Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-11658 February 15, 1918

LEUNG YEE, plaintiff-appellant,

vs.
FRANK L. STRONG MACHINERY COMPANY and J. G. WILLIAMSON,
defendants-appellees.

Booram and Mahoney for appellant.

Williams, Ferrier and SyCip for appellees.

CARSON, J.:

The "Compañia Agricola Filipina" bought a considerable quantity of rice-

cleaning machinery company from the defendant machinery company, and
executed a chattel mortgage thereon to secure payment of the purchase
price. It included in the mortgage deed the building of strong materials in
which the machinery was installed, without any reference to the land on
which it stood. The indebtedness secured by this instrument not having
been paid when it fell due, the mortgaged property was sold by the
sheriff, in pursuance of the terms of the mortgage instrument, and was
bought in by the machinery company. The mortgage was registered in the
chattel mortgage registry, and the sale of the property to the machinery
company in satisfaction of the mortgage was annotated in the same
registry on December 29, 1913.

A few weeks thereafter, on or about the 14th of January, 1914, the

"Compañia Agricola Filipina" executed a deed of sale of the land upon
which the building stood to the machinery company, but this deed of sale,
although executed in a public document, was not registered. This deed
makes no reference to the building erected on the land and would appear
to have been executed for the purpose of curing any defects which might
be found to exist in the machinery company's title to the building under
the sheriff's certificate of sale. The machinery company went into
possession of the building at or about the time when this sale took place,
that is to say, the month of December, 1913, and it has continued in
possession ever since.

At or about the time when the chattel mortgage was executed in favor of
the machinery company, the mortgagor, the "Compañia Agricola Filipina"
executed another mortgage to the plaintiff upon the building, separate and
apart from the land on which it stood, to secure payment of the balance
of its indebtedness to the plaintiff under a contract for the construction
of the building. Upon the failure of the mortgagor to pay the amount of
the indebtedness secured by the mortgage, the plaintiff secured judgment
for that amount, levied execution upon the building, bought it in at the
sheriff's sale on or about the 18th of December, 1914, and had the
sheriff's certificate of the sale duly registered in the land registry of the
Province of Cavite.

At the time when the execution was levied upon the building, the
defendant machinery company, which was in possession, filed with the
sheriff a sworn statement setting up its claim of title and demanding the
release of the property from the levy. Thereafter, upon demand of the
sheriff, the plaintiff executed an indemnity bond in favor of the sheriff in
the sum of P12,000, in reliance upon which the sheriff sold the property
at public auction to the plaintiff, who was the highest bidder at the
sheriff's sale.

This action was instituted by the plaintiff to recover possession of the

building from the machinery company.

The trial judge, relying upon the terms of article 1473 of the Civil Code,
gave judgment in favor of the machinery company, on the ground that the
company had its title to the building registered prior to the date of
registry of the plaintiff's certificate.
Article 1473 of the Civil Code is as follows:

If the same thing should have been sold to different vendees, the
ownership shall be transfer to the person who may have the first taken
possession thereof in good faith, if it should be personal property.

Should it be real property, it shall belong to the person acquiring it who

first recorded it in the registry.

Should there be no entry, the property shall belong to the person who
first took possession of it in good faith, and, in the absence thereof, to the
person who presents the oldest title, provided there is good faith.

The registry her referred to is of course the registry of real property,

and it must be apparent that the annotation or inscription of a deed of
sale of real property in a chattel mortgage registry cannot be given the
legal effect of an inscription in the registry of real property. By its
express terms, the Chattel Mortgage Law contemplates and makes
provision for mortgages of personal property; and the sole purpose and
object of the chattel mortgage registry is to provide for the registry of
"Chattel mortgages," that is to say, mortgages of personal property
executed in the manner and form prescribed in the statute. The building of
strong materials in which the rice-cleaning machinery was installed by the
"Compañia Agricola Filipina" was real property, and the mere fact that the
parties seem to have dealt with it separate and apart from the land on
which it stood in no wise changed its character as real property. It follows
that neither the original registry in the chattel mortgage of the building
and the machinery installed therein, not the annotation in that registry of
the sale of the mortgaged property, had any effect whatever so far as
the building was concerned.

We conclude that the ruling in favor of the machinery company cannot be

sustained on the ground assigned by the trial judge. We are of opinion,
however, that the judgment must be sustained on the ground that the
agreed statement of facts in the court below discloses that neither the
purchase of the building by the plaintiff nor his inscription of the sheriff's
certificate of sale in his favor was made in good faith, and that the
machinery company must be held to be the owner of the property under
the third paragraph of the above cited article of the code, it appearing
that the company first took possession of the property; and further, that
the building and the land were sold to the machinery company long prior
to the date of the sheriff's sale to the plaintiff.

It has been suggested that since the provisions of article 1473 of the Civil
Code require "good faith," in express terms, in relation to "possession" and
"title," but contain no express requirement as to "good faith" in relation to
the "inscription" of the property on the registry, it must be presumed that
good faith is not an essential requisite of registration in order that it may
have the effect contemplated in this article. We cannot agree with this
contention. It could not have been the intention of the legislator to base
the preferential right secured under this article of the code upon an
inscription of title in bad faith. Such an interpretation placed upon the
language of this section would open wide the door to fraud and collusion.
The public records cannot be converted into instruments of fraud and
oppression by one who secures an inscription therein in bad faith. The
force and effect given by law to an inscription in a public record
presupposes the good faith of him who enters such inscription; and rights
created by statute, which are predicated upon an inscription in a public
registry, do not and cannot accrue under an inscription "in bad faith," to
the benefit of the person who thus makes the inscription.

Construing the second paragraph of this article of the code, the supreme
court of Spain held in its sentencia of the 13th of May, 1908, that:

This rule is always to be understood on the basis of the good faith

mentioned in the first paragraph; therefore, it having been found that the
second purchasers who record their purchase had knowledge of the
previous sale, the question is to be decided in accordance with the
following paragraph. (Note 2, art. 1473, Civ. Code, Medina and Maranon
[1911] edition.)
Although article 1473, in its second paragraph, provides that the title of
conveyance of ownership of the real property that is first recorded in the
registry shall have preference, this provision must always be understood
on the basis of the good faith mentioned in the first paragraph; the
legislator could not have wished to strike it out and to sanction bad faith,
just to comply with a mere formality which, in given cases, does not obtain
even in real disputes between third persons. (Note 2, art. 1473, Civ. Code,
issued by the publishers of the La Revista de los Tribunales, 13th edition.)

The agreed statement of facts clearly discloses that the plaintiff, when he
bought the building at the sheriff's sale and inscribed his title in the land
registry, was duly notified that the machinery company had bought the
building from plaintiff's judgment debtor; that it had gone into possession
long prior to the sheriff's sale; and that it was in possession at the time
when the sheriff executed his levy. The execution of an indemnity bond by
the plaintiff in favor of the sheriff, after the machinery company had filed
its sworn claim of ownership, leaves no room for doubt in this regard.
Having bought in the building at the sheriff's sale with full knowledge that
at the time of the levy and sale the building had already been sold to the
machinery company by the judgment debtor, the plaintiff cannot be said to
have been a purchaser in good faith; and of course, the subsequent
inscription of the sheriff's certificate of title must be held to have been
tainted with the same defect.

Perhaps we should make it clear that in holding that the inscription of the
sheriff's certificate of sale to the plaintiff was not made in good faith, we
should not be understood as questioning, in any way, the good faith and
genuineness of the plaintiff's claim against the "Compañia Agricola Filipina."
The truth is that both the plaintiff and the defendant company appear to
have had just and righteous claims against their common debtor. No
criticism can properly be made of the exercise of the utmost diligence by
the plaintiff in asserting and exercising his right to recover the amount of
his claim from the estate of the common debtor. We are strongly inclined
to believe that in procuring the levy of execution upon the factory building
and in buying it at the sheriff's sale, he considered that he was doing no
more than he had a right to do under all the circumstances, and it is
highly possible and even probable that he thought at that time that he
would be able to maintain his position in a contest with the machinery
company. There was no collusion on his part with the common debtor, and
no thought of the perpetration of a fraud upon the rights of another, in
the ordinary sense of the word. He may have hoped, and doubtless he did
hope, that the title of the machinery company would not stand the test of
an action in a court of law; and if later developments had confirmed his
unfounded hopes, no one could question the legality of the propriety of
the course he adopted.

But it appearing that he had full knowledge of the machinery company's

claim of ownership when he executed the indemnity bond and bought in
the property at the sheriff's sale, and it appearing further that the
machinery company's claim of ownership was well founded, he cannot be
said to have been an innocent purchaser for value. He took the risk and
must stand by the consequences; and it is in this sense that we find that
he was not a purchaser in good faith.

One who purchases real estate with knowledge of a defect or lack of title
in his vendor cannot claim that he has acquired title thereto in good faith
as against the true owner of the land or of an interest therein; and the
same rule must be applied to one who has knowledge of facts which
should have put him upon such inquiry and investigation as might be
necessary to acquaint him with the defects in the title of his vendor. A
purchaser cannot close his eyes to facts which should put a reasonable
man upon his guard, and then claim that he acted in good faith under the
belief that there was no defect in the title of the vendor. His mere refusal
to believe that such defect exists, or his willful closing of his eyes to the
possibility of the existence of a defect in his vendor's title, will not make
him an innocent purchaser for value, if afterwards develops that the title
was in fact defective, and it appears that he had such notice of the
defects as would have led to its discovery had he acted with that measure
of precaution which may reasonably be acquired of a prudent man in a like
situation. Good faith, or lack of it, is in its analysis a question of intention;
but in ascertaining the intention by which one is actuated on a given
occasion, we are necessarily controlled by the evidence as to the conduct
and outward acts by which alone the inward motive may, with safety, be
determined. So it is that "the honesty of intention," "the honest lawful
intent," which constitutes good faith implies a "freedom from knowledge
and circumstances which ought to put a person on inquiry," and so it is
that proof of such knowledge overcomes the presumption of good faith in
which the courts always indulge in the absence of proof to the contrary.
"Good faith, or the want of it, is not a visible, tangible fact that can be
seen or touched, but rather a state or condition of mind which can only be
judged of by actual or fancied tokens or signs." (Wilder vs. Gilman, 55 Vt.,
504, 505; Cf. Cardenas Lumber Co. vs. Shadel, 52 La. Ann., 2094-2098;
Pinkerton Bros. Co. vs. Bromley, 119 Mich., 8, 10, 17.)

We conclude that upon the grounds herein set forth the disposing part of
the decision and judgment entered in the court below should be affirmed
with costs of this instance against the appellant. So ordered.

FIRST DIVISION
[G.R. No. 109946. February 9, 1996]

DEVELOPMENT BANK OF THE PHILIPPINES, petitioner, vs. COURT OF

APPEALS, MYLO O. QUINTO and JESUSA CHRISTINE S. CHUPUICO,
respondents.
DECISION
BELLOSILLO, J.:

DEVELOPMENT BANK OF THE PHILIPPINES filed this petition for review on

certiorari assailing the decision of the Court of Appeals holding that the
mortgages in favor of the bank were void and ineffectual because when
constituted the mortgagors, who were merely applicants for free patent of
the property mortgaged, were not the owners thereof in fee simple and
therefore could not validly encumber the same.[1]

On 20 April 1978 petitioner granted a loan of P94,000.00 to the spouses

Santiago Olidiana and Oliva Olidiana. To secure the loan the Olidiana
spouses executed a real estate mortgage on several properties among
which was Lot 2029 (Pls-6 1) with Tax Declaration No. 2335/1, situated ib
Bo. Bago Capalaran, Molave, Zamboanga del Sur, with an area of 84,108
square meters, more or less. At the time of the mortgage the property
was still the subject of a Free Patent application filed by the Olidianas
with the Bureau of Lands but registered under their name in the Office of
the Municipal Assessor of Molave for taxation purposes.[2]

On 2 November 1978 the Olidiana spouses filed with the Bureau of Lands
a Request for Amendment of their Free Patent applications over several
parcels of land including Lot No. 2029 (PIs-61). In this request they
renounced, relinquished and waived all their rights and interests over Lot
No. 2029 (Pls-61) in favor of Jesusa Christine Chupuico and Mylo O. Quinto,
respondents herein. On 10 January 1979 Free Patent Nos. IX-5-2223
(covering one-half of Lot No. 2029 [Pls-61] and IX-5-2224 (covering the
other half of the same Lot No. 2029 [Pls-61]) were accordingly granted
respectively to respondents Jesusa Christine Chupuico and Mylo 0. Quinto
by the Bureau of Lands District Land Office No. IX-5, Pagadian City. Jesusa
Christine Chupuico later obtained Original Certificate of Title No. P-27,361
covering aforementioned property while Mylo O. Quinto was also issued
Original Certificate of Title No. P-27,362 in view of the previous free
patent.[3]

On 20 April 1979 an additional loan of P62,000 00 was extended by

petitioner to the Olidiana spouses. Thus on 23 April 1979 the Olidianas
executed an additional mortgage on the same parcels of land already
covered by the first mortgage of 4 April 1978. This second mortgage also
included Lot No. 2029 (Pls-61) as security for the Olidiana spouses
financial obligation with petitioner.[4]

Thereafter, for failure of Santiago and Oliva Olidiana to comply with the
terms and conditions of their promissory notes and mortgage contracts,
petitioner extrajudicially foreclosed all their mortgaged properties.
Consequently, on 14 April 1983 these properties, including Lot No. 2029
(Pls-61) were sold at public auction for P88,650.00 and awarded to
petitioner as the highest bidder. A Certificate of Sale was thereafter
executed in favor of petitioner and an Affidavit of Consolidation of
Ownership registered in its name. However, when petitioner tried to
register the sale and the affidavit of consolidation and to have the tax
declaration transferred in its name it was discovered that Lot No. 2029
(Pls-61) had already been divided into two (2) parcels, one-half (1/2) now
known as Lot 2029-A and covered by OCT No. P-27,361 in the name of
Jesusa Christine Chupuico, while the other half known as Lot 2029-B was
covered by the same OCT No. P-27,361 in the name of Mylo 0. Quinto.[5]

In view of the discovery, petitioner filed an action for Quieting of Title and
Cancellation or Annulment of Certificate of Title against respondents. After
trial the Regional Trial Court of Molave, Zamboanga del Sur, Branch 23,
rendered judgment against petitioner.[6] The court ruled that the
contracts of mortgage entered into by petitioner and the subsequent
foreclosure of subject property could not have vested valid title to
petitioner bank because the mortgagors were not the owners in fee simple
of the property mortgaged. The court also found the mortgages over Lot
No. 2029 (Pls-61) of no legal consequence because they were executed in
violation of Art. 2085, par. 2, of the New Civil Code which requires that the
mortgagor be the absolute owner of the thing mortgaged. According to
the court a quo there was no evidence to prove that the mortgagors of
the land in dispute were its absolute owners at the time of the mortgage
to petitioner.

The factual findings of the lower court disclose that when the Olidiana
spouses mortgaged Lot No. 2029 (Pls-61) to petitioner it was still the
subject of a miscellaneous sales application by the spouses with the
Bureau of Lands. Since there was no showing that the sales application
was approved before the property was mortgaged, the trial court
concluded that the Olidiana spouses were not yet its owners in fee simple
when they mortgaged the property. The lower court also said that with
the subsequent issuance of the Free Patent by the Bureau of Lands in the
name of respondents Chupuico and Quinto, it could be gleaned that the
property was indeed public land when mortgaged to petitioner. Therefore
petitioner could not have acquired a valid title over the subject property
by virtue of the foreclosure and subsequent sale at public auction.[7]
Resultantly, the trial court declared the following as null and void insofar
as they related to Lot No. 2029 (Pls-61) being a public land: the real
estate mortgage dated 4 April 1978, the second mortgage dated 23 April
1979, the foreclosure sale on 14 April 1983, the certificate of sale
registered with the Register of Deeds of Zamboanga del Sur on 1
September 1983, and the affidavit of consolidation of ownership registered
with the Register of Deeds on 2 August 1985.

Petitioner then appealed to the Court of Appeals which likewise ruled in

favor of respondents, hence the instant petition.[8]

Petitioner now seeks to overturn the decision of respondent Court of

Appeals holding that Lot No. 2029 (Pls-61) could not have been the
subject of a valid mortgage and foreclosure proceeding because it was
public land at the time of the mortgage, and that the act of Jesusa
Christine S. Chupuico and Mylo 0. Quinto in securing the patents was not
tainted with fraud. The crux of this appeal thus lies in the basic issue of
whether the land in dispute could have been validly mortgaged while still
the subject of a Free Patent Application with the government.[9]

We agree with the court a quo. We hold that petitioner bank did not
acquire valid title over the land in dispute because it was public land when
mortgaged to the bank. We cannot accept petitioners contention that the
lot in dispute was no longer public land when mortgaged to it since the
Olidrana spouses had been in open, continuous, adverse and public
possession thereof for more than thirty (30) years.[10] In Visayan Realty,
Inc. v. Meer[11] we ruled that the approval of a sales application merely
authorized the applicant to take possession of the land so that he could
comply with the requirements prescribed by law before a final patent could
be issued in his favor. Meanwhile the government still remained the owner
thereof, as in fact the application could still be canceled and the land
awarded to another applicant should it be shown that the legal
requirements had not been complied with. What divests the government of
title to the land is the issuance of the sales patent and its subsequent
registration with the Register of Deeds. It is the registration and issuance
of the certificate of title that segregate public lands from the mass of
public domain and convert it into private property.[12] Since the disputed
lot in the case before us was still the subject of a Free Patent Application
when mortgaged to petitioner and no patent was granted to the Olidiana
spouses, Lot No. 2029 (Pis-61) remained part of the public domain.

With regard to the validity of the mortgage contracts entered into by the
parties, Art. 2085, par. 2, of the New Civil Code specifically requires that
the pledgor or mortgagor be the absolute owner of the thing pledged or
mortgaged. Thus, since the disputed property was not owned by the
Olidiana spouses when they mortgaged it to petitioner the contracts of
mortgage and all their subsequent legal consequences as regards Lot No.
2029 (Pls-61) are null and void. In a much earlier case[13] we held that it
was an essential requisite for the validity of a mortgage that the
mortgagor be the absolute owner of the property mortgaged, and it
appearing that the mortgage was constituted before the issuance of the
patent to the mortgagor, the mortgage in question must of necessity be
void and ineffective. For, the law explicitly requires as imperative for the
validity of a mortgage that the mortgagor be the absolute owner of what
is mortgaged.

Finally, anent the contention of petitioner that respondents fraudulently

obtained the property in litigation, we also find for the latter. As correctly
found by the lower courts, no evidence existed to show that respondents
had prior knowledge of the real estate mortgages executed by the
Olidiana spouses in favor of petitioner. The act of respondents in securing
the patents cannot therefore be categorized as having been tainted with
fraud.

WHEREFORE, the petition is DENIED and the questioned decision of the

Court of Appeals is AFFIRMED.

SO ORDERED.

FIRST DIVISION
[G.R. No. 137887. February 28, 2000]

REPUBLIC OF THE PHILIPPINES, petitioner, vs. DAMIAN ERMITAO DE

GUZMAN, DEOGRACIAS ERMITAO DE GUZMAN, ZENAIDA ERMITAO DE
GUZMAN, ALICIA ERMITAO DE GUZMAN, SALVADOR ERMITAO DE
GUZMAN, DOMINGA ERMITAON, NATIVIDAD ENCARNACION, MELBA E.
TORRES, FLORA MANALO, SOCORRO DELA ROSA, JOSE ERMITAO,
ESMERANDO ERMITAO, TRICOM DEVELOPMENT CORPORATION and
FILOMENO ERMITAO, respondents. francis

DECISION

YNARES_SANTIAGO, J.:

Before us is a Petition for Review on Certiorari of a decision of the Court

of Appeals[1] affirming the judgment of the Regional Trial Court of
Tagaytay, Branch 18, in LRC Cases No. TG-362 and TG-396.[2]

The facts are simple:

Conflicting applications for confirmation of imperfect title were filed by

Norma Almanzor and private respondent Salvador De Guzman over parcels
of land located in Silang, Cavite. After trial on the merits, the lower court
rendered judgment in favor of private respondent De Guzman, to wit -

"WHEREFORE, judgment is hereby rendered by this Court as follows: nigel

(1) In LRC Case No. TG-362, this Court hereby denies the application for
registration of the parcels of land mentioned therein by applicant Norma
R. Almanzor for lack of factual and legal bases;

(2) In LRC Case No. 396, this Court hereby approves the petition for
registration and thus places under the operation of Act 141, Act 946 and/
or P.D. 1529, otherwise known as the Property Registration Law, the land
described in Plan Psu-67537-Amd-2 and containing an area of 308,638
square meters, as supported by its technical descriptions now forming
parts of the records of these cases, in addition to other proofs adduced in
the names of petitioners Damian Ermitao De Guzman, Deogracias Ermitao
De Guzman, Zenaida Ermitao De Guzman, Alicia Ermitao De Guzman and
Salvador De Guzman, all married, of legal age and with residence and
postal addresses at Magallanes Street, Carmona, Cavite, subject to the
claims of oppositors Dominga Ermitao, Natividad Encarnacion, Melba E.
Torres, Flora Manalo, Socorro de la Rosa, Jose Ermitao and Esmeranso
Ermitao under an instrument entitled 'Waiver of Rights with Conformity"
the terms and conditions of which are hereby ordered by this Court to be
annotated at the back of the certificates of title to be issued to the
petitioners pursuant to the judgment of this Court. brnado

SO ORDERED."[3]

As earlier mentioned, on appeal to the Court of Appeals, said judgment

was affirmed and the petition for registration of private respondents over
the subject parcels of land was approved.

Hence, the instant Petition, anchored upon the following assignments of

error

THE TRIAL COURT ERRED IN NOT FINDING THAT THE DE GUZMANS HAVE
NOT SUBMITTED PROOF OF THEIR FEE SIMPLE TITLE OR POSSESSION
IN THE MANNER AND FOR THE LENGTH OF TIME REQUIRED BY LAW TO
JUSTIFY CONFIRMATION OF AN IMPERFECT TITLE. novero

II

THE TRIAL COURT ERRED IN NOT DECLARING THAT THE DE GUZMANS

HAVE NOT OVERTHROWN THE PRESUMPTION THAT THE LANDS ARE
PORTIONS OF THE PUBLIC DOMAIN BELONGING TO THE REPUBLIC OF
THE PHILIPPINES.[4]
We find merit in the instant Petition.

It is not disputed that the subject parcels of land were released as

agricultural land only in 1965[5] while the petition for confirmation of
imperfect title was filed by private respondents only in 1991.[6] Thus the
period of occupancy of the subject parcels of land from 1965 until the
time the application was filed in 1991 was only twenty six (26) years, four
(4) years short of the required thirty (30) year period possession
requirement under Sec. 14, P.D. 29 and R.A. No. 6940.

In finding that private respondents' possession of the subject property

complied with law, the Court of Appeals reasoned out that - nigel

"(W)hile it is true that the land became alienable and disposable only in
December, 1965, however, records indicate that as early as 1928, Pedro
Ermitao, appellees' predecessor-in-interest, was already in possession of
the property, cultivating it and planting various crops thereon. It follows
that appellees' possession as of the time of the filing of the petition in
1991 when tacked to Pedro Ermitao's possession is 63 years or more than
the required 30 years period of possession. The land, which is agricultural,
has been converted to private property ."[7]

We disagree.

The Court of Appeals' consideration of the period of possession prior to

the time the subject land was released as agricultural is in direct
contravention of the pronouncement in Almeda vs. Court of Appeals,[8] to
wit -

"The Court of Appeals correctly ruled that the private respondents had
not qualified for a grant under Section 48(b) of the Public Land Act
because their possession of the land while it was still inalienable forest
land, or before it was declared alienable and disposable land of the public
domain on January 13, 1968, could not ripen into private ownership, and
should be excluded from the computation of the 30-year open and
continuous possession in concept of owner required under Section 48(b) of
Com. Act 141. It accords with our ruling in Director of Lands vs. Court of
Appeals, Ibarra Bishar, et al., 178 SCRA 708, that: marinella

'Unless and until the land classified as forest is released in an official

proclamation to that effect so that it may form part of the disposable
lands of the public domain, the rules on confirmation of imperfect title do
not apply (Amunategui vs. Director of Forestry, 126 SCRA 69; Director of
Lands vs. Court of Appeals, 129 SCRA 689; Director of Lands vs. Court of
Appeals, 133 SCRA 701; Republic vs. Court of Appeals, 148 SCRA 480;
Vallarta vs. Intermediate Appellate Court, 151 SCRA 679).

'Thus possession of forest lands, however long, cannot ripen into private
ownership (Vamo vs. Government, 41 Phil. 161 [1920]; Adorable vs. Director
of Forestry, 17 Phil. 410 [1960]). A parcel of forest land is within the
exclusive jurisdiction of the Bureau of Forestry and beyond the power and
jurisdiction of the cadastral court to register under the Torrens System
(Republic vs. Court of Appeals, 89 SCRA 648; Republic vs. Vera, 120 SCRA
210 [1983]; Director of Lands vs. Court of Appeals, 129 SCRA 689
[1984])." (emphasis ours)

So, too, is the Court of Appeals' reliance on the case of Director of Land
Management vs. Court of Appeals[9] misplaced. There, while the period of
possession of the applicant's predecessor-in-interest was tacked to his own
possession to comply with the required thirty year period possession
requirement, the land involved therein was not forest land but alienable
public land. On the other hand, in the case before us, the property
subject of private respondents' application was only declared alienable in
1965. Prior to such date, the same was forest land incapable of private
appropriation. It was not registrable and possession thereof, no matter
how lengthy, could not convert it into private property, (unless) and until
such lands were reclassified and considered disposable and alienable.[10]
alonzo

In summary, therefore, prior to its declaration as alienable land in 1965,

any occupation or possession thereon cannot be considered in the counting
of the thirty year possession requirement. This is in accord with the ruling
in Almeda vs. Court of Appeals, (supra), and because the rules on the
confirmation of imperfect titles do not apply unless and until the land
classified as forest land is released in an official proclamation to that
effect so that it may form part of the disposable agricultural lands of the
public domain.[11]

While we acknowledge the Court of Appeals' finding that private

respondents and their predecessors-in-interest have been in possession of
the subject land for sixty three (63) years at the time of the application
of their petition, our hands are tied by the applicable laws and
jurisprudence in giving practical relief to them. The fact remains that from
the time the subject land was declared alienable until the time of their
application, private respondents' occupation thereof was only twenty six
(26) years. We cannot consider their thirty seven (37) years of possession
prior to the release of the land as alienable because absent the fact of
declassification prior to the possession and cultivation in good faith by
petitioner, the property occupied by him remained classified as forest or
timberland, which he could not have acquired by prescription. Further,
jurisprudence is replete with cases which reiterate that forest lands or
forest reserves are not capable of private appropriation and possession
thereof, however long, cannot convert them into private property.
Possession of the land by private respondents, whether spanning decades
or centuries, could never ripen into ownership. This Court is constrained to
abide by the latin maxim "(d)ura lex, sed lex".[12] iska

WHEREFORE, the instant Petition is GRANTED and the February 26, 1998
decision of the Court of Appeals in CA-G.R. CV No. 48785 as well as that
of the Regional Trial Court of Cavite, Branch 38, in LRC Case No. TG-396
are both REVERSED. Judgment is rendered dismissing LRC Case No. 396 for
failure of the applicants therein to comply with the thirty year occupancy
and possessory requirements of law for confirmation of imperfect title. No
pronouncement as to costs.

SO ORDERED.
Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 152827 February 6, 2007

GERARDO MENDOZA, TRINIA and IYLENE all surnamed MENDOZA,

Petitioners,
vs.
SOLEDAD SALINAS, Respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

Assailed in the present Petition for Review on Certiorari is the Order

dated April 2, 2002 issued by the Regional Trial Court (RTC) of Olongapo
City, Branch 72, acting as Land Registration Court, in LRC Case No.
N-04-0-97, granting respondent's prayer for the issuance of a writ of
possession in her favor.1

The assailed Order was issued by the RTC after it rendered a favorable
judgment on respondent's application for registration in its Decision dated
November 3, 1998, and Original Certificate of Title (OCT) No. P-10053 was
issued in her name covering a parcel of land described as follows:

A parcel of land (Plan Psu-224228, LR Case No. N-04-0-97, LRA Record

No. N-68955), situated in the Barrio of Barretto, Municipality of Olongapo,
Province of Zambales, Island of Luzon, Bounded on the NW., points 1-3 by
Road (6.00 m. wide) (unimproved); on the NE., points 3-4 by Public Land
claimed by C. Panaligan; on the E., SE., and SW., points 4-19 by Makinaya
River (10.00 m. wide); on the SW., points 19-29 by Public Land; and on the
NW., points 29-1 by Road (6.00 m. wide) unimproved. Beginning at a point
marked "1" on plan, being S.84 deg. 47'E., 2644.65 m. from B.L.B.M. 2,
Barrio of Matain, Subic, Zambales, thence

xxxx

beginning; containing an area of TWENTY THOUSAND ONE HUNDRED

FORTY NINE (20, 149) SQUARE METERS, more or less. x x x2

Petitioners opposed respondent's application for the issuance of a writ of

possession claiming that they were not oppositors/parties to the
registration case and they have been in actual physical possession of the
property since 1964. The RTC, however, rejected their arguments and
granted respondent's application for the issuance of a writ of possession
per herein assailed Order.

Hence, the present petition.1avvphi1.net

Petitioners set forth the lone assignment of error that the RTC erred in
issuing the writ of possession and acted with grave abuse of discretion
amounting to lack and excess of jurisdiction.3 Petitioners reiterate their
argument that they cannot be ousted of their possession of the property,
having been in actual possession of the property since 1964, as evidenced
by petitioner Gerardo C. Mendoza's Sales Application made in January 1986
over the following property:

A parcel of land situated at Burgos St., Bo. Barretto, O.C. Bounded on the
North., by Benjamin Salinas; South., by Gloria Montemayor; East., by
Benjamin Salinas & Conrado Pilapil and West., Burgos St. situated in Bo.
Barretto, Olongapo City, Zambales, and containing an area of 932 square
meters x x x.4

and a Declaration of Real Property for the years 1976 and 1985,5 among
others.

Respondent counters that the present petition should be dismissed, arguing

that the petition should have been initially with the Court of Appeals,
based on the principle of hierarchy of courts, and that the general order
of default on October 8, 1998 issued by the RTC binds them and personal
notice was not necessary.

The petition must be granted.

On the procedural issue, it should be pointed out that what petitioners

filed with the Court is a petition for review on certiorari under Rule 45 of
the Rules of Court of Court, and not a special civil action for certiorari
under Rule 65. The principle of hierarchy of courts does not find any
application in this case. Under Section 2(c), Rule 41 of the Rules of Court,
it is provided that in all cases where only questions of law are raised, the
appeal from a decision or order of the RTC shall be to the Supreme Court
by petition for review on certiorari in accordance with Rule 45, Section 1
of which provides:

SECTION 1. Filing of petition with Supreme Court. – A party desiring to

appeal by certiorari from a judgment or final order or resolution of the
Court of Appeals, the Sandiganbayan, the Regional Trial Court or other
courts whenever authorized by law, may file with the Supreme Court a
verified petition for review on certiorari. The petition shall raise only
questions of law which must be distinctly set forth.

A question of law exists when the doubt or controversy concerns the

correct application of law or jurisprudence to a certain set of facts; or
when the issue does not call for an examination of the probative value of
the evidence presented, the truth or falsehood of facts being admitted. A
question of fact exists when the doubt or difference arises as to the truth
or falsehood of facts or when the query invites calibration of the whole
evidence considering mainly the credibility of the witnesses, the existence
and relevancy of specific surrounding circumstances, as well as their
relation to each other and to the whole, and the probability of the
situation.6

The substantive issue posed for resolution in the present case pertains to
the propriety of the issuance of the writ of possession by the RTC. This,
obviously, is a question of law; consequently, direct resort to this Court is
proper.

There is no question that the writ of possession granted in this case was
made by the RTC acting as a land registration court, after finality of its
Decision dated November 3, 1998 and the corresponding OCT No. P-10053
was issued in the name of respondent. As the soundness of the order
granting the writ of possession is a matter of judgment, the remedy is
ordinary appeal by way of petition for review on certiorari. An error of
judgment committed by a court in the exercise of its legitimate jurisdiction
is not the same as "grave abuse of discretion." Errors of judgment are
correctible by appeal, while those of jurisdiction are reviewable by
certiorari.7

Petitioners, therefore, filed the proper petition before the Court.

On the substantive issue of the propriety of the issuance of the writ of

possession, the Court finds that the RTC committed a reversible error in
granting the issuance of the writ of possession.

A writ of possession may be issued under the following instances: (1) land
registration proceedings under Sec. 17 of Act No. 496; (2) judicial
foreclosure, provided the debtor is in possession of the mortgaged realty
and no third person, not a party to the foreclosure suit, had intervened;
and (3) extrajudicial foreclosure of a real estate mortgage under Sec. 7 of
Act No. 3135 as amended by Act No. 4118.

In land registration cases, principles regarding the issuance of a writ of

possession are well-settled. A judgment confirming the title of the
applicant in a registration case and ordering its registration in his name
necessarily carries with it the delivery of possession which is an inherent
element of the right of ownership.8 This is sanctioned by existing laws in
this jurisdiction and by the generally accepted principle upon which the
administration of justice rests.9
Also, a writ of possession may be issued not only against the person who
has been defeated in a registration case but also against anyone unlawfully
and adversely occupying the land or any portion thereof during the land
registration proceedings up to the issuance of the final decree,10 and it is
the duty of the registration court to issue said writ when asked for by the
successful claimant.11

Based on these tenets, the issuance of a writ of possession, therefore, is

clearly a ministerial duty of the land registration court. Such ministerial
duty, however, ceases to be so with particular regard to petitioners who
are actual possessors of the property under a claim of ownership. Actual
possession under claim of ownership raises a disputable presumption of
ownership. This conclusion is supported by Article 433 of the Civil Code,
which provides:

Actual possession under claim of ownership raises a disputable presumption

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

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

possessed by another must bring the appropriate judicial action for its
physical recovery. The term "judicial process" could mean no less than an
ejectment suit or reinvindicatory action, in which the ownership claims of
the contending parties may be properly heard and adjudicated.12

It is noted that there already exists a final and executory decision

disregarding respondent's claim for possession over the property. In a
Decision dated January 21, 2002, rendered by the Municipal Trial Court in
Cities (MTCC) of Olongapo City, Branch 3, in Civil Case No. 4643, an action
for unlawful detainer filed by respondent and her spouse against
petitioners and several other occupants of the property, the case against
petitioners was dismissed by the MTCC for lack of cause of action.13
While the MTCC Decision was appealed by the other defendants,
respondent and her spouse manifested that they will not appeal the
decision and, instead, will file for a writ of possession in LRC Case No.
N-04-0-97.
Note should also be made that petitioners registered their opposition to
respondent's application for the issuance of a writ of possession and
apprised the RTC of their actual, peaceful, physical and uninterrupted
possession since 1964,14 including therein documents supporting their
claim, consisting of Gerardo C. Mendoza's Sales Application made on
January 1986 and a Declaration of Real Property for the years 1976 and
1985, among others.15 The RTC, nevertheless, disregarded their opposition
and, instead, relied on the ruling in Serra Serra v. Court of Appeals [195
SCRA 482],16 that a writ of possession may be issued in a land
registration proceeding.

A reading of the Serra Serra case, however, supports the Court's

conclusion that a writ of possession should not have been issued in this
case. It was ruled by the Court that while a writ of possession may be
issued only pursuant to a decree of registration in an original land
registration proceedings, it cannot issue against possessors under claim of
ownership, as actual possession under claim of ownership raises a
disputable presumption of ownership, and the true owner must resort to
judicial process for the recovery of the property, not summarily through a
motion for the issuance of a writ of possession.17

Thus, it was erroneous for the RTC to have issued the writ of possession
against petitioners. This conclusion, of course, is without prejudice to any
case that respondent may file for the recovery of the property.

WHEREFORE, the petition is GRANTED. The Order dated April 2, 2002

issued by the Regional Trial Court of Olongapo City, Branch 72, acting as
Land Registration Court, in LRC Case No. N-04-0-97, is NULLIFIED and SET
ASIDE. Respondent’s application for the issuance of a writ of possession is
DENIED, without prejudice to any case that she may file for recovery of
the property.

SO ORDERED.
THIRD DIVISION

[G.R. No. 138053. May 31, 2000]

CORNELIO M. ISAGUIRRE, petitioner, vs. FELICITAS DE LARA, respondent.

DECISION

GONZAGA-REYES, J.:

In this petition for review on certiorari under Rule 45 of the 1997 Revised
Rules of Civil Procedure, petitioner Cornelio M. Isaguirre assails the
October 5, 1998 decision[1] of the Court of Appeals[2] and its Resolution
promulgated on March 5, 1999.

The antecedent facts of the present case are as follows:

Alejandro de Lara was the original applicant-claimant for a Miscellaneous

Sales Application over a parcel of land identified as portion of Lot 502,
Guianga Cadastre, filed with the Bureau of Lands on January 17, 1942 and
with an area of 2,342 square meters. Upon his death, Alejandro de Lara
was succeeded by his wife - respondent Felicitas de Lara, as claimant. On
November 19, 1954, the Undersecretary of Agriculture and Natural
Resources amended the sales application to cover only 1,600 square
meters. Then, on November 3, 1961, by virtue of a decision rendered by
the Secretary of Agriculture and Natural Resources dated November 19,
1954, a subdivision survey was made and the area was further reduced to
1,000 square meters. On this lot stands a two-story residential-commercial
apartment declared for taxation purposes under TD 43927 in the name of
respondents sons - Apolonio and Rodolfo, both surnamed de Lara.

Sometime in 1953, respondent obtained several loans from the Philippine

National Bank. When she encountered financial difficulties, respondent
approached petitioner Cornelio M. Isaguirre, who was married to her niece,
for assistance. On February 10, 1960, a document denominated as "Deed of
Sale and Special Cession of Rights and Interests" was executed by
respondent and petitioner, whereby the former sold a 250 square meter
portion of Lot No. 502, together with the two-story commercial and
residential structure standing thereon, in favor of petitioner, for and in
consideration of the sum of P5,000.

Sometime in May, 1968, Apolonio and Rodolfo de Lara filed a complaint

against petitioner for recovery of ownership and possession of the two-
story building.[3] However, the case was dismissed for lack of jurisdiction.

On August 21, 1969, petitioner filed a sales application over the subject
property on the basis of the deed of sale. His application was approved on
January 17, 1984, resulting in the issuance of Original Certificate of Title
No. P-11566 on February 13, 1984, in the name of petitioner. Meanwhile,
the sales application of respondent over the entire 1,000 square meters of
subject property (including the 250 square meter portion claimed by
petitioner) was also given due course, resulting in the issuance of Original
Certificate of Title No. P-13038 on June 19, 1989, in the name of
respondent.[4]

Due to the overlapping of titles, petitioner filed an action for quieting of

title and damages with the Regional Trial Court of Davao City against
respondent on May 17, 1990. The case was docketed as Civil Case No.
20124-90. After trial on the merits, the trial court rendered judgment on
October 19, 1992, in favor of petitioner, declaring him to be the lawful
owner of the disputed property. However, the Court of Appeals reversed
the trial courts decision, holding that the transaction entered into by the
parties, as evidenced by their contract, was an equitable mortgage, not a
sale.[5] The appellate courts decision was based on the inadequacy of the
consideration agreed upon by the parties, on its finding that the payment
of a large portion of the "purchase price" was made after the execution
of the deed of sale in several installments of minimal amounts; and finally,
on the fact that petitioner did not take steps to confirm his rights or to
obtain title over the property for several years after the execution of the
deed of sale. As a consequence of its decision, the appellate court also
declared Original Certificate of Title No.P-11566 issued in favor of
petitioner to be null and void. On July 8, 1996, in a case docketed as G. R.
No. 120832, this Court affirmed the decision of the Court of Appeals and
on September 11, 1996, we denied petitioners motion for reconsideration.

On May 5, 1997, respondent filed a motion for execution with the trial
court, praying for the immediate delivery of possession of the subject
property, which motion was granted on August 18, 1997. On February 3,
1998, respondent moved for a writ of possession, invoking our ruling in G.
R. No. 120832. Petitioner opposed the motion, asserting that he had the
right of retention over the property until payment of the loan and the
value of the improvements he had introduced on the property. On March
12, 1998, the trial court granted respondents motion for writ of
possession. Petitioners motion for reconsideration was denied by the trial
court on May 21, 1998. Consequently, a writ of possession dated June 16,
1998, together with the Sheriffs Notice to Vacate dated July 7, 1998, were
served upon petitioner.

Petitioner filed with the Court of Appeals a special civil action for
certiorari and prohibition with prayer for a temporary restraining order or
preliminary injunction to annul and set aside the March 12, 1998 and May
21, 1998 orders of the trial court, including the writ of possession dated
June 16, 1998 and the sheriffs notice to vacate dated July 7, 1998.[6]

The appellate court summarized the issues involved in the case as follows:
(1) whether or not the mortgagee in an equitable mortgage has the right
to retain possession of the property pending actual payment to him of the
amount of indebtedness by the mortgagor; and (b) whether or not
petitioner can be considered a builder in good faith with respect to the
improvements he made on the property before the transaction was
declared to be an equitable mortgage.

The Court of Appeals held that petitioner was not entitled to retain
possession of the subject property. It said that -

the mortgagee merely has to annotate his claim at the back of the
certificate of title in order to protect his rights against third persons and
thereby secure the debt. There is therefore no necessity for him to
actually possess the property. Neither should a mortgagee in an equitable
mortgage fear that the contract relied upon is not registered and hence,
may not operate as a mortgage to justify its foreclosure. In Feliza Zubiri v.
Lucio Quijano, 74 Phil 47, it was ruled "that when a contract x x x is held
as an equitable mortgage, the same shall be given effect as if it had
complied with the formal requisites of mortgage. x x x by its very nature
the lien thereby created ought not to be defeated by requiring compliance
with the formalities necessary to the validity of a voluntary real estate
mortgage, as long as the land remains in the hands of the petitioner
(mortgagor) and the rights of innocent parties are not affected."

Proceeding from the foregoing, petitioners imagined fears that his lien
would be lost by surrendering possession are unfounded.

In the same vein, there is nothing to stop the mortgagor de Lara from
acquiring possession of the property pending actual payment of the
indebtedness to petitioner. This does not in anyway endanger the
petitioners right to security since, as pointed out by private respondents,
the petitioner can always have the equitable mortgage annotated in the
Certificate of Title of private respondent and pursue the legal remedies for
the collection of the alleged debt secured by the mortgage. In this case,
the remedy would be to foreclose the mortgage upon failure to pay the
debt within the required period.

It is unfortunate however, that the Court of Appeals, in declaring the

transaction to be an equitable mortgage failed to specify in its Decision
the period of time within which the private respondent could settle her
account, since such period serves as the reckoning point by which
foreclosure could ensue. As it is, petitioner is now in a dilemma as to how
he could enforce his rights as a mortgagee. ...

Hence, this Court, once and for all resolves the matter by requiring the
trial court to determine the amount of total indebtedness and the period
within which payment shall be made.
Petitioners claims that he was a builder in good faith and entitled to
reimbursement for the improvements he introduced upon the property
were rejected by the Court of Appeals. It held that petitioner knew, or at
least had an inkling, that there was a defect or flaw in his mode of
acquisition. Nevertheless, the appellate court declared petitioner to have
the following rights:

He is entitled to reimbursement for the necessary expenses which he may

have incurred over the property, in accordance with Art. 526 and Art. 452
of the Civil Code. Moreover, considering that the transaction was merely
an equitable mortgage, then he is entitled to payment of the amount of
indebtedness plus interest, and in the event of non-payment to foreclose
the mortgage. Meanwhile, pending receipt of the total amount of debt,
private respondent is entitled to possession over the disputed property.

The case was finally disposed of by the appellate court in the following
manner:

WHERFORE, the Petition is hereby DISMISSED, and this case is ordered

remanded to the Regional Trial Court of Davao City for further
proceedings, as follows:

1) The trial court shall determine

a) The period within which the mortgagor must pay his total amount of
indebtedness.

b) The total amount of indebtedness owing the petitioner-mortgagee plus

interest computed from the time when the judgment declaring the
contract to be an equitable mortgage became final.

c) The necessary expenses incurred by petitioner over the property.[7]

On March 5, 1999, petitioners motion for reconsideration was denied by

the appellate court.[8] Hence, the present appeal wherein petitioner makes
the following assignment of errors:
A.......THE HONORABLE COURT OF APPEALS ERRED IN NOT RULING THAT
THE RTC ACTED WITHOUT OR IN EXCESS OF ITS JURISDICTION OR
WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS
OF JURISDICTION IN ISSUING A WRIT OF POSSESSION IN FAVOR OF
RESPONDENT.

A.1......The RTC patently exceeded the scope of its authority and acted with
grave abuse of discretion in ordering the immediate delivery of possession
of the Property to respondent as said order exceeded the parameters of
the final and executory decision and constituted a variance thereof.

B.......THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT

PETITIONER IS NOT ENTITLED TO THE POSSESSION OF THE PROPERTY
PRIOR TO THE PAYMENT OF RESPONDENTS MORTGAGE LOAN.

C.......THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT

PETITIONER WAS NOT A BUILDER IN GOOD FAITH.

D.......THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT

PETITIONER IS ENTITLED TO INTEREST COMPUTED ONLY FROM THE
TIME WHEN THE JUDGMENT DECLARING THE CONTRACT TO BE AN
EQUITABLE MORTGAGE BECAME FINAL.[9]

Basically, petitioner claims that he is entitled to retain possession of the

subject property until payment of the loan and the value of the necessary
and useful improvements he made upon such property.[10] According to
petitioner, neither the Court of Appeals decision in G.R. CV No. 42065 nor
this Courts decision in G.R. No. 120832 ordered immediate delivery of
possession of the subject property to respondent.

The dispositive portion of the March 31, 1995 decision of the Court of
Appeals in G.R. CV No. 42065, which was affirmed by this Court, provides
that
IN VIEW OF ALL THE FOREGOING, the judgment appealed from is
REVERSED and SET ASIDE and a new one entered: (1) dismissing the
complaint; (2) declaring the "Document of Sale and Special Cession of
Rights and Interests" (Exhibit B) dated February 10, 1960, to be an
equitable mortgage not a sale; (3) upholding the validity of OCT No.
P-13038 in the name of Felicitas de Lara; and (3) declaring null and void
OCT No. P-11566 in the name of plaintiff Cornelio Isaguirre. All other
counterclaims for damages are likewise dismissed. Costs against the
appellee.[11]

Petitioner argues that the abovementioned decision merely settled the

following matters: (1) that the transaction between petitioner and
respondent was not a sale but an equitable mortgage; (2) that OCT No.
P-13038 in the name of respondent is valid; and (3) that OCT No. P-11566
in the name of petitioner is null and void. Since the aforementioned
decision did not direct the immediate ouster of petitioner from the subject
property and the delivery thereof to respondent, the issuance of the writ
of possession by the trial court on June 16, 1998 constituted an
unwarranted modification or addition to the final and executory decision of
this Court in G.R. No. 120832.[12]

We do not agree with petitioners contentions. On the contrary, the March

31, 1995 decision of the appellate court, which was affirmed by this Court
on July 8, 1996, served as more than adequate basis for the issuance of
the writ of possession in favor of respondent since these decisions
affirmed respondents title over the subject property. As the sole owner,
respondent has the right to enjoy her property, without any other
limitations than those established by law.[13] Corollary to such right,
respondent also has the right to exclude from the possession of her
property any other person to whom she has not transmitted such property.
[14]

It is true that, in some instances, the actual possessor has some valid
rights over the property enforceable even against the owner thereof, such
as in the case of a tenant or lessee.[15] Petitioner anchors his own claim
to possession upon his declared status as a mortgagee. In his Memorandum,
he argues that

4.8 It was respondent who asserted that her transfer of the Property to
petitioner was by way of an equitable mortgage and not by sale. After her
assertion was sustained by the Courts, respondent cannot now ignore or
disregard the legal effects of such judicial declaration regarding the
nature of the transaction.

xxx......xxx......xxx

4.13 Having delivered possession of the Property to petitioner as part of

the constitution of the equitable mortgage thereon, respondent is not
entitled to the return of the Property unless and until the mortgage loan
is discharged by full payment thereof. Petitioners right as mortgagee to
retain possession of the Property so long as the mortgage loan remains
unpaid is further supported by the rule that a mortgage may not be
extinguished even though then mortgagor-debtor may have made partial
payments on the mortgage loan:

"Art. 2089. A pledge or mortgage is indivisible, even though the debt may
be divided among the successors in interest of the debtor or the creditor.

"Therefore, the debtors heir who has paid a part of the debt cannot ask
for the proportionate extinguishment of the pledge or mortgage as long as
the debt is not completely satisfied.

"Neither can the creditors heir who has received his share of the debt
return the pledge or cancel the mortgage, to the prejudice of the other
heirs who have not been paid."

(Emphasis supplied.)

xxx......xxx......xxx
4.14 ......To require petitioner to deliver possession of the Property to
respondent prior to the full payment of the latters mortgage loan would
be equivalent to the cancellation of the mortgage. Such effective
cancellation would render petitioners rights ineffectual and nugatory and
would constitute unwarranted judicial interference.

xxx......xxx......xxx

4.16 The fact of the present case show that respondent delivered
possession of the Property to petitioner upon the execution of the Deed
of Absolute Sale and Special Cession of Rights and Interest dated 10
February 1960. Hence, transfer of possession of the Property to petitioner
was an essential part of whatever agreement the parties entered into,
which, in this case, the Supreme Court affirmed to be an equitable
mortgage.

xxx......xxx......xxx

4.19 Petitioner does not have the mistaken notion that the mortgagee
must be in actual possession of the mortgaged property in order to secure
the debt. However, in this particular case, the delivery of possession of the
Property was an integral part of the contract between petitioner and
respondent. After all, it was supposed to be a contract of sale. If delivery
was not part of the agreement entered into by the parties in 1960, why
did respondent surrender possession thereof to petitioner in the first
place?

4.20 Now that the Courts have ruled that the transaction was not a sale
but a mortgage, petitioners entitlement to the possession of the Property
should be deemed as one of the provisions of the mortgage, considering
that at the time the contract was entered into, possession of the Property
was likewise delivered to petitioner. Thus, until respondent has fully paid
her mortgage loan, petitioner should be allowed to retain possession of the
subject property.[16]

Petitioners position lacks sufficient legal and factual moorings.

A mortgage is a contract entered into in order to secure the fulfillment of
a principal obligation.[17] It is constituted by recording the document in
which it appears with the proper Registry of Property, although, even if it
is not recorded, the mortgage is nevertheless binding between the parties.
[18] Thus, the only right granted by law in favor of the mortgagee is to
demand the execution and the recording of the document in which the
mortgage is formalized.[19] As a general rule, the mortgagor retains
possession of the mortgaged property since a mortgage is merely a lien
and title to the property does not pass to the mortgagee.[20] However,
even though a mortgagee does not have possession of the property, there
is no impairment of his security since the mortgage directly and
immediately subjects the property upon which it is imposed, whoever the
possessor may be, to the fulfillment of the obligation for whose security it
was constituted.[21] If the debtor is unable to pay his debt, the mortgage
creditor may institute an action to foreclose the mortgage, whether
judicially or extrajudicially, whereby the mortgaged property will then be
sold at a public auction and the proceeds therefrom given to the creditor
to the extent necessary to discharge the mortgage loan. Apparently,
petitioners contention that "[t]o require [him] to deliver possession of the
Property to respondent prior to the full payment of the latters mortgage
loan would be equivalent to the cancellation of the mortgage" is without
basis. Regardless of its possessor, the mortgaged property may still be
sold, with the prescribed formalities, in the event of the debtors default in
the payment of his loan obligation.

Moreover, this Court cannot find any justification in the records to uphold
petitioners contention that respondent delivered possession of the subject
property upon the execution of the "Deed of Sale and Special Cession of
Rights and Interests" on February 10, 1960 and that the transfer of
possession to petitioner must therefore be considered an essential part of
the agreement between the parties. This self-serving assertion of
petitioner was directly contradicted by respondent in her pleadings.[22]
Furthermore, nowhere in the Court of Appeals decisions promulgated on
March 31, 1995 (G.R. CV No. 42065) and on October 5, 1998 (G.R. SP No.
48310), or in our own decision promulgated on July 8, 1996 (G.R. No.
120832) was it ever established that the mortgaged properties were
delivered by respondent to petitioner.

In Alvano v. Batoon,[23] this Court held that "[a] simple mortgage does not
give the mortgagee a right to the possession of the property unless the
mortgage should contain some special provision to that effect." Regrettably
for petitioner, he has not presented any evidence, other than his own
gratuitous statements, to prove that the real intention of the parties was
to allow him to enjoy possession of the mortgaged property until full
payment of the loan.

Therefore, we hold that the trial court correctly issued the writ of
possession in favor of respondent. Such writ was but a necessary
consequence of this Courts ruling in G.R. No. 120832 affirming the validity
of the original certificate of title (OCT No. P-13038) in the name of
respondent Felicitas de Lara, while at the same time nullifying the original
certificate of title (OCT No. P-11566) in the name of petitioner Cornelio
Isaguirre. Possession is an essential attribute of ownership; thus, it would
be redundant for respondent to go back to court simply to establish her
right to possess subject property. Contrary to petitioners claims, the
issuance of the writ of possession by the trial court did not constitute an
unwarranted modification of our decision in G.R. No. 120832, but rather,
was a necessary complement thereto.[24] It bears stressing that a
judgment is not confined to what appears upon the face of the decision,
but also those necessarily included therein or necessary thereto.[25]

With regard to the improvements made on the mortgaged property, we

confirm the Court of Appeals characterization of petitioner as a possessor
in bad faith. Based on the factual findings of the appellate court, it is
evident that petitioner knew from the very beginning that there was
really no sale and that he held respondents property as mere security for
the payment of the loan obligation. Therefore, petitioner may claim
reimbursement only for necessary expenses; however, he is not entitled to
reimbursement for any useful expenses[26] which he may have incurred.
[27]
Finally, as correctly pointed out by the Court of Appeals, this case should
be remanded to the Regional Trial Court of Davao City for a determination
of the total amount of the loan, the necessary expenses incurred by
petitioner, and the period within which respondent must pay such amount.
[28] However, no interest is due on the loan since there has been no
express stipulation in writing.[29]

WHEREFORE, the assailed Decision of the Court of Appeals dated October

5, 1998 and its Resolution dated March 5, 1999 are hereby AFFIRMED.
Respondent is entitled to delivery of possession of the subject property.
This case is hereby REMANDED to the trial court for determination of the
amount of the loan, the necessary expenses incurred by petitioner and the
period within which the respondent must pay the same.

SO ORDERED.

THIRD DIVISION
[G.R. No. 120303. July 24, 1996]

FEDERICO GEMINIANO, MARIA GEMINIANO, ERNESTO GEMINIANO,

ASUNCION GEMINIANO, LARRY GEMINIANO, and MARLYN GEMINIANO,
petitioners, vs. COURT OF APPEALS, DOMINADOR NICOLAS, and MARY A.
NICOLAS, respondents.
DECISION

DAVIDE, JR., J.:

This petition for review on certiorari has its origins in Civil Case No. 9214
of Branch 3 of the Municipal Trial Court in Cities (MTCC) in Dagupan City
for unlawful detainer and damages. The petitioners ask the Court to set
aside the decision of the Court of Appeals affirming the decision of Branch
40 of the Regional Trial Court (RTC) of Dagupan City, which, in turn,
reversed the MTCC; ordered the petitioners to reimburse the private
respondents the value of the house in question and other improvements;
and allowed the latter to retain the premises until reimbursement was
made.

It appears that Lot No. 3765-B-1 containing an area of 314 square meters
was originally owned by the petitioners' mother, Paulina Amado vda. de
Geminiano. On a 12-square-meter portion of that lot stood the petitioners'
unfinished bungalow, which the petitioners sold in November 1978 to the
private respondents for the sum of P6,000.00, with an alleged promise to
sell to the latter that portion of the lot occupied by the house.
Subsequently, the petitioners' mother executed a contract of lease over a
126 square-meter portion of the lot, including that portion on which the
house stood, in favor of the private respondents for P40.00 per month for
a period of seven years commencing on 15 November 1978.[1] The private
respondents then introduced additional improvements and registered the
house in their names. After the expiration of the lease contract in
November 1985, however, the petitioners' mother refused to accept the
monthly rentals.

It turned out that the lot in question was the subject of a suit, which
resulted in its acquisition by one Maria Lee in 1972. In 1982, Lee sold the
lot to Lily Salcedo, who in turn sold it in 1984 to the spouses Agustin and
Ester Dionisio.

On 14 February 1992, the Dionisio spouses executed a Deed of Quitclaim

over the said property in favor of the petitioners.[2] As such, the lot was
registered in the latter's names.[3]

On 9 February 1993, the petitioners sent, via registered mail, a letter

addressed to private respondent Mary Nicolas demanding that she vacate
the premises and pay the rentals in arrears within twenty days from
notice.[4]

Upon failure of the private respondents to heed the demand, the

petitioners filed with the MTCC of Dagupan City a complaint for unlawful
detainer and damages.
During the pre-trial conference, the parties agreed to confine the issues
to: (1) whether there was an implied renewal of the lease which expired in
November 1985; (2) whether the lessees were builders in good faith and
entitled to reimbursement of the value of the house and improvements;
and (3) the value of the house.

The parties then submitted their respective position papers and the case
was heard under the Rule on Summary Procedure.

On the first issue, the court held that since the petitioners' mother was no
longer the owner of the lot in question at the time the lease contract was
executed in 1978, in view of its acquisition by Maria Lee as early as 1972,
there was no lease to speak of, much less, a renewal thereof. And even if
the lease legally existed, its implied renewal was not for the period
stipulated in the original contract, but only on a month-to-month basis
pursuant to Article 1687 of the Civil Code. The refusal of the petitioners'
mother to accept the rentals starting January 1986 was then a clear
indication of her desire to terminate the monthly lease. As regards the
petitioners' alleged failed promise to sell to the private respondents the lot
occupied by the house, the court held that such should be litigated in a
proper case before the proper forum, not an ejectment case where the
only issue was physical possession of the property.

The court resolved the second issue in the negative, holding that Articles
448 and 546 of the Civil Code, which allow possessors in good faith to
recover the value of improvements and retain the premises until
reimbursed, did not apply to lessees like the private respondents, because
the latter knew that their occupation of the premises would continue only
during the life of the lease. Besides, the rights of the private respondents
were specifically governed by Article 1678, which allows reimbursement of
up to one-half of the value of the useful improvements, or removal of the
improvements should the lessor refuse to reimburse.

On the third issue, the court deemed as conclusive the private

respondents' allegation that the value of the house and improvements was
P180,000.00, there being no controverting evidence presented.
The trial court thus ordered the private respondents to vacate the
premises, pay the petitioners P40.00 a month as reasonable compensation
for their stay thereon from the filing of the complaint on 14 April 1993
until they vacated, and to pay the sum of P1,000.00 as attorney's fees,
plus costs.[5]

On appeal by the private respondents, the RTC of Dagupan City reversed

the trial court's decision and rendered a new judgment: (1) ordering the
petitioners to reimburse the private respondents for the value of the
house and improvements in the amount of P180,000.00 and to pay the
latter P10,000.00 as attorney's fees and P2,000.00 as litigation expenses;
and (2) allowing the private respondents to remain in possession of the
premises until they were fully reimbursed for the value of the house.[6] It
ruled that since the private respondents were assured by the petitioners
that the lot they leased would eventually be sold to them, they could be
considered builders in good faith, and as such, were entitled to
reimbursement of the value of the house and improvements with the right
of retention until reimbursement had been made.

On appeal, this time by the petitioners, the Court of Appeals affirmed the
decision of the RTC[7] and denied[8] the petitioners' motion for
reconsideration. Hence, the present petition.

The Court is confronted with the issue of which provision of law governs
the case at bench: Article 448 or Article 1678 of the Civil Code? The said
articles read as follows:

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

xxx xxx xxx

Art. 1678. If the lessee makes, in good faith, useful improvements which
are suitable to the use for which the lease is intended, without altering
the form or substance of the property leased, the lessor upon the
termination of the lease shall pay the lessee one-half of the value of the
improvements at that time. Should the lessor refuse to reimburse said
amount, the lessee may remove the improvements, even though the
principal thing may suffer damage thereby. He shall not, however, cause
any more impairment upon the property leased than is necessary.

With regard to ornamental expenses, the lessee shall not be entitled to

any reimbursement, but he may remove the ornamental objects, provided
no damage is caused to the principal thing, and the lessor does not choose
to retain them by paying their value at the time the lease is extinguished.

The crux of the said issue then is whether the private respondents are
builders in good faith or mere lessees.

The private respondents claim they are builders in good faith, hence,
Article 448 of the Civil Code should apply. They rely on the lack of title of
the petitioners' mother at the time of the execution of the contract of
lease, as well as the alleged assurance made by the petitioners that the
lot on which the house stood would be sold to them.

It has been said that while the right to let property is an incident of title
and possession, a person may be a lessor and occupy the position of a
landlord to the tenant although he is not the owner of the premises let.[9]
After all, ownership of the property is not being transferred,[10] only the
temporary use and enjoyment thereof.[11]
In this case, both parties admit that the land in question was originally
owned by the petitioners' mother. The land was allegedly acquired later by
one Maria Lee by virtue of an extrajudicial foreclosure of mortgage. Lee,
however, never sought a writ of possession in order that she gain
possession of the property in question.[12] The petitioners' mother
therefore remained in possession of the lot.

It is undisputed that the private respondents came into possession of a

126 square-meter portion of the said lot by virtue of a contract of lease
executed by the petitioners' mother in their favor. The juridical relation
between the petitioners' mother as lessor, and the private respondents as
lessees, is therefore well-established, and carries with it a recognition of
the lessor's title.[13] The private respondents, as lessees who had
undisturbed possession for the entire term under the lease, are then
estopped to deny their landlord's title, or to assert a better title not only
in themselves, but also in some third person while they remain in
possession of the leased premises and until they surrender possession to
the landlord.[14] This estoppel applies even though the lessor had no title
at the time the relation of lessor and lessee was created,[15] and may be
asserted not only by the original lessor, but also by those who succeed to
his title.[16]

Being mere lessees, the private respondents knew that their occupation of
the premises would continue only for the life of the lease. Plainly, they
cannot be considered as possessors nor builders in good faith.[17]

In a plethora of cases,[18] this Court has held that Article 448 of the Civil
Code, in relation to Article 546 of the same Code, which allows full
reimbursement of useful improvements and retention of the premises until
reimbursement is made, applies only to a possessor in good faith, i.e., one
who builds on land with the belief that he is the owner thereof. It does
not apply where one's only interest is that of a lessee under a rental
contract; otherwise, it would always be in the power of the tenant to
"improve" his landlord out of his property.
Anent the alleged promise of the petitioners to sell the lot occupied by
the private respondents' house, the same was not substantiated by
convincing evidence. Neither the deed of sale over the house nor the
contract of lease contained an option in favor of the respondent spouses to
purchase the said lot. And even if the petitioners indeed promised to sell,
it would not make the private respondents possessors or builders in good
faith so as to be covered by the provisions of Article 448 of the Civil Code.
The latter cannot raise the mere expectancy of ownership of the
aforementioned lot because the alleged promise to sell was not fulfilled
nor its existence even proven. The first thing that the private respondents
should have done was to reduce the alleged promise into writing, because
under Article 1403 of the Civil Code, an agreement for the sale of real
property or an interest therein is unenforceable, unless some note or
memorandum thereof be produced. Not having taken any steps in order
that the alleged promise to sell may be enforced, the private respondents
cannot bank on that promise and profess any claim nor color of title over
the lot in question.

There is no need to apply by analogy the provisions of Article 448 on

indemnity as was done in Pecson vs. Court of Appeals,[19] because the
situation sought to be avoided and which would justify the application of
that provision, is not present in this case. Suffice it to say, "a state of
forced co-ownership" would not be created between the petitioners and
the private respondents. For, as correctly pointed out by the petitioners,
the rights of the private respondents as lessees are governed by Article
1678 of the Civil Code which allows reimbursement to the extent of one-
half of the value of the useful improvements.

It must be stressed, however, that the right to indemnity under Article

1678 of the Civil Code arises only if the lessor opts to appropriate the
improvements. Since the petitioners refused to exercise that option,[20]
the private respondents cannot compel them to reimburse the one-half
value of the house and improvements. Neither can they retain the premises
until reimbursement is made. The private respondents' sole right then is to
remove the improvements without causing any more impairment upon the
property leased than is necessary.[21]
WHEREFORE, judgment is hereby rendered GRANTING the instant petition;
REVERSING and SETTING ASIDE the decision of the Court of Appeals of
27 January 1995 in CA-G.R. SP No. 34337; and REINSTATING the decision
of Branch 3 of the Municipal Trial Court in Cities of Dagupan City in Civil
Case No. 9214 entitled "Federico Geminiano, et al. vs. Dominador Nicolas, et
al."

Costs against the private respondents.

SO ORDERED.

THIRD DIVISION
[G.R. No. 108894. February 10, 1997]

TECNOGAS PHILIPPINES MANUFACTURING CORPORATION, petitioner, vs.

COURT OF APPEALS (FORMER SPECIAL SEVENTEENTH DIVISION) and
EDUARDO UY, respondents.
DECISION
PANGANIBAN, J.:

The parties in this case are owners of adjoining lots in Paraaque, Metro
Manila. It was discovered in a survey that a portion of a building of
petitioner, which was presumably constructed by its predecessor-in-
interest, encroached on a portion of the lot owned by private respondent.
What are the rights and obligations of the parties? Is petitioner
considered a builder in bad faith because, as held by respondent Court, he
is presumed to know the metes and bounds of his property as described in
his certificate of title? Does petitioner succeed into the good faith or bad
faith of his predecessor-in-interest which presumably constructed the
building?
These are the questions raised in the petition for review of the Decision[1]
dated August 28, 1992, in CA-G.R. CV No. 28293 of respondent Court[2]
where the disposition reads:[3]

WHEREFORE, premises considered, the Decision of the Regional Trial Court

is hereby reversed and set aside and another one entered -

1. Dismissing the complaint for lack of cause of action;

2. Ordering Tecnogas to pay the sum of P2,000.00 per month as

reasonable rental from October 4, 1979 until appellee vacates the land;

3. To remove the structures and surrounding walls on the encroached area;

4. Ordering appellee to pay the value of the land occupied by the two-
storey building;

5. Ordering appellee to pay the sum of P20,000.00 for and as attorneys

fees;

6. Costs against appellee.

Acting on the motions for reconsideration of both petitioner and private

respondent, respondent Court ordered the deletion of paragraph 4 of the
dispositive portion in an Amended Decision dated February 9, 1993, as
follows:[4]

WHEREFORE, premises considered, our decision of August 28, 1992 is

hereby modified deleting paragraph 4 of the dispositive portion of our
decision which reads:

4. Ordering appellee to pay the value of the land occupied by the two-
storey building.

The motion for reconsideration of appellee is hereby DENIED for lack of

merit.
The foregoing Amended Decision is also challenged in the instant petition.

The Facts

The facts are not disputed. Respondent Court merely reproduced the
factual findings of the trial court, as follows:[5]

That plaintiff (herein petitioner) which is a corporation duly organized and

existing under and by virtue of Philippine laws is the registered owner of
a parcel of land situated in Barrio San Dionisio, Paraaque, Metro Manila
known as Lot 4331-A (should be 4531-A) of Lot 4531 of the Cadastral
Survey of Paraaque, Metro Manila, covered by Transfer Certificate of Title
No. 409316 of the Registry of Deeds of the Province of Rizal; that said
land was purchased by plaintiff from Pariz Industries, Inc. in 1970,
together with all the buildings and improvements including the wall
existing thereon; that the defendant (herein private respondent) is the
registered owner of a parcel of land known as Lot No. 4531-B of Lot 4531
of the Cadastral Survey of Paraaque, LRC (GLRO) Rec. No. 19645 covered
by Transfer Certificate of Title No. 279838, of the Registry of Deeds for
the Province of Rizal; that said land which adjoins plaintiffs land was
purchased by defendant from a certain Enrile Antonio also in 1970; that in
1971, defendant purchased another lot also adjoining plaintiffs land from a
certain Miguel Rodriguez and the same was registered in defendants name
under Transfer Certificate of Title No. 31390, of the Registry of Deeds for
the Province of Rizal; that portions of the buildings and wall bought by
plaintiff together with the land from Pariz Industries are occupying a
portion of defendants adjoining land; that upon learning of the
encroachment or occupation by its buildings and wall of a portion of
defendants land, plaintiff offered to buy from defendant that particular
portion of defendants land occupied by portions of its buildings and wall
with an area of 770 square meters, more or less, but defendant, however,
refused the offer. In 1973, the parties entered into a private agreement
before a certain Col. Rosales in Malacaang, wherein plaintiff agreed to
demolish the wall at the back portion of its land thus giving to defendant
possession of a portion of his land previously enclosed by plaintiffs wall;
that defendant later filed a complaint before the office of Municipal
Engineer of Paraaque, Metro Manila as well as before the Office of the
Provincial Fiscal of Rizal against plaintiff in connection with the
encroachment or occupation by plaintiffs buildings and walls of a portion
of its land but said complaint did not prosper; that defendant dug or
caused to be dug a canal along plaintiffs wall, a portion of which collapsed
in June, 1980, and led to the filing by plaintiff of the supplemental
complaint in the above-entitled case and a separate criminal complaint for
malicious mischief against defendant and his wife which ultimately resulted
into the conviction in court of defendants wife for the crime of malicious
mischief; that while trial of the case was in progress, plaintiff filed in
Court a formal proposal for settlement of the case but said proposal,
however, was ignored by defendant.

After trial on the merits, the Regional Trial Court[6] of Pasay City, Branch
117, in Civil Case No. PQ-7631-P, rendered a decision dated December 4,
1989 in favor of petitioner who was the plaintiff therein. The dispositive
portion reads:[7]

WHEREFORE, judgment is hereby rendered in favor of plaintiff and against

defendant and ordering the latter to sell to plaintiff that portion of land
owned by him and occupied by portions of plaintiffs buildings and wall at
the price of P2,000.00 per square meter and to pay the former:

1. The sum of P44,000.00 to compensate for the losses in materials and

properties incurred by plaintiff through thievery as a result of the
destruction of its wall;

2. The sum of P7,500.00 as and by way of attorneys fees; and

3. The costs of this suit.

Appeal was duly interposed with respondent Court, which as previously

stated, reversed and set aside the decision of the Regional Trial Court and
rendered the assailed Decision and Amended Decision. Hence, this recourse
under Rule 45 of the Rules of Court.
The Issues

The petition raises the following issues:[8]

(A)

Whether or not the respondent Court of Appeals erred in holding the

petitioner a builder in bad faith because it is presumed to know the metes
and bounds of his property.

(B)

Whether or not the respondent Court of Appeals erred when it used the
amicable settlement between the petitioner and the private respondent,
where both parties agreed to the demolition of the rear portion of the
fence, as estoppel amounting to recognition by petitioner of respondents
right over his property including the portions of the land where the other
structures and the building stand, which were not included in the
settlement.

(C)

Whether or not the respondent Court of Appeals erred in ordering the

removal of the structures and surrounding walls on the encroached area
and in withdrawing its earlier ruling in its August 28, 1992 decision for the
petitioner to pay for the value of the land occupied by the building, only
because the private respondent has manifested its choice to demolish it
despite the absence of compulsory sale where the builder fails to pay for
the land, and which choice private respondent deliberately deleted from its
September 1, 1980 answer to the supple-mental complaint in the Regional
Trial Court.

In its Memorandum, petitioner poses the following issues:

A
The time when to determine the good faith of the builder under Article
448 of the New Civil Code, is reckoned during the period when it was
actually being built; and in a case where no evidence was presented nor
introduced as to the good faith or bad faith of the builder at that time,
as in this case, he must be presumed to be a builder in good faith, since
bad faith cannot be presumed.[9]

B.

In a specific boundary overlap situation which involves a builder in good

faith, as in this case, it is now well settled that the lot owner, who builds
on the adjacent lot is not charged with constructive notice of the
technical metes and bounds contained in their torrens titles to determine
the exact and precise extent of his boundary perimeter.[10]

C.

The respondent courts citation of the twin cases of Tuason & Co. v.
Lumanlan and Tuason & Co. v. Macalindong is not the judicial authority for
a boundary dispute situation between adjacent torrens titled lot owners,
as the facts of the present case do not fall within nor square with the
involved principle of a dissimilar case.[11]

D.

Quite contrary to respondent Uys reasoning, petitioner Tecnogas continues

to be a builder in good faith, even if it subsequently built/repaired the
walls/other permanent structures thereon while the case a quo was
pending and even while respondent sent the petitioner many letters/filed
cases thereon.[12]

D. (E.)

The amicable settlement between the parties should be interpreted as a

contract and enforced only in accordance with its explicit terms, and not
over and beyond that agreed upon; because the courts do not have the
power to create a contract nor expand its scope.[13]

E. (F.)

As a general rule, although the landowner has the option to choose

between: (1) buying the building built in good faith, or (2) selling the
portion of his land on which stands the building under Article 448 of the
Civil Code; the first option is not absolute, because an exception thereto,
once it would be impractical for the landowner to choose to exercise the
first alternative, i.e. buy that portion of the house standing on his land, for
the whole building might be rendered useless. The workable solution is for
him to select the second alternative, namely, to sell to the builder that
part of his land on which was constructed a portion of the house.[14]

Private respondent, on the other hand, argues that the petition is suffering
from the following flaws:[15]

1. It did not give the exact citations of cases decided by the Honorable
Supreme Court that allegedly contradicts the ruling of the Hon. Court of
Appeals based on the doctrine laid down in Tuason vs. Lumanlan case citing
also Tuason vs. Macalindong case (Supra).

2. Assuming that the doctrine in the alleged Co Tao vs. Chico case is
contradictory to the doctrine in Tuason vs. Lumanlan and Tuason vs.
Macalindong, the two cases being more current, the same should prevail.

Further, private respondent contends that the following unmistakably point

to the bad faith of petitioner: (1) private respondents purchase of the two
lots, was ahead of the purchase by petitioner of the building and lot from
Pariz Industries; (2) the declaration of the General Manager of Tecnogas
that the sale between petitioner and Pariz Industries was not registered
because of some problems with China Banking Corporation; and (3) the
Deed of Sale in favor of petitioner was registered in its name only in the
month of May 1973.[16]
The Courts Ruling

The petition should be granted.

Good Faith or Bad Faith

Respondent Court, citing the cases of J. M. Tuason & Co., Inc. vs. Vda. de
Lumanlan[17] and J. M. Tuason & Co., Inc. vs. Macalindong,[18] ruled that
petitioner cannot be considered in good faith because as a land owner, it is
presumed to know the metes and bounds of his own property, specially if
the same are reflected in a properly issued certificate of title. One who
erroneously builds on the adjoining lot should be considered a builder in
(b)ad (f)aith, there being presumptive knowledge of the Torrens title, the
area, and the extent of the boundaries.[19]

We disagree with respondent Court. The two cases it relied upon do not
support its main pronouncement that a registered owner of land has
presumptive knowledge of the metes and bounds of its own land, and is
therefore in bad faith if he mistakenly builds on an adjoining land. Aside
from the fact that those cases had factual moorings radically different
from those obtaining here, there is nothing in those cases which would
suggest, however remotely, that bad faith is imputable to a registered
owner of land when a part of his building encroaches upon a neighbors
land, simply because he is supposedly presumed to know the boundaries of
his land as described in his certificate of title. No such doctrinal statement
could have been made in those cases because such issue was not before
the Supreme Court. Quite the contrary, we have rejected such a theory in
Co Tao vs. Chico,[20] where we held that unless one is versed in the science
of surveying, no one can determine the precise extent or location of his
property by merely examining his paper title.

There is no question that when petitioner purchased the land from Pariz
Industries, the buildings and other structures were already in existence.
The record is not clear as to who actually built those structures, but it
may well be assumed that petitioners predecessor-in-interest, Pariz
Industries, did so. Article 527 of the Civil Code presumes good faith, and
since no proof exists to show that the encroachment over a narrow,
needle-shaped portion of private respondents land was done in bad faith
by the builder of the encroaching structures, the latter should be
presumed to have built them in good faith.[21] It is presumed that
possession continues to be enjoyed in the same character in which it was
acquired, until the contrary is proved.[22] Good faith consists in the belief
of the builder that the land he is building on is his, and his ignorance of
any defect or flaw in his title.[23] Hence, such good faith, by law, passed
on to Parizs successor, petitioner in this case. Further, (w)here one derives
title to property from another, the act, declaration, or omission of the
latter, while holding the title, in relation to the property, is evidence
against the former.[24] And possession acquired in good faith does not lose
this character except in case and from the moment facts exist which show
that the possessor is not unaware that he possesses the thing improperly
or wrongfully.[25] The good faith ceases from the moment defects in the
title are made known to the possessor, by extraneous evidence or by suit
for recovery of the property by the true owner.[26]

Recall that the encroachment in the present case was caused by a very
slight deviation of the erected wall (as fence) which was supposed to run
in a straight line from point 9 to point 1 of petitioners lot. It was an error
which, in the context of the attendant facts, was consistent with good
faith. Consequently, the builder, if sued by the aggrieved landowner for
recovery of possession, could have invoked the provisions of Art. 448 of
the Civil Code, which reads:

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

The obvious benefit to the builder under this article is that, instead of
being outrightly ejected from the land, he can compel the landowner to
make a choice between the two options: (1) to appropriate the building by
paying the indemnity required by law, or (2) sell the land to the builder.
The landowner cannot refuse to exercise either option and compel instead
the owner of the building to remove it from the land.[27]

The question, however, is whether the same benefit can be invoked by

petitioner who, as earlier stated, is not the builder of the offending
structures but possesses them as buyer.

We answer such question in the affirmative.

In the first place, there is no sufficient showing that petitioner was aware
of the encroachment at the time it acquired the property from Pariz
Industries. We agree with the trial court that various factors in evidence
adequately show petitioners lack of awareness thereof. In any case,
contrary proof has not overthrown the presumption of good faith under
Article 527 of the Civil Code, as already stated, taken together with the
disputable presumptions of the law on evidence. These presumptions state,
under Section 3 (a) of Rule 131 of the Rules of Court, that the person is
innocent of a crime or wrong; and under Section 3 (ff) of Rule 131, that
the law has been obeyed. In fact, private respondent Eduardo Uy himself
was unaware of such intrusion into his property until after 1971 when he
hired a surveyor, following his purchase of another adjoining lot, to survey
all his newly acquired lots. Upon being apprised of the encroachment,
petitioner immediately offered to buy the area occupied by its building --
a species of conduct consistent with good faith.

In the second place, upon delivery of the property by Pariz Industries, as

seller, to the petitioner, as buyer, the latter acquired ownership of the
property. Consequently and as earlier discussed, petitioner is deemed to
have stepped into the shoes of the seller in regard to all rights of
ownership over the immovable sold, including the right to compel the
private respondent to exercise either of the two options provided under
Article 448 of the Civil Code.

Estoppel

Respondent Court ruled that the amicable settlement entered into

between petitioner and private respondent estops the former from
questioning the private respondents right over the disputed property. It
held that by undertaking to demolish the fence under said settlement,
petitioner recognized private respondents right over the property, and
cannot later on compel private respondent to sell to it the land since
private respondent is under no obligation to sell.[28]

We do not agree. Petitioner cannot be held in estoppel for entering into

the amicable settlement, the pertinent portions of which read:[29]

That the parties hereto have agreed that the rear portion of the fence
that separates the property of the complainant and respondent shall be
demolished up to the back of the building housing the machineries which
demolision (sic) shall be undertaken by the complainant at anytime.

That the fence which serve(s) as a wall housing the electroplating

machineries shall not be demolished in the mean time which portion shall
be subject to negotiation by herein parties.

From the foregoing, it is clear that petitioner agreed only to the demolition
of a portion of the wall separating the adjoining properties of the parties
-- i.e. up to the back of the building housing the machineries. But that
portion of the fence which served as the wall housing the electroplating
machineries was not to be demolished. Rather, it was to be subject to
negotiation by herein parties. The settlement may have recognized the
ownership of private respondent but such admission cannot be equated
with bad faith. Petitioner was only trying to avoid a litigation, one reason
for entering into an amicable settlement.
As was ruled in Osmea vs. Commission on Audit,[30]

A compromise is a bilateral act or transaction that is expressly

acknowledged as a juridical agreement by the Civil Code and is therein
dealt with in some detail. `A compromise, declares Article 2208 of said
Code, `is a contract whereby the parties, by making reciprocal concessions,
avoid a litigation or put an end to one already commenced.

xxx xxx xxx

The Civil Code not only defines and authorizes compromises, it in fact
encourages them in civil actions. Art. 2029 states that `The Court shall
endeavor to persuade the litigants in a civil case to agree upon some fair
compromise. x x x.

In the context of the established facts, we hold that petitioner did not
lose its rights under Article 448 of the Civil Code on the basis merely of
the fact that some years after acquiring the property in good faith, it
learned about -- and aptly recognized -- the right of private respondent
to a portion of the land occupied by its building. The supervening
awareness of the encroachment by petitioner does not militate against its
right to claim the status of a builder in good faith. In fact, a judicious
reading of said Article 448 will readily show that the landowners exercise
of his option can only take place after the builder shall have come to know
of the intrusion -- in short, when both parties shall have become aware of
it. Only then will the occasion for exercising the option arise, for it is only
then that both parties will have been aware that a problem exists in
regard to their property rights.

Options of Private Respondent

What then is the applicable provision in this case which private respondent
may invoke as his remedy: Article 448 or Article 450[31] of the Civil Code?

In view of the good faith of both petitioner and private respondent, their
rights and obligations are to be governed by Art. 448. The essential
fairness of this codal provision has been pointed out by Mme. Justice
Ameurfina Melencio-Herrera, citing Manresa and applicable precedents, in
the case of Depra vs. Dumlao,[32] to wit:

Where the builder, planter or sower has acted in good faith, a conflict of
rights arises between the owners, and it becomes necessary to protect
the owner of the improvements without causing injustice to the owner of
the land. In view of the impracticality of creating a state of forced co-
ownership, the law has provided a just solution by giving the owner of the
land the option to acquire the improvements after payment of the proper
indemnity, or to oblige the builder or planter to pay for the land and the
sower to pay the proper rent. It is the owner of the land who is
authorized to exercise the option, because his right is older, and because,
by the principle of accession, he is entitled to the ownership of the
accessory thing. (3 Manresa 213; Bernardo vs. Bataclan, 37 Off. Gaz. 1382;
Co Tao vs. Chan Chico, G. R. No. 49167, April 30, 1949; Article applied; see
Cabral, et al. vs. Ibanez [S.C.] 52 Off. Gaz. 217; Marfori vs. Velasco, [C.A.]
52 Off. Gaz. 2050).

The private respondents insistence on the removal of the encroaching

structures as the proper remedy, which respondent Court sustained in its
assailed Decisions, is thus legally flawed. This is not one of the remedies
bestowed upon him by law. It would be available only if and when he
chooses to compel the petitioner to buy the land at a reasonable price but
the latter fails to pay such price.[33] This has not taken place. Hence, his
options are limited to: (1) appropriating the encroaching portion of
petitioners building after payment of proper indemnity, or (2) obliging the
latter to buy the lot occupied by the structure. He cannot exercise a
remedy of his own liking.

Neither is petitioners prayer that private respondent be ordered to sell

the land[34] the proper remedy. While that was dubbed as the more
workable solution in Grana and Torralba vs. The Court of Appeals, et al.,[35]
it was not the relief granted in that case as the landowners were directed
to exercise within 30 days from this decision their option to either buy
the portion of the petitioners house on their land or sell to said
petitioners the portion of their land on which it stands.[36] Moreover, in
Grana and Torralba, the area involved was only 87 square meters while this
case involves 520 square meters[37]. In line with the case of Depra vs.
Dumlao,[38] this case will have to be remanded to the trial court for
further proceedings to fully implement the mandate of Art. 448. It is a
rule of procedure for the Supreme Court to strive to settle the entire
controversy in a single proceeding leaving no root or branch to bear the
seeds of future litigation.[39]

Petitioner, however, must also pay the rent for the property occupied by
its building as prescribed by respondent Court from October 4, 1979, but
only up to the date private respondent serves notice of its option upon
petitioner and the trial court; that is, if such option is for private
respondent to appropriate the encroaching structure. In such event,
petitioner would have a right of retention which negates the obligation to
pay rent.[40] The rent should however continue if the option chosen is
compulsory sale, but only up to the actual transfer of ownership.

The award of attorneys fees by respondent Court against petitioner is

unwarranted since the action appears to have been filed in good faith.
Besides, there should be no penalty on the right to litigate.[41]

WHEREFORE, premises considered, the petition is hereby GRANTED and

the assailed Decision and the Amended Decision are REVERSED and SET
ASIDE. In accordance with the case of Depra vs. Dumlao,[42] this case is
REMANDED to the Regional Trial Court of Pasay City, Branch 117, for
further proceedings consistent with Articles 448 and 546 [43] of the Civil
Code, as follows:

The trial court shall determine:

a) the present fair price of private respondents 520 square-meter area of

land;
b) the increase in value (plus value) which the said area of 520 square
meters may have acquired by reason of the existence of the portion of the
building on the area;

c) the fair market value of the encroaching portion of the building; and

d) whether the value of said area of land is considerably more than the
fair market value of the portion of the building thereon.

2. After said amounts shall have been determined by competent evidence,

the regional trial court shall render judgment as follows:

a) The private respondent shall be granted a period of fifteen (15) days

within which to exercise his option under the law (Article 448, Civil Code),
whether to appropriate the portion of the building as his own by paying to
petitioner its fair market value, or to oblige petitioner to pay the price of
said area. The amounts to be respectively paid by petitioner and private
respondent, in accordance with the option thus exercised by written notice
of the other party and to the court, shall be paid by the obligor within
fifteen (15) days from such notice of the option by tendering the amount
to the trial court in favor of the party entitled to receive it;

b) If private respondent exercises the option to oblige petitioner to pay

the price of the land but the latter rejects such purchase because, as
found by the trial court, the value of the land is considerably more than
that of the portion of the building, petitioner shall give written notice of
such rejection to private respondent and to the trial court within fifteen
(15) days from notice of private respondents option to sell the land. In
that event, the parties shall be given a period of fifteen (15) days from
such notice of rejection within which to agree upon the terms of the
lease, and give the trial court formal written notice of the agreement and
its provisos. If no agreement is reached by the parties, the trial court,
within fifteen (15) days from and after the termination of the said period
fixed for negotiation, shall then fix the terms of the lease provided that
the monthly rental to be fixed by the Court shall not be less than two
thousand pesos (P2,000.00) per month, payable within the first five (5)
days of each calendar month. The period for the forced lease shall not be
more than two (2) years, counted from the finality of the judgment,
considering the long period of time since 1970 that petitioner has
occupied the subject area. The rental thus fixed shall be increased by ten
percent (10%) for the second year of the forced lease. Petitioner shall not
make any further constructions or improvements on the building. Upon
expiration of the two-year period, or upon default by petitioner in the
payment of rentals for two (2) consecutive months, private respondent shall
be entitled to terminate the forced lease, to recover his land, and to have
the portion of the building removed by petitioner or at latters expense.
The rentals herein provided shall be tendered by petitioner to the trial
court for payment to private respondent, and such tender shall constitute
evidence of whether or not compliance was made within the period fixed
by the said court.

c) In any event, petitioner shall pay private respondent an amount

computed at two thousand pesos (P2,000.00) per month as reasonable
compensation for the occupancy of private respondents land for the period
counted from October 4, 1979, up to the date private respondent serves
notice of its option to appropriate the encroaching structures, otherwise
up to the actual transfer of ownership to petitioner or, in case a forced
lease has to be imposed, up to the commencement date of the forced lease
referred to in the preceding paragraph;

d) The periods to be fixed by the trial court in its decision shall be non-
extendible, and upon failure of the party obliged to tender to the trial
court the amount due to the obligee, the party entitled to such payment
shall be entitled to an order of execution for the enforcement of payment
of the amount due and for compliance with such other acts as may be
required by the prestation due the obligee.

No costs.

SO ORDERED.
THIRD DIVISION
[G.R. No. 79688. February 1, 1996]

PLEASANTVILLE DEVELOPMENT CORPORATION, petitioner, vs. COURT OF

APPEALS, WILSON KEE, C.T. TORRES ENTERPRISES, INC. and ELDRED
JARDINICO, respondents.
DECISION
PANGANIBAN, J.:

Is a lot buyer who constructs improvements on the wrong property

erroneously delivered by the owners agent, a builder in good faith? This is
the main issue resolved in this petition for review on certiorari to reverse
the Decision[1] of the Court of Appeals[2] in CA-G.R. SP No. 11040,
promulgated on August 20, 1987.

By resolution dated November 13, 1995, the First Division of this Court
resolved to transfer this case (along with several others) to the Third
Division. After due deliberation and consultation, the Court assigned the
writing of this Decision to the undersigned ponente.

The Facts

The facts, as found by respondent Court, are as follows:

Edith Robillo purchased from petitioner a parcel of land designated as Lot

9, Phase II and located at Taculing Road, Pleasantville Subdivision, Bacolod
City. In 1975, respondent Eldred Jardinico bought the rights to the lot
from Robillo. At that time, Lot 9 was vacant.

Upon completing all payments, Jardinico secured from the Register of

Deeds of Bacolod City on December 19, 1978 Transfer Certificate of Title
No. 106367 in his name. It was then that he discovered that improvements
had been introduced on Lot 9 by respondent Wilson Kee, who had taken
possession thereof.
It appears that on March 26, 1974, Kee bought on installment Lot 8 of the
same subdivision from C.T. Torres Enterprises, Inc. (CTTEI), the exclusive
real estate agent of petitioner. Under the Contract to Sell on Installment,
Kee could possess the lot even before the completion of all installment
payments. On January 20, 1975, Kee paid CTTEI the relocation fee of
P50.00 and another P50.00 on January 27, 1975, for the preparation of
the lot plan. These amounts were paid prior to Kees taking actual
possession of Lot 8. After the preparation of the lot plan and a copy
thereof given to Kee, CTTEI through its employee, Zenaida Octaviano,
accompanied Kees wife, Donabelle Kee, to inspect Lot 8. Unfortunately, the
parcel of land pointed by Octaviano was Lot 9. Thereafter, Kee proceeded
to construct his residence, a store, an auto repair shop and other
improvements on the lot.

After discovering that Lot 9 was occupied by Kee, Jardinico confronted

him. The parties tried to reach an amicable settlement, but failed.

On January 30, 1981, Jardinicos lawyer wrote Kee, demanding that the
latter remove all improvements and vacate Lot 9. When Kee refused to
vacate Lot 9, Jardinico filed with the Municipal Trial Court in Cities, Branch
3, Bacolod City (MTCC), a complaint for ejectment with damages against
Kee.

Kee, in turn, filed a third-party complaint against petitioner and CTTEI.

The MTCC held that the erroneous delivery of Lot 9 to Kee was
attributable to CTTEI. It further ruled that petitioner and CTTEI could not
successfully invoke as a defense the failure of Kee to give notice of his
intention to begin construction required under paragraph 22 of the
Contract to Sell on Installment and his having built a sari-sari store
without. the prior approval of petitioner required under paragraph 26 of
said contract, saying that the purpose of these requirements was merely
to regulate the type of improvements to be constructed on the lot[3].

However, the MTCC found that petitioner had already rescinded its
contract with Kee over Lot 8 for the latters failure to pay the installments
due, and that Kee had not contested the rescission. The rescission was
effected in 1979, before the complaint was instituted. The MTCC concluded
that Kee no longer had any right over the lot subject of the contract
between him and petitioner. Consequently, Kee must pay reasonable rentals
for the use of Lot 9, and, furthermore, he cannot claim reimbursement for
the improvements he introduced on said lot.

The MTCC thus disposed:

IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered as

follows:

1. Defendant Wilson Kee is ordered to vacate tithe premises of Lot 9,

covered by TCT No. 106367 and to remove all structures and improvements
he introduced thereon;

2. Defendant Wilson Kee is ordered to pay to the plaintiff rentals at the

rate of P 15.00 a day computed from the time this suit was filed on March
12, 1981 until he actually vacates the premises. This amount shall bear
interests (sic) at the rate of 12 per cent (sic) per annum.

3. Third-Party Defendant CT. Torres Enterprises, Inc. and Pleasantville

Subdivision are ordered to pay the plaintiff jointly and severally the sum
of P3,000.00 as attorneys fees and P700.00 as cost and litigation
expenses.[4]

On appeal, the Regional Trial Court, Branch 48, Bacolod City (RTC) ruled
that petitioner and CTTEI were not at fault or were not negligent, there
being no preponderant evidence to show that they directly participated in
the delivery of Lot 9 to Kee.[5] It found Kee a builder in bad faith. It
further ruled that even assuming arguendo that Kee was acting in good
faith, he was, nonetheless, guilty of unlawfully usurping the possessory
right of Jardinico over Lot 9 from the time he was served with notice to
vacate said lot, and thus was liable for rental.

The RTC thus disposed:

WHEREFORE, the decision appealed from is affirmed with respect to the
order against the defendant to vacate the premises of Lot No. 9 covered
by Transfer Certificate of Title No. T-106367 of the land records of Bacolod
City; the removal of all structures and improvements introduced thereon at
his expense and the payment to plaintiff (sic) the sum of Fifteen (P 15.00)
Pesos a day as reasonable rental to be computed from January 30, 1981,
the date of the demand, and not from the date of the filing of the
complaint, until he had vacated (sic) the premises, with interest thereon at
12% per annum. This Court further renders judgment against the
defendant to pay the plaintiff the sum of Three Thousand (P3,000.00)
Pesos as attorneys fees, plus costs of litigation.

The third-party complaint against Third-Party Defendants Pleasantville

Development Corporation and C.T. Torres Enterprises, Inc. is dismissed. The
order against Third-Party Defendants to pay attorneys fees to plaintiff and
costs of litigation is reversed.[6]

Following the denial of his motion for reconsideration on October 20, 1986,
Kee appealed directly to the Supreme Court, which referred the matter to
the Court of Appeals.

The appellate court ruled that Kee was a builder in good faith, as he was
unaware of the mix-up when he began construction of the improvements
on Lot 8. It further ruled that the erroneous delivery was due to the
negligence of CTTEI, and that such wrong delivery was likewise imputable
to its principal, petitioner herein. The appellate court also ruled that the
award of rentals was without basis.

Thus, the Court of Appeals disposed:

WHEREFORE, the petition is GRANTED, the appealed decision is REVERSED,

and judgment is rendered as follows:
1. Wilson Kee is declared a builder in good faith with respect to the
improvements he introduced on Lot 9, and is entitled to the rights granted
him under Articles 448, 546 and 548 of the New Civil Code.

2. Third-party defendants C.T. Torres Enterprises, Inc. and Pleasantville

Development Corporation are solidarily liable under the following
circumstances:

a. If Eldred Jardinico decides to appropriate the improvements and,

thereafter, remove these structures, the third-party defendants shall
answer for all demolition expenses and the value of the improvements thus
destroyed or rendered useless;

b. If Jardinico prefers that Kee buy the land, the third-party defendants
shall answer for the amount representing the value of Lot 9 that Kee
should pay to Jardinico.

3. Third-party defendants C.T. Torres Enterprises, Inc. and Pleasantville

Development Corporation are ordered to pay in solidum the amount of
P3,000.00 to Jardinico as attorneys fees, as well as litigation expenses.

4. The award of rentals to Jardinico is dispensed with.

Furthermore, the case is REMANDED to the court of origin for the

determination of the actual value of the improvements and the property
(Lot 9), as well as for further proceedings in conformity with Article 448
of the New Civil Code.[7]

Petitioner then filed the instant petition against Kee, Jardinico and CTTEI.

The Issues

The petition submitted the following grounds to justify a review of the

respondent Courts Decision, as follows:
1. The Court of Appeals has decided the case in a way probably not in
accord with law or the the (sic) applicable decisions of the Supreme Court
on third-party complaints, by ordering third-party defendants to pay the
demolition expenses and/or price of the land;

2. The Court of Appeals has so far departed from the accepted course of
judicial proceedings, by granting to private respondent-Kee the rights of a
builder in good faith in excess of what the law provides, thus enriching
private respondent Kee at the expense of the petitioner;

3. In the light of the subsequent events or circumstances which changed

the rights of the parties, it becomes imperative to set aside or at least
modify the judgment of the Court of Appeals to harmonize with justice
and the facts;

4. Private respondent-Kee in accordance with the findings of facts of the

lower court is clearly a builder in bad faith, having violated several
provisions of the contract to sell on installments;

5. The decision of the Court of Appeals, holding the principal, Pleasantville

Development Corporation (liable) for the acts made by the agent in excess
of its authority is clearly in violation of the provision of the law;

6. The award of attorneys fees is clearly without basis and is equivalent to

putting a premium in (sic) court litigation.

From these grounds, the issues could be re-stated as follows:

(1) Was Kee a builder in good faith?

(2) What is the liability, if any, of petitioner and its agent, C.T. Torres
Enterprises, Inc.? and

(3) Is the award of attorneys fees proper?

The First Issue: Good Faith

Petitioner contends that the Court of Appeals erred in reversing the RTCs
ruling that Kee was a builder in bad faith.

Petitioner fails to persuade this Court to abandon the findings and

conclusions of the Court of Appeals that Kee was a builder in good faith.
We agree with the following observation of the Court of Appeals:

The roots of the controversy can be traced directly to the errors

committed by CTTEI, when it pointed the wrong property to Wilson Kee
and his wife. It is highly improbable that a purchaser of a lot would
knowingly and willingly build his residence on a lot owned by another,
deliberately exposing himself and his family to the risk of being ejected
from the land and losing all improvements thereon, not to mention the
social humiliation that would follow.

Under the circumstances, Kee had acted in the manner of a prudent man
in ascertaining the identity of his property. Lot 8 is covered by Transfer
Certificate of Title No. T-69561, while Lot 9 is identified in Transfer
Certificate of Title No. T-106367. Hence, under the Torrens system of land
registration, Kee is presumed to have knowledge of the metes and bounds
of the property with which he is dealing. x x x

xxx xxx xxx

But as Kee is a layman not versed in the technical description of his

property, he had to find a way to ascertain that what was described in
TCT No. 69561 matched Lot 8. Thus, he went to the subdivision developers
agent and applied and paid for the relocation of the lot, as well as for the
production of a lot plan by CTTEIs geodetic engineer. Upon Kees receipt of
the map, his wife went to the subdivision site accompanied by CTTEIs
employee, Octaviano, who authoritatively declared that the land she was
pointing to was indeed Lot 8. Having full faith and confidence in the
reputation of CTTEI, and because of the companys positive identification of
the property, Kee saw no reason to suspect that there had been a
misdelivery. The steps Kee had taken to protect his interests were
reasonable. There was no need for him to have acted ex-abundantia
cautela, such as being present during the geodetic engineers relocation
survey or hiring an independent geodetic engineer to countercheck for
errors, for the final delivery of subdivision lots to their owners is part of
the regular course of everyday business of CTTEI. Because of CTTEIs
blunder, what Kee had hoped to forestall did in fact transpire. Kees efforts
all went to naught.[8]

Good faith consists in the belief of the builder that the land he is building
on is his and his ignorance of any defect or flaw in his title.[9] And as
good faith is presumed, petitioner has the burden of proving bad faith on
the part of Kee.[10]

At the time he built improvements on Lot 8, Kee believed that said lot was
what he bought from petitioner. He was not aware that the lot delivered
to him was not Lot 8. Thus, Kees good faith. Petitioner failed to prove
otherwise.

To demonstrate Kees bad faith, petitioner points to Kees violation of

paragraphs 22 and 26 of the Contract of Sale on Installment.

We disagree. Such violations have no bearing whatsoever on whether Kee

was a builder in good faith, that is, on his state of mind at the time he
built the improvements on Lot 9. These alleged violations may give rise to
petitioners cause of action against Kee under the said contract
(contractual breach), but may not be bases to negate the presumption that
Kee was a builder in good faith.

Petitioner also points out that, as found by the trial court, the Contract of
Sale on Installment covering Lot 8 between it and Kee was rescinded long
before the present action was instituted. This has no relevance on the
liability of petitioner, as such fact does not negate the negligence of its
agent in pointing out the wrong lot to Kee. Such circumstance is relevant
only as it gives Jardinico a cause of action for unlawful detainer against
Kee.
Petitioner next contends that Kee cannot claim that another lot was
erroneously pointed out to him because the latter agreed to the following
provision in the Contract of Sale on Installment, to wit:

13. The Vendee hereby declares that prior to the execution of his contract
he/she has personally examined or inspected the property made subject-
matter hereof, as to its location, contours, as well as the natural condition
of the lots and from the date hereof whatever consequential change
therein made due to erosion, the said Vendee shall bear the expenses of
the necessary fillings, when the same is so desired by him/her.[11]

The subject matter of this provision of the contract is the change of the
location, contour and condition of the lot due to erosion. It merely provides
that the vendee, having examined the property prior to the execution of
the contract, agrees to shoulder the expenses resulting from such change.

We do not agree with the interpretation of petitioner that Kee contracted

away his right to recover damages resulting from petitioners negligence.
Such waiver would be contrary to public policy and cannot be allowed.
Rights may be waived, unless the waiver is contrary to law, public order,
public policy, morals, or good customs, or prejudicial to a third person with
a right recognized by law.[12]

The Second Issue: Petitioners Liability

Kee filed a third-party complaint against petitioner and CTTEI, which was
dismissed by the RTC after ruling that there was no evidence from which
fault or negligence on the part of petitioner and CTTEI can be inferred.
The Court of Appeals disagreed and found CTTEI negligent for the
erroneous delivery of the lot by Octaviano, its employee.

Petitioner does not dispute the fact that CTTEI was its agent. But it
contends that the erroneous delivery of Lot 9 to Kee was an act which
was clearly outside the scope of its authority, and consequently, CTTEI
alone should be liable. It asserts that while [CTTEI] was authorized to sell
the lot belonging to the herein petitioner, it was never authorized to
deliver the wrong lot to Kee.[13]

Petitioners contention is without merit.

The rule is that the principal is responsible for the acts of the agent, done
within the scope of his authority, and should bear the damage caused to
third persons.[14] On the other hand, the agent who exceeds his authority
is personally liable for the damage.[15]

CTTEI was acting within its authority as the sole real estate representative
of petitioner when it made the delivery to Kee. In acting within its scope
of authority, it was, however, negligent. It is this negligence that is the
basis of petitioners liability, as principal of CTTEI, per Articles 1909 and
1910 of the Civil Code.

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

The deed of sale contained the following provision:

1. That Civil Case No. 3815 entitled Jardinico vs. Kee which is now pending
appeal with the Court of Appeals, regardless of the outcome of the
decision shall be mutually disregarded and shall not be pursued by the
parties herein and shall be considered dismissed and without effect
whatsoever;[16]

Kee asserts though that the terms and conditions in said deed of sale are
strictly for the parties thereto and that (t)here is no waiver made by
either of the parties in said deed of whatever favorable judgment or
award the honorable respondent Court of Appeals may make in their favor
against herein petitioner Pleasantville Development Corporation and/or
private respondent C.T. Torres Enterprises, Inc.[17]
Obviously, the deed of sale can have no effect on the liability of petitioner.
As we have earlier stated, petitioners liability is grounded on the
negligence of its agent. On the other hand, what the deed of sale
regulates are the reciprocal rights of Kee and Jardinico; it stressed that
they had reached an agreement independent of the outcome of the case.

Petitioner further assails the following holding of the Court of Appeals:

2. Third-party defendants C.T. Torres Enterprises, Inc. and Pleasantville

Development Corporation are solidarily liable under the following
circumstances:

a. If Eldred Jardinico decides to appropriate the improvements and,

thereafter, remove these structures, the third-party defendants shall
answer for all demolition expenses and the value of the improvements thus
destroyed or rendered useless;

b. If Jardinico prefers that Kee buy the land, the third-party defendants
shall answer for the amount representing the value of Lot 9 that Kee
should pay to Jardinico.[18]

Petitioner contends that if the above holding would be carried out, Kee
would be unjustly enriched at its expense. In other words, Kee would be -
able to own the lot, as buyer, without having to pay anything on it, because
the aforequoted portion of respondent Courts Decision would require
petitioner and CTTEI jointly and solidarily to answer or reimburse Kee
there for.

We agree with petitioner.

Petitioners liability lies in the negligence of its agent CTTEI. For such
negligence, the petitioner should be held liable for damages. Now, the
extent and/or amount of damages to be awarded is a factual issue which
should be determined after evidence is adduced. However, there is no
showing that such evidence was actually presented in the trial court;
hence no damages could now be awarded.
The rights of Kee and Jardinico vis-a-vis each other, as builder in good
faith and owner in good faith, respectively, are regulated by law (i.e., Arts.
448, 546 and 548 of the Civil Code). It was error for the Court of
Appeals to make a slight modification in the application of such law, on the
ground of equity. At any rate, as it stands now, Kee and Jardinico have
amicably settled through their deed of sale their rights and obligations
with regards to Lot 9. Thus, we delete items 2 (a) and (b) of the dispositive
portion of the Court of Appeals Decision [as reproduced above] holding
petitioner and CTTEI solidarily liable.

The Third Issue: Attorneys Fees

The MTCC awarded Jardinico attorneys fees and costs in the amount of
P3,000.00 and P700.00, respectively, as prayed for in his complaint. The
RTC deleted the award, consistent with its ruling that petitioner was
without fault or negligence. The Court of Appeals, however, reinstated the
award of attorneys fees after ruling that petitioner was liable for its
agents negligence.

The award of attorneys fees lies within the discretion of the court and
depends upon the circumstances of each case.[19] We shall not interfere
with the discretion of the Court of Appeals. Jardinico was compelled to
litigate for the protection of his interests and for the recovery of damages
sustained as a result of the negligence of petitioners agent.[20]

In sum, we rule that Kee is a builder in good faith. The disposition of the
Court of Appeals that Kee is entitled to the rights granted him under
Articles 448, 546 and 548 of the New Civil Code is deleted, in view of the
deed of sale entered into by Kee and Jardinico, which deed now governs
the rights of Jardinico and Kee as to each other. There is also no further
need, as ruled by the appellate Court, to remand the case to the court of
origin for determination of the actual value of the improvements and the
property (Lot 9), as well as for further proceedings in conformity with
Article 448 of the New Civil Code.
WHEREFORE, the petition is partially GRANTED. The Decision of the Court
of Appeals is hereby MODIFIED as follows:

(1) Wilson Kee is declared a builder in good faith;

(2) Petitioner Pleasantville Development Corporation and respondent C.T.

Tones Enterprises, Inc. are declared solidarily liable for damages due to
negligence; however, since the amount and/or extent of such damages was
not proven during the trial, the same cannot now be quantified and
awarded;

(3) Petitioner Pleasantville Develpment Corporation and respondent C.T.

Torres Enterprises, Inc. are ordered to pay in solidum the amount of
P3,000.00 to Jardinico as attorneys fees, as well as litigation expenses;
and

(4) The award of rentals to Jardinico is dispensed with.

SO ORDERED.

THIRD DIVISION
[G.R. No. 104828. January 16, 1997]

SPOUSES RAFAEL BENITEZ AND AVELINA BENITEZ, petitioners, vs. COURT

OF APPEALS, SPOUSES RENATO MACAPAGAL and ELIZABETH
MACAPAGAL, respondents.
DECISION
PANGANIBAN, J.:

May possession of a lot encroached upon by a part of another's house be

recovered in an action for ejectment?

This is the main question raised by the petition for review on certiorari
assailing the Resolution[1] of the Court of Appeals, Sixth Division,[2] dated
March 24, 1992, in CA-G.R. SP No. 26853 denying due course to
petitioner's appeal and affirming the decision of the Regional Trial Court
of Pasig in Civil Case No. 61004, which in turn affirmed the decision of the
Metropolitan Trial Court of San Juan, Metro Manila, Branch 58.

The Facts

On January 22, 1986, petitioners Rafael and Avelina Benitez purchased a

303-square-meter parcel of land with improvement from the Cavite
Development Bank, covered by Transfer Certificate of Title No. 41961 (now,
TCT No. 55864).

Subsequently, private respondents Renato and Elizabeth Macapagal bought

a 361-square-meter lot covered by TCT No. 40155. On September 18,
1986, they filed Civil Case No. 53835 with the Regional Trial Court of
Pasig, Branch 157 against petitioners for the recovery of possession of an
encroached portion of the lot they purchased. The parties were able to
reach a compromise in which private respondents sold the encroached
portion to petitioners at the acquisition cost of One Thousand Pesos
(P1,000.00) per square meter.

On July 17, 1989, private respondents purchased still another property, a

285.70 square-meter-lot covered by TCT No. 3249-R, adjacent to that of
petitioners. After a relocation survey was conducted, private respondents
discovered that some 46.50 square meters of their property was occupied
by petitioners' house. Despite verbal and written demands, petitioners
refused to vacate. A last notice to vacate was sent to petitioners on
October 26, 1989.

On January 18, 1990, private respondents filed with the Metropolitan Trial
Court of San Juan, Branch 58, Civil Case No. 61004 for ejectment against
petitioners. The MeTC of San Juan decided in favor of the former, with
the following disposition:[3]

"WHEREFORE, in view of all the foregoing, judgment is hereby rendered

for the plaintiffs and against the defendants ordering them and all
persons claiming rights under them to vacate and surrender possession of
the subject premises to the plaintiffs as well as to pay the following:

1. The amount of P930.00 a month starting July 17, 1989 until they finally
vacate the subject premises;

2. The amount of P5,000.00 for and as attorney's fees; and

3. Cost of suit."

On appeal, the Regional Trial Court of Pasig, Branch 167, affirmed said
decision.[4] The RTC said:[5]

"The controversy in this case is not an encroachment or overlapping of

two (2) adjacent properties owned by the parties. It is a case where a
part of the house of the defendants is constructed on a portion of the
property of the plaintiffs. So that as new owner of the real property, who
has a right to the full enjoyment and possession of the entire parcel
covered by Transfer Certificate of Title No. 41961, plaintiffs have the right
to demand that defendants remove the portion of the house standing on
plaintiff's realty. . . ."

The dispositive portion thereof reads:[6]

"WHEREFORE, finding no reversible error in the decision appealed from, it

being more consistent with the facts and the law applicable, the same is
hereby AFFIRMED in toto. Costs against the defendant-appellants.

SO ORDERED."

On further appeal, the respondent Court found no merit in petitioners'

plea. In a Resolution dated March 24, 1992, the Sixth Division of said
Court found the petition to be a mere rehash of the issues and arguments
presented before the lower courts. It ruled in part that:[7]
"3) Petitioners were fully aware that part of their house encroached on
their neighbor's property, while respondents became aware of it only after
purchasing said property. Petitioners cannot claim good faith as against
the respondents.

"4) Since petitioners are not builders in good faith, they cannot demand
that respondents sell the disputed portion; what the law provides is that
the builders in bad faith can be ordered to dismantle said structure at
their own expense. In the interim period that petitioners' structure
remains, they should pay reasonable rent until they remove the structure."

The dispositive portion thereof reads:[8]

"For reasons indicated, We find the appeal without merit and deny it due
course, with costs against the petitioners.

SO ORDERED."

Hence, this petition.

The Issues

The main issue is whether the possession of the portion of the private
respondents' land encroached by petitioners' house can be recovered
through an action of ejectment, not accion publiciana. Corollarily,
petitioners question (a) the validity of the imposition of "rental" for the
occupancy of the encroached portion, (b) the denial of their claimed pre-
emptive right to purchase the encroached portion of the private
respondents' land, and (c) the propriety of a factual review of the CA's
finding of bad faith on the part of petitioners.

In a nutshell, petitioners insist that the MeTC had no jurisdiction over the
case at bar because its real nature is accion publiciana or recovery of
possession, not unlawful detainer. It is not forcible entry because private
respondents did not have prior possession of the contested property as
petitioners possessed it ahead of private respondents. It is not unlawful
detainer because petitioners were not the private respondents' tenants nor
vendee unlawfully withholding possession thereof. Said court also has no
jurisdiction to impose payment of "rentals" as there is no lessor-lessee
relationship between the parties. They pray for a review of the factual
finding of bad faith, insisting that the facts uphold their position. Due to
their alleged good faith, they claim the pre-emptive right to purchase the
litigated portion as a matter of course. Finally, they insist that the award
of attorney's fees is unwarranted as private respondents allegedly had
knowledge of the encroachment prior to their acquisition of said land.

Private respondents counter that petitioners are estopped from questioning

the jurisdiction of the MeTC after they voluntarily participated in the trial
on the merits and lost; that there is no law giving petitioners the option to
buy the encroached property; and that petitioners acted in bad faith
because they waived in their deed of sale the usual seller's warranty as to
the absence of any and all liens and encumbrances on the property,
thereby implying they had knowledge of the encroachment at the time of
purchase .

The Court's Ruling

The petition lacks merit and should be denied.

First Issue: MeTC Has Jurisdiction

The jurisdictional requirements for ejectment, as borne out by the facts,

are: after conducting a relocation survey, private respondents discovered
that a portion of their land was encroached by petitioners' house; notices
to vacate were sent to petitioners, the last one being dated October 26,
1989; and private respondents filed the ejectment suit against petitioners
on January 18, 1990 or within one (1) year from the last demand.

Private respondents' cause of action springs from Sec. 1, Rule 70 of the

Revised Rules of Court, which provides:
"Section 1. Who may institute proceedings, and when -- Subject to the
provisions of the next succeeding section, a person deprived of the
possession of any land or building by force, intimidation, threat, strategy, or
stealth, or a landlord, vendor, vendee, or other person against whom the
possession of any land or building is unlawfully withheld after the
expiration or termination of the right to hold possession, by virtue of any
contract, express or implied, or the legal representatives or assigns of any
such landlord, vendor, vendee, or other person, may, at any time within one
(1) year after such unlawful deprivation or withholding of possession, bring
an action in the proper inferior court against the person or persons
unlawfully withholding or depriving of possession, or any person or persons
claiming under them, for the restitution of such possession, together with
damages and costs. . . ."

That petitioners occupied the land prior to private respondents' purchase

thereof does not negate the latter's case for ejectment. Prior possession is
not always a condition sine qua non in ejectment.[9] This is one of the
distinctions between forcible entry and unlawful detainer. In forcible entry,
the plaintiff is deprived of physical possession of his land or building by
means of force, intimidation, threat, strategy or stealth; thus, he must
allege and prove prior possession. But in unlawful detainer, the defendant
unlawfully withholds possession after the expiration or termination of his
right thereto under any contract, express or implied. In such a case, prior
physical possession is not required. [10]

Possession can also be acquired, not only by material occupation, but also
by the fact that a thing is subject to the action of one's will or by the
proper acts and legal formalities established for acquiring such right.[11]
Possession of land can be acquired upon the execution of the deed of sale
thereof by its vendor. Actual or physical occupation is not always
necessary.

In the case before us, considering that private respondents are unlawfully
deprived of possession of the encroached land and that the action for the
recovery of possession thereof was made within the one- year
reglementary period, ejectment is the proper remedy.[12] The MeTC of San
Juan had jurisdiction.

In addition, after voluntarily submitting themselves to its proceedings,

petitioners are estopped from assailing the jurisdiction of the MeTC.[13]
This Court will not allow petitioners to attack the jurisdiction of the trial
court after receiving a decision adverse to their position.

Second Issue: Compensation For Occupancy

Petitioners erroneously construed the order of the MeTC to pay private

respondents Nine Hundred Thirty Pesos (P930.00) a month starting July 17,
1989 until they (petitioners) finally vacate the subject premises as
"rentals". Technically, such award is not rental, but damages. Damages are
recoverable in ejectment cases under Section 8, Rule 70 of the Revised
Rules of Court.[14] These damages arise from the loss of the use and
occupation of the property, and not the damages which private
respondents may have suffered but which have no direct relation to their
loss of material possession.[15] Damages in the context of Section 8, Rule
70 is limited to "rent" or "fair rental value" for the use and occupation of
the property.[16]

There is no question that petitioners benefited from their occupation of a

portion of private respondents' property. Such benefit justifies the award
of the damages of this kind. Nemo cum alterius, detrimenti locupletari
potest. No one shall enrich himself at the expense of another.

Third Issue: Option To Sell Belongs To Owner

Article 448 of the Civil Code[17] is unequivocal that the option to sell the
land on which another in good faith builds, plants or sows on, belongs to
the landowner.

The option is to sell, not to buy, and it is the landowner's choice. Not even
a declaration of the builder, planter, or sower's bad faith shifts this option
to him per Article 450 of the Civil Code.[18] This advantage in Article 448
is accorded the landowner because "his right is older, and because, by the
principle of accession, he is entitled to the ownership of the accessory
thing."[19] There can be no pre-emptive right to buy even as a
compromise, as this prerogative belongs solely to the landowner. No
compulsion can be legally forced on him, contrary to what petitioners asks
from this Court. Such an order would certainly be invalid and illegal. Thus,
the lower courts were correct in rejecting the petitioners' offer to buy
the encroached land.

Fourth Issue: A Review of Factual Findings Is Unwarranted

Petitioners ask this Court to review the alleged error of the respondent
Court in appreciating bad faith on their part. According to them, this is
contradictory to the fact that private respondents acquired their lot and
discovered the encroachment after petitioners bought their house. After
careful deliberation on this issue, this Court finds this petition for review
inadequate as it failed to show convincingly a reversible error on the part
of the respondent Court in this regard. Thus, for very good reasons, this
Court has consistently and emphatically declared that review of the
factual findings of the Court of Appeals is not a function that is normally
undertaken in petitions for review under Rule 45 of the Rules of Court.
Such findings, as a general rule, are binding and conclusive.[20] The
jurisdiction of this Court is limited to reviewing errors of law unless there
is a showing that the findings complained of are totally devoid of support
in the records or that they are so glaringly erroneous as to constitute
reversible error.[21]

Even respondent Court has taken note of the inadequacy of the petition
before it, as it wryly said:[22]

"The Petition for Review is not certainly a manifestation of clarity nor an

example of a well-organized summation of petitioners' cause of
action. . . . . .

xxx xxx xxx

A careful scrutiny of the above issues discloses that they are mere
repetitions in a rehashed form of the same issues with the same
supporting arguments raised by petitioners when they appealed from the
decision of the (MeTC) to the RTC. x x x."

This petition is no different. We share the foregoing sentiments of the

respondent Court. In essence, respondent Court merely affirmed the
decision of the MeTC. The Court of Appeal's finding of petitioners' bad
faith did not alter nor affect the MeTC's disposition. Petitioners want this
Court to declare them in good faith and to determine their rights under
Article 448, Civil Code. However, the mere fact that they bought their
property ahead of the private respondents does not establish this point.
Nor does it prove that petitioners had no knowledge of the encroachment
when they purchased their property. Reliance on the presumption in
Article 526 of the Code is misplaced in view of the declaration of the
respondent Court that petitioners are not builders in good faith.

What petitioners presented are mere allegations and arguments, without

sufficient evidence to support them. As such, we have no ground to depart
from the general rule against factual review.

In sum, the petition has not shown cogent reasons and sufficient grounds
to reverse the unanimous ruling of the three lower courts. The MeTC, RTC
and the Court of Appeals were all in agreement in sustaining private
respondents' rights. And we uphold them.

WHEREFORE, the petition is DENIED. The assailed Resolution is hereby

AFFIRMED.

SO ORDERED.

SECOND DIVISION
[G.R. No. 138842. October 18, 2000]
NATIVIDAD P. NAZARENO, MAXIMINO P. NAZARENO, JR., petitioners, vs.
COURT OF APPEALS, ESTATE OF MAXIMINO A. NAZARENO, SR., ROMEO P.
NAZARENO and ELIZA NAZARENO, respondents.
DECISION
MENDOZA, J.:

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

Appeals in CA-GR CV No. 39441 dated May 29, 1998 affirming with
modifications the decision of the Regional Trial Court, Branch 107, Quezon
City, in an action for annulment of sale and damages.

The facts are as follows:

Maximino Nazareno, Sr. and Aurea Poblete were husband and wife. Aurea
died on April 15, 1970, while Maximino, Sr. died on December 18, 1980.
They had five children, namely, Natividad, Romeo, Jose, Pacifico, and
Maximino, Jr. Natividad and Maximino, Jr. are the petitioners in this case,
while the estate of Maximino, Sr., Romeo, and his wife Eliza Nazareno are
the respondents.

During their marriage, Maximino Nazareno, Sr. and Aurea Poblete acquired
properties in Quezon City and in the Province of Cavite. It is the
ownership of some of these properties that is in question in this case.

It appears that after the death of Maximino, Sr., Romeo filed an intestate
case in the Court of First Instance of Cavite, Branch XV, where the case
was docketed as Sp. Proc. No. NC-28. Upon the reorganization of the
courts in 1983, the case was transferred to the Regional Trial Court of
Naic, Cavite. Romeo was appointed administrator of his fathers estate.

In the course of the intestate proceedings, Romeo discovered that his

parents had executed several deeds of sale conveying a number of real
properties in favor of his sister, Natividad. One of the deeds involved six
lots in Quezon City which were allegedly sold by Maximino, Sr., with the
consent of Aurea, to Natividad on January 29, 1970 for the total amount
of P47,800.00. The Deed of Absolute Sale reads as follows:
DEED OF ABSOLUTE SALE

KNOW ALL MEN BY THESE PRESENTS:

I, MAXIMINO A. NAZARENO, Filipino, married to Aurea Poblete-Nazareno,

of legal age and a resident of the Mun. of Naic, Prov. of Cavite, Philippines,

-WITNESSETH-

That I am the absolute registered owner of six (6) parcels of land with
the improvements thereon situated in Quezon City, Philippines, which
parcels of land are herewith described and bounded as follows, to wit:

TRANS. CERT. OF TITLE NO. 140946

A parcel of land (Lot 3-B of the subdivision plan Psd-47404, being a

portion of Lot 3, Block D-3 described on plan Bsd-10642, G.L.R.O. Record
No.) situated in the Quirino District, Quezon City. Bounded on the N., along
line 1-2 by Lot 15, Block D-3 of plan Bsd - 10642; along line 2-3 by Lot 4,
Block D-3 of plan Bsd-10642; along line 3-4 by Aurora Boulevard (Road
Lot-1, Bsd-10642); and along line 4-1 by Lot 3-D of the subdivision plan.
Beginning at a point marked 1 on plan, being S.29 deg. 26E., 1156.22 m.
from B.L.L.M. 9, Quezon City,

thence N. 79 deg. 53E., 12.50 m. to point 2;

thence S. 10 deg. 07E., 40.00 m. to point 3;

thence S. 79 deg. 53W., 12.50 m. to point 4;

thence N. 10 deg. 07W., 40.00 m. to the point

of beginning; containing an area of FIVE HUNDRED (500) SQUARE METERS.

All points referred to are indicated on the plan and are marked on the
ground as follows: points 1 and 4 by P.L.S. Cyl. Conc. Mons. bearings true;
date of the original survey, April 8-July 15, 1920 and that of the
subdivision survey, March 25, 1956.

TRANS. CERT. OF TITLE NO. 132019

A parcel of land (Lot 3, Block 93 of the subdivision plan Psd-57970 being a

portion of Lot 6, Pcs-4786, G.L.R.O. Rec. No. 917) situated in Quirino
District Quezon City. Bounded on the NW., along line 1-2, by Lot 1, Block
93; on the NE., along line 2-3, by Road Lot 101; on the SE., along line 3-4,
by Road Lot 100; on the SW., along line 4-1, by Lot 4, Block 93; all of the
subdivision plan. Beginning at point marked 1 on plan, being S. 65 deg. 40
3339.92 m. from B.L.L.M. No. 1, Marikina, Rizal;

thence N. 23 deg. 28 min. E., 11.70 m. to point 2;

thence S. 66 deg. 32 min. E., 18.00 m. to point 3;

thence S. 23 deg. 28 min. W., 11.70 m. to point 4;

thence N. 66 deg. 32. min. W., 18.00 m. to the point

of beginning; containing an area of TWO HUNDRED TEN SQUARE METERS

AND SIXTY SQUARE DECIMETERS (210.60). All points referred to are
indicated on the plan and are marked on the ground by B.L. Cyl. Conc.
Mons. 15 x 60 cm.; bearings true; date of the original survey, Nov. 10,
1920 and Jan. 31-March 31, 1924 and that of the subdivision survey,
February 1 to September 30, 1954. Date approved - March 9, 1962.

TRANS. CERT. OF TITLE NO. 118885

A parcel of land (Lot No. 10, of the consolidation and subdivision plan
Pcs-988, being a portion of the consolidated Lot No. 26, Block No. 6,
Psd-127, and Lots Nos. 27-A and 27-B, Psd-14901, G.L.R.O. Record No. 917),
situated in the District of Cubao, Quezon City, Island of Luzon. Bounded on
the NE., by Lot No. 4 of the consolidation and subdivision plan; on the SE.,
by Lot No. 11 of the consolidation and subdivision plan; on the SW., by Lot
No. 3 of the consolidation and subdivision plan; and on the NW., by Lot No.
9 of the consolidation and subdivision plan. Beginning at a point marked 1
on the plan, being S. 7 deg. 26W., 4269.90 m. more or less from B.L.L.M.
No. 1, Mp. of Mariquina;

thence S. 25 deg. 00E., 12.00 m. to point 2;

thence S. 64 deg. 59W., 29.99 m. to point 3;

thence N. 25 deg. 00W., 12.00 m to point 4;

thence N. 64 deg. 59E., 29.99 m. to the point of

beginning; containing an area of THREE HUNDRED SIXTY SQUARE METERS

(360), more or less. All points referred to are indicated on the plan and on
the ground are marked by P.L.S. Conc. Mons. 15 x 60 cm.; bearings true;
declination 0 deg. 50E., date of the original survey, April 8 to July 15,
1920, and that of the consolidation and subdivision survey, April 24 to 26,
1941.

TRANS. CERT. OF TITLE NO. 118886

A parcel of land (Lot No. 11, of the consolidation and subdivision plan
Pcs-988, being a portion of the consolidated Lot No. 26, Block No. 6,
Psd-127, and Lots Nos. 27-A and 27-B, Psd-14901, G.L.R.O. Record No. 917),
situated in the District of Cubao, Quezon City, Island of Luzon. Bounded on
the NE., by Lot No. 4 of the consolidation and subdivision plan; on the SE.,
by Lot No. 12 of the consolidation and subdivision plan; on the SW., by Lot
No. 3 of the consolidation and subdivision plan; on the NW., by Lot No. 10
of the consolidation and subdivision plan. Beginning at a point marked 1 on
plan, being S. 79 deg. 07W., 4264.00 m. more or less from B.L.L.M. No. 1,
Mp. of Mariquina;

thence S. 64 deg. 59W., 29.99 m. to point 2;

thence N. 25 deg. 00W., 12.00 m. to point 3;

thence N. 64 deg. 59E., 29.99 m. to point 4;

thence S. 26 deg. 00E., 12.00 m. to the point of

beginning; containing an area of THREE HUNDRED SIXTY SQUARE METERS

(360), more or less. All points referred to are indicated on the plan and on
the ground, are marked by P.L.S. Conc. Mons. 15 x 60 cm.; bearings true;
declination 0 deg. 50E.; date of the original survey, April 8 to July 15,
1920, and that of the consolidation and subdivision survey, April 24 to 26,
1941.

A parcel of land (Lot No. 13 of the consolidation and subdivision plan

Pcs-988, being a portion of the consolidated Lot No. 26, Block No. 6,
Psd-127, and Lots Nos. 27-A and 27-B, Psd-14901, G.L.R.O. Record No. 917),
situated in the District of Cubao, Quezon City, Island of Luzon. Bounded on
the NE., by Lot No. 4 of the consolidation and subdivision plan; on the SE.,
by Lot No. 14, of the consolidation; and subdivision plan; on the SW., by Lot
No. 3 of the consolidation and subdivision plan; and on the NW., by Lot No.
12, of the consolidation and subdivision plan. Beginning at the point marked
1 on plan, being S.78 deg. 48W., 4258.20 m. more or less from B.L.L.M. No.
1, Mp. of Mariquina;

thence S. 64 deg. 58W., 30.00 m. to point 2;

thence N. 25 deg. 00W., 12.00 m. to point 3;

thence N. 64 deg. 59E., 29.99 m. to point 4;

thence S.25 deg. 00E., 12.00 m. to point of

beginning; containing an area of THREE HUNDRED SIXTY SQUARE METERS

(360, more or less. All points referred to are indicated on the plan and on
the ground are marked by P.L.S. Conc. Mons. 15 x 60 cm.; bearings true;
declination 0 deg. 50E., date of the original survey, April 8 to July 15,
1920, and that of the consolidation and subdivision survey, April 24 to 26,
1941.

A parcel of land (Lot No. 14, of the consolidation and subdivision plan
Pcs-988, being a portion of the consolidated Lot No. 26, Block No. 6,
Psd-127, and Lots Nos. 27-A and 27-B, Psd-14901, G.L.R.O. Record No. 917),
situated in the District of Cubao, Quezon City, Island of Luzon. Bounded on
the NE., by Lot No. 4 of the consolidation and subdivision plan; on the SE.,
by Lot No. 15, of the consolidation and subdivision plan; on the SW., by Lot
No. 3 of the consolidation and subdivision plan; and on the NW., by Lot No.
13 of the consolidation and subdivision plan. Beginning at the point marked
1 on plan, being S.78 deg. 48W., 4258.20 m. more or less from B.L.L.M. No.
1, Mp. of Mariquina;

thence S. 25 deg. 00E., 12.00 m. to point 2;

thence S. 65 deg. 00W., 30.00 m. to point 3;

thence S. 65 deg. 00W., 12.00 m. to point 4;

thence N.64 deg. 58E., 30.00 m. to the point of

beginning; containing an area of THREE HUNDRED SIXTY SQUARE METERS

(360), more or less. All points referred to are indicated on the plan and on
the ground are marked by P.L.S. Conc. Mons. 15 x 60 cm.; bearings true;
declination 0 deg. 50E., date of the original survey, April 8 to July 15,
1920, and that of the consolidation and subdivision survey, April 24 to 26,
1941.

That for and in consideration of the sum of FORTY THREE THOUSAND

PESOS (P43,000.00) PHILIPPINE CURRENCY, to me in hand paid by
NATIVIDAD P. NAZARENO, Filipino, single, of legal age and a resident of
the Mun. of Naic, Prov. of Cavite, Philippines, the receipt whereof is
acknowledged to my entire satisfaction, I do hereby CEDE, SELL,
TRANSFER, CONVEY and ASSIGN unto the said Natividad P. Nazareno, her
heirs, administrators and assigns, all my title, rights, interests and
participations to the abovedescribed parcels of land with the improvements
thereon, with the exception of LOT NO. 11 COVERED BY T.C.T. NO. 118886,
free of any and all liens and encumbrances; and

That for and in consideration of the sum of FOUR THOUSAND EIGHT

HUNDRED PESOS (P4,800.00) PHILIPPINE CURRENCY, to me in hand paid
by NATIVIDAD P. NAZARENO, Filipino, single, of legal age and a resident of
the Mun. of Naic, Prov. of Cavite, Philippines, the receipt whereof is
acknowledged to my entire satisfaction, I do hereby CEDE, SELL,
TRANSFER, CONVEY and ASSIGN unto the said Natividad P. Nazareno, her
heirs, administrators and assigns, all my title, rights, interests and
participations in and to Lot No. 11 covered by T.C.T. No. 118886 above-
described, free of any and all liens and encumbrances, with the
understanding that the title to be issued in relation hereto shall be
separate and distinct from the title to be issued in connection with Lots
Nos. 13 and 14, although covered by the same title.

IN WITNESS WHEREOF, I have hereunto signed this deed of absolute sale

in the City of Manila, Philippines, this 29th day of January, 1970.[2]

By virtue of this deed, transfer certificates of title were issued to

Natividad, to wit: TCT No. 162738 (Lot 3-B),[3] TCT No. 162739 (Lot 3),[4]
TCT No. 162735 (Lot 10),[5] TCT No. 162736 (Lot 11),[6] and TCT No.
162737 (Lots 13 and 14),[7] all of the Register of Deeds of Quezon City.

Among the lots covered by the above Deed of Sale is Lot 3-B which is
registered under TCT No. 140946. This lot had been occupied by Romeo, his
wife Eliza, and by Maximino, Jr. since 1969. Unknown to Romeo, Natividad
sold Lot 3-B on July 31, 1982 to Maximino, Jr.,[8] for which reason the
latter was issued TCT No. 293701 by the Register of Deeds of Quezon City.
[9]

When Romeo found out about the sale to Maximino, Jr., he and his wife
Eliza locked Maximino, Jr. out of the house. On August 4, 1983, Maximino,
Jr. brought an action for recovery of possession and damages with prayer
for writs of preliminary injunction and mandatory injunction with the
Regional Trial Court of Quezon City. On December 12, 1986, the trial
court ruled in favor of Maximino, Jr. In CA-G.R. CV No. 12932, the Court
of Appeals affirmed the decision of the trial court.[10]

On June 15, 1988, Romeo in turn filed, on behalf of the estate of

Maximino, Sr., the present case for annulment of sale with damages
against Natividad and Maximino, Jr. The case was filed in the Regional Trial
Court of Quezon City, where it was docketed as Civil Case No. 88-58.[11]
Romeo sought the declaration of nullity of the sale made on January 29,
1970 to Natividad and that made on July 31, 1982 to Maximino, Jr. on the
ground that both sales were void for lack of consideration.

On March 1, 1990, Natividad and Maximino, Jr. filed a third-party

complaint against the spouses Romeo and Eliza.[12] They alleged that Lot
3, which was included in the Deed of Absolute Sale of January 29, 1970 to
Natividad, had been surreptitiously appropriated by Romeo by securing for
himself a new title (TCT No. 277968) in his name.[13] They alleged that
Lot 3 is being leased by the spouses Romeo and Eliza to third persons.
They therefore sought the annulment of the transfer to Romeo and the
cancellation of his title, the eviction of Romeo and his wife Eliza and all
persons claiming rights from Lot 3, and the payment of damages.

The issues having been joined, the case was set for trial. Romeo presented
evidence to show that Maximino and Aurea Nazareno never intended to sell
the six lots to Natividad and that Natividad was only to hold the said lots
in trust for her siblings. He presented the Deed of Partition and
Distribution dated June 28, 1962 executed by Maximino Sr. and Aurea and
duly signed by all of their children, except Jose, who was then abroad and
was represented by their mother, Aurea. By virtue of this deed, the nine
lots subject of this Deed of Partition were assigned by raffle as follows:

1. Romeo - Lot 25-L (642 m2)

2. Natividad - Lots 23 (312 m2) and 24 (379 m2)
3. Maximino, Jr. - Lots 6 (338 m2) and 7 (338 m2)
4. Pacifico - Lots 13 (360 m2) and 14 (360 m2)
5. Jose - Lots 10 (360 m2) and 11 (360 m2)
Romeo received the title to Lot 25-L under his name,[14] while Maximino,
Jr. received Lots 6 and 7 through a Deed of Sale dated August 16, 1966
for the amount of P9,500.00.[15] Pacifico and Joses shares were allegedly
given to Natividad, who agreed to give Lots 10 and 11 to Jose, in the
event the latter came back from abroad. Natividads share, on the other
hand, was sold to third persons[16] because she allegedly did not like the
location of the two lots. But, Romeo said, the money realized from the sale
was given to Natividad.

Romeo also testified that Lot 3-B was bought for him by his father, while
Lot 3 was sold to him for P7,000.00 by his parents on July 4, 1969.[17]
However, he admitted that a document was executed by his parents
transferring six properties in Quezon City, i.e., Lots 3, 3-B, 10, 11, 13, and
14, to Natividad.

Romeo further testified that, although the deeds of sale executed by his
parents in their favor stated that the sale was for a consideration, they
never really paid any amount for the supposed sale. The transfer was
made in this manner in order to avoid the payment of inheritance taxes.
[18] Romeo denied stealing Lot 3 from his sister but instead claimed that
the title to said lot was given to him by Natividad in 1981 after their
father died.

Natividad and Maximino, Jr. claimed that the Deed of Partition and
Distribution executed in 1962 was not really carried out. Instead, in
December of 1969, their parents offered to sell to them the six lots in
Quezon City, i.e., Lots 3, 3-B, 10, 11, 13 and 14. However, it was only
Natividad who bought the six properties because she was the only one
financially able to do so. Natividad said she sold Lots 13 and 14 to Ros-Alva
Marketing Corp.[19] and Lot 3-B to Maximino, Jr. for P175,000.00.[20]
Natividad admitted that Romeo and the latters wife were occupying Lot 3-
B at that time and that she did not tell the latter about the sale she had
made to Maximino, Jr.
Natividad said that she had the title to Lot 3 but it somehow got lost. She
could not get an original copy of the said title because the records of the
Registrar of Deeds had been destroyed by fire. She claimed she was
surprised to learn that Romeo was able to obtain a title to Lot 3 in his
name.

Natividad insisted that she paid the amount stated in the Deed of Absolute
Sale dated January 29, 1970. She alleged that their parents had sold
these properties to their children instead of merely giving the same to
them in order to impose on them the value of hardwork.

Natividad accused Romeo of filing this case to harass her after Romeo lost
in the action for recovery of possession (Civil Case No. Q-39018) which had
been brought against him by Maximino, Jr. It appears that before the case
filed by Romeo could be decided, the Court of Appeals rendered a decision
in CA-GR CV No. 12932 affirming the trial courts decision in favor of
Maximino, Jr.

On August 10, 1992, the trial court rendered a decision, the dispositive
portion of which states:

WHEREFORE, judgment is hereby rendered declaring the nullity of the

Deed of Sale dated January 29, 1970. Except as to Lots 3, 3-B, 13 and 14
which had passed on to third persons, the defendant Natividad shall hold
the rest in trust for Jose Nazareno to whom the same had been
adjudicated. The Register of Deeds of Quezon City is directed to annotate
this judgment on Transfer Certificate of Titles Nos. 162735 and 162736 as
a lien in the titles of Natividad P. Nazareno.

The defendants counterclaim is dismissed. Likewise, the third-party

complaint is dismissed.

The defendants are hereby directed to pay to the plaintiff jointly and
severally the sum of P30,000 as and for attorneys fees. Likewise, the
third-party plaintiff is directed to pay the third-party defendants
attorneys fees of P20,000.
All other claims by one party against the other are dismissed.

SO ORDERED.[21]

Natividad and Maximino, Jr. filed a motion for reconsideration. As a result,

on October 14, 1992 the trial court modified its decision as follows:

WHEREFORE, the plaintiffs Partial Motion for Reconsideration is hereby

granted. The judgment dated August 10, 1992 is hereby amended, such
that the first paragraph of its dispositive portion is correspondingly
modified to read as follows:

WHEREFORE, judgment is hereby rendered declaring the nullity of the

Deeds of Sale dated January 29, 1970 and July 31, 1982.

Except as to Lots 3, 13 and 14 which had passed on to third person, the

defendant Natividad shall hold the rest OF THE PROPERTIES COVERED BY
THE DEED OF SALE DATED JANUARY 29, 1970 (LOTS 10 and 11) in trust
for Jose Nazareno to whom the same had been adjudicated.

The Register of Deeds of Quezon City is directed to annotate this

judgment on Transfer Certificates of Title No. 162735 and 162736 as a lien
on the titles of Natividad P. Nazareno.

LIKEWISE, THE SAID REGISTER OF DEEDS IS DIRECTED TO CANCEL TCT

NO. 293701 (formerly 162705) OVER LOT 3-B AND RESTORE TCT NO.
140946 IN THE NAME OF MAXIMINO NAZARENO SR. AND AUREA
POBLETE.[22]

On appeal to the Court of Appeals, the decision of the trial court was
modified in the sense that titles to Lot 3 (in the name of Romeo Nazareno)
and Lot 3-B (in the name of Maximino Nazareno, Jr.), as well as to Lots 10
and 11 were cancelled and ordered restored to the estate of Maximino
Nazareno, Sr. The dispositive portion of the decision dated May 29, 1998
reads:
WHEREFORE, the appeal is GRANTED. The decision and the order in
question are modified as follows:

1. The Deed of Absolute Sale dated 29 January 1970 and the Deed of
Absolute Sale dated 31 July 1982 are hereby declared null and void;

2. Except as to Lots 13 and 14 ownership of which has passed on to third

persons, it is hereby declared that Lots 3, 3-B, 10 and 11 shall form part
of the estate of the deceased Maximino Nazareno, Sr.;

3. The Register of Deeds of Quezon City is hereby ordered to restore TCT

No. 140946 (covering Lot 3-B), TCT No. 132019 (covering Lot 3), TCT No.
118885 (covering Lot 10), and TCT No. 118886 (covering Lot 11).[23]

Petitioners filed a motion for reconsideration but it was denied in a

resolution dated May 27, 1999. Hence this petition.

Petitioners raise the following issues:

1. WHETHER OR NOT THE UNCORROBORATED TESTIMONY OF PRIVATE

RESPONDENT ROMEO P. NAZARENO CAN DESTROY THE FULL FAITH AND
CREDIT ACCORDED TO NOTARIZED DOCUMENTS LIKE THE DEED OF
ABSOLUTE SALE DATED JANUARY 29, 1970 (EXH. 1) EXECUTED BY THE
DECEASED SPOUSES MAXIMINO A. NAZARENO, SR. AND AUREA POBLETE
IN FAVOR OF PETITIONER NATIVIDAD P. NAZARENO.

2. WHETHER OR NOT THE RESPONDENT COURT GROSSLY

MISAPPRECIATED THE FACTS OF THE CASE WITH RESPECT TO THE
VALIDITY OF THE SAID DEED OF ABSOLUTE SALE DATED JANUARY 29,
1970 (EXH. 1) IN THE LIGHT OF THE FOLLOWING:

A) THE DOCUMENTARY EVIDENCE, ALL OF WHICH ARE NOTARIZED,

EXECUTED BY THE DECEASED SPOUSES DURING THEIR LIFETIME
INVOLVING SOME OF THEIR CONJUGAL PROPERTIES.
B) THE EXECUTION OF AN EXTRA-JUDICIAL PARTITION WITH WAIVER
OF RIGHTS AND CONFIRMATION OF SALE DATED MAY 24, 1975 (EXH.
14A) OF THE ESTATE OF AUREA POBLETE BY THE DECEASED MAXIMINO A.
NAZARENO, SR. AND THEIR CHILDREN INVOLVING THE ONLY REMAINING
ESTATE OF AUREA POBLETE THUS IMPLIEDLY ADMITTING THE VALIDITY
OF PREVIOUS DISPOSITIONS MADE BY SAID DECEASED SPOUSES ON
THEIR CONJUGAL PROPERTIES, HALF OF WHICH WOULD HAVE BECOME A
PART OF AUREA POBLETES ESTATE UPON HER DEMISE.

C) THE ADMISSION MADE BY MAXIMINO A. NAZARENO, SR. IN HIS

TESTIMONY IN OPEN COURT ON AUGUST 13, 1980 DURING HIS
LIFETIME IN CIVIL CASE NO. NC-712 (EXH. 81, 81B) THAT HE HAD SOLD
CERTAIN PROPERTIES IN FAVOR OF NATIVIDAD P. NAZARENO THUS
BELYING THE CLAIM OF ROMEO P. NAZARENO THAT THE DEED OF
ABSOLUTE SALE DATED JANUARY 29, 1970 IS ONE AMONG THE
DOCUMENTS EXECUTED BY THE DECEASED SPOUSES TO BE WITHOUT
CONSIDERATION.

D) THE ADMISSIONS MADE BY ROMEO P. NAZARENO HIMSELF

CONTAINED IN A FINAL DECISION OF THE RESPONDENT COURT IN CA-
GR CV NO. 12932 DATED AUGUST 31, 1992 AND AN ANNEX APPEARING IN
HIS ANSWER TO THE COMPLAINT IN CIVIL CASE NO. Q-39018 (EXH. 11-
B) INVOLVING LOT 3B, ONE OF THE PROPERTIES IN QUESTION THAT THE
SAID PROPERTY IS OWNED BY PETITIONER NATIVIDAD P. NAZARENO.

E) THE PARTIAL PROJECT OF PARTITION DATED MAY 24, 1995 WHICH

WAS APPROVED BY THE INTESTATE COURT IN SP. PROC. NO. NC-28 AND
EXECUTED IN ACCORDANCE WITH THE LATTER COURTS FINAL ORDER
DATED JULY 9, 1991 DETERMINING WHICH WERE THE REMAINING
PROPERTIES OF THE ESTATE.

3. WHETHER OR NOT THE DEED OF ABSOLUTE SALE DATED JANUARY 29,

1970 EXECUTED BY THE DECEASED SPOUSES MAXIMINO A. NAZARENO,
SR. AND AUREA POBLETE DURING THEIR LIFETIME INVOLVING THEIR
CONJUGAL PROPERTIES IS AN INDIVISIBLE CONTRACT? AND IF SO
WHETHER OR NOT UPON THEIR DEATH, THE ESTATE OF MAXIMINO A.
NAZARENO, SR. ALONE CAN SEEK THE ANNULMENT OF SAID SALE?

4. WHETHER OR NOT THE SALE OF LOT 3 UNDER THE DEED OF ABSOLUTE

SALE DATED JANUARY 29, 1970 IN FAVOR OF PETITIONER NATIVIDAD P.
NAZARENO, IS VALID CONSIDERING THAT AS PER THE ORDER OF THE
LOWER COURT DATED NOVEMBER 21, 1990. ROMEO NAZARENO
ADMITTED THAT HE DID NOT PAY THE CONSIDERATION STATED IN THE
DEED OF ABSOLUTE SALE DATED JULY 4, 1969 EXECUTED BY THE
DECEASED SPOUSES IN HIS FAVOR (EXH. M-2).

5. WHETHER OR NOT AS A CONSEQUENCE, THE TITLE ISSUED IN THE

NAME OF ROMEO P. NAZARENO, TCT NO. 277968 (EXH. M) SHOULD BE
CANCELLED AND DECLARED NULL AND VOID AND A NEW ONE ISSUED IN
FAVOR OF NATIVIDAD P. NAZARENO PURSUANT TO THE DEED OF
ABSOLUTE SALE EXECUTED IN THE LATTERS FAVOR ON JANUARY 29,
1970 BY THE DECEASED SPOUSES.[24]

We find the petition to be without merit.

First. Petitioners argue that the lone testimony of Romeo is insufficient to

overcome the presumption of validity accorded to a notarized document.

To begin with, the findings of fact of the Court of Appeals are conclusive
on the parties and carry even more weight when these coincide with the
factual findings of the trial court. This Court will not weigh the evidence
all over again unless there is a showing that the findings of the lower
court are totally devoid of support or are clearly erroneous so as to
constitute serious abuse of discretion.[25] The lone testimony of a witness,
if credible, is sufficient. In this case, the testimony of Romeo that no
consideration was ever paid for the sale of the six lots to Natividad was
found to be credible both by the trial court and by the Court of Appeals
and it has not been successfully rebutted by petitioners. We, therefore,
have no reason to overturn the findings by the two courts giving credence
to his testimony.
The fact that the deed of sale was notarized is not a guarantee of the
validity of its contents. As held in Suntay v. Court of Appeals:[26]

Though the notarization of the deed of sale in question vests in its favor
the presumption of regularity, it is not the intention nor the function of
the notary public to validate and make binding an instrument never, in the
first place, intended to have any binding legal effect upon the parties
thereto. The intention of the parties still and always is the primary
consideration in determining the true nature of a contract.

Second. Petitioners make capital of the fact that in C.A.-G.R. CV No.

12932, which was declared final by this Court in G.R. No. 107684, the
Court of Appeals upheld the right of Maximino, Jr. to recover possession of
Lot 3-B. In that case, the Court of Appeals held:

As shown in the preceding disquisition, Natividad P. Nazareno acquired the

property in dispute by purchase in 1970. She was issued Transfer
Certificate of Title No. 162738 of the Registry of Deeds of Quezon City.
When her parents died, her mother Aurea Poblete-Nazareno in 1970 and
her father Maximino A. Nazareno, Sr. in 1980, Natividad P. Nazareno had
long been the exclusive owner of the property in question. There was no
way therefore that the aforesaid property could belong to the estate of
the spouses Maximino Nazareno, Sr. and Aurea Poblete. The mere fact that
Romeo P. Nazareno included the same property in an inventory of the
properties of the deceased Maximino A. Nazareno, Sr. will not adversely
affect the ownership of the said realty. Appellant Romeo P. Nazarenos
suspicion that his parents had entrusted all their assets under the care
and in the name of Natividad P. Nazareno, their eldest living sister who
was still single, to be divided upon their demise to all the compulsory
heirs, has not progressed beyond mere speculation. His barefaced
allegation on the point not only is without any corroboration but is even
belied by documentary evidence. The deed of absolute sale (Exhibit B),
being a public document (Rule 132, Secs. 19 and 23, Revised Rules on
Evidence), is entitled to great weight; to contradict the same, there must
be evidence that is clear, convincing and more than merely preponderant
(Yturralde vs. Aganon, 28 SCRA 407; Favor vs. Court of Appeals, 194 SCRA
308). Defendants-appellants own conduct disproves their claim of co-
ownership over the property in question. Being themselves the owner of a
ten-unit apartment building along Stanford St., Cubao Quezon City,
defendants-appellants, in a letter of demand to vacate addressed to their
tenants (Exhibits P, P-1 and P-2) in said apartment, admitted that the
house and lot located at No. 979 Aurora Blvd., Quezon City where they
were residing did not belong to them. Also, when they applied for a permit
to repair the subject property in 1977, they stated that the property
belonged to and was registered in the name of Natividad P. Nazareno.
Among the documents submitted to support their application for a building
permit was a copy of TCT No. 162738 of the Registry of Deeds of Quezon
City in the name of Natividad Nazareno (Exhibit O and submarkings; tsn
March 15, 1985, pp. 4-5).[27]

To be sure, that case was for recovery of possession based on ownership

of Lot 3-B. The parties in that case were Maximino, Jr., as plaintiff, and
the spouses Romeo and Eliza, as defendants. On the other hand, the
parties in the present case for annulment of sale are the estate of
Maximino, Sr., as plaintiff, and Natividad and Maximino, Jr., as defendants.
Romeo and Eliza were named third-party defendants after a third-party
complaint was filed by Natividad and Maximino, Jr. As already stated,
however, this third-party complaint concerned Lot 3, and not Lot 3-B.

The estate of a deceased person is a juridical entity that has a personality

of its own.[28] Though Romeo represented at one time the estate of
Maximino, Sr., the latter has a separate and distinct personality from the
former. Hence, the judgment in CA-GR CV No. 12932 regarding the
ownership of Maximino, Jr. over Lot 3-B binds Romeo and Eliza only, and
not the estate of Maximino, Sr., which also has a right to recover
properties which were wrongfully disposed.

Furthermore, Natividads title was clearly not an issue in the first case. In
other words, the title to the other five lots subject of the present deed of
sale was not in issue in that case. If the first case resolved anything, it
was the ownership of Maximino, Jr. over Lot 3-B alone.
Third. Petitioners allege that, as shown by several deeds of sale executed
by Maximino, Sr. and Aurea during their lifetime, the intention to dispose of
their real properties is clear. Consequently, they argue that the Deed of
Sale of January 29, 1970 should also be deemed valid.

This is a non-sequitur. The fact that other properties had allegedly been
sold by the spouses Maximino, Sr. and Aurea does not necessarily show
that the Deed of Sale made on January 29, 1970 is valid.

Romeo does not dispute that their parents had executed deeds of sale. The
question, however, is whether these sales were made for a consideration.
The trial court and the Court of Appeals found that the Nazareno spouses
transferred their properties to their children by fictitious sales in order to
avoid the payment of inheritance taxes.

Indeed, it was found both by the trial court and by the Court of Appeals
that Natividad had no means to pay for the six lots subject of the Deed
of Sale.

All these convince the Court that Natividad had no means to pay for all
the lots she purportedly purchased from her parents. What is more,
Romeos admission that he did not pay for the transfer to him of lots 3 and
25-L despite the considerations stated in the deed of sale is a declaration
against interest and must ring with resounding truth. The question is, why
should Natividad be treated any differently, i.e., with consideration for the
sale to her, when she is admittedly the closest to her parents and the one
staying with them and managing their affairs? It just seems without
reason. Anyway, the Court is convinced that the questioned Deed of Sale
dated January 29, 1970 (Exh. A or 1) is simulated for lack of consideration,
and therefore ineffective and void.[29]

In affirming this ruling, the Court of Appeals said:

Facts and circumstances indicate badges of a simulated sale which make

the Deed of Absolute Sale dated 29 January 1970 void and of no effect. In
the case of Suntay vs. Court of Appeals (251 SCRA 430 [1995]), the
Supreme Court held that badges of simulation make a deed of sale null
and void since parties thereto enter into a transaction to which they did
not intend to be legally bound.

It appears that it was the practice in the Nazareno family to make

simulated transfers of ownership of real properties to their children in
order to avoid the payment of inheritance taxes. Per the testimony of
Romeo, he acquired Lot 25-L from his parents through a fictitious or
simulated sale wherein no consideration was paid by him. He even
truthfully admitted that the sale of Lot 3 to him on 04 July 1969 (Deed
of Absolute Sale, Records, Vol. II, p. 453) likewise had no consideration. This
document was signed by the spouses Max, Sr. and Aurea as vendors while
defendant-appellant Natividad signed as witness.[30]

Fourth. Petitioners argue further:

The Deed of Absolute Sale dated January 29, 1970 is an indivisible contract
founded on an indivisible obligation. As such, it being indivisible, it can not
be annulled by only one of them. And since this suit was filed only by the
estate of Maximino A. Nazareno, Sr. without including the estate of Aurea
Poblete, the present suit must fail. The estate of Maximino A. Nazareno, Sr.
can not cause its annulment while its validity is sustained by the estate of
Aurea Poblete.[31]

An obligation is indivisible when it cannot be validly performed in parts,

whatever may be the nature of the thing which is the object thereof. The
indivisibility refers to the prestation and not to the object thereof.[32] In
the present case, the Deed of Sale of January 29, 1970 supposedly
conveyed the six lots to Natividad. The obligation is clearly indivisible
because the performance of the contract cannot be done in parts,
otherwise the value of what is transferred is diminished. Petitioners are
therefore mistaken in basing the indivisibility of a contract on the number
of obligors.

In any case, if petitioners only point is that the estate of Maximino, Sr.
alone cannot contest the validity of the Deed of Sale because the estate
of Aurea has not yet been settled, the argument would nonetheless be
without merit. The validity of the contract can be questioned by anyone
affected by it.[33] A void contract is inexistent from the beginning. Hence,
even if the estate of Maximino, Sr. alone contests the validity of the sale,
the outcome of the suit will bind the estate of Aurea as if no sale took
place at all.

Fifth. As to the third-party complaint concerning Lot 3, we find that this

has been passed upon by the trial court and the Court of Appeals. As
Romeo admitted, no consideration was paid by him to his parents for the
Deed of Sale. Therefore, the sale was void for having been simulated.
Natividad never acquired ownership over the property because the Deed
of Sale in her favor is also void for being without consideration and title to
Lot 3 cannot be issued in her name.

Nonetheless, it cannot be denied that Maximino, Sr. intended to give the six
Quezon City lots to Natividad. As Romeo testified, their parents executed
the Deed of Sale in favor of Natividad because the latter was the only
female and the only unmarried member of the family.[34] She was thus
entrusted with the real properties in behalf of her siblings. As she herself
admitted, she intended to convey Lots 10 and 11 to Jose in the event the
latter returned from abroad. There was thus an implied trust constituted
in her favor. Art. 1449 of the Civil Code states:

There is also an implied trust when a donation is made to a person but it

appears that although the legal estate is transmitted to the donee, he
nevertheless is either to have no beneficial interest or only a part thereof.

There being an implied trust, the lots in question are therefore subject to
collation in accordance with Art. 1061 which states:

Every compulsory heir, who succeeds with other compulsory heirs, must
bring into the mass of the estate any property or right which he may have
received from the decedent, during the lifetime of the latter, by way of
donation, or any other gratuitous title, in order that it may be computed in
the determination of the legitime of each heir, and in the account of the
partition.

As held by the trial court, the sale of Lots 13 and 14 to Ros-Alva

Marketing, Corp. on April 20, 1979[35] will have to be upheld for Ros-Alva
Marketing is an innocent purchaser for value which relied on the title of
Natividad. The rule is settled that every person dealing with registered
land may safely rely on the correctness of the certificate of title issued
therefor and the law will in no way oblige him to go behind the certificate
to determine the condition of the property.[36]

WHEREFORE, the decision of the Court of Appeals is AFFIRMED.

SO ORDERED.

FIRST DIVISION
[G.R. No. 68166. February 12, 1997]

HEIRS OF EMILIANO NAVARRO, petitioner, vs. INTERMEDIATE APPELLATE

COURT AND HEIRS OF SINFOROSO PASCUAL, respondents.
DECISION
HERMOSISIMA, JR., J.:

Unique is the legal question visited upon the claim of an applicant in a

Land Registration case by oppositors thereto, the Government and a
Government lessee, involving as it does ownership of land formed by
alluvium.

The applicant owns the property immediately adjoining the land sought to
be registered. His registered property is bounded on the east by the
Talisay River, on the west by the Bulacan River, and on the north by the
Manila Bay. The Talisay River and the Bulacan River flow down towards the
Manila Bay and act as boundaries of the applicant's registered land on the
east and on the west.
The land sought to be registered was formed at the northern tip of the
applicant's land. Applicant's registered property is bounded on the north by
the Manila Bay.

The issue: May the land sought to be registered be deemed an accretion in

the sense that it naturally accrues in favor of the riparian owner or
should the land be considered as foreshore land?

Before us is a petition for review of: (1) the decision[1] and (2) two
subsequent resolutions[2] of the Intermediate Appellate Court[3] (now the
Court of Appeals) in Land Registration Case No. N-84,[4] the application
over which was filed by private respondents' predecessor-in-interest,
Sinforoso Pascual, now deceased, before the Court of First Instance[5]
(now the Regional Trial Court) of Balanga, Bataan.

There is no dispute as to the following facts:

On October 3, 1946, Sinforoso Pascual, now deceased, filed an application

for foreshore lease covering a tract of foreshore land in Sibocon, Balanga,
Bataan, having an area of approximately seventeen (17) hectares. This
application was denied on January 15, 1953. So was his motion for
reconsideration.

Subsequently, petitioners' predecessor-in-interest, also now deceased,

Emiliano Navarro, filed a fishpond application with the Bureau of Fisheries
covering twenty five (25) hectares of foreshore land also in Sibocon,
Balanga, Bataan. Initially, such application was denied by the Director of
Fisheries on the ground that the property formed part of the public
domain. Upon motion for reconsideration, the Director of Fisheries, on May
27, 1988, gave due course to his application but only to the extent of
seven (7) hectares of the property as may be certified by the Bureau of
Forestry as suitable for fishpond purposes.

The Municipal Council of Balanga, Bataan, had opposed Emiliano Navarro's

application. Aggrieved by the decision of the Director of Fisheries, it
appealed to the Secretary of Natural Resources who, however, affirmed
the grant. The then Executive Secretary, acting in behalf of the President
of the Philippines, similarly affirmed the grant.

On the other hand, sometime in the early part of 1960, Sinforoso Pascual
filed an application to register and confirm his title to a parcel of land,
situated in Sibocon, Balanga, Bataan, described in Plan Psu-175181 and
said to have an area of 146,611 square meters. Pascual claimed that this
land is an accretion to his property, situated in Barrio Puerto Rivas,
Balanga, Bataan, and covered by Original Certificate of Title No. 6830. It is
bounded on the eastern side by the Talisay River, on the western side by
the Bulacan River, and on the northern side by the Manila Bay. The Talisay
River as well as the Bulacan River flow downstream and meet at the
Manila Bay thereby depositing sand and silt on Pascual's property resulting
in an accretion thereon. Sinforoso Pascual claimed the accretion as the
riparian owner.

On March 25, 1960, the Director of Lands, represented by the Assistant

Solicitor General, filed an opposition thereto stating that neither Pascual
nor his predecessors-in-interest possessed sufficient title to the subject
property, the same being a portion of the public domain and, therefore, it
belongs to the Republic of the Philippines. The Director of Forestry,
through the Provincial Fiscal, similarly opposed Pascual's application for the
same reason as that advanced by the Director of Lands. Later on, however,
the Director of Lands withdrew his opposition. The Director of Forestry
become the sole oppositor.

On June 2, 1960, the court a quo issued an order of general default

excepting the Director of Lands and the Director of Forestry.

Upon motion of Emiliano Navarro, however, the order of general default

was lifted and, on February 13, 1961, Navarro thereupon filed an
opposition to Pascual's application. Navarro claimed that the land sought to
be registered has always been part of the public domain, it being a part of
the foreshore of Manila Bay; that he was a lessee and in possession of a
part of the subject property by virtue of a fishpond permit issued by the
Bureau of Fisheries and confirmed by the Office of the President; and that
he had already converted the area covered by the lease into a fishpond.

During the pendency of the land registration case, that is, on November 6,
1960, Sinforoso Pascual filed a complaint for ejectment against Emiliano
Navarro, one Marcelo Lopez and their privies, alleged by Pascual to have
unlawfully claimed and possessed, through stealth, force and strategy, a
portion of the subject property covered by Plan Psu-175181. The
defendants in the case were alleged to have built a provisional dike
thereon: thus they have thereby deprived Pascual of the premises sought
to be registered. This, notwithstanding repeated demands for defendants to
vacate the property.

The case was decided adversely against Pascual. Thus, Pascual appealed to
the Court of First Instance (now Regional Trial Court) of Balanga, Bataan,
the appeal having been docketed as Civil Case No. 2873. Because of the
similarity of the parties and the subject matter, the appealed case for
ejectment was consolidated with the land registration case and was jointly
tried by the court a quo.

During the pendency of the trial of the consolidated cases, Emiliano

Navarro died on November 1, 1961 and was substituted by his heirs, the
herein petitioners.

Subsequently, on August 26, 1962, Pascual died and was substituted by his
heirs, the herein private respondents.

On November 10, 1975, the court a quo rendered judgment finding the
subject property to be foreshore land and, being a part of the public
domain, it cannot be the subject of land registration proceedings.

The decision's dispositive portion reads:

"WHEREFORE, judgment is rendered:

(1) Dismissing plaintiff [private respondent] Sinforoso Pascual's complaint for
ejectment in Civil Case No. 2873;

(2) Denying the application of Sinforoso Pascual for land registration over
the land in question; and

(3) Directing said Sinforoso Pascual, through his heirs, as plaintiff in Civil
Case No. 2873 and as applicant in Land Registration Case No. N-84 to pay
costs in both instances."[6]

The heirs of Pascual appealed and, before the respondent appellate court,
assigned the following errors:

"1. The lower court erred in not finding the land in question as an
accretion by the action of the Talisay and Bulacan Rivers to the land
admittedly owned by applicants-appellants [private respondents].

2. The lower court erred in holding that the land in question is foreshore
land.

3. The lower court erred in not ordering the registration of the and is
controversy in favor of applicants-appellants [private respondents].

4. The lower court erred in not finding that the applicants-appellants

[private respondents] are entitled to eject the oppositor-appellee
[petitioners]."[7]

On appeal, the respondent court reversed the findings of the court a quo
and granted the petition for registration of the subject property but
excluding therefrom fifty (50) meters from corner 2 towards corner 1; and
fifty meters (50) meters from corner 5 towards corner 6 of the
Psu-175181.

The respondent appellate court explained the reversal in this wise:

"The paramount issue to be resolved in this appeal as set forth by the
parties in their respective briefs is whether or not the land sought to be
registered is accretion or foreshore land, or, whether or not said land was
formed by the action of the two rivers of Talisay and Bulacan or by the
action of the Manila Bay. If formed by the action of the Talisay and
Bulacan rivers, the subject land is accretion but if formed by the action of
the Manila Bay then it is foreshore land.

xxx

It is undisputed that applicants-appellants [private respondents] owned the

land immediately adjoining the land sought to be registered. Their property
which is covered by OCT No. 6830 is bounded on the east by the Talisay
River, on the west by the Bulacan River, and on the north by the Manila
Bay. The Talisay and Bulacan rivers come from inland flowing downstream
towards the Manila Bay. In other words, between the Talisay River and the
Bulacan River is the property of applicants with both rivers acting as the
boundary to said land and the flow of both rivers meeting and emptying
into the Manila Bay. The subject land was formed at the tip or apex of
appellants' [private respondents'] land adding thereto the land now sought
to be registered.

This makes this case quite unique because while it is undisputed that the
subject land is immediately attached to appellants' [private respondents']
land and forms the tip thereof, at the same time, said land immediately
faces the Manila Bay which is part of the sea. We can understand
therefore the confusion this case might have caused the lower court,
faced as it was with the uneasy problem of deciding whether or not the
subject land was formed by the action of the two rivers or by the action
of the sea. Since the subject land is found at the shore of the Manila Bay
facing appellants' [private respondents'] land, it would be quite easy to
conclude that it is foreshore and therefore part of the patrimonial
property of the State as the lower court did in fact rule x x x .

xxx
It is however undisputed that appellants' [private respondents'] land lies
between these two rivers and it is precisely appellants' [private
respondents'] land which acts as a barricade preventing these two rivers
to meet. Thus, since the flow of the two rivers is downwards to the Manila
Bay the sediments of sand and silt are deposited at their mouths.

It is, therefore, difficult to see how the Manila Bay could have been the
cause of the deposit thereat for in the natural course of things, the waves
of the sea eat the land on the shore, as they suge [sic] inland. It would
not therefore add anything to the land but instead subtract from it due to
the action of the waves and the wind. It is then more logical to believe
that the two rivers flowing towards the bay emptied their cargo of sand,
silt and clay at their mouths, thus causing appellants' [private respondents']
land to accumulate therein.

However, our distinguished colleage [sic], Mr. Justice Serrano, do [sic] not
seem to accept this theory and stated that the subject land arose only
when x x x Pascual planted 'palapat' and 'bakawan' trees thereat to serve
as a boundary or strainer. But we do not see how this act of planting
trees by Pascual would explain how the land mass came into being. Much
less will it prove that the same came from the sea. Following Mr. Justice
Serrano's argument that it were the few trees that acted as strainers or
blocks, then the land that grew would have stopped at the place where
the said trees were planted. But this is not so because the land mass went
far beyond the boundary, or where the trees were planted.

On the other hand, the picture-exhibits of appellants' [private

respondents'] clearly show that the land that accumulated beyond the so-
called boundary, as well as the entire area being applied for is dry land,
above sea level, and bearing innumerable trees x x x. The existence of
vegetation on the land could only confirm that the soil thereat came from
inland rather than from the sea, for what could the sea bring to the shore
but sand, pebbles, stones, rocks and corrals? On the other hand, the two
rivers would be bringing soil on their downward flow which they brought
along from the eroded mountains, the lands along their path, and dumped
them all on the northern portion of appellants' [private respondents'] land.
In view of the foregoing, we have to deviate from the lower court's
finding. While it is true that the subject land is found at the shore of the
Manila Bay fronting appellants' [private respondents'] land, said land is not
foreshore but an accretion from the action of the Talisay and Bulacan
rivers. In fact, this is exactly what the Bureau of Lands found out, as
shown in the following report of the Acting Provincial Officer, Jesus M.
Orozco, to wit:

'Upon ocular inspection of the land subject of this registration made on

June 11, 1960, it was found out that the said land is x x x sandwitched
[sic] by two big rivers x x x These two rivers bring down considerable
amount of soil and sediments during floods every year thus raising the soil
of the land adjoining the private property of the applicant [private
respondents]. About four-fifth [sic] of the area applied for is now dry land
whereon are planted palapat trees thickly growing thereon. It is the
natural action of these two rivers that has caused the formation of said
land x x x subject of this registration case. It has been formed, therefore,
by accretion. And having been formed by accretion, the said land may be
considered the private property of the riparian owner who is the applicant
herein [private respondents'] x x x .

In view of the above, the opposition hereto filed by the government should
be withdrawn, except for the portion recommended by the land
investigator in his report dated May 2, 1960, to be excluded and
considered foreshore. x x x'

Because of this report, no less than the Solicitor General representing the
Bureau of Lands withdrew his opposition dated March 25, 1960, and limited
'the same to the northern portion of the land applied for, compromising a
strip 50 meters wide along the Manila Bay, which should be declared
public land as part of the foreshore' x x x.[8]

Pursuant to the aforecited decision, the respondent appellate court

ordered the issuance of the corresponding decree of registration in the
name of private respondents and the reversion to private respondents of
the possession of the portion of the subject property included in Navarro's
fishpond permit.

On December 20, 1978, petitioners filed a motion for reconsideration of

the aforecited decision. The Director of Forestry also moved for the
reconsideration of the same decision. Both motions were opposed by private
respondents on January 27, 1979.

On November 21, 1980, respondent appellate court promulgated a

resolution denying the motion for reconsideration filed by the Director of
Forestry. It, however, modified its decision, to read, viz:

"(3). Ordering private oppositors Heirs of Emiliano Navarro to vacate that

portion included in their fishpond permit covered by Plan Psu-175181 and
hand over possession of said portion to applicants-appellants, if the said
portion is not within the strip of land fifty (50) meters wide along Manila
Bay on the northern portion of the land subject of the registration
proceedings and which area is more particularly referred to as fifty (50)
meters from corner 2 towards corner 1; and fifty (50) meters from corner
5 towards corner 6 of Plan Psu-175181. x x x[9]

On December 15, 1980, we granted the Solicitor General, acting as counsel

for the Director of Forestry, an extension of time within which to file in
this court, a petition for review of the decision dated November 29, 1978
of the respondent appellate court and of the aforecited resolution dated
November 21, 1980.

Thereafter, the Solicitor General, in behalf of the Director of Forestry,

filed a petition for review entitled, "The Director of Forestry vs. the Court
of Appeals."[10] We, however, denied the same in a minute resolution dated
July 20, 1981, such petition having been prematurely filed at a time when
the Court of Appeals was yet to resolve petitioners' pending motion to set
aside the resolution dated November 21, 1980.

On October 9, 1981, respondent appellate court denied petitioners' motion

for reconsideration of the decision dated November 29, 1978.
On October 17, 1981, respondent appellate court made an entry of
judgment stating that the decision dated November 29, 1978 had become
final and executory as against herein petitioners as oppositors in L.R.C.
Case No. N-84 and Civil Case No. 2873 of the Court of First Instance (now
the Regional Trial Court) of Balanga, Bataan.

On October 26, 1981, a second motion for reconsideration of the decision

dated November 29, 1978 was filed by petitioners' new counsel.

On March 26, 1982, respondent appellate court issued a resolution

granting petitioners' request for leave to file a second motion for
reconsideration.

On July 13, 1984, after hearing, respondent appellate court denied

petitioners' second motion for reconsideration on the ground that the same
was filed out of time, citing Rule 52, Section 1 of the Rules of Court
which provides that a motion for reconsideration shall be made ex-parte
and filed within fifteen (15) days from the notice of the final order or
judgment.

Hence this petition where the respondent appellate court is imputed to

have palpably erred in appreciating the facts of the case and to have
gravely misapplied statutory and case law relating to accretion, specifically,
Article 457 of the Civil Code.

We find merit in the petition.

The disputed property was brought forth by both the withdrawal of the
waters of Manila Bay and the accretion formed on the exposed foreshore
land by the action of the sea which brought soil and sand sediments in
turn trapped by the palapat and bakawan trees planted thereon by
petitioner Sulpicio Pascual in 1948.

Anchoring their claim of ownership on Article 457 of the Civil Code, private
respondents vigorously argue that the disputed 14-hectare land is an
accretion caused by the joint action of the Talisay and Bulacan Rivers
which run their course on the eastern and western boundaries,
respectively, of private respondents' own tract of land.

Accretion as a mode of acquiring property under said Article 457, requires

the concurrence of the following requisites: (1) that the accumulation of
soil or sediment be gradual and imperceptible; (2) that it be the result of
the action of the waters of the river; and (3) that the land where the
accretion takes place is adjacent to the bank of the river.[11] Accretion is
the process whereby the soil is deposited, while alluvium is the soil
deposited on the estate fronting the river bank;[12] the owner of such
estate is called the riparian owner. Riparian owners are, strictly speaking,
distinct from littoral owners, the latter being owners of lands bordering
the shore of the sea or lake or other tidal waters.[13] The alluvium, by
mandate of Article 457 of the Civil Code, is automatically owned by the
riparian owner from the moment the soil deposit can be seen[14] but is
not automatically registered property, hence, subject to acquisition through
prescription by third persons.[15]

Private respondents' claim of ownership over the disputed property under

the principle of accretion, is misplaced.

First, the title of private respondents' own tract of land reveals its
northeastern boundary to be Manila Bay. Private respondents' land,
therefore, used to adjoin, border or front the Manila Bay and not any of
the two rivers whose torrential action, private respondents insist, is to
account for the accretion on their land. In fact, one of the private
respondents, Sulpicio Pascual, testified in open court that the waves of
Manila Bay used to hit the disputed land being part of the bay's foreshore
but, after he had planted palapat and bakawan trees thereon in 1948, the
land began to rise.[16]

Moreover, there is no dispute as to the location of: (a) the disputed land;
(b) private respondents' own tract of land; (c) the Manila Bay; and, (d) the
Talisay and Bulacan Rivers. Private respondents' own land lies between the
Talisay and Bulacan Rivers; in front of their land on the northern side lies
now the disputed land where before 1948, there lay the Manila Bay. If
the accretion were to be attributed to the action of either or both of the
Talisay and Bulacan Rivers, the alluvium should have been deposited on
either or both of the eastern and western boundaries of private
respondents' own tract of land, not on the northern portion thereof which
is adjacent to the Manila Bay. Clearly lacking, thus, is the third requisite
of accretion, which is, that the alluvium is deposited on the portion of
claimant's land which is adjacent to the river bank.

Second, there is no dispute as to the fact that private respondents' own

tract of land adjoins the Manila Bay. Manila Bay is obviously not a river,
and jurisprudence is already settled as to what kind of body of water the
Manila Bay is. It is to be remembered that we held that:

"Appellant next contends that x x x Manila Bay cannot be considered as a

sea. We find said contention untenable. A bay is part of the sea, being a
mere indentation of the same:

'Bay. An opening into the land where the water is shut in on all sides
except at the entrance; an inlet of the sea; an arm of the sea, distinct
from a river, a bending or curbing of the shore of the sea or of a lake.' 7
C.J. 1013-1014."[17]

The disputed land, thus, is an accretion not on a river bank but on a sea
bank, or on what used to be the foreshore of Manila Bay which adjoined
private respindents' own tract of land on the northern side. As such, the
applicable law is not Article 457 of the Civil Code but Article 4 of the
Spanish Law of Waters of 1866.

The process by which the disputed land was formed, is not difficult to
discern from the facts of the case. As the trial court correctly observed:

"A perusal of the survey plan x x x of the land subject matter of these
cases shows that on the eastern side, the property is bounded by Talisay
River, on the western side by Bulacan River, on the southern side by Lot
1436 and on the northern side by Manila Bay. It is not correct to state
that the Talisay and Bulacan Rivers meet a certain portion because the
two rivers both flow towards Manila Bay. The Talisay River is straight while
the Bulacan River is a little bit meandering and there is no portion where
the two rivers meet before they end up at Manila Bay. The land which is
adjacent to the property belonging to Pascual cannot be considered an
accretion [caused by the action of the two rivers].

Applicant Pascual x x x has not presented proofs to convince the Court

that the land he has applied for registration is the result of the settling
down on his registered land of soil, earth or other deposits so as to be
rightfully be considered as an accretion [caused by the action of the two
rivers]. Said Art. 457 finds no applicability where the accretion must have
been caused by action of the bay."[18]

The conclusion formed by the trial court on the basis of the foregoing
observation is that the disputed land is part of the foreshore of Manila
Bay and therefore, part of the public domain. The respondent appellate
court, however, perceived the fact that petitioners' own land lies between
the Talisay and Bulacan Rivers, to be basis to conclude that the disputed
land must be an accretion formed by the action of the two rivers because
private respondents' own land acted as a barricade preventing the two
rivers to meet and that the current of the two rivers carried sediments
of sand and silt downwards to the Manila Bay which accumulated somehow
to a 14-hectare land. These conclusions, however, are fatally incongruous in
the light of the one undisputed critical fact: the accretion was deposited,
not on either the eastern or western portion of private respondents' land
where a river each runs, but on the northern portion of petitioners' land
which adjoins the Manila Bay. Worse, such conclusions are further eroded
of their practical logic and consonance with natural experience in the light
of Sulpicio Pascual's admission as to having planted palapat and bakawan
trees on the northern boundary of their own land. In amplification of this,
plainly more reasonable and valid are Justice Mariano Serrano's
observations in his dissenting opinion when he stated that:

"As appellants' (titled) land x x x acts as a barricade that prevents the

two rivers to meet, and considering the wide expanse of the boundary
between said land and the Manila Bay, measuring some 593.00 meters x x
x it is believed rather farfetched for the land in question to have been
formed through 'sediments of sand and salt [sic] . . . deposited at their
[rivers'] mouths.' Moreover, if 'since the flow of the two rivers is
downwards to the Manila Bay the sediments of sand and silt are deposited
at their mouths,' why then would the alleged cargo of sand, silt and clay
accumulate at the northern portion of appellants' titled land facing Manila
Bay instead of merely at the mouths and banks of these two rivers? That
being the case, the accretion formed at said portion of appellants' titled
[land] was not caused by the current of the two rivers but by the action
of the sea (Manila Bay) into which the rivers empty.

The conclusion x x x is not supported by any reference to the evidence

which, on the contrary, shows that the disputed land was formed by the
action of the sea. Thus, no less than Sulpicio Pascual, one of the heirs of
the original applicant, testified on cross-examination that the land in
dispute was part of the shore and it was only in 1948 that he noticed that
the land was beginning to get higher after he had planted trees thereon
in 1948. x x x

x x x it is established that before 1948 sea water from the Manila Bay at
high tide could reach as far as the dike of appellants' fishpond within their
titled property, which dike now separates this titled property from the
land in question. Even in 1948 when appellants had already planted palapat
and bakawan trees in the land involved, inasmuch as these trees were yet
small, the waves of the sea could still reach the dike. This must be so
because in x x x the survey plan of the titled property approved in 1918,
said titled land was bounded on the north by Manila Bay. So Manila Bay
was adjacent to it on the north. It was only after the planting of the
aforesaid trees in 1948 that the land in question began to rise or to get
higher in elevation.

The trees planted by appellants in 1948 became a sort of strainer of the

sea water and at the same time a kind of block to the strained sediments
from being carried back to the sea by the very waves that brought them
to the former shore at the end of the dike, which must have caused the
shoreline to recede and dry up eventually raising the former shore leading
to the formation of the land in question."[19]

In other words, the combined and interactive effect of the planting of

palapat and bakawan trees, the withdrawal of the waters of Manila Bay
eventually resulting in the drying up of its former foreshore, and the
regular torrential action of the waters of Manila Bay, is the formation of
the disputed land on the northern boundary of private respondents' own
tract of land.

The disputed property is an accretion on a sea bank, Manila Bay being an

inlet or an arm of the sea; as such, the disputed property is, under Article
4 of the Spanish Law of Waters of 1866, part of the public domain.

At the outset, there is a need to distinguish between Manila Bay and

Laguna de Bay.

While we held in the case of Ignacio v. Director of Lands and Valeriano[20]

that Manila Bay is considered a sea for purposes of determining which law
on accretion is to be applied in multifarious situations, we have ruled
differently insofar as accretions on lands adjoining the Laguna de Bay are
concerned.

In the cases of Government of the P.I v. Colegio de San Jose,[21] Republic

v. Court of Appeals,[22] Republic v. Alagad[23], and Meneses v. Court of
Appeals,[24] we categorically ruled that Laguna de Bay is a lake the
accretion on which, by the mandate of Article 84 of the Spanish Law of
Waters of 1866, belongs to the owner of the land contiguous thereto.

The instant controversy, however, brings a situation calling for the

application of Article 4 of the Spanish Law of Waters of 1866, the
disputed land being an accretion on the foreshore of Manila Bay which is,
for all legal purposes, considered a sea.

Article 4 of the Spanish Law of Waters of August 3, 1866 provides as

follows:
"Lands added to the shores by accretions and alluvial deposits caused by
the action of the sea, form part of the public domain. When they are no
longer washed by the waters of the sea and are not necessary for
purposes of public utility, or for the establishment of special industries, or
for the coast-guard service, the Government shall declare them to be the
property of the owners of the estates adjacent thereto and as increment
thereof."

In the light of the aforecited vintage but still valid law, unequivocal is the
public nature of the disputed land in this controversy, the same being an
accretion on a sea bank which, for all legal purposes, the foreshore of
Manila Bay is. As part of the public domain, the herein disputed land is
intended for public uses, and "so long as the land in litigation belongs to
the national domain and is reserved for public uses, it is not capable of
being appropriated by any private person, except through express
authorization granted in due form by a competent authority."[25] Only the
executive and possibly the legislative departments have the right and the
power to make the declaration that the lands so gained by action of the
sea is no longer necessary for purposes of public utility or for the cause
of establishment of special industries or for coast guard services.[26]
Petitioners utterly fail to show that either the executive or legislative
department has already declared the disputed land as qualified, under
Article 4 of the Spanish Law of Waters of 1866, to be the property of
private respondents as owners of the estates adjacent thereto.

WHEREFORE, the instant Petition for Review is hereby GRANTED.

The decision of the Intermediate Appellate Court (now Court of Appeals) in

CA G.R. No. 59044-R dated November 29, 1978 is hereby REVERSED and
SET ASIDE. The resolution dated November 21, 1980 and March 28, 1982,
respectively, promulgated by the Intermediate Appellate Court are likewise
REVERSED and SET ASIDE.

The decision of the Court of First Instance (now the Regional Trial Court),
Branch 1, Balanga, Bataan, is hereby ORDERED REINSTATED.
Costs against private respondents.