the 5% tax under this ordinance. (Emphasis supplied)
Absent a statutory definition, the term gross receipts is understood in its plain and ordinary meaning. Words in a statute are
taken in their usual and familiar signification, with due regard to their general and popular use. The Supreme Court of Hawaii
held in Bishop Trust Company v. Burns that

x x x It is fundamental that in construing or interpreting a statute, in order to ascertain the intent of the legislature, the language
used therein is to be taken in the generally accepted and usual sense. Courts will presume that the words in a statute were used
to express their meaning in common usage. This principle is equally applicable to a tax statute. [Citations omitted] (Emphasis
supplied)

Additionally, we held in Solidbank, to wit:[17]

[W]e note that US cases have persuasive effect in our jurisdiction, because Philippine income tax law is patterned after
its US counterpart.

[G]ross receipts with respect to any period means the sum of: (a) The total amount received or accrued during such period from
the sale, exchange, or other disposition of x x x other property of a kind which would properly be included in the inventory of
the taxpayer if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale to customers in the
ordinary course of its trade or business, and (b) The gross income, attributable to a trade or business, regularly carried on by the
taxpayer, received or accrued during such period x x x.

x x x [B]y gross earnings from operations x x x was intended all operations x x x including incidental, subordinate, and subsidiary
operations, as well as principal operations.

When we speak of the gross earnings of a person or corporation, we mean the entire earnings or receipts of such person or
corporation from the business or operations to which we refer.

From these cases, gross receipts ] refer to the total, as opposed to the net, income. These are therefore the total receipts before
any deduction for the expenses of management. Websters New International Dictionary, in fact, defines gross as whole or
entire.

The legislative intent to apply the term in its ordinary meaning may also be surmised from a historical perspective of the levy on
gross receipts. From the time the gross receipts tax on banks was first imposed in 1946 under R.A. No. 39 and throughout its
successive reenactments,[18] the legislature has not established a definition of the term gross receipts. Absent a statutory
definition of the term, the BIR had consistently applied it in its ordinary meaning, i.e., without deduction. On the presumption
that the legislature is familiar with the contemporaneous interpretation of a statute given by the administrative agency tasked
to enforce the statute, subsequent legislative reenactments of the subject levy sans a definition of the term gross receipts
reflect that the BIRs application of the term carries out the legislative purpose. [19]

Furthermore, Section 119 (a)[20] of the Tax Code expressly includes interest income as part of the base income from which the
gross receipts tax on banks is computed. This express inclusion of interest income in taxable gross receipts creates a
presumption that the entire amount of the interest income, without any deduction, is subject to the gross receipts tax. [21]

The exclusion of the 20% final tax on passive income from the taxpayers tax base is effectively a tax exemption, the application
of which is highly disfavored. [22] The rule is that whoever claims an exemption must justify this right by the clearest grant of
organic or statute law.[23] Like the other banks who have asserted a right tantamount

to exception under these circumstances, BPI has failed to present a clear statutory basis for its claim to take away the interest
income withheld from the purview of the levy on gross tax receipts.

Bereft of a clear statutory basis on which to hinge its claim, BPIs view, as adopted by the Court of Appeals, is that Section 4(e) of
Revenue Regulations No. 12-80 establishes the exclusion of the 20% final tax withheld from the banks taxable gross receipts.

However, we agree with the Commissioner that BPIs asserted right under Section 4(e) of Revenue Regulations No. 12-80
presents a misconstruction of the provision. While, indeed, the provision states that [t]he rates of taxes to be imposed on the
gross receipts of such financial institutions shall be based on all items of income actually received, it goes on to distinguish
actual receipt from accrual, i.e., that [m]ere accrual shall not be considered, but once payment is received on such accrual or
in case of prepayment, then the amount actually received shall be included in the tax base of such financial institutions x x x.

Section 4(e) recognizes that income could be recognized by the taxpayer either at the time of its actual receipt or its accrual,
[24]
depending

on the accounting method used by the taxpayer,[25] but establishes the rule that, for purposes of gross receipts tax, interest
income is taxable upon actual receipt of the income, as opposed to the time of its accrual. Section 4(e) does not exclude
accrued interest income from gross receipts but merely postpones its inclusion until actual payment of the interest to the
lending bank, thus mandating that [m]ere accrual shall not be considered, but once payment is received on such accrual or in
case of prepayment, then the amount actually received shall be included in the tax base of such financial institutions x x x.[26]

Even if Section 4(e) had been properly construed, it still cannot be the basis for deducting the income tax withheld since Section
4(e) has been superseded by Section 7 of Revenue Regulations No. 17-84, which states, thus:

SECTION 7. Nature and Treatment of Interest on Deposits and Yield on Deposit Substitutes.

(a) The interest earned on Philippine Currency bank deposits and yield from deposit substitutes subjected to the withholding
taxes in accordance with these regulations need not be included in the gross income in computing the depositor's/investor's
income tax liability in accordance with the provision of Section 29(b), (c) and (d) of the National Internal Revenue Code, as
amended.

(b) Only interest paid or accrued on bank deposits, or yield from deposit substitutes declared for purposes of imposing the
withholding taxes in accordance with these regulations shall be allowed as interest expense deductible for purposes of
computing taxable net income of the payor.

(c) If the recipient of the above-mentioned items of income are financial institutions, the same shall be included as part of
the tax base upon which the gross receipt tax is imposed. (Emphasis supplied.)

The provision categorically provides that if the recipient of interest subjected to withholding taxes is a financial institution, the
interest shall be included as part of the tax base upon which the gross receipts tax is imposed.

The implied repeal of Section 4(e) is undeniable. Section 4(e) imposes the gross receipts tax only on all items of
income actually received, as opposed to their mere accrual, while Section 7 of Revenue Regulations No. 17-84
includes all interest income (whether actual or accrued) in computing the gross receipts tax. [27] Section 4(e) of Revenue
Regulations No. 12-80 was superseded by the later rule, because Section 4(e) thereof is not restated in Revenue Regulations No.
17-84.[28] Clearly, then, the current revenue regulations requires interest income, whether actually received or merely accrued,
to form part of the banks taxable gross receipts. [29]

The Commissioner correctly controverts the conclusion made by the Court of Appeals that it would be unjust and confiscatory
to include the withheld 20% final tax in the tax base for purposes of computing the gross receipts tax since the amount
corresponding to said 20% final tax was not received by the taxpayer and the latter derived no benefit therefrom.[30]

Receipt of income may be actual or constructive. We have held that the withholding process results in the taxpayers
constructive receipt of the income withheld, to wit:

By analogy, we apply to the receipt of income the rules on actual and constructive possession provided in Articles 531 and 532
of our Civil Code.

Under Article 531:

Possession is acquired by the material occupation of a thing or the exercise of a right, or by the fact that it is subject to the
action of our will, or by the proper acts and legal formalities established for acquiring such right.
Article 532 states:

Possession may be acquired by the same person who is to enjoy it, by his legal representative, by his agent, or by any person
without any power whatever; but in the last case, the possession shall not be considered as acquired until the person in whose
name the act of possession was executed has ratified the same, without prejudice to the juridical consequences
of negotiorum gestio in a proper case.

The last means of acquiring possession under Article 531 refers to juridical acts the acquisition of possession by sufficient titleto
which the law gives the force of acts of possession. Respondent argues that only items of income actually received should be
included in its gross receipts. It claims that since the amount had already been withheld at source, it did not have actual receipt
thereof.

We clarify. Article 531 of the Civil Code clearly provides that the acquisition of the right of possession is through the proper acts
and legal formalities established therefor. The withholding process is one such act. There may not be actual receipt of the
income withheld; however, as provided for in Article 532, possession by any person without any power whatsoever shall be
considered as acquired when ratified by the person in whose name the act of possession is executed.

In our withholding tax system, possession is acquired by the payor as the withholding agent of the government, because the
taxpayer ratifies the very act of possession for the government. There is thus constructive receipt. The processes of
bookkeeping and accounting for interest on deposits and yield on deposit substitutes that are subjected to FWT are indeedfor
legal purposestantamount to delivery, receipt or remittance. [31] (Emphasis supplied.)

Thus, BPI constructively received income by virtue of its acquiescence to the extinguishment of its 20% final tax liability when
the withholding agents remitted BPIs income to the government.Consequently, it received the amounts corresponding to the
20% final tax and benefited therefrom.

The cases cited by BPI, Commissioner of Internal Revenue v. Tours Specialists, Inc.[32] and Commissioner of Internal Revenue v.
Manila Jockey Club, Inc.,[33] in which this Court held that gross receipts subject to tax under the Tax Code do not include monies
or receipts entrusted to the taxpayer which do not belong to them and do not redound to the taxpayer's benefit, [34] only further
substantiate the fact that BPI benefited from the withheld amounts.

In Tours Specialists and Manila Jockey Club, the taxable entities held the subject monies not as income earned but as mere
trustees. As such, they held the money entrusted to them but which neither belonged to them nor redounded to their
benefit. On the other hand, BPI cannot be considered as a mere trustee; it is the actual owner of the funds. As owner thereof, it
was BPIs tax obligation to the government that was extinguished upon the withholding agents remittance of the 20% final
tax. We elucidated on BPIs ownership of the funds in China Banking, to wit:

Manila Jockey Club does not support CBCs contention but rather the Commissioners proposition. The Court ruled in Manila
Jockey Club that receipts not owned by the Manila Jockey Club but merely held by it in trust did not form part of Manila Jockey
Clubs gross receipts. Conversely, receipts owned by the Manila Jockey Club would form part of its gross receipts.

In the instant case, CBC owns the interest income which is the source of payment of the final withholding tax. The
government subsequently becomes the owner of the money constituting the final tax when CBC pays the final withholding
tax to extinguish its obligation to the government. This is the consideration for the transfer of ownership of the money from
CBC to the government. Thus, the amount constituting the final tax, being originally owned by CBC as part of its interest
income, should form part of its taxable gross receipts.

In Commissioner v. Tours Specialists, Inc., the Court excluded from gross receipts money entrusted by foreign tour operators to
Tours Specialists to pay the hotel accommodation of tourists booked in various local hotels.The Court declared that Tours
Specialists did not own such entrusted funds and thus the funds were not subject to the 3% contractors tax payable by Tours
Specialists. The Court held:
x x x [G]ross receipts subject to tax under the Tax Code do not include monies or receipts entrusted to the taxpayer which do not
belong to them and do not redound to the taxpayers benefit; and it is not necessary that there must be a law or regulation
which would exempt such monies and receipts within the meaning of gross receipts under the Tax Code.

x x x [T]he room charges entrusted by the foreign travel agencies to the private respondent do not form part of its gross receipts
within the definition of the Tax Code. The said receipts never belonged to the private respondent. The private respondent never
benefited from their payment to the local hotels. x x x [T]his arrangement was only to accommodate the foreign travel agencies.

Unless otherwise provided by law, ownership is essential in determining whether interest income forms part of taxable gross
receipts. Ownership is the circumstance that makes interest income part of the taxable gross receipts of the taxpayer. When
the taxpayer acquires ownership of money representing interest, the money constitutes income or receipt of the taxpayer.

In contrast, the trustee or agent does not own the money received in trust and such money does not constitute income or
receipt for which the trustee or agent is taxable. This is a fundamental concept in taxation. Thus, funds received by a money
remittance agency for transfer and delivery to the beneficiary do not constitute income or gross receipts of the money
remittance agency. Similarly, a travel agency that collects ticket fares for an airline does not include the ticket fare in its gross
income or receipts. In these cases, the money remittance agency or travel agency does not acquire ownership of the funds
received.[35] (Emphasis supplied.)

BPI argues that to include the 20% final tax withheld in its gross receipts tax base would be to tax twice its passive income and
would constitute double taxation. Granted that interest income is being taxed twice, this, however, does not amount to double
taxation. There is no double taxation if the law imposes two different taxes on the same income, business or
property. [36] In Solidbank, we ruled, thus:

Double taxation means taxing the same property twice when it should be taxed only once; that is, x x x taxing the same person
twice by the same jurisdiction for the same thing. It is obnoxious when the taxpayer is taxed twice, when it should be but once.
Otherwise described as direct duplicate taxation, the two taxes must be imposed on the same subject matter, for the same
purpose, by the same taxing authority, within the same jurisdiction, during the same taxing period; and they must be of the
same kind or character.

First, the taxes herein are imposed on two different subject matters. The subject matter of the FWT [Final Withholding
Tax] is the passive income generated in the form of interest on deposits and yield on deposit substitutes, while the subject
matter of the GRT [Gross Receipts Tax] is the privilege of engaging in the business of banking.

A tax based on receipts is a tax on business rather than on the property; hence, it is an excise rather than a property tax. It is
not an income tax, unlike the FWT. In fact, we have already held that one can be taxed for engaging in business and further
taxed differently for the income derived therefrom. Akin to our ruling in Velilla v. Posadas, these two taxes are entirely distinct
and are assessed under different provisions.

Second, although both taxes are national in scope because they are imposed by the same taxing authoritythe national
government under the Tax Codeand operate within the same Philippine jurisdiction for the same purpose of raising revenues,
the taxing periods they affect are different. The FWT is deducted and withheld as soon as the income is earned, and is paid after
every calendar quarter in which it is earned. On the other hand, the GRT is neither deducted nor withheld, but is paid only after
every taxable quarter in which it is earned.

Third, these two taxes are of different kinds or characters. The FWT is an income tax subject to withholding, while the GRT is a
percentage tax not subject to withholding.

In short, there is no double taxation, because there is no taxing twice, by the same taxing authority, within the same jurisdiction,
for the same purpose, in different taxing periods, some of the property in the territory. Subjecting interest income to a 20%
FWT and including it in the computation of the 5% GRT is clearly not double taxation. [37]
Clearly, therefore, despite the fact that that interest income is taxed twice, there is no double taxation present in this case.

An interpretation of the tax laws and relevant jurisprudence shows that the tax on interest income of banks withheld at source
is included in the computation of their gross receipts tax base.

WHEREFORE, the Petition is GRANTED. The assailed Decisions of the Court of Appeals and the Court of Tax Appeals are
REVERSED AND SET ASIDE. Petitioner Commissioner of Internal Revenues denial of respondent Bank of Philippine Islands claim
for refund is SUSTAINED. No costs.

SO ORDERED.

THIRD DIVISION

[G.R. No. 142276. August 14, 2001]

FLORENTINO GO, JR., MA. LUZVIMINDA GO, LEONIDA GO, FELIPE GO, MARIETTA GO, ROBERTO GO, ESTRELITA GO, ANTONIO
GO, ALBERTO GO, BABY LUCILA GO and MANUEL GO, petitioners, vs. HON. COURT OF APPEALS and AURORA I.
PEREZ, respondents.

DECISION

GONZAGA-REYES, J.:

The decision[1] promulgated on January 27, 1999 by respondent Court of Appeals in CA-G.R. SP No. 46779 reversing the decision
of the regional trial court, as well as its resolution of February 28, 2000 denying herein petitioners motion for reconsideration,
are assailed in this petition for review on certiorari.

This case originated from a complaint for ejectment filed by herein petitioners Florentino, Jr., Luzviminda, Leonida, Felipe,
Marietta, Roberto, Estrelita, Alberto and Baby Lucila (all surnamed Go), as plaintiffs, against herein private respondent Aurora I.
Perez, as defendant, in the Metropolitan Trial Court (MTC) of Caloocan City as Civil Case No. 22172, which complaint alleges
these material facts:

2. Plaintiffs are the children and the only surviving heirs of the late spouses Florentino, Sr. and Lucila Go who both died intestate
on June 10, 1973 and January 22, 1988, respectively, and in whose name a parcel of land situated in Caloocan City is registered
under Transfer Certificate of Title No. C-32110.

A copy of said Transfer Certificate of Title No. C-32110 is attached hereto and marked as Annex A and made as an integral part of
this complaint.

3. Through mere tolerance of plaintiffs as well as their late mother, defendant was allowed to occupy the said parcel of land
temporarily on condition that she would vacate the same once she is asked.

4. In December, 1994, plaintiffs, feeling the need to establish another residence to accommodate a growing family finally asked
defendant to vacate the premises. This demand to vacate was repeated several times more but the same went unheeded even
up to this time thus prompting plaintiffs to seek the help of the local Barangay office.

5. Several conciliation meetings were held but no settlement was reached and as a result of which a Certification to File Action
was issued as shown by the attached copy of the same marked as Annex B and made as an integral part of the complaint.

6. By reason of defendants unjustified refusal to vacate the premises notwithstanding repeated demands therefor, plaintiffs
were forced to engage the services of counsel for an agreed fee of P5,000.00 plus P500.00 per appearance for which defendant
should be made to pay plaintiffs. Defendant should likewise be made to pay plaintiffs litigation expenses of no less than
P10,000.00 and the sum of at least P2,000.00 a month for the reasonable use and occupancy of the premises from January,
1995 until the same is vacated.[2]

In her answer,[3] defendant denied the allegations of the plaintiffs and invoked the following alternative defenses, among
others: that she has been occupying the subject land since 1963, through permission of the security guards of the Peoples
Homesite and Housing Corporation (PHHC); that she cleared the said land and constructed houses for her family thereon, and
applied for its acquisition with the PHHC and its successor-in-interest, the National Housing Authority (NHA); that it was only in
December, 1994, when Estrelita Go demanded that she vacate the premises, that she learned that the land had already been
titled in the name of Lucila Go in 1980; that Lucila Go acquired the said title through false statements in her application with the
PHHC; and that she has the preferential right to acquire the property .

After the issues have been joined, the MTC heard the case under the Rules on Summary Procedure and decided on the basis of
the position papers and the oral and documentary evidence of the parties.

On August 26, 1996, the MTC rendered its decision dismissing the case without prejudice. According to the MTC, the case is
neither an action for unlawful detainer nor forcible entry. The MTC reasoned out that it could not be a case for unlawful
detainer because plaintiffs failed to substantiate their claim that defendants possession of the subject parcel of land was by
mere tolerance as the plaintiffs in open court denied such tolerance, either by their parents or by themselves; and neither could
it be forcible entry for failure to file the action within the one year period counted from the date of forcible entry.

On appeal to the Regional Trial Court (RTC) of Caloocan City, Branch 131, in Civil Case No. 17707, plaintiffs assailed the MTC
decision. On December 18, 1997, said lower appellate court reversed and set aside the judgment of the MTC, disposing as
follows:

(1) Ordering the defendant-appellee and all persons claiming rights under her to immediately vacate the subject premises,
particularly, Lot 10, Block 50 of the consolidation subdivision plan PCS-5914, situated in Camarin, Caloocan City, and covered by
TCT No. C-32110;

(2) Ordering the plaintiff-appellee to pay plaintiffs-appellants P5,000.00 as and for attorneys fees;

(3) Ordering the defendant-appellee to pay plaintiffs-appellants the amount of P2,000.00 per month for the reasonable use and
occupancy of the subject premises from the date of the filing of the complaint in court on June 27, 1996 until she finally vacates
the same, and to pay the costs of suit;

(4) Ordering the dismissal of defendant-appellees counterclaim for lack of merit. [4]

In reversing the MTC, the RTC reasoned out as follows:

However, the lower court had overlooked and misappreciated facts of substance in rendering its assailed decision.

It was not reliably disputed that a certain attorney was allowed by the registered owner Lucila Go to temporarily utilize the
house within the subject premises sometime in 1964 and it was only in 1977 that the defendant-appellee was first seen to be
residing with the attorney her relative, in the said house and, thus she was similarly tolerated to stay thereat. It was only
sometime in December 1994 that demand was made upon the defendant-appellee to vacate the subject premises.

The lower court overlooked and misappreciated the facts when it concluded that the plaintiffs denied that tolerance was given
to the defendant-appellee because what was propounded by the plaintiffs-appellants during the preliminary conference was
that their mother did not allow the defendant to build her house on the premises (TSN, February 29, 1996, pages 5 and 6) and
not that the claim of tolerance was denied. In this complaint for ejectment, the remedies of unlawful detainer and forcible entry
have been fully substantiated.

As regards to unlawful detainer, the defendant-appellee, who was able to lawfully enter the subject premises by residing with
her relative attorney, who was tolerated to temporarily occupy and reside in the house within the premises, is now being asked
to vacate the same but refused to heed the demand. After demand and its repudiation, the continuing possession of private
respondent became illegal and the complaint for unlawful detainer filed by petitioner was its proper remedy. (Asset Privatization
vs. Court of Appeals 229 SCRA 1994).

As regards to forcible entry, the subsequent construction and occupancy of defendant-appellees house was by stealth.
Consistent with the doctrine laid down in the case of Sumulong vs. Court of Appeals, 232 SCRA 372, which applies by analogy,
the defendant-appellee was able to avoid discovery and to gain entrance into and remain within the subject premises, the
defendant-appellee, without permission, and by her secret or clandestine act of residing first with her relative attorney who was
tolerated to reside temporarily in the said premises, succeeded in constructing her own house which she finally
occupied. Applicable in this case, by analogy, is the pronouncement in Piano vs. Court of Appeals, 169 SCRA 485 (1989) that The
remedies of forcible entry and illegal detainer are both allowed in a single action as illegal detainer refers to the 5-hectare
portion of the land while the forcible entry refers to the remaining portion.

It is undubitable that the lower court erred in its conclusion that the claim of tolerance was denied and that if this case is for
forcible entry, this ejectment case should have been filed within one (1) year from as early as 1977 despite the evidence on
record that demand was made in December 1994 and the case for ejectment was filed just about six (6) months after or,
specifically, on June 27, 1995, which filing is well within the prescribed period to file the case in court. For sure, it has been held
in Elane vs. Court of Appeals, 172 SCRA 822 (1989) that Where forcible entry was made clandestinely, the one year prescriptive
period should be counted from the time respondent demanded that the deforciant desist from such possession when the
former learned thereof, and the essence of such pronouncement is that to deprive the lawful possessor of the benefit of
summary action, under Rule 70 of the Revised Rule, simply because the stealthy intruder manages to conceal the trespass for
more than a year would be to reward clandestine usurpation even if they are unlawful (Vda. de Prieto vs. Reyes, 14 SCRA 430).

Furthermore, as held in the Mabalot vs. Madela, 121 SCRA 347, the time limitation of one year within which to file an action for
forcible entry and detainer is reckoned not from the moment of occupancy by the defendant, but from the time that his
possession becomes unlawful.

In this case, the jurisdictional requirement of demand was complied with as it was alleged in the complaint that demand was
made in December 1994 for defendant to vacate the premises, thus, in substance, where a complaint in an ejectment case
sufficiently alleges prior demand, the jurisdictional requirement is deemed complied with (Hautea vs. Magallon, 12 SCRA 514).

Dissatisfied with the RTCs pronouncements, defendant Aurora I. Perez elevated the case to the respondent Court of Appeals. On
January 27, 1999, the Court of Appeals rendered judgment in CA-G.R. SP No. 46779 reversing the decision of the RTC and
reinstating that of the MTC. The Court of Appeals explained thus-

The cause of action embodied in the respondents complaint is that the petitioner occupied the land in question only by
tolerance of their mother and, after her death, by their own tolerance. Article 537 of the New Civil Code provides that

Acts merely tolerated, and those executed clandestinely and without the knowledge of the possessor of a thing, or by violence,
do not affect possession.

Tolentino explains the concept of tolerance under the said article thus: -

Acts merely tolerated are those which by reason of neighborliness or familiarity, the owner of property allows his neighbor or
another person to do on the property; they are generally those particular services or benefits which ones property can give to
another without material injury or prejudice to the owner, who permits them out of friendship or courtesy. They are acts of little
disturbances which a person, in the interest of neighborliness or friendly relations, permits others to do on his property, such as
passing over the land, tying a horse therein, or getting some water from the well. Although this is continued for a long time, no
right will be acquired by prescription.

There is tacit consent of the possessor to the acts which are merely tolerated. Thus, not every case of knowledge and silence on
the part of the possessor can be considered mere tolerance. By virtue of tolerance that is considered as an authorization,
permission or license, act of possession are realized and performed. The question reduces itself to the existence or non-
existence of permission.

It is difficult to draw a dividing line between tolerance of the owner and abandonment of his rights when the acts of the
possessor are repeated, specially when the lapse of time has consolidated and affirmed a relation the legality of the origin of
which can be doubted. When there is license or permission, the proof of easy. It is for the court to decide in each case whether
there exists tolerance or an abandonment of right on the part of the owner. (Tolentino, Civil Code of the Philippines, 1972 ed.,
Vol. 2, pp. 253-254)

In the instant case, the evidence of tolerance on the part of the respondents consists of the affidavit of Luzviminda Go, which
states, among others, the following: -

1. That I am one of the daughters of the late Lucila Go who died on January 22, 1988;

2. That sometime in 1964 I was made to accompany my mother to visit a parcel of land which I know as the lot subject of our
ejectment case against one Aurora Perez;
3. That during that visit I saw a lone house there being occupied by a certain Attorney who I learned from my mother that he
was being allowed to stay there temporarily as we had no immediate need yet of the premises as we were allowed free use of a
premises in Cubao, Quezon City belonging to a relative of our grandfather;

4. That in early 1977 when I had another chance to visit the subject premises, I saw for the first time the person of Aurora Perez
whom I came to know then as Baby Sansano residing at the same house which earlier was being utilized as the residence of the
certain Attorney;

5. That I heard from my mother that certain Attorney was a relative of Aurora Perez

To our minds, this does not constitute sufficient evidence of tolerance to the occupancy by the petitioner of the disputed lot. In
the first place, the knowledge of Luzviminda Go of such alleged tolerance was derived from what her mother told her, hence,
hearsay. In the second place, the permission to stay on the lot was given only to a certain Attorney, and not to the petitioner
herself, who was only considered as a relative of the Attorney.

In fact, the records of the pre-trial conference conducted by the Metropolitan Trial Court on February 29, 1996 shows that the
respondents considered tolerance as equivalent to their mothers failure to act to eject the petitioner from the land.Thus

Court: O sige, okay. Who are the other plaintiffs? Ngayon, ayon sa Nanay ninyo, pinayagan ba niyang magtayo ng bahay doon si
Aurora Perez?

Miss Go: Hindi po.

Court: Hindi niya pinayagan?

Miss Go: Basta nakita na lamang po niya na nakatayo na yung bahay.

Court: Yung bang ibang mga kapatid, ganon din ba and sinasabi? Sino ang iba pang mga kapatid? Pinayagan ba ng Nanay ninyo
na magtayo ng bahay si Aurora Perez?

Answer: Hindi po.

Court: Yun din ba ang sagot ng ibang mga kapatid?

Answer: Opo, hindi po.

Court: Hindi pinayagan ang ibig sabihin. There is no tolerance there, Attorney.

Atty. Soriano: May we comment Your Honor?

Court: Teka muna.

Atty. Solidum: I was made to understand that at the time the mother was still living, in a way, she tolerated the stay of the
defendants when she did not at the time take steps to have the defendant ejected from the premises, and from that, the late
Mrs. Go tolerated the stay of the defendants in the premises. (t.s.n., pp. 5-7, Feb. 29, 1996).

The participants above knew what they were talking about, the possession of the lot. It is idle to distinguish between the
building of a house and the occupancy of the lot, for a house cannot be built without occupancy of the lot.

For that matter, if the Miss Go who appeared at the pre-trial was the same person as Luzviminda Go who executed the affidavit
partially quoted above, her statement that her mother simply found the petitioners house standing on the lot in question, runs
counter to her statement in the affidavit that her mother tolerated the Attorneys occupancy of a house on the said lot.

Consequently, we agree with the Metropolitan Trial Court that the occupancy of the petitioner was not a matter of tolerance on
the part of the respondents. This is not to say that the petitioner is entitled to remain in the subject land. It is only that the
respondents can no longer avail of the remedy of forcible entry or unlawful detainer. However, they may still bring the other
appropriate vindicatory actions. That is why the Metropolitan Trial Court dismissed their complaint without prejudice.

Hence, the present petition, where petitioners assign for resolution the main issue of: whether an ejectment action is the
appropriate judicial remedy for the recovery of possession of subject property in the instant case or whether a vindicatory
action is the proper remedy for such recovery; with the following subsidiary issues: 1. whether the instant action for ejectment
was commenced within the jurisdictional one year period provided for in Section 1, Rule 70 of the Rules of Court.; 2. whether
private respondents occupancy of the property in controversy, prior to the demand to vacate, was by mere tolerance of
petitioners mother and by their own tolerance; 3. whether the Court of Appeals properly applied the hearsay rule in rejecting
the submission that private respondents occupancy was merely tolerated; 4. whether or not petitioners certificate of title may
be collaterally attacked; 5. whether private respondent can validly claim reimbursement for her alleged expenses on
improvements made on the subject property; and, 6. whether petitioners are entitled to reasonable compensation for the use
and occupancy of subject property by the private respondent.

The Court finds no cogent reason to disturb the findings and conclusions of the Court of Appeals in its questioned decision.

Ejectment cases are summary proceedings intended to provide an expeditious means of protecting actual possession or right of
possession of property. Title is not involved, that is why it is a special civil action with a special procedure. [5]The only issue to be
resolved in ejectment cases is the question as to who is entitled to the physical or material possession of the premises or
possession de facto.[6] The summary actions for forcible entry and unlawful detainer are distinguished from each other as
follows:

Forcible entry and unlawful detainer cases are two distinct actions defined in Section 1, Rule 70 of the Rules of Court. In forcible
entry, one is deprived of physical possession of land or building by means of force, intimidation, threat, strategy, or stealth. In
unlawful detainer, one unlawfully withholds possession thereof after the expiration or termination of his right to hold
possession under any contract, express or implied. In forcible entry, the possession is illegal from the beginning and the basic
inquiry centers on who has the prior possession de facto. In unlawful detainer, the possession was originally lawful but became
unlawful by the expiration or termination of the right to possess, hence the issue of rightful possession is decisive for, in such
action, the defendant is in actual possession and the plaintiffs cause of action is the termination of the defendants right to
continue in possession.

What determines the cause of action is the nature of defendants entry into the land. If the entry is illegal, then the action which
may be filed against the intruder within one year therefrom is forcible entry. If, on the other hand, the entry is legal but the
possession thereafter became illegal, the case is one of unlawful detainer which must be filed within one year from the date of
the last demand.[7]

The complaint subject of this case was captioned as ejectment. From a reading of the allegations of the complaint quoted
above, we find that the action is one for unlawful detainer. Petitioners alleged in their complaint that they inherited the
property registered under TCT No. C-32110 from their parents; that possession thereof by private respondent was by
tolerance of their mother, and after her death, by their own tolerance; and that they had served written demand on December,
1994, but that private respondent refused to vacate the property. According to them, they availed of the appropriate judicial
remedy pursuant to Section I, Rule 70 of the Revised Rules of Court and that the complaint which was filed on June 27, 1995,
was filed within one year from date of the demand to vacate on December, 1994.

It is settled that one whose stay is merely tolerated becomes a deforciant illegally occupying the land the moment he is required
to leave.[8] It is essential in unlawful detainer cases of this kind, that the plaintiffs supposed acts of tolerance must have been
present right from the start of the possession which is later sought to be recovered. [9] This is where petitioners cause of action
fails. The appellate court, in full agreement with the MTC made the conclusion that the alleged tolerance by their mother and
after her death, by them, was unsubstantiated. On this point, we defer to the findings of the MTC as affirmed by the Court of
Appeals. The Supreme Court does not review findings of facts by the Court of Appeals unless the findings of the appellate court
are mistaken, absurd, speculative, conjectural, conflicting, tainted with grave abuse of discretion, or contrary to the findings
culled by the trial court of origin. [10] Here, we find no infirmity or anything reversible in the aforesaid findings arrived at by both
the MTC and the Court of Appeals.

The evidence revealed that the possession of defendant was illegal at the inception and not merely tolerated as alleged in the
complaint, considering that defendant started to occupy the subject lot and then built a house thereon without the permission
and consent of petitioners and before them, their mother. Per the affidavit of Luzviminda Go, she saw the defendant for the first
time in the subject lot in 1977 residing at the same house which was previously used by a certain Attorney who was allegedly
allowed by her mother to stay thereat. During the pre-trial conference, petitioner Ms. Go confirmed that their mother did not
allow defendant to stay in the subject lot and that they just saw the house of defendant standing thereon. Clearly, defendants
entry into the land was effected clandestinely, without the knowledge of the owners, consequently, it is categorized as
possession by stealth[11] which is forcible entry. As explained in Sarona vs. Villegas, cited in Muoz vs. Court of
Appeals[12] tolerance must be present right from the start of possession sought to be recovered, to categorize a cause of action
as one of unlawful detainer not of forcible entry, to wit:

But will this rule as to tolerance hold true in a case where there was forcible entry at the start, but the lawful possessor did not
attempt to oust the intruder for over one year, and only thereafter filed forcible entry suit following demand to vacate?

A close assessment of the law and the concept of the word `tolerance confirms our view heretofore expressed that such
tolerance must be present right from the start of possession sought to be recovered, to categorize a cause of action as one of
unlawful detainer not of forcible entry. Indeed, to hold otherwise would espouse a dangerous doctrine. And for two
reasons. First. Forcible entry into the land is an open challenge to the right of the possessor. Violation of that right authorizes
the speedy redress in the inferior court provided for in the rules. If one year from the forcible entry is allowed to lapse before
suit is filed, then the remedy ceases to be speedy; and the possessor is deemed to have waived his right to seek relief in the
inferior court. Second, if a forcible entry action in the inferior court is allowed after the lapse of a number of years, then the
result may well be that no action for forcible entry can really prescribe. No matter how long such defendant is in physical
possession, plaintiff will merely make a demand, bring suit in the inferior court upon a plea of tolerance to prevent prescription
to set in and summarily throw him out of the land. Such a conclusion is unreasonable. Especially if we bear in mind the
postulates that proceedings of forcible entry and unlawful detainer are summary in nature, and that the one year time bar to
suit is but in pursuance of the summary nature of the action.

It is well to remember that after the lapse of the one year period, suit must be started in the Court of First Instance in an accion
publiciana.

The RTC erred in treating the complaint as a case of forcible entry and ruling in favor of petitioners since there was no allegation
and proof of prior physical possession by the petitioners. In forcible entry, the complaint must allege that one in physical
possession of a land or building has been deprived of that possession by another through force, intimidation, threat, strategy or
stealth. Moreover, the action should be brought with in one year from date of forcible entry. In the case at bar, petitioners came
to know that defendant was occupying the subject land way back in 1977, but filed the case only in 1995.

We agree with the Court of Appeals that if petitioners are indeed the owners of the subject lot and were unlawfully deprived of
the real right of possession, they should present their claim before the regional trial court in an accion publicianaor an accion
reivindicatoria, and not before the metropolitan trial court in a summary proceeding of unlawful detainer or forcible entry. For
even if one is the owner of the property, the possession thereof cannot be wrested from another who had been in the physical
or material possession of the same for more than one year by resorting to a summary action for ejectment. [13] In view of the
foregoing, it is unnecessary to pass upon the other issues raised in the petition at bar.

WHEREFORE, the petition is DENIED and the judgment of the Court of Appeals is hereby AFFIRMED.

SO ORDERED.

Melo, (Chairman), Vitug, Panganiban, and Sandoval-Gutierrez, JJ., concur.

THIRD DIVISION
[G.R. No. 137944. April 6, 2000]

FERNANDA MENDOZA CEQUENA and RUPERTA MENDOZA LIRIO, petitioners, vs. HONORATA MENDOZA
BOLANTE, respondent. D E C I S I O N

PANGANIBAN, J.:

Tax receipts and declarations are prima facie proofs of ownership or possession of the property for which such taxes have been
paid. Coupled with proof of actual possession of the property, they may become the basis of a claim for ownership. By
acquisitive prescription, possession in the concept of owner -- public, adverse, peaceful and uninterrupted -- may be converted
to ownership. On the other hand, mere possession and occupation of land cannot ripen into ownership.

The Case

Before us is a Petition for Review on Certiorari of the March 19, 1999 Decision[1] of the Court of Appeals[2] (CA) in CA-GR CV No.
43423. The assailed Decision disposed as follows: [3]

"WHEREFORE, for all the foregoing, the decision of the trial court appealed from is REVERSED and SET ASIDE. In lieu thereof,
judgment is hereby rendered declaring x x x Honorata Mendoza Bolante the rightful owner and possessor of the parcel of land
which is the subject of this appeal." Lexj uris

The Facts

The Petition herein refers to a parcel of land situated in Barangay Bangad, Binangonan, Province of Rizal, having an area of 1,728
square meters and covered by Tax Declaration No. 26-0027.

The undisputed antecedents of this case are narrated by the Court of Appeals as follows: [4]

"The facts not disputed revealed that prior to 1954, the land was originally declared for taxation purposes in the name of
Sinforoso Mendoza, father of [respondent] and married to Eduarda Apiado. Sinforoso died in 1930. [Petitioners] were the
daughters of Margarito Mendoza. On the basis of an affidavit, the tax declaration in the name of Sinforoso Mendoza of the
contested lot was cancelled and subsequently declared in the name of Margarito Mendoza. Margarito and Sinforoso are
brothers. [Respondent] is the present occupant of the land. Earlier, on October 15, 1975, [respondent] and Miguel Mendoza,
another brother of [petitioners], during the cadastral survey had a dispute on [the] ownership of the land. Juri smis

"During the pre-trial conference, parties stipulated the following facts:

1) The land subject of the case was formerly declared for taxation purposes in the name of Sinforoso Mendoza prior to 1954 but
is now declared in the name of Margarito Mendoza.

2) The parties agree[d] as to the identity of the land subject of instant case.

3) [Petitioners] are the daughters of Margarito Mendoza while the [respondent] is the only daughter of Sinforoso Mendoza.

'4) Margarito Mendoza and Sinforoso Mendoza [were] brothers, now deceased.

5) During the cadastral survey of the property on October 15, 1979 there was already a dispute between Honorata M. Bolante
and Miguel Mendoza, brother of [petitioners].

6) [Respondent was] occupying the property in question.

The only issue involved [was] who [was] the lawful owner and possessor of the land subject of the case.

"After trial, the court a quo rendered its judgment in favor of [petitioners], the dispositive portion of which reads as follows:
Wherefore, in view of the foregoing considerations, judgment is hereby rendered for the [petitioners] and against the
[respondent]:

1. Declaring that the parcel of land situated in Bangad, Binangonan, Rizal covered by tax declaration no. 26-0027 in the name of
Margarito Mendoza belong to his heirs, the [petitioners] herein;

2. Ordering [respondent] to vacate the property subject of the case and deliver possession thereof to the heirs of Margarito
Mendoza. Jjj uris

3. Ordering the [respondent] to indemnify the [petitioners] in the sum of P10,000.00, as actual damages.

4. Ordering the [respondent] to pay the costs."

Ruling of the Court of Appeals

The Court of Appeals reversed the trial court because the genuineness and the due execution of the affidavit allegedly signed by
the respondent and her mother had not been sufficiently established. The notary public or anyone else who had witnessed the
execution of the affidavit was not presented. No expert testimony or competent witness ever attested to the genuineness of the
questioned signatures.

The CA further ruled that the affidavit was insufficient to overcome the denial of respondent and her mother. The former
testified that the latter, never having attended school, could neither read nor write. Respondent also said that she had never
been called "Leonor," which was how she was referred to in the affidavit.

Moreover, the appellate court held that the probative value of petitioners tax receipts and declarations paled in comparison
with respondents proof of ownership of the disputed parcel. Actual, physical, exclusive and continuous possession by
respondent since 1985 indeed gave her a better title under Article 538 of the Civil Code. lex

Hence, this Petition.[5]

Issues

Insisting that they are the rightful owners of the disputed land, the petitioners allege that the CA committed these reversible
errors:[6]

"1. xxx [I]n not considering the affidavit as an exception to the general rule that an affidavit is classified as hearsay evidence,
unless the affiant is placed on the witness stand; and Jksm

"2. xxx [I]n holding that respondent has been in actual and physical possession, coupled with xxx exclusive and continuous
possession of the land since 1985, which are evidence of the best kind of circumstance proving the claim of the title of
ownership and enjoys the presumption of preferred possessor."

The Court's Ruling

The Petition has no merit.

First Issue: Admissibility of the Affidavit

Petitioners dispute the CA's ruling that the affidavit was not the best evidence of their father's ownership of the disputed land,
because the "affiant was not placed on the witness stand." They contend that it was unnecessary to present a witness to
establish the authenticity of the affidavit because it was a declaration against respondent's interest and was an ancient
document. As a declaration against interest, it was an exception to the hearsay rule. As a necessary and trustworthy document,
it was admissible in evidence. And because it was executed on March 24, 1953, it was a self-authenticating ancient
document. Chief
We quote below the pertinent portion of the appellate court's ruling: [7]

"While it is true that the affidavit was signed and subscribed before a notary public, the general rule is that affidavits are
classified as hearsay evidence, unless affiants are placed on the witness stand (People's Bank and Trust Company vs. Leonidas,
207 SCRA 164). Affidavits are not considered the best evidence, if affiants are available as witnesses (Vallarta vs. Court of
Appeals, 163 SCRA 587). The due execution of the affidavit was not sufficiently established. The notary public or others who saw
that the document was signed or at least [could] confirm its recitals [were] not presented. There was no expert testimony or
competent witness who attested to the genuineness of the questioned signatures. Worse, [respondent] denied the genuineness
of her signature and that of her mother xxx. [Respondent] testified that her mother was an illiterate and as far as she knew her
mother could not write because she had not attended school (p. 7, ibid). Her testimony was corroborated by Ma. Sales Bolante
Basa, who said the [respondent's] mother was illiterate."

The petitioners allegations are untenable. Before a private document offered as authentic can be received in evidence, its due
execution and authenticity must be proved first.[8] And before a document is admitted as an exception to the hearsay rule under
the Dead Man's Statute, the offeror must show (a) that the declarant is dead, insane or unable to testify; (b) that the declaration
concerns a fact cognizable by the declarant; (c) that at the time the declaration was made, he was aware that the same was
contrary to his interest; and (d) that circumstances render improbable the existence of any motive to falsify. [9]Esmsc

In this case, one of the affiants happens to be the respondent, who is still alive and who testified that the signature in the
affidavit was not hers. A declaration against interest is not admissible if the declarant is available to testify as a witness. [10] Such
declarant should be confronted with the statement against interest as a prior inconsistent statement.

The affidavit cannot be considered an ancient document either. An ancient document is one that is (1) more than 30 years old,
(2) found in the proper custody, and (3) unblemished by any alteration or by any circumstance of suspicion. [11] It must on its face
appear to be genuine. The petitioners herein failed, however, to explain how the purported signature of Eduarda Apiado could
have been affixed to the subject affidavit if, according to the witness, she was an illiterate woman who never had any formal
schooling. This circumstance casts suspicion on its authenticity.

Not all notarized documents are exempted from the rule on authentication. Thus, an affidavit does not automatically become a
public document just because it contains a notarial jurat. Furthermore, the affidavit in question does not state how the
ownership of the subject land was transferred from Sinforoso Mendoza to Margarito Mendoza. By itself, an affidavit is not a
mode of acquiring ownership.

Second Issue: Preference of PossessionEsmmis

The CA ruled that the respondent was the preferred possessor under Article 538 of the Civil Code because she was in notorious,
actual, exclusive and continuous possession of the land since 1985. Petitioners dispute this ruling. They contend that she came
into possession through force and violence, contrary to Article 536 of the Civil Code.

We concede that despite their dispossession in 1985, the petitioners did not lose legal possession because possession cannot be
acquired through force or violence.[12] To all intents and purposes, a possessor, even if physically ousted, is still deemed the legal
possessor.[13] Indeed, anyone who can prove prior possession, regardless of its character, may recover such possession. [14]

However, possession by the petitioners does not prevail over that of the respondent. Possession by the former before 1985 was
not exclusive, as the latter also acquired it before 1985. The records show that the petitioners father and brother, as well as the
respondent and her mother were simultaneously in adverse possession of the land. Es-mso

Before 1985, the subject land was occupied and cultivated by the respondent's father (Sinforoso), who was the brother of
petitioners' father (Margarito), as evidenced by Tax Declaration No. 26425. [15] When Sinforoso died in 1930, Margarito took
possession of the land and cultivated it with his son Miguel. At the same time, respondent and her mother continued residing
on the lot.
When respondent came of age in 1948, she paid realty taxes for the years 1932-1948. [16] Margarito declared the lot for taxation
in his name in 1953[17] and paid its realty taxes beginning 1952.[18] When he died, Miguel continued cultivating the land. As found
by the CA, the respondent and her mother were living on the land, which was being tilled by Miguel until 1985 when he was
physically ousted by the respondent. [19]

Based on Article 538 of the Civil Code, the respondent is the preferred possessor because, benefiting from her father's tax
declaration of the subject lot since 1926, she has been in possession thereof for a longer period. On the other hand, petitioners'
father acquired joint possession only in 1952. Ms-esm

Third Issue: Possession of Better Right

Finally, the petitioners challenge the CA ruling that "actual and physical coupled with the exclusive and continuous possession
[by respondent] of the land since 1985" proved her ownership of the disputed land. The respondent argues that she was legally
presumed to possess the subject land with a just title since she possessed it in the concept of owner. Under Article 541 of the
Code, she could not be obliged to show or prove such title.

The respondent's contention is untenable. The presumption in Article 541 of the Civil Code is merely disputable; it prevails until
the contrary is proven. [20] That is, one who is disturbed in one's possession shall, under this provision, be restored thereto by the
means established by law.[21] Article 538 settles only the question of possession, and possession is different from ownership.
Ownership in this case should be established in one of the ways provided by law. E-xsm

To settle the issue of ownership, we need to determine who between the claimants has proven acquisitive prescription. [22]

Ownership of immovable property is acquired by ordinary prescription through possession for ten years. [23] Being the sole heir of
her father, respondent showed through his tax receipt that she had been in possession of the land for more than ten years since
1932. When her father died in 1930, she continued to reside there with her mother. When she got married, she and her
husband engaged in kaingin inside the disputed lot for their livelihood. [24]

Respondent's possession was not disturbed until 1953 when the petitioners' father claimed the land. But by then, her
possession, which was in the concept of owner -- public, peaceful, and uninterrupted [25] -- had already ripened into ownership.
Furthermore she herself, after her father's demise, declared and paid realty taxes for the disputed land. Tax receipts and
declarations of ownership for taxation, when coupled with proof of actual possession of the property, can be the basis of a claim
for ownership through prescription.[26]Ky-le

In contrast, the petitioners, despite thirty-two years of farming the subject land, did not acquire ownership. It is settled that
ownership cannot be acquired by mere occupation. [27] Unless coupled with the element of hostility toward the true owner,
[28]
occupation and use, however long, will not confer title by prescription or adverse possession. Moreover, the petitioners
cannot claim that their possession was public, peaceful and uninterrupted. Although their father and brother arguably acquired
ownership through extraordinary prescription because of their adverse possession for thirty-two years (1953-1985), [29] this
supposed ownership cannot extend to the entire disputed lot, but must be limited to the portion that they actually farmed.

We cannot sustain the petitioners' contention that their ownership of the disputed land was established before the trial court
through the series of tax declarations and receipts issued in the name of Margarito Mendoza. Such documents prove that the
holder has a claim of title over the property. Aside from manifesting a sincere desire to obtain title thereto, they announce the
holder's adverse claim against the state and other interested parties. [30]Ky-calr

However, tax declarations and receipts are not conclusive evidence of ownership. [31] At most, they constitute mere prima
facie proof of ownership or possession of the property for which taxes have been paid. [32] In the absence of actual public and
adverse possession, the declaration of the land for tax purposes does not prove ownership. [33] In sum, the petitioners' claim of
ownership of the whole parcel has no legal basis.

WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution AFFIRMED. Costs against petitioners.
Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION
G.R. No. 130316 January 24, 2007

ERNESTO V. YU and ELSIE O. YU, Petitioners,

vs.
BALTAZAR PACLEB,1 Respondent.

DECISION

CORONA, J.:

The present petition filed under Rule 45 of the Rules of Court originated from an action for forcible entry and damages filed by
petitioners Ernesto and Elsie Yu against respondent Baltazar Pacleb.

The antecedent facts follow.

Sometime in September 1992, Ruperto Javier allegedly offered to sell Lot No. 6853-D to petitioners for P75 per
sq.m.lawphil.net The lot was approximately 18,000 square meters and was located in Barangay Langkaan, Dasmarias, Cavite.
Javier supposedly purchased the lot from one Rebecca del Rosario who, in turn, acquired it from respondent and his wife. The
title of the property (Transfer Certificate of Title [TCT] No. T-118375), however, remained in the names of respondent and his
wife. The instruments in support of the series of alleged sales were not registered.

On September 11, 1992, petitioners accepted the offer and gave Javier P200,000 as downpayment for the lot. Javier then
delivered his supposed muniments of title to petitioners. After the execution of a contract to sell, he formally turned over the
property to petiti oners.

At the time of the turn-over, a portion of the lot was occupied by Ramon C. Pacleb, respondents son, and his wife as tenants.
On September 12, 1992, Ramon and his wife allegedly surrendered possession of their portion to petitioners. Later on,
petitioners appointed Ramon as their trustee over the subject lot.

Aside from taking possession of the property, petitioners also caused the annotation on TCT No. T-118375 of a decision
rendered in their favor in Civil Case No. 741-93. 2 This decision attained finality on April 19, 1995.

Petitioners alleged that they exercised ownership rights as well as enjoyed open, public and peaceful possession over the
property from September 12, 1992 until the early part of September 1995. During this time, respondent was in the United
States.

Upon respondents return to the Philippines in May 1995, he allegedly entered the property by means of force, threat,
intimidation, strategy and stealth thereby ousting petitioners and their trustee, Ramon.

Despite repeated demands, respondent, asserting his rights as registered owner of the property, refused to vacate the premises
and surrender its possession to petitioners.

Petitioners filed an action for forcible entry 3 in the Municipal Trial Court (MTC) of Dasmarias, Cavite on November 23, 1995.
Respondent filed an answer with compulsory counterclaim dated December 8, 1995. After the issues were joined, the MTC
required the submission of the parties position papers at a preliminary conference on March 11, 1996. Respondent failed to
comply.

On June 17, 1996, the MTC ruled:

WHEREFORE, in view of the foregoing, the [respondent] and other persons claiming right under him are hereby ordered to
surrender physical possession of Lot No. 6853-D in favor of the [petitioners] and to pay the sum of TWENTY-FIVE THOUSAND
(P25,000.00) PESOS as attorneys fees.

SO ORDERED.4
On appeal,5 the Regional Trial Court (RTC) of Imus, Cavite rendered a decision affirming the MTC decision in toto.6

Respondent elevated his case to the Court of Appeals (CA) 7 which rendered the assailed decision on March 18, 1997:

WHEREFORE, the Petition is GRANTED; the Decision dated October 25, 1996 of the [RTC] of Imus, Cavite in Civil Case No. 052-96
and the Decision of the [MTC] of Dasmarias, Cavite in Civil Case No. 182 are SET ASIDE; and Civil Case No. 182 for Forcible Entry
and Damages is hereby ordered DISMISSED. No pronouncement as to costs.

SO ORDERED.8

In a resolution dated August 20, 1997, the CA denied petitioners motion for reconsideration for lack of merit.

Before us now come petitioners who claim that the appellate court erred in finding that respondent had prior physical
possession of the subject property.lawphil.net

"In an action for forcible entry, the plaintiff must prove that he was in prior possession of the land or building and that he was
deprived thereof by means of force, intimidation, threat, strategy or stealth." 9 The plaintiff, however, cannot prevail where it
appears that, as between himself and the defendant, the latter had possession antedating his own. 10 We are generally precluded
in a Rule 45 petition from reviewing factual evidence tracing the events prior to the first act of spoliation. 11 However, the
conflicting factual findings of the MTC and RTC on one hand, and the CA on the other, require us to make an exception.

We overrule petitioners contentions.

The Civil Code states that possession is the holding of a thing or the enjoyment of a right. 12 In the grammatical sense, to possess
means to have, to actually and physically occupy a thing, with or without right. 13 "Possession always includes the idea of
occupation x x x. It is not necessary that the person in possession should himself be the occupant. The occupancy can be held by
another in his name."14 Without occupancy, there is no possession. 15

Two things are paramount in possession. 16 First, there must be occupancy, apprehension or taking. Second, there must be intent
to possess (animus possidendi).17

Here, petitioners failed to establish that they had prior physical possession to justify a ruling in their favor in the complaint for
forcible entry against respondent.

In the decision in Civil Case No. 741-93 (a case for specific performance and damages against Javier, the alleged vendor of the lot
in question) upon which petitioners based their right to possess in the first place, the trial court categorically stated:

The [petitioners were never placed] in possession of the subject property on which [was] planned to be [site of] a piggery, nor
[were they] given a clearance or certification from the Municipal Agrarian Reform Officer. 18(emphasis ours)

The claim that the lot was turned over to petitioners in 1992 was self-serving in the face of this factual finding. On the other
hand, the tax declarations and receipts in the name of respondent in 1994 and 1995 established the possession of
respondent. 19 The payment of real estate tax is one of the most persuasive and positive indications showing the will of a person
to possess in concepto de dueo or with claim of ownership.20

"[P]ossession in the eyes of the law does not mean that a man has to have his feet on every square meter of the ground before
he is deemed in possession."21 In this case, Ramon, as respondents son, was named caretaker when respondent left for the
United States in 1983.22 Due to the eventual loss of trust and confidence in Ramon, however, respondent transferred the
administration of the land to his other son, Oscar, in January 1995 until his return in May 1995. 23 In other words, the subject
land was in the possession of the respondents sons during the contested period.

Petitioners cite an alleged document (Kusangloob na Pagsasauli ng Lupang Sakahan at Pagpapahayag ng Pagtalikod sa
Karapatan) dated March 10, 1995 executed by them and Ramon to prove a turn over of possession. They also seek to prove
their exercise of rights over the land through alleged frequent visits and the designation of Ramon as their own trustee as
declared in a joint affidavit attached to their position paper filed with the MTC. These instruments, however, fail to convince us
of petitioners actual occupancy of the subject land. First, petitioners themselves acknowledged that Ramon and his wife
occupied part of the land as tenants of respondent. Second, Ramon, a mere tenant, had no authority to sign such document
dated March 10, 1995 waiving all rights to the land. Third, there was no clear proof in the records of the appointment of Ramon
as petitioners trustee save their self-serving statements to this effect. Finally, at the time the Kusangloob na
Pagsasauli document was executed, the caretaker of the land was no longer Ramon but Oscar. 24

Most important, the title of the land in question (TCT No. T-118375) remained in the name of respondent. 25 "As the registered
owner, petitioner had a right to the possession of the property, which is one of the attributes of ownership." 26 The Civil Code
states:

Art. 538. Possession as a fact cannot be recognized at the same time in two different personalities except in the cases of co-
possession. Should a question arise regarding the fact of possession, the present possessor shall be preferred; if there are two
possessors, the one longer in possession; if the dates of the possession are the same, the one who presents a title; and if all
these conditions are equal, the thing shall be placed in judicial deposit pending determination of its possession or ownership
through proper proceedings.

In view of the evidence establishing respondents continuing possession of the subject property, petitioners allegation that
respondent deprived them of actual possession by means of force, intimidation and threat was clearly untenable. In Gaza v. Lim,
we held that:

Where a dispute over possession arises between two persons, the person first having actual possession is the one who is
entitled to maintain the action granted by law; otherwise, a mere usurper without any right whatever, might enter upon the
property of another and, by allowing himself to be ordered off, could acquire the right to maintain the action of forcible entry
and detainer, however momentary his intrusion might have been. 27

WHEREFORE, the petition is hereby DENIED. The decision of the Court of Appeals dated March 18, 1997 in CA-G.R. SP No.
42604 is AFFIRMED.

Costs against petitioners.

SO ORDERED.

RENATO C. CORONA
Associate Justice

THIRD DIVISION
HERMINIA ESTRELLA, G.R. No. 171029

Petitioner,

Present:

YNARES-SANTIAGO, J.,

Chairperson,

AUSTRIA-MARTINEZ,

- versus - CHICO-NAZARIO,

NACHURA, and

REYES, JJ.

Promulgated:

GREGORIO ROBLES, JR.

Respondent. November 22, 2007

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

DECISION

CHICO-NAZARIO, J.:

This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the Decision [1] dated 15 September
2005 rendered by the Court of Appeals in CA-G.R. SP No. 78672. In reversing the Decision,[2] dated 16 July 2003, rendered by
Branch 74 of the Regional Trial Court (RTC) of Olongapo City, the Court of Appeals declared that petitioner Herminia Estrella is
liable to respondent Gregorio Robles, Jr. for unpaid rent and should be ejected from the leased premises due to her continued
refusal to pay the accrued rentals.

On 8 August 2001, respondent filed a Complaint for Unlawful Detainer against the petitioner before the Municipal Trial Court in
Cities (MTCC) of Olongapo City docketed as Civil Case No. 5031. He alleged therein that he is the owner of the subject property -
a building and a parcel of land consisting of 370 square meters situated at 19 Otero Avenue, Mabayuan, Olongapo City. He
allegedly acquired the land from the government on 20 June 1983 through a previously filed Miscellaneous Sales Application.
[3]
He presented a copy of the Notice dated 20 June 1983 issued by then Director of Lands Ramon Casanova, informing the public
of the sale of the subject property to the respondent, and a copy of a Certification dated 4 June 1992 by the City Treasurer
of Olongapo City that the purchase price had been paid on 20 June 1984.[4]

Respondent also claimed that after purchasing the land, he constructed a building thereon. To support his claim, he submitted a
copy of the receipts of payments made as early as 10 October 1979 for building permit fee and other fees that he was required
to pay for the construction of the building. [5] Also attached was a receipt for light connection fee, dated 22 December 1965, paid
by the respondents father and predecessor-in-interest, Gregorio Robles. [6]

Respondent averred that he leased the building to Virginia Fernandez, the mother of petitioner at a monthly rental of P1,200.00
from February 1991 to December 1994. After December 1994, petitioner replaced her mother as lessee and occupied the
subject property and continued to pay monthly rentals of P1,000.00 until September 1996. Thereafter, she refused to pay
rentals despite repeated spoken and written demands. Receipts issued by the respondent showing rental payments made by
petitioner were attached to the Complaint. [7] On 11 June 2001, respondent wrote petitioner a letter terminating the lease and
demanding payment of rentals in arrears, but petitioner refused to comply with the demand. [8]

Several years after the government had awarded the land to the respondent, petitioner belatedly filed a protest to respondents
Miscellaneous Sales Application on 5 October 1998. The said protest was denied in an Order dated 24 January 2000 issued by
Department of Environment and Natural Resources (DENR) Regional Executive Director Gregorio Nisperos. [9] In the said Order, it
was stressed that while petitioner was in actual possession of the subject property, nevertheless, her possession thereof was
not in the concept of an owner:

After a careful evaluation of the evidence submitted, it was observed that though protestant is in actual occupation of the
disputed property, her possession and occupation could not be considered as that in the concept of an owner which is the
ultimate requirement in public land grant. This observation is supported by the receipts corresponding to the payment of lease
rentals by protestant. This will connote to nothing less than to establish the fact that the possession thereof by the protestant
was merely tolerated by the protestee by virtue of a lease contract by and between the parties. That sufficient evidence were
presented supporting the ownership of the property by the protestee. x x x.[10]

Petitioner filed a Motion for Reconsideration which was denied in an Order dated 12 March 2001. On appeal, the DENR
Secretary, in a Decision dated 29 January 2004, affirmed the findings of Regional Executive Director Gregorio Nisperos.[11]

During the proceedings before the Olongapo MTCC, petitioner denied ever having leased the subject property claiming that the
receipts that the respondent presented as evidence were falsified. She insisted that she was now the owner of the property
after occupying the same for 30 years by reason of acquisitive prescription. She averred that she built improvements therein
which she used for her funeral parlor business. She questioned the award of the land to respondent by way of Miscellaneous
Sales Application as he purportedly never even set foot in the property. [12] She asserted that her Miscellaneous Sales Application
filed on 11 December 1997[13] should have been given due course. She added that the respondent was merely a professional
squatter or land speculator. [14]

The Olongapo MTCC rendered a decision in favor of the respondent. Although there was no contract of lease executed between
the parties, the Olongapo MTCC took into account the receipts presented by the respondent showing that petitioner paid rent
on the subject property. It declared that the petitioners long years of stay in the subject property did not vest ownership in her
as her Miscellaneous Sales Application was never granted by the government. It ruled that the respondent presented a better
right to possess the subject property since he was able to present proof that he bought it from the government and paid for
it. Thus, the MTCC ordered the eviction of the petitioner from the subject property.

On 14 August 1998, petitioner appealed the Decision of the Olongapo MTCC, and it was raffled to Branch 74 of the RTC
of Olongapo City and docketed as Civil Case No. 150-0-03. The Olongapo RTC reversed the Decision rendered by
the Olongapo MTCC and ordered the dismissal of the complaint filed by the respondent against petitioner. The RTC gave little
probative value to the receipts presented by the respondent as evidence of rentals paid by the petitioner since these receipts
were unsigned by the petitioner. Thus, it ruled that respondent had not been able to prove ownership, and that the case should
be resolved in favor of who had actual possession of the subject property. In interpreting Article 538 of the Civil Code, [15] the RTC
ruled that petitioner had the preferred right as she was in actual possession of the subject property. The dispositive part of the
Decision dated 16 July 2003 reads:

WHEREFORE, foregoing considered, the appeal is hereby granted. The Decision appealed from is REVERSED and SET ASIDE. The
complaint below is DISMISSED. No pronouncements as to costs.[16]
On appeal, the Court of Appeals in CA-G.R. SP No. 78672 reversed the Decision rendered by the Olongapo RTC and reinstated
the Judgment rendered by the Olongapo MTCC. The appellate court adjudged that the respondent adequately proved that he
possessed the property in the concept of an owner, and that the petitioner failed to refute this by contrary proof. Moreover, it
stated that the DENRsDecision to affirm the decision of the Bureau of Lands granting the respondents Miscellaneous Sales
Application was conclusive upon the courts as to who should be granted the subject property, which was formerly a public lot. It
further ruled that petitioner occupied the subject property merely as the respondents lessee. Since the petitioner continually
refused to pay rent, she should be ejected from the property and pay rentals in arrears. However, it clarified the Judgment
rendered by the MTCC by setting the monthly rental payable to respondent at P1,000.00. The appellate court, in its Decision in
CA-G.R. SP No. 78672, declared that:

WHEREFORE, judgment is hereby rendered, reinstating the decision dated 24 February 2003 of the Municipal Trial Court, Branch
4, Olongapo, in Civil Case No. 5031, with the following modification: respondent HerminiaEstrella is ordered to pay petitioner
Gregorio Robles, Jr. the amount of P1,000.00 per month from September 1996 until said respondent vacates the building at No.
19 Otero Avenue, Mabayuan, Olongapo.[17]

Petitioner filed a Motion for Reconsideration of the Decision of the Court of Appeals wherein she presented for the first time a
copy of a Miscellaneous Sales Application which was supposedly filed on 14 December 1971. The said motion was denied in a
Resolution dated 13 January 2006.[18]

Hence, in the present Petition, petitioner relies on the following grounds [19]:

THE COURT OF APPEALS GROSSLY ERRED IN MAKING THE FINDINGS OF FACTS IN ITS ASSAILED DECISION WARRANTING A
REVIEW OF THE SAME BY THIS HONORABLE COURT

II

THE COURT OF APPEALS GROSSLY ERRED IN GIVING DUE CREDENCE TO THE FINDINGS OF FACTS OF THE DENR.

III

THE COURT OF APPEALS GROSSLY ERRED IN HOLDING THAT THE CLAIM OF OWNERSHIP AND POSSESSION BY THE PETITIONER
OF THE SUBJECT PROPERTY SINCE 1969 IS NOT SUPPORTED BY CREDIBLE EVIDENCE.

IV

THE COURT OF APPEALS GROSSLY ERRED IN FINDING THAT THE RESPONDENT HAS PROVEN HIS OWNERSHIP OF THE SUBJECT
PROPERTY

THE COURT OF APPEALS GROSSLY ERRED IN FINDING THAT THE PETITIONER IS A LESSEE OF THE RESPONDENT IN THE SUBJECT
PROPERTY

THE COURT OF APPEALS GROSSLY ERRED IN NOT (sic) HOLDING THAT THE RESPONDENT HAS A BETTER RIGHT TO POSSESS THE
SUBJECT PROPERTY.

First off, it must be stated that the power to resolve conflicts of possession is recognized to be within the legal competence of
the civil courts and its purpose is to extend protection to the actual possessors and occupants with a view to quell social
unrest. A judgment of the court ordering restitution of the possession of a parcel of land to the actual occupant, who has been
deprived thereof by another through the use of force or in any other illegal manner, should never be construed as an
interference with the disposition and alienation of public lands. [20]

The Bureau of Lands determines the respective rights of rival claimants to public lands, but it does not have the wherewithal to
police public lands. Neither does it have the means to prevent disorders or breaches of peace among the occupants. Its power is
clearly limited to disposition and alienation and any power to decide disputes over possession is but in aid of making the proper
awards.[21]

We now proceed to the core issues raised by the petitioner.

Petitioner stubbornly insists that she, not the respondent, is in actual possession of the subject property.

In a case for unlawful detainer, the possession is unlawfully withheld after the expiration or termination of the right to hold
possession under any contract, express or implied.[22] The only elements that need to be proved are the fact of the lease, the
pertinent contract in this case, and the expiration of its terms. [23]

In Barba v. Court of Appeals,[24] this Court categorically ruled that:

Where the cause of action is unlawful detainer, prior possession is not always a condition sine qua non. A complaint for
unlawful detainer should be distinguished from that of forcible entry. In forcible entry, the plaintiff has prior possession of the
property and he is deprived thereof by the defendant through force, intimidation, threat, strategy or stealth. In an
unlawful detainer, the defendant unlawfully withholds possession of the property after the expiration or termination of his right
thereto under any contract, express or implied; hence, prior physical possession is not required. x x x. In ejectment cases,
therefore, possession of land does not only mean actual or physical possession or occupation but also includes the subjection of
the thing to the action of ones will or by the proper acts and legal formalities established for acquiring such right, such as the
execution of a deed of sale over a property.

In an unlawful detainer case, the defendants possession was originally lawful but ceased to be so by the expiration of his right to
possess. Hence the phrase unlawful withholding has been held to imply possession on the part of the defendant, which was
legal from the beginning, having no other source than a contract, express or implied, and which later expired as a right and is
being withheld by defendant.[25] The issue of rightful possession is the one decisive, for in such action, the defendant is the party
in actual possession and the plaintiffs cause of action is the termination of the defendants right to continue in possession.
[26]
Possession in the eyes of the law does not mean that a man has to have his feet on every square meter of the ground before
he is deemed in possession. Nor does the law require one in possession of a house to reside in the house to maintain his
possession.[27] As lessor of the subject property, respondent is legally considered as being in possession thereof. Hence, the fact
of actual possession becomes a non-issue.

Next, petitioner denies the existence of any lease agreement between petitioner and respondent. She maintains that she was in
possession of the subject property as early as 1969.

To bolster her contentions, petitioner presented before the Court of Appeals and this Court a Miscellaneous Sales Application
different from that which she presented before the Olongapo MTCC. The Miscellaneous Sales Application presented before the
Court of Appeals in the Motion for Reconsideration was supposedly filed on 14 December 1971, as marked in the application
itself.[28] The Miscellaneous Sales Application presented before the Olongapo MTCC was supposedly filed on 11 December 1997.
[29]
No mention was made of the 1971 Miscellaneous Sales Application in the protest before the DENR, which only took notice of
the 1997 application.

In the 1971 Miscellaneous Sales Application, petitioner alleged that she was in actual possession of the subject property as early
as 1969.[30] But in the 1997 application, petitioner claimed that she took possession of the subject property only in 1972. [31] Even
assuming that the petitioner actually filed two Miscellaneous Sales Applications, it is highly incomprehensible that the petitioner
would state that she occupied the land in 1972 in the 1997 application, when she had already filed one on an earlier date in
1971, when she allegedly took possession of the land in 1969.

There seems to be an attempt to mislead this Court as to when the petitioner filed a Miscellaneous Sales Application. No
mention was made of the 1997 application in the Petition for Review. [32]Moreover, it was made to appear as if the letter dated 5
February 1998 of Atty. Ricardo G. Lazaro, Jr. was in response to the 1971 application, when in fact it was made in response to the
one filed in 1997.Given the foregoing considerations, very little weight can be given to the 1971 application.

Petitioner presented as supporting documents to the 1971 Miscellaneous Sales Application the Indorsement issued by City
Engineer Domingo Farin dated 17 December 1971 and a Certification issued by then Mayor Amelia Gordon dated 22 December
1971, which were not even presented before the MTCC. [33]

Petitioner also submitted affidavits designated as Pinagsanib na Sinumpaang Salaysay ni Azucena Gracia at Cristina v.
Gonzales dated 20 July 2001 and Pinagsanib na Sinumpaang Salaysay ni DelfinManguino at Duisaldo Fernando dated 20 July
2001.

It should be noted that the aforementioned documents were belatedly presented only before the Court of Appeals, and not
during the proceedings before the Olongapo MTCC and Olongapo RTC.Therefore, respondent was not given an opportunity to
examine and verify the authenticity of these documents before the trial court. Further, no justification was supplied by the
petitioner for the belated presentation of these pieces of evidence. Hence, these are not admissible. Where the adverse party is
deprived of the opportunity to cross-examine the affiants, affidavits are generally rejected for being hearsay. [34] Even if they were
admissible in evidence, they only testified to the actual physical possession of the petitioner and failed to establish privity to any
lease agreement between the petitioner and the respondent.

Similarly, the Sinumpaang Salaysay of Severino Ferrer dated 13 October 2001 and the Certification issued
by Barangay Captain Danilo S. Fernandez on 22 October 2001 -- both attesting that petitioner, and not the respondent, resided
on the subject property -- do not disprove the existence of a lease agreement between petitioner and respondent. And, as
earlier demonstrated, neither do they bear significance on the right of possession of respondent.

The Affidavit of then Mayor Amelia Gordon dated 10 February 2000 was to the effect that she permitted the petitioner to
occupy the subject property in 1969; that she never saw the respondent occupy the premises; and therefore the lease
agreement between petitioner and respondent was preposterous. Again, these statements cannot be given credence over the
findings of DENR. The Office of the Mayor is not authorized to dispose of or authorize the use of public lands, as this duty lies
with the Bureau of Lands.

The tax receipts presented by the petitioner were evidence of payments made from 1998 to 2002, while the Tax Declaration of
Real Property was issued no later than 1999, the date of effectivity of assessment.[35] Tax declarations are not conclusive proofs
of ownership,[36] or even of possession. Remarkably, payments were made after 1996, at the time when the respondent alleged
that the petitioner had refused to pay rentals and committed acts of dispossession of the subject property against the
respondent. Stated differently, payments were made soon after the dispute arose between the parties.

IN STARK CONTRAST, respondent presented receipts of the rentals paid by the petitioners mother, in whose name the lease was
taken, for the period starting December 1994 until July 1996. [37] The lease agreement between petitioner and respondent is also
confirmed by the findings of DENR Regional Executive Director Gregorio Nisperos, who sent representatives to inspect the
subject premises.[38] In a letter dated 11 June 2001,[39] respondent, through counsel, demanded that petitioner vacate the
premises, but notwithstanding such demand, petitioner refused to vacate the same. Such act amounted to an unlawful
withholding of the subject property by petitioner because she refused to vacate the premises after the lease agreement had
already been terminated by her failure to pay rentals despite the notices sent to her to that effect.

What cannot be brushed aside are the findings of the DENR on the status of petitioner as lessee after it sent its representatives
to inspect the subject property to determine who between the petitioner and respondent had a better claim on the subject
property, which cannot be defeated by the casual observations of the petitioners witnesses.
After a careful evaluation of the evidence submitted, it was observed that though protestant is in actual occupation of the
disputed property, her possession and occupation could not be considered as that in the concept of an owner which is the
ultimate requirement in the public land grant. This observation is supported by the receipts corresponding to the payment of
lease rentals by protestant. This will connote nothing less than to establish the fact that the possession thereof by the
protestant was merely tolerated by the protestee by virtue of a lease contract by and between the parties. That sufficient
evidence were presented supporting the ownership of the property by the protestee, who paid the same in full per O.R. No.
6186377, the announcement of Director of Lands of the sale of the property in favor of the protestee by virtue of his
Miscellaneous Sales Application No. (III-4)9822 for commercial purposes per his Notice dated June 20, 1986 (sic), the
declaration of the property per Tax Declaration No. 11615 dated March 15, 1963, Tax Declaration No. 16888 dated April 29,
1965 where it was revealed that a portion of the subject lot was even donated by the protestee to the Bo. Mabayuan to be used
as a playground per amicable settlement by the protestee and the Barrio Council of Mabayuan, Olongapo City, and tax receipts
corresponding to the payment of realty taxes due thereon as paid by the protestee up to the present. These evidence protestant
were not able to overcome.

Thus, if it were true that protestants status of occupation on the disputed lot since 1969 is in the concept of an owner
continuously, publicly and adversely as she claimed, then, thirty (30) years is quite too long for her to have not acquired a patent
and corresponding title on the land as it normally happens to persons similarly situated who can avail of a public land grant in
just a couple of years or earlier as when the government is fast-tracking and or conducting what we call Oplan Handog Titulo. In
other words, protestants actuations under the circumstances are contrary to human experience and actual course of things.

Ostensibly, protestee, indeed merely tolerated and allowed the respondents to stay on the subject property by virtue of a lease
agreement. Hence, protestants, whose length of possession, however long, cannot ripen into ownership, this is so, because that
is not in the concept of an owner. Under the law, acts merely tolerated and those executed clandestinely and without
knowledge of the possessor of the thing, or by violence, do not affect possession (Art. 537, New Civil Code). Thus, lawful owners
have the right to demand the return of their property at any time as long as the possession was unauthorized or merely
tolerated. This right is never barred by laches, because, possession by merely tolerance does not start the running of the
prescriptive period.

All told, this Office finds in the protestee all the qualifications and none of the disqualifications to avail of the public land grant
over the disputed lot.[40]

Factual considerations relating to lands of the public domain properly rest within the administrative competence of the Director
of Lands and the DENR. [41] Findings of administrative agencies, which have acquired expertise because of their jurisdiction, are
confined to specific matters and are accorded respect, if not finality, by the courts. [42] Even if they are not binding as to civil
courts exercising jurisdiction over ejectment cases, such factual findings deserve great consideration and are accorded much
weight.

Finally, petitioner questions the propriety of the award by the DENR of the Miscellaneous Sales Application to the respondent.

The DENR Secretary, in denying the appeal filed by the petitioner questioning the granting of respondents Miscellaneous Sales
Application, took note of the following evidence, in addition to the evidence presented before the Olongapo MTCC[43]:

1. 3rd Indorsement issued by the Department of Public Utilities and Safety of the Municipality of Olongapo dated 23 March 1966,
which stated that respondents father and predecessor-in-interest, Gregorio A. Robles, was the lawful occupant of the subject
property and had been in possession since 1962;

2. Real Property Tax Receipts (Official Receipts No. 7639431, 313300, and 463315) for payments made by respondents father as
early as 1962 to 1964; and
3. A letter dated 9 November 1960 written by then Mayor Ruben Geronimo thanking the respondents father for the help
providing filling materials for Bouzer Avenue (Otero Avenue at present), Mabayuan, Olongapo, where the subject property is
located.

Based on the aforementioned evidence, the DENR found that the petitioners protest of the disposition of the subject land in
favor of the respondent was without basis. The disposition of the subject land cannot be questioned in a case for
unlawful detainer. Under the Public Land Act, the Director of Lands primarily and the DENR Secretary ultimately have the
authority to dispose of and manage public lands.And while the DENRs jurisdiction over public lands does not negate the
authority of courts of justice to resolve questions of possession, the DENRs decision would prevail with regard to the respective
rights of public land claimants. Regular courts would have no jurisdiction to inquire into the validity of the award of the public
land.[44]

IN SUM, the records are bereft of proof that petitioner had indeed occupied the premises prior to the possession of the
respondent and his predecessor. The pieces of evidence presented by the petitioner were either inconsistent, dubious in
character, irrelevant, or issued by an unauthorized public official. On the other hand, respondents evidence is consistent,
straightforward and derived from public officers tasked to perform official functions. The notices, certifications and receipts
were issued soon after the supposed event occurred and before any dispute arose between the parties. Respondent has
sufficiently established a case for unlawful detainer.

IN VIEW OF THE FOREGOING, the instant Petition is DENIED and the assailed Decision of the Court of Appeals in CA-G.R. SP No.
78672, promulgated on 15 September 2005, is AFFIRMED.Petitioner is ordered to vacate the subject property and to pay
respondent the amount of P1,000.00 per month from September 1996 until she vacates the building at No. 19 Otero
Avenue, Mabayuan, Olongapo.Costs against the petitioner.

SO ORDERED.

Republic of the Philippines

Supreme Court

Manila
THIRD DIVISION

B.E. SAN DIEGO, INC., G.R. No. 159230

Petitioner,

Promulgated:

- versus - October 18, 2010

COURT OF APPEALS and JOVITA MATIAS,

Respondents.

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

DECISION

BRION, J.:

Petitioner B. E. San Diego, Inc. (B.E. San Diego) filed before the Court a petition for review on certiorari[1] assailing the
September 25, 2002 decision[2] of the Court of Appeals (CA) in CA-G.R. CV No. 50213. The CA decision reversed the June 22,
1995 decision[3] of the Regional Trial Court (RTC) of Malabon, Branch 74, in Civil Case No. 1421-MN.[4] The RTC in turn granted
the complaint for recovery of possession [5] instituted by B. E. San Diego against private respondent Jovita Matias (Matias).

THE FACTS

B.E. San Diego alleged that it is the registered owner of a parcel of land (subject property) located in Hernandez Street,
Catmon, Malabon, covered by Transfer Certificate of Title (TCT) No. T-134756 of the Register of Deeds of Caloocan, and
delineated as Lot No. 3, Block No. 13, with an area of 228 square meters. B. E. San Diego claimed that Matias has been
occupying the subject property for over a year without its authority or consent. As both its oral and written demands to
vacate were left unheeded, B. E. San Diego filed a complaint for the recovery of possession of the subject property against
Matias on March 15, 1990 before the RTC.[6]

In her answer to the complaint, Matias alleged that she and her family have been living on the subject property since the
1950s on the basis of a written permit issued by the local government of Malabon in 1954. [7] Matias stated that she and her
family have introduced substantial improvements on the subject property and have been regularly paying realty taxes
thereon. She further claimed that she is a legitimate beneficiary of Presidential Decree (PD) No. 1517[8] and PD No. 2016,
[9]
which classified the subject property as part of the Urban Land Reform Zone (ULRZ) and an Area for Priority Development
(APD).

More importantly, she questioned B. E. San Diegos claim over the subject property by pointing out that the title relied on by
B. E. San Diego (TCT No. T-134756) covers a property located in BarrioTinajeros, Malabon, while the subject property is
actually located in Barrio Catmon, Malabon. Matias thus claimed that the property she is occupying in Barrio Catmon is
different from the property that B. E. San Diego seeks to recover in the possessory action before the RTC. [10]

The RTC found no issue as to the identity of the property, ruling that the property covered by B. E. San Diegos TCT No. T-
134756, located in Barrio Tinajeros, is the same property being occupied by Matias, located in Barrio Catmon. The RTC took
judicial notice of the fact that Barrio Catmon was previously part of Barrio Tinajeros. It found that the Approved Subdivision
Plan and tax declarations showed that the subject property is located in Barrio Catmon, Malabon. The RTC thus declared that
B. E. San Diego sufficiently proved its right to recover possession of the subject property on the basis of its TCT No. T-
134756. As opposed to B. E. San Diegos clear right, it found Matias claimed of possession over the subject property as a long-
time occupant and as a beneficiary of PD Nos. 1517 and 2016 unfounded. [11]

On appeal, the CA disagreed with the RTCs findings. It considered the discrepancy in the location significant and declared that
this should have prompted the RTC to require an expert witness from the concerned government agency to explain the
matter. Since it was undisputed that Matias was in actual possession of the subject property at the time of the filing of the
complaint, the CA declared that her possession should have been upheld under Article 538 of the Civil Code. [12] The CA also
upheld Matias possession based on PD Nos. 1517 and 2016. [13]

As its motion for reconsideration of the CAs judgment was denied, [14] B. E. San Diego filed the present petition for review
on certiorari under Rule 45 of the Rules of Court.

THE PETITION FOR REVIEW ON CERTIORARI

B. E. San Diego contends that the CA erred in reversing the RTCs finding on the sole basis of a discrepancy, which it claims has
been explained and controverted by the evidence it presented. It assails the CA decision for failing to consider the following
evidence which adequately show that the property covered by its TCT No. T-134756 is the same property occupied by Matias:

a. TCT No. T-134756 issued in the name of B. E. San Diego, covering a property delineated as Lot No. 3, Block No. 13;

b. Approved Subdivision Plan showing Lot No. 3, Block No. 3 is situated in Barrio Catmon, Malabon;

c. Tax Declaration No. B-005-00296 issued in the name of B. E. San Diego, referring to a property covered by TCT No. T-
134756;

d. Testimonial evidence of B. E. San Diegos witness that the property described in TCT No. T-134756 is the same property
occupied by Matias; and

e. Judicial notice taken by the RTC of Malabon, based on public and common knowledge, that Barrio Catmon was
previously part of Barrio Tinajeros, Malabon.

B. E. San Diego also alleges that Matias is estopped from alleging that the property she is occupying is different from the
property covered by its TCT No. T-134756. Matias previously moved to dismiss its complaint for recovery of possession of the
subject property (accion publiciana), raising res judicata as ground.[15] She alleged that the accion publiciana[16] is barred by
the judgment in an earlier ejectment case,[17] as both involved the same parties, the same subject matter, and the same cause
of action. The ejectment case involved a parcel of land covered by TCT No. T-134756, located at Hernandez Street, Barrio
Catmon, Malabon; Matias never questioned the identity and location of the property in that case. [18] B. E. San Diego thus
contends that Matias, by raising the ground of res judicata, has impliedly admitted there is no difference in the subject
matter of the two actions and, thus, could no longer question the identity and location of the subject property.

In controverting B. E. San Diegos petition, Matias relies on the same points that the CA discussed in its decision.

THE COURTS RULING

The Court finds the petition meritorious.

From the errors raised in the petition, what emerges as a primary issue is the identity of the subject matter of the
case whether the subject property that Matias occupies is the same as the property covered by B. E. San Diegos title. Our
reading of the records discloses that the two are one and the same.

B. E. San Diegos TCT No. T-134756 refers to a property located in Barrio Tinajeros, Malabon, but the subject property sought
to be recovered from Matias is in Barrio Catmon, Malabon. In ruling for Matias, the CA declared that this discrepancy should
have been explained by an expert witness, which B. E. San Diego failed to present.

The Court, however, does not find the testimony of an expert witness necessary to explain the discrepancy. The RTC declared
that the discrepancy arose from the fact that Barrio Catmon was previously part of Barrio Tinajeros. The RTC has authority to
declare so because this is a matter subject of mandatory judicial notice. Section 1 of Rule 129 of the Rules of Court[19] includes
geographical divisions as among matters that courts should take judicial notice of. Given that Barrio Tinajeros is adjacent to
Barrio Catmon,[20] we find it likely that, indeed, the two barrios previously formed one geographical unit.

Even without considering judicial notice of the geographical divisions within a political unit, sufficient evidence exists
supporting the RTCs finding that the subject property B. E. San Diego seeks to recover is the Barrio Catmon property in
Matias possession. TCT No. T-134756 identifies a property in Barrio Tinajeros as Lot No. 3, Block No. 13. Although B. E. San
Diegos tax declaration refers to a property in Barrio Catmon, it nevertheless identifies it also as Lot No. 3, Block No. 13,
covered by the same TCT No. T-134756. Indeed, both title and the tax declaration share the same boundaries to identify the
property. With this evidence, the trial court judge can very well ascertain the facts to resolve the discrepancy, and dispense
with the need for the testimony of an expert witness. [21]

Additionally, we agree with B. E. San Diego that Matias can no longer question the identity of the property it seeks to recover
when she invoked res judicata as ground to dismiss the accion publiciana that is the root of the present petition. An
allegation of res judicata necessarily constitutes an admission that the subject matter of the pending suit (the accion
publiciana) is the same as that in a previous one (the ejectment case). [22] That Matias never raised the discrepancy in the
location stated in B.E. San Diegos title and the actual location of the subject property in the ejectment suit bars her now from
raising the same. Thus, the issue of identity of the subject matter of the case has been settled by Matias admission and
negates the defenses she raised against B. E. San Diegos complaint.

We then proceed to resolve the core issue of the accion publiciana who between the parties is entitled possession of the
subject property. Notably, the judgment in the ejectment suit that B. E. San Diego previously filed against Matias is not
determinative of this issue and will not prejudice B. E. San Diegos claim. [23] While there may be identity of parties and subject
matter, there is no identity of cause of action between the two cases; an action for ejectment and accion publiciana, though
both referring to the issue of possession, differ in the following manner:

First, forcible entry should be filed within one year from the unlawful dispossession of the real property, while accion
publiciana is filed a year after the unlawful dispossession of the real property. Second, forcible entry is concerned with the
issue of the right to the physical possession of the real property; in accion publiciana, what is subject of litigation is the better
right to possession over the real property. Third, an action for forcible entry is filed in the municipal trial court and is a
summary action, while accion publiciana is a plenary action in the RTC.[24]

B. E. San Diego anchors it right to possess based on its ownership of the subject property, as evidenced by its title. Matias, on
the other hand, relies on (1) the 1954 permit she secured from the local government of Malabon, (2) the Miscellaneous Sales
Application, (3) the tax declarations and realty tax payments she made annually beginning 1974, (4) her standing as
beneficiary of PD Nos. 1517 and 2016, and (5) her long possession of the subject property since 1954 up to the
present. Unfortunately for Matias, her evidence does not establish a better right of possession over B. E. San Diegos
ownership.

The settled doctrine in property law is that no title to register land in derogation of that of the registered owner shall be
acquired by prescription or adverse possession. [25] Even if the possession is coupled with payment of realty taxes, we cannot
apply in Matias case the rule that these acts combined constitute proof of the possessors claim of title. [26] Despite her claim
of possession since 1954, Matias began paying realty taxes on the subject property only in 1974 when B. E. San Diego filed an
ejectment case against her husband/predecessor, Pedro Matias.[27] Considering these circumstances, we find Matias payment
of realty taxes suspect.

Matias cannot rely on the Miscellaneous Sales Application and the local government permit issued in her favor; neither
establishes a clear right in favor of Matias over the subject property. A sales application, in the absence of approval by the
Bureau of Lands or the issuance of a sales patent, remains simply as an application that does not vest title in the applicant.
[28]
The local government permit contained only a statement of the local executive that the case between the local
government and B. E. San Diego was decided by a trial court in favor of the former. [29]

The CA erroneously upheld Matias claim of possession based on PD Nos. 1517 and 2016. Matias is not a qualified beneficiary
of these laws. The tenants/occupants who have a right not to be evicted from urban lands does not include those whose
presence on the land is merely tolerated and without the benefit of contract, those who enter the land by force or deceit,
or those whose possession is under litigation. [30] At the time of PD 1517s enactment, there was already a pending ejectment
suit between B. E. San Diego and Pedro Matias over the subject property. Occupants of the land whose presence therein is
devoid of any legal authority, or those whose contracts of lease were already terminated or had already expired, or whose
possession is under litigation, are not considered tenants under the [PD Nos. 1517]. [31] The RTC correctly ruled that Matias
cannot be considered a legitimate tenant who can avail the benefits of these laws no matter how long her possession of the
subject property was.

WHEREFORE, we GRANT the petition for review on certiorari, and REVERSE the September 25, 2002 decision and May 20,
2003 resolution of the Court of Appeals in CA-G.R. CV No. 50213. The June 22, 1995 decision of the Regional Trial Court of
Malabon in Civil Case No. 1421-MN is REINSTATED. Costs against the respondent.

SO ORDERED.