G.R. No.
L-11658 February 15, 1918 The trial judge, relying upon the terms of article 1473 of the Civil Code, gave judgment in
LEUNG YEEvs.FRANK L. STRONG MACHINERY COMPANY and J. G. WILLIAMSON
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.
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
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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
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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.
G.R. No. L-40411 August 7, 1935
DAVAO SAW MILL CO., INC., vs. APRONIANO G. CASTILLO and DAVAO LIGHT &
POWER CO., INC.,
The issue in this case, as announced in the opening sentence of the decision in the trial court
and as set forth by counsel for the parties on appeal, involves the determination of the nature
of the properties described in the complaint. The trial judge found that those properties were
personal in nature, and as a consequence absolved the defendants from the complaint, with
costs against the plaintiff.
The Davao Saw Mill Co., Inc., is the holder of a lumber concession from the Government of
the Philippine Islands. It has operated a sawmill in the sitio of Maa, barrio of Tigatu,
municipality of Davao, Province of Davao. However, the land upon which the business was
conducted belonged to another person. On the land the sawmill company erected a building
which housed the machinery used by it. Some of the implements thus used were clearly
personal property, the conflict concerning machines which were placed and mounted on
foundations of cement. In the contract of lease between the sawmill company and the owner
of the land there appeared the following provision:
That on the expiration of the period agreed upon, all the improvements and buildings
introduced and erected by the party of the second part shall pass to the exclusive
ownership of the party of the first part without any obligation on its part to pay any
amount for said improvements and buildings; also, in the event the party of the
second part should leave or abandon the land leased before the time herein
stipulated, the improvements and buildings shall likewise pass to the ownership of
the party of the first part as though the time agreed upon had expired: Provided,
however, That the machineries and accessories are not included in the
improvements which will pass to the party of the first part on the expiration or
abandonment of the land leased.
In another action, wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao,
Saw, Mill Co., Inc., was the defendant, a judgment was rendered in favor of the plaintiff in that
action against the defendant in that action; a writ of execution issued thereon, and the
properties now in question were levied upon as personalty by the sheriff. No third party claim
was filed for such properties at the time of the sales thereof as is borne out by the record
made by the plaintiff herein. Indeed the bidder, which was the plaintiff in that action, and the
defendant herein having consummated the sale, proceeded to take possession of the
machinery and other properties described in the corresponding certificates of sale executed
in its favor by the sheriff of Davao.
As connecting up with the facts, it should further be explained that the Davao Saw Mill Co.,
Inc., has on a number of occasions treated the machinery as personal property by executing
chattel mortgages in favor of third persons. One of such persons is the appellee by
assignment from the original mortgages.
Article 334, paragraphs 1 and 5, of the Civil Code, is in point. According to the Code, real
property consists of —
1. Land, buildings, roads and constructions of all kinds adhering to the soil;
xxx xxx xxx
5. Machinery, liquid containers, instruments or implements intended by the owner of
any building or land for use in connection with any industry or trade being carried on
therein and which are expressly adapted to meet the requirements of such trade of
industry.
Appellant emphasizes the first paragraph, and appellees the last mentioned paragraph. We
entertain no doubt that the trial judge and appellees are right in their appreciation of the legal
doctrines flowing from the facts.
In the first place, it must again be pointed out that the appellant should have registered its
protest before or at the time of the sale of this property. It must further be pointed out that
while not conclusive, the characterization of the property as chattels by the appellant is
indicative of intention and impresses upon the property the character determined by the
parties. In this connection the decision of this court in the case of Standard Oil Co. of New
York vs. Jaramillo ( [1923], 44 Phil., 630), whether obiter dicta or not, furnishes the key to
such a situation.
It is, however not necessary to spend overly must time in the resolution of this appeal on side
issues. It is machinery which is involved; moreover, machinery not intended by the owner of
any building or land for use in connection therewith, but intended by a lessee for use in a
building erected on the land by the latter to be returned to the lessee on the expiration or
abandonment of the lease.
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A similar question arose in Puerto Rico, and on appeal being taken to the United States
Supreme Court, it was held that machinery which is movable in its nature only becomes
immobilized when placed in a plant by the owner of the property or plant, but not when so
placed by a tenant, a usufructuary, or any person having only a temporary right, unless such
person acted as the agent of the owner. In the opinion written by Chief Justice White, whose
knowledge of the Civil Law is well known, it was in part said:
To determine this question involves fixing the nature and character of the property
from the point of view of the rights of Valdes and its nature and character from the
point of view of Nevers & Callaghan as a judgment creditor of the Altagracia
Company and the rights derived by them from the execution levied on the machinery
placed by the corporation in the plant. Following the Code Napoleon, the Porto Rican
Code treats as immovable (real) property, not only land and buildings, but also
attributes immovability in some cases to property of a movable nature, that is,
personal property, because of the destination to which it is applied. "Things," says
section 334 of the Porto Rican Code, "may be immovable either by their own nature
or by their destination or the object to which they are applicable." Numerous
illustrations are given in the fifth subdivision of section 335, which is as follows:
"Machinery, vessels, instruments or implements intended by the owner of the
tenements for the industrial or works that they may carry on in any building or upon
any land and which tend directly to meet the needs of the said industry or works."
(See also Code Nap., articles 516, 518 et seq. to and inclusive of article 534,
recapitulating the things which, though in themselves movable, may be immobilized.)
So far as the subject-matter with which we are dealing — machinery placed in the
plant — it is plain, both under the provisions of the Porto Rican Law and of the Code
Napoleon, that machinery which is movable in its nature only becomes immobilized
when placed in a plant by the owner of the property or plant. Such result would not be
accomplished, therefore, by the placing of machinery in a plant by a tenant or a
usufructuary or any person having only a temporary right. (Demolombe, Tit. 9, No.
203; Aubry et Rau, Tit. 2, p. 12, Section 164; Laurent, Tit. 5, No. 447; and decisions
quoted in Fuzier-Herman ed. Code Napoleon under articles 522 et seq.) The
distinction rests, as pointed out by Demolombe, upon the fact that one only having a
temporary right to the possession or enjoyment of property is not presumed by the
law to have applied movable property belonging to him so as to deprive him of it by
causing it by an act of immobilization to become the property of another. It follows
that abstractly speaking the machinery put by the Altagracia Company in the plant
belonging to Sanchez did not lose its character of movable property and become
immovable by destination. But in the concrete immobilization took place because of
the express provisions of the lease under which the Altagracia held, since the lease
in substance required the putting in of improved machinery, deprived the tenant of
any right to charge against the lessor the cost such machinery, and it was expressly
stipulated that the machinery so put in should become a part of the plant belonging to
the owner without compensation to the lessee. Under such conditions the tenant in
putting in the machinery was acting but as the agent of the owner in compliance with
the obligations resting upon him, and the immobilization of the machinery which
resulted arose in legal effect from the act of the owner in giving by contract a
permanent destination to the machinery.
xxx xxx xxx
The machinery levied upon by Nevers & Callaghan, that is, that which was placed in
the plant by the Altagracia Company, being, as regards Nevers & Callaghan,
movable property, it follows that they had the right to levy on it under the execution
upon the judgment in their favor, and the exercise of that right did not in a legal sense
conflict with the claim of Valdes, since as to him the property was a part of the realty
which, as the result of his obligations under the lease, he could not, for the purpose
of collecting his debt, proceed separately against. (Valdes vs. Central Altagracia
[192], 225 U.S., 58.)
Finding no reversible error in the record, the judgment appealed from will be affirmed, the
costs of this instance to be paid by the appellant.
G.R. No. L-58469 May 16, 1983
MAKATI LEASING and FINANCE CORPORATIONvs.WEAREVER TEXTILE MILLS, INC.,
and HONORABLE COURT OF APPEALS
Petition for review on certiorari of the decision of the Court of Appeals (now Intermediate
Appellate Court) promulgated on August 27, 1981 in CA-G.R. No. SP-12731, setting aside
certain Orders later specified herein, of Judge Ricardo J. Francisco, as Presiding Judge of
the Court of First instance of Rizal Branch VI, issued in Civil Case No. 36040, as wen as the
resolution dated September 22, 1981 of the said appellate court, denying petitioner's motion
for reconsideration.
It appears that in order to obtain financial accommodations from herein petitioner Makati
Leasing and Finance Corporation, the private respondent Wearever Textile Mills, Inc.,
discounted and assigned several receivables with the former under a Receivable Purchase
Agreement. To secure the collection of the receivables assigned, private respondent
executed a Chattel Mortgage over certain raw materials inventory as well as a machinery
described as an Artos Aero Dryer Stentering Range.
Upon private respondent's default, petitioner filed a petition for extrajudicial foreclosure of the
properties mortgage to it. However, the Deputy Sheriff assigned to implement the foreclosure
failed to gain entry into private respondent's premises and was not able to effect the seizure
of the aforedescribed machinery. Petitioner thereafter filed a complaint for judicial foreclosure
with the Court of First Instance of Rizal, Branch VI, docketed as Civil Case No. 36040, the
case before the lower court.
4
Acting on petitioner's application for replevin, the lower court issued a writ of seizure, the
enforcement of which was however subsequently restrained upon private respondent's filing
of a motion for reconsideration. After several incidents, the lower court finally issued on
February 11, 1981, an order lifting the restraining order for the enforcement of the writ of
seizure and an order to break open the premises of private respondent to enforce said writ.
The lower court reaffirmed its stand upon private respondent's filing of a further motion for
reconsideration.
On July 13, 1981, the sheriff enforcing the seizure order, repaired to the premises of private
respondent and removed the main drive motor of the subject machinery.
The Court of Appeals, in certiorari and prohibition proceedings subsequently filed by herein
private respondent, set aside the Orders of the lower court and ordered the return of the drive
motor seized by the sheriff pursuant to said Orders, after ruling that the machinery in suit
cannot be the subject of replevin, much less of a chattel mortgage, because it is a real
property pursuant to Article 415 of the new Civil Code, the same being attached to the ground
by means of bolts and the only way to remove it from respondent's plant would be to drill out
or destroy the concrete floor, the reason why all that the sheriff could do to enfore the writ
was to take the main drive motor of said machinery. The appellate court rejected petitioner's
argument that private respondent is estopped from claiming that the machine is real property
by constituting a chattel mortgage thereon.
A motion for reconsideration of this decision of the Court of Appeals having been denied,
petitioner has brought the case to this Court for review by writ of certiorari. It is contended by
private respondent, however, that the instant petition was rendered moot and academic by
petitioner's act of returning the subject motor drive of respondent's machinery after the Court
of Appeals' decision was promulgated.
The contention of private respondent is without merit. When petitioner returned the subject
motor drive, it made itself unequivocably clear that said action was without prejudice to a
motion for reconsideration of the Court of Appeals decision, as shown by the receipt duly
signed by respondent's representative. 1 Considering that petitioner has reserved its right to
question the propriety of the Court of Appeals' decision, the contention of private respondent
that this petition has been mooted by such return may not be sustained.
The next and the more crucial question to be resolved in this Petition is whether the
machinery in suit is real or personal property from the point of view of the parties, with
petitioner arguing that it is a personality, while the respondent claiming the contrary, and was
sustained by the appellate court, which accordingly held that the chattel mortgage constituted
thereon is null and void, as contended by said respondent.
A similar, if not Identical issue was raised in Tumalad v. Vicencio, 41 SCRA 143 where this
Court, speaking through Justice J.B.L. Reyes, ruled:
Although there is no specific statement referring to the subject house as
personal property, yet by ceding, selling or transferring a property by way of
chattel mortgage defendants-appellants could only have meant to convey the
house as chattel, or at least, intended to treat the same as such, so that they
should not now be allowed to make an inconsistent stand by claiming
otherwise. Moreover, the subject house stood on a rented lot to which
defendants-appellants merely had a temporary right as lessee, and although
this can not in itself alone determine the status of the property, it does so
when combined with other factors to sustain the interpretation that the
parties, particularly the mortgagors, intended to treat the house as
personality. Finally, unlike in the Iya cases, Lopez vs. Orosa, Jr. & Plaza
Theatre, Inc. & Leung Yee vs. F.L. Strong Machinery & Williamson, wherein
third persons assailed the validity of the chattel mortgage, it is the
defendants-appellants themselves, as debtors-mortgagors, who are attacking
the validity of the chattel mortgage in this case. The doctrine of estoppel
therefore applies to the herein defendants-appellants, having treated the
subject house as personality.
Examining the records of the instant case, We find no logical justification to exclude the rule
out, as the appellate court did, the present case from the application of the abovequoted
pronouncement. If a house of strong materials, like what was involved in the above Tumalad
case, may be considered as personal property for purposes of executing a chattel mortgage
thereon as long as the parties to the contract so agree and no innocent third party will be
prejudiced thereby, there is absolutely no reason why a machinery, which is movable in its
nature and becomes immobilized only by destination or purpose, may not be likewise treated
as such. This is really because one who has so agreed is estopped from denying the
existence of the chattel mortgage.
In rejecting petitioner's assertion on the applicability of the Tumalad doctrine, the Court of
Appeals lays stress on the fact that the house involved therein was built on a land that did not
belong to the owner of such house. But the law makes no distinction with respect to the
ownership of the land on which the house is built and We should not lay down distinctions not
contemplated by law.
It must be pointed out that the characterization of the subject machinery as chattel by the
private respondent is indicative of intention and impresses upon the property the character
determined by the parties. As stated in Standard Oil Co. of New York v. Jaramillo, 44 Phil.
630, it is undeniable that the parties to a contract may by agreement treat as personal
property that which by nature would be real property, as long as no interest of third parties
would be prejudiced thereby.
Private respondent contends that estoppel cannot apply against it because it had never
represented nor agreed that the machinery in suit be considered as personal property but
5
was merely required and dictated on by herein petitioner to sign a printed form of chattel
mortgage which was in a blank form at the time of signing. This contention lacks
persuasiveness. As aptly pointed out by petitioner and not denied by the respondent, the
status of the subject machinery as movable or immovable was never placed in issue before
the lower court and the Court of Appeals except in a supplemental memorandum in support
of the petition filed in the appellate court. Moreover, even granting that the charge is true,
such fact alone does not render a contract void ab initio, but can only be a ground for
rendering said contract voidable, or annullable pursuant to Article 1390 of the new Civil Code,
by a proper action in court. There is nothing on record to show that the mortgage has been
annulled. Neither is it disclosed that steps were taken to nullify the same. On the other hand,
as pointed out by petitioner and again not refuted by respondent, the latter has indubitably
benefited from said contract. Equity dictates that one should not benefit at the expense of
another. Private respondent could not now therefore, be allowed to impugn the efficacy of the
chattel mortgage after it has benefited therefrom,
From what has been said above, the error of the appellate court in ruling that the questioned
machinery is real, not personal property, becomes very apparent. Moreover, the case of
Machinery and Engineering Supplies, Inc. v. CA, 96 Phil. 70, heavily relied upon by said court
is not applicable to the case at bar, the nature of the machinery and equipment involved
therein as real properties never having been disputed nor in issue, and they were not the
subject of a Chattel Mortgage. Undoubtedly, the Tumalad case bears more nearly perfect
parity with the instant case to be the more controlling jurisprudential authority.
WHEREFORE, the questioned decision and resolution of the Court of Appeals are hereby
reversed and set aside, and the Orders of the lower court are hereby reinstated, with costs
against the private respondent.
SO ORDERED.
G.R. Nos. L-10837-38 May 30, 1958
ASSOCIATED INSURANCE and SURETY COMPANY, INC.,vs.ISABEL IYA, ADRIANO
VALINO and LUCIA VALINO
ISABEL IYAvs.ADRIANO VALINO, LUCIA VALINO and ASSOCIATED INSURANCE and
SURETY COMPANY. INC.
Adriano Valino and Lucia A. Valino, husband and wife, were the owners and possessors of a
house of strong materials constructed on Lot No. 3, Block No. 80 of the Grace Park
Subdivision in Caloocan, Rizal, which they purchased on installment basis from the Philippine
Realty Corporation. On November 6, 1951, to enable her to purchase on credit rice from the
NARIC, Lucia A. Valino filed a bond in the sum of P11,000.00 (AISCO Bond No. G-971)
subscribed by the Associated Insurance and Surety Co., Inc., and as counter-guaranty
therefor, the spouses Valino executed an alleged chattel mortgage on the aforementioned
house in favor of the surety company, which encumbrance was duly registered with the
Chattel Mortgage Register of Rizal on December 6, 1951. It is admitted that at the time said
undertaking took place, the parcel of land on which the house is erected was still registered in
the name of the Philippine Realty Corporation. Having completed payment on the purchase
price of the lot, the Valinos were able to secure on October 18, 1958, a certificate of title in
their name (T.C.T. No. 27884). Subsequently, however, or on October 24, 1952, the Valinos,
to secure payment of an indebtedness in the amount of P12,000.00, executed a real estate
mortgage over the lot and the house in favor of Isabel Iya, which was duly registered and
annotated at the back of the certificate of title.
On the other hand, as Lucia A. Valino, failed to satisfy her obligation to the NARIC, the surety
company was compelled to pay the same pursuant to the undertaking of the bond. In turn,
the surety company demanded reimbursement from the spouses Valino, and as the latter
likewise failed to do so, the company foreclosed the chattel mortgage over the house. As a
result thereof, a public sale was conducted by the Provincial Sheriff of Rizal on December 26,
1952, wherein the property was awarded to the surety company for P8,000.00, the highest
bid received therefor. The surety company then caused the said house to be declared in its
name for tax purposes (Tax Declaration No. 25128).
Sometime in July, 1953, the surety company learned of the existence of the real estate
mortgage over the lot covered by T.C.T. No. 26884 together with the improvements thereon;
thus, said surety company instituted Civil Case No. 2162 of the Court of First Instance of
Manila naming Adriano and Lucia Valino and Isabel Iya, the mortgagee, as defendants. The
complaint prayed for the exclusion of the residential house from the real estate mortgage in
favor of defendant Iya and the declaration and recognition of plaintiff's right to ownership over
the same in virtue of the award given by the Provincial Sheriff of Rizal during the public
auction held on December 26, 1952. Plaintiff likewise asked the Court to sentence the
spouses Valino to pay said surety moral and exemplary damages, attorney's fees and costs.
Defendant Isabel Iya filed her answer to the complaint alleging among other things, that in
virtue of the real estate mortgage executed by her co-defendants, she acquired a real right
over the lot and the house constructed thereon; that the auction sale allegedly conducted by
the Provincial Sheriff of Rizal as a result of the foreclosure of the chattel mortgage on the
house was null and void for non-compliance with the form required by law. She, therefore,
prayed for the dismissal of the complaint and anullment of the sale made by the Provincial
Sheriff. She also demanded the amount of P5,000.00 from plaintiff as counterclaim, the sum
of P5,000.00 from her co-defendants as crossclaim, for attorney's fees and costs.
Defendants spouses in their answer admitted some of the averments of the complaint and
denied the others. They, however, prayed for the dismissal of the action for lack of cause of
action, it being alleged that plaintiff was already the owner of the house in question, and as
said defendants admitted this fact, the claim of the former was already satisfied.
6
On October 29, 1953, Isabel Iya filed another civil action against the Valinos and the surety
company (Civil Case No. 2504 of the Court of First Instance of Manila) stating that pursuant
to the contract of mortgage executed by the spouses Valino on October 24, 1952, the latter
undertook to pay a loan of P12,000.00 with interest at 12% per annum or P120.00 a month,
which indebtedness was payable in 4 years, extendible for only one year; that to secure
payment thereof, said defendants mortgaged the house and lot covered by T.C.T. No. 27884
located at No. 67 Baltazar St., Grace Park Subdivision, Caloocan, Rizal; that the Associated
Insurance and Surety Co., Inc., was included as a party defendant because it claimed to have
an interest on the residential house also covered by said mortgage; that it was stipulated in
the aforesaid real estate mortgage that default in the payment of the interest agreed upon
would entitle the mortgagee to foreclose the same even before the lapse of the 4-year period;
and as defendant spouses had allegedly failed to pay the interest for more than 6 months,
plaintiff prayed the Court to order said defendants to pay the sum of P12,000.00 with interest
thereon at 12% per annum from March 25, 1953, until fully paid; for an additional sum
equivalent to 20% of the total obligation as damages, and for costs. As an alternative in case
such demand may not be met and satisfied plaintiff prayed for a decree of foreclosure of the
land, building and other improvements thereon to be sold at public auction and the proceeds
thereof applied to satisfy the demands of plaintiff; that the Valinos, the surety company and
any other person claiming interest on the mortgaged properties be barred and foreclosed of
all rights, claims or equity of redemption in said properties; and for deficiency judgment in
case the proceeds of the sale of the mortgaged property would be insufficient to satisfy the
claim of plaintiff.
Defendant surety company, in answer to this complaint insisted on its right over the building,
arguing that as the lot on which the house was constructed did not belong to the spouses at
the time the chattel mortgage was executed, the house might be considered only as a
personal property and that the encumbrance thereof and the subsequent foreclosure
proceedings made pursuant to the provisions of the Chattel Mortgage Law were proper and
legal. Defendant therefore prayed that said building be excluded from the real estate
mortgage and its right over the same be declared superior to that of plaintiff, for damages,
attorney's fees and costs.
Taking side with the surety company, defendant spouses admitted the due execution of the
mortgage upon the land but assailed the allegation that the building was included thereon, it
being contended that it was already encumbered in favor of the surety company before the
real estate mortgage was executed, a fact made known to plaintiff during the preparation of
said contract and to which the latter offered no objection. As a special defense, it was
asserted that the action was premature because the contract was for a period of 4 years,
which had not yet elapsed.
The two cases were jointly heard upon agreement of the parties, who submitted the same on
a stipulation of facts, after which the Court rendered judgment dated March 8, 1956, holding
that the chattel mortgage in favor of the Associated Insurance and Surety Co., Inc., was
preferred and superior over the real estate mortgage subsequently executed in favor of Isabel
Iya. It was ruled that as the Valinos were not yet the registered owner of the land on which
the building in question was constructed at the time the first encumbrance was made, the
building then was still a personality and a chattel mortgage over the same was proper.
However, as the mortgagors were already the owner of the land at the time the contract with
Isabel Iya was entered into, the building was transformed into a real property and the real
estate mortgage created thereon was likewise adjudged as proper. It is to be noted in this
connection that there is no evidence on record to sustain the allegation of the spouses Valino
that at the time they mortgaged their house and lot to Isabel Iya, the latter was told or knew
that part of the mortgaged property, i.e., the house, had previously been mortgaged to the
surety company.
The residential building was, therefore, ordered excluded from the foreclosure prayed for by
Isabel Iya, although the latter could exercise the right of a junior encumbrance. So the
spouses Valino were ordered to pay the amount demanded by said mortgagee or in their
default to have the parcel of land subject of the mortgage sold at public auction for the
satisfaction of Iya's claim.
There is no question as to appellant's right over the land covered by the real estate mortgage;
however, as the building constructed thereon has been the subject of 2 mortgages;
controversy arise as to which of these encumbrances should receive preference over the
other. The decisive factor in resolving the issue presented by this appeal is the determination
of the nature of the structure litigated upon, for where it be considered a personality, the
foreclosure of the chattel mortgage and the subsequent sale thereof at public auction, made
in accordance with the Chattel Mortgage Law would be valid and the right acquired by the
surety company therefrom would certainly deserve prior recognition; otherwise, appellant's
claim for preference must be granted. The lower Court, deciding in favor of the surety
company, based its ruling on the premise that as the mortgagors were not the owners of the
land on which the building is erected at the time the first encumbrance was made, said
structure partook of the nature of a personal property and could properly be the subject of a
chattel mortgage. We find reason to hold otherwise, for as this Court, defining the nature or
character of a building, has said:
. . . while it is true that generally, real estate connotes the land and the building
constructed thereon, it is obvious that the inclusion of the building, separate and
distinct from the land, in the enumeration of what may constitute real properties (Art.
415, new Civil Code) could only mean one thing — that a building is by itself an
immovable property . . . Moreover, and in view of the absence of any specific
provision to the contrary, a building is an immovable property irrespective of whether
or not said structure and the land on which it is adhered to belong to the same owner.
(Lopez vs. Orosa, G.R. Nos. supra, p. 98).
7
A building certainly cannot be divested of its character of a realty by the fact that the land on
which it is constructed belongs to another. To hold it the other way, the possibility is not
remote that it would result in confusion, for to cloak the building with an uncertain status
made dependent on the ownership of the land, would create a situation where a permanent
fixture changes its nature or character as the ownership of the land changes hands. In the
case at bar, as personal properties could only be the subject of a chattel mortgage (Section
1, Act 3952) and as obviously the structure in question is not one, the execution of the chattel
mortgage covering said building is clearly invalid and a nullity. While it is true that said
document was correspondingly registered in the Chattel Mortgage Register of Rizal, this act
produced no effect whatsoever for where the interest conveyed is in the nature of a real
property, the registration of the document in the registry of chattels is merely a futile act.
Thus, the registration of the chattel mortgage of a building of strong materials produce no
effect as far as the building is concerned (Leung Yee vs. Strong Machinery Co., 37 Phil.,
644). Nor can we give any consideration to the contention of the surety that it has acquired
ownership over the property in question by reason of the sale conducted by the Provincial
Sheriff of Rizal, for as this Court has aptly pronounced:
A mortgage creditor who purchases real properties at an extrajudicial foreclosure
sale thereof by virtue of a chattel mortgage constituted in his favor, which mortgage
has been declared null and void with respect to said real properties, acquires no right
thereto by virtue of said sale (De la Riva vs. Ah Keo, 60 Phil., 899).
Wherefore the portion of the decision of the lower Court in these two cases appealed from
holding the rights of the surety company, over the building superior to that of Isabel Iya and
excluding the building from the foreclosure prayed for by the latter is reversed and appellant
Isabel Iya's right to foreclose not only the land but also the building erected thereon is hereby
recognized, and the proceeds of the sale thereof at public auction (if the land has not yet
been sold), shall be applied to the unsatisfied judgment in favor of Isabel Iya. This decision
however is without prejudice to any right that the Associated Insurance and Surety Co., Inc.,
may have against the spouses Adriano and Lucia Valino on account of the mortgage of said
building they executed in favor of said surety company. Without pronouncement as to costs.
It is so ordered.
G.R. No. L-17870 September 29, 1962
MINDANAO BUS COMPANYvs.THE CITY ASSESSOR & TREASURER and the BOARD
OF TAX APPEALS of Cagayan de Oro City
Appeals on the ground that the same are not realty. The Board of Tax Appeals of the City
sustained the city assessor, so petitioner herein filed with the Court of Tax Appeals a petition
for the review of the assessment.
In the Court of Tax Appeals the parties submitted the following stipulation of facts:
Petitioner and respondents, thru their respective counsels agreed to the following
stipulation of facts:
1. That petitioner is a public utility solely engaged in transporting passengers and
cargoes by motor trucks, over its authorized lines in the Island of Mindanao,
collecting rates approved by the Public Service Commission;
2. That petitioner has its main office and shop at Cagayan de Oro City. It maintains
Branch Offices and/or stations at Iligan City, Lanao; Pagadian, Zamboanga del Sur;
Davao City and Kibawe, Bukidnon Province;
3. That the machineries sought to be assessed by the respondent as real properties
are the following:
(a) Hobart Electric Welder Machine, appearing in the attached photograph,
marked Annex "A";
(b) Storm Boring Machine, appearing in the attached photograph, marked
Annex "B";
(c) Lathe machine with motor, appearing in the attached photograph, marked
Annex "C";
(d) Black and Decker Grinder, appearing in the attached photograph, marked
Annex "D";
(e) PEMCO Hydraulic Press, appearing in the attached photograph, marked
Annex "E";

(f) Battery charger (Tungar charge machine) appearing in the attached

This is a petition for the review of the decision of the Court of Tax Appeals in C.T.A. Case No.
photograph, marked Annex "F"; and
710 holding that the petitioner Mindanao Bus Company is liable to the payment of the realty
tax on its maintenance and repair equipment hereunder referred to.
(g) D-Engine Waukesha-M-Fuel, appearing in the attached photograph,
marked Annex "G".
Respondent City Assessor of Cagayan de Oro City assessed at P4,400 petitioner's above-
mentioned equipment. Petitioner appealed the assessment to the respondent Board of Tax
8
 4. That these machineries are sitting on cement or wooden platforms as may be seen
in the attached photographs which form part of this agreed stipulation of facts;
5. That petitioner is the owner of the land where it maintains and operates a garage
for its TPU motor trucks; a repair shop; blacksmith and carpentry shops, and with
these machineries which are placed therein, its TPU trucks are made; body
constructed; and same are repaired in a condition to be serviceable in the TPU land
transportation business it operates;
6. That these machineries have never been or were never used as industrial
equipments to produce finished products for sale, nor to repair machineries, parts
and the like offered to the general public indiscriminately for business or commercial
purposes for which petitioner has never engaged in, to date.1awphîl.nèt
The Court of Tax Appeals having sustained the respondent city assessor's ruling, and having
denied a motion for reconsideration, petitioner brought the case to this Court assigning the
following errors:
1. The Honorable Court of Tax Appeals erred in upholding respondents' contention
that the questioned assessments are valid; and that said tools, equipments or
machineries are immovable taxable real properties.
2. The Tax Court erred in its interpretation of paragraph 5 of Article 415 of the New
Civil Code, and holding that pursuant thereto the movable equipments are taxable
realties, by reason of their being intended or destined for use in an industry.
3. The Court of Tax Appeals erred in denying petitioner's contention that the
respondent City Assessor's power to assess and levy real estate taxes on
machineries is further restricted by section 31, paragraph (c) of Republic Act No. 521;
and
4. The Tax Court erred in denying petitioner's motion for reconsideration.
Respondents contend that said equipments, tho movable, are immobilized by destination, in
accordance with paragraph 5 of Article 415 of the New Civil Code which provides:
Art. 415. — The following are immovable properties:
xxx xxx xxx
(5) Machinery, receptacles, instruments or implements intended by the owner of the
tenement for an industry or works which may be carried on in a building or on a piece
of land, and which tend directly to meet the needs of the said industry or works.
(Emphasis ours.)
Note that the stipulation expressly states that the equipment are placed on wooden or cement
platforms. They can be moved around and about in petitioner's repair shop. In the case of B.
H. Berkenkotter vs. Cu Unjieng, 61 Phil. 663, the Supreme Court said:
Article 344 (Now Art. 415), paragraph (5) of the Civil Code, gives the character of real
property to "machinery, liquid containers, instruments or implements intended by the
owner of any building or land for use in connection with any industry or trade being
carried on therein and which are expressly adapted to meet the requirements of such
trade or industry."
If the installation of the machinery and equipment in question in the central of the
Mabalacat Sugar Co., Inc., in lieu of the other of less capacity existing therein, for its
sugar and industry, converted them into real property by reason of their purpose, it
cannot be said that their incorporation therewith was not permanent in character
because, as essential and principle elements of a sugar central, without them the
sugar central would be unable to function or carry on the industrial purpose for which
it was established. Inasmuch as the central is permanent in character, the necessary
machinery and equipment installed for carrying on the sugar industry for which it has
been established must necessarily be permanent. (Emphasis ours.)
So that movable equipments to be immobilized in contemplation of the law must first be
"essential and principal elements" of an industry or works without which such industry or
works would be "unable to function or carry on the industrial purpose for which it was
established." We may here distinguish, therefore, those movable which become immobilized
by destination because they are essential and principal elements in the industry for those
which may not be so considered immobilized because they are merely incidental, not
essential and principal. Thus, cash registers, typewriters, etc., usually found and used in
hotels, restaurants, theaters, etc. are merely incidentals and are not and should not be
considered immobilized by destination, for these businesses can continue or carry on their
functions without these equity comments. Airline companies use forklifts, jeep-wagons,
pressure pumps, IBM machines, etc. which are incidentals, not essentials, and thus retain
their movable nature. On the other hand, machineries of breweries used in the manufacture
of liquor and soft drinks, though movable in nature, are immobilized because they are
essential to said industries; but the delivery trucks and adding machines which they usually
own and use and are found within their industrial compounds are merely incidental and retain
their movable nature.
Similarly, the tools and equipments in question in this instant case are, by their nature, not
essential and principle municipal elements of petitioner's business of transporting passengers
and cargoes by motor trucks. They are merely incidentals — acquired as movables and used
9
only for expediency to facilitate and/or improve its service. Even without such tools and
equipments, its business may be carried on, as petitioner has carried on, without such
equipments, before the war. The transportation business could be carried on without the
repair or service shop if its rolling equipment is repaired or serviced in another shop
belonging to another.
The law that governs the determination of the question at issue is as follows:
Art. 415. The following are immovable property:
xxx xxx xxx
(5) Machinery, receptacles, instruments or implements intended by the owner of the
tenement for an industry or works which may be carried on in a building or on a piece
of land, and which tend directly to meet the needs of the said industry or works; (Civil
Code of the Phil.)
Aside from the element of essentiality the above-quoted provision also requires that the
industry or works be carried on in a building or on a piece of land. Thus in the case of
Berkenkotter vs. Cu Unjieng, supra, the "machinery, liquid containers, and instruments or
implements" are found in a building constructed on the land. A sawmill would also be installed
in a building on land more or less permanently, and the sawing is conducted in the land or
building.
But in the case at bar the equipments in question are destined only to repair or service the
transportation business, which is not carried on in a building or permanently on a piece of
land, as demanded by the law. Said equipments may not, therefore, be deemed real
property.
Resuming what we have set forth above, we hold that the equipments in question are not
absolutely essential to the petitioner's transportation business, and petitioner's business is
not carried on in a building, tenement or on a specified land, so said equipment may not be
considered real estate within the meaning of Article 415 (c) of the Civil Code.
WHEREFORE, the decision subject of the petition for review is hereby set aside and the
equipment in question declared not subject to assessment as real estate for the purposes of
the real estate tax. Without costs.
So ordered.
G.R. No. L-15334 January 31, 1964
BOARD OF ASSESSMENT APPEALS vs. MANILA ELECTRIC COMPANY
From the stipulation of facts and evidence adduced during the hearing, the following
appear:
On October 20, 1902, the Philippine Commission enacted Act No. 484 which authorized
the Municipal Board of Manila to grant a franchise to construct, maintain and operate an
electric street railway and electric light, heat and power system in the City of Manila and
its suburbs to the person or persons making the most favorable bid. Charles M. Swift
was awarded the said franchise on March 1903, the terms and conditions of which were
embodied in Ordinance No. 44 approved on March 24, 1903. Respondent Manila Electric
Co. (Meralco for short), became the transferee and owner of the franchise.
Meralco's electric power is generated by its hydro-electric plant located at Botocan Falls,
Laguna and is transmitted to the City of Manila by means of electric transmission wires,
running from the province of Laguna to the said City. These electric transmission wires
which carry high voltage current, are fastened to insulators attached on steel towers
constructed by respondent at intervals, from its hydro-electric plant in the province of
Laguna to the City of Manila. The respondent Meralco has constructed 40 of these steel
towers within Quezon City, on land belonging to it. A photograph of one of these steel
towers is attached to the petition for review, marked Annex A. Three steel towers were
inspected by the lower court and parties and the following were the descriptions given
there of by said court:
The first steel tower is located in South Tatalon, España Extension, Quezon City.
The findings were as follows: the ground around one of the four posts was
excavated to a depth of about eight (8) feet, with an opening of about one (1)
meter in diameter, decreased to about a quarter of a meter as it we deeper until it
reached the bottom of the post; at the bottom of the post were two parallel steel
bars attached to the leg means of bolts; the tower proper was attached to the leg
three bolts; with two cross metals to prevent mobility; there was no concrete
foundation but there was adobe stone underneath; as the bottom of the
excavation was covered with water about three inches high, it could not be
determined with certainty to whether said adobe stone was placed purposely or
not, as the place abounds with this kind of stone; and the tower carried five high
voltage wires without cover or any insulating materials.
The second tower inspected was located in Kamuning Road, K-F, Quezon City,
on land owned by the petitioner approximate more than one kilometer from the
first tower. As in the first tower, the ground around one of the four legs was
10
 excavate from seven to eight (8) feet deep and one and a half (1-½) meters wide.
There being very little water at the bottom, it was seen that there was no
concrete foundation, but there soft adobe beneath. The leg was likewise provided
with two parallel steel bars bolted to a square metal frame also bolted to each
corner. Like the first one, the second tower is made up of metal rods joined
together by means of bolts, so that by unscrewing the bolts, the tower could be
dismantled and reassembled.
The third tower examined is located along Kamias Road, Quezon City. As in the
first two towers given above, the ground around the two legs of the third tower
was excavated to a depth about two or three inches beyond the outside level of
the steel bar foundation. It was found that there was no concrete foundation. Like
the two previous ones, the bottom arrangement of the legs thereof were found to
be resting on soft adobe, which, probably due to high humidity, looks like mud or
clay. It was also found that the square metal frame supporting the legs were not
attached to any material or foundation.
On November 15, 1955, petitioner City Assessor of Quezon City declared the aforesaid
steel towers for real property tax under Tax declaration Nos. 31992 and 15549. After
denying respondent's petition to cancel these declarations, an appeal was taken by
respondent to the Board of Assessment Appeals of Quezon City, which required
respondent to pay the amount of P11,651.86 as real property tax on the said steel towers
for the years 1952 to 1956. Respondent paid the amount under protest, and filed a
petition for review in the Court of Tax Appeals (CTA for short) which rendered a decision
on December 29, 1958, ordering the cancellation of the said tax declarations and the
petitioner City Treasurer of Quezon City to refund to the respondent the sum of
P11,651.86. The motion for reconsideration having been denied, on April 22, 1959, the
instant petition for review was filed.
In upholding the cause of respondents, the CTA held that: (1) the steel towers come
within the term "poles" which are declared exempt from taxes under part II paragraph 9
of respondent's franchise; (2) the steel towers are personal properties and are not
subject to real property tax; and (3) the City Treasurer of Quezon City is held responsible
for the refund of the amount paid. These are assigned as errors by the petitioner in the
brief.
The tax exemption privilege of the petitioner is quoted hereunder:
PAR 9. The grantee shall be liable to pay the same taxes upon its real estate,
buildings, plant (not including poles, wires, transformers, and insulators),
machinery and personal property as other persons are or may be hereafter
required by law to pay ... Said percentage shall be due and payable at the time
stated in paragraph nineteen of Part One hereof, ... and shall be in lieu of all
taxes and assessments of whatsoever nature and by whatsoever authority upon
the privileges, earnings, income, franchise, and poles, wires, transformers, and
insulators of the grantee from which taxes and assessments the grantee is
hereby expressly exempted. (Par. 9, Part Two, Act No. 484 Respondent's
Franchise; emphasis supplied.)
The word "pole" means "a long, comparatively slender usually cylindrical piece of wood
or timber, as typically the stem of a small tree stripped of its branches; also by extension,
a similar typically cylindrical piece or object of metal or the like". The term also refers to
"an upright standard to the top of which something is affixed or by which something is
supported; as a dovecote set on a pole; telegraph poles; a tent pole; sometimes,
specifically a vessel's master (Webster's New International Dictionary 2nd Ed., p. 1907.)
Along the streets, in the City of Manila, may be seen cylindrical metal poles, cubical
concrete poles, and poles of the PLDT Co. which are made of two steel bars joined
together by an interlacing metal rod. They are called "poles" notwithstanding the fact that
they are no made of wood. It must be noted from paragraph 9, above quoted, that the
concept of the "poles" for which exemption is granted, is not determined by their place or
location, nor by the character of the electric current it carries, nor the material or form of
which it is made, but the use to which they are dedicated. In accordance with the
definitions, pole is not restricted to a long cylindrical piece of wood or metal, but includes
"upright standards to the top of which something is affixed or by which something is
supported. As heretofore described, respondent's steel supports consists of a framework
of four steel bars or strips which are bound by steel cross-arms atop of which are cross-
arms supporting five high voltage transmission wires (See Annex A) and their sole
function is to support or carry such wires.
The conclusion of the CTA that the steel supports in question are embraced in the term
"poles" is not a novelty. Several courts of last resort in the United States have called
these steel supports "steel towers", and they denominated these supports or towers, as
electric poles. In their decisions the words "towers" and "poles" were used
interchangeably, and it is well understood in that jurisdiction that a transmission tower or
pole means the same thing.
In a proceeding to condemn land for the use of electric power wires, in which the law
provided that wires shall be constructed upon suitable poles, this term was construed to
mean either wood or metal poles and in view of the land being subject to overflow, and
the necessary carrying of numerous wires and the distance between poles, the statute
was interpreted to include towers or poles. (Stemmons and Dallas Light Co. (Tex) 212
S.W. 222, 224; 32-A Words and Phrases, p. 365.)
11
The term "poles" was also used to denominate the steel supports or towers used by an
association used to convey its electric power furnished to subscribers and members,
constructed for the purpose of fastening high voltage and dangerous electric wires
alongside public highways. The steel supports or towers were made of iron or other
metals consisting of two pieces running from the ground up some thirty feet high, being
wider at the bottom than at the top, the said two metal pieces being connected with criss-
cross iron running from the bottom to the top, constructed like ladders and loaded with
high voltage electricity. In form and structure, they are like the steel towers in question.
(Salt River Valley Users' Ass'n v. Compton, 8 P. 2nd, 249-250.)
The term "poles" was used to denote the steel towers of an electric company engaged in
the generation of hydro-electric power generated from its plant to the Tower of Oxford
and City of Waterbury. These steel towers are about 15 feet square at the base and
extended to a height of about 35 feet to a point, and are embedded in the cement
foundations sunk in the earth, the top of which extends above the surface of the soil in
the tower of Oxford, and to the towers are attached insulators, arms, and other
equipment capable of carrying wires for the transmission of electric power (Connecticut
Light and Power Co. v. Oxford, 101 Conn. 383, 126 Atl. p. 1).
In a case, the defendant admitted that the structure on which a certain person met his
death was built for the purpose of supporting a transmission wire used for carrying high-
tension electric power, but claimed that the steel towers on which it is carried were so
large that their wire took their structure out of the definition of a pole line. It was held that
in defining the word pole, one should not be governed by the wire or material of the
support used, but was considering the danger from any elevated wire carrying electric
current, and that regardless of the size or material wire of its individual members, any
continuous series of structures intended and used solely or primarily for the purpose of
supporting wires carrying electric currents is a pole line (Inspiration Consolidation Cooper
Co. v. Bryan 252 P. 1016).
It is evident, therefore, that the word "poles", as used in Act No. 484 and incorporated in
the petitioner's franchise, should not be given a restrictive and narrow interpretation, as
to defeat the very object for which the franchise was granted. The poles as contemplated
thereon, should be understood and taken as a part of the electric power system of the
respondent Meralco, for the conveyance of electric current from the source thereof to its
consumers. If the respondent would be required to employ "wooden poles", or "rounded
poles" as it used to do fifty years back, then one should admit that the Philippines is one
century behind the age of space. It should also be conceded by now that steel towers,
like the ones in question, for obvious reasons, can better effectuate the purpose for
which the respondent's franchise was granted.
Granting for the purpose of argument that the steel supports or towers in question are
not embraced within the term poles, the logical question posited is whether they
constitute real properties, so that they can be subject to a real property tax. The tax law
does not provide for a definition of real property; but Article 415 of the Civil Code does,
by stating the following are immovable property:
(1) Land, buildings, roads, and constructions of all kinds adhered to the soil;
xxx xxx xxx
(3) Everything attached to an immovable in a fixed manner, in such a way that it
cannot be separated therefrom without breaking the material or deterioration of
the object;
xxx xxx xxx
(5) Machinery, receptacles, instruments or implements intended by the owner of
the tenement for an industry or works which may be carried in a building or on a
piece of land, and which tends directly to meet the needs of the said industry or
works;
xxx xxx xxx
The steel towers or supports in question, do not come within the objects mentioned in
paragraph 1, because they do not constitute buildings or constructions adhered to the
soil. They are not construction analogous to buildings nor adhering to the soil. As per
description, given by the lower court, they are removable and merely attached to a
square metal frame by means of bolts, which when unscrewed could easily be
dismantled and moved from place to place. They can not be included under paragraph 3,
as they are not attached to an immovable in a fixed manner, and they can be separated
without breaking the material or causing deterioration upon the object to which they are
attached. Each of these steel towers or supports consists of steel bars or metal strips,
joined together by means of bolts, which can be disassembled by unscrewing the bolts
and reassembled by screwing the same. These steel towers or supports do not also fall
under paragraph 5, for they are not machineries, receptacles, instruments or implements,
and even if they were, they are not intended for industry or works on the land. Petitioner
is not engaged in an industry or works in the land in which the steel supports or towers
are constructed.
It is finally contended that the CTA erred in ordering the City Treasurer of Quezon City to
refund the sum of P11,651.86, despite the fact that Quezon City is not a party to the
12
case. It is argued that as the City Treasurer is not the real party in interest, but Quezon
City, which was not a party to the suit, notwithstanding its capacity to sue and be sued,
he should not be ordered to effect the refund. This question has not been raised in the
court below, and, therefore, it cannot be properly raised for the first time on appeal. The
herein petitioner is indulging in legal technicalities and niceties which do not help him
any; for factually, it was he (City Treasurer) whom had insisted that respondent herein
pay the real estate taxes, which respondent paid under protest. Having acted in his
official capacity as City Treasurer of Quezon City, he would surely know what to do,
under the circumstances.
IN VIEW HEREOF, the decision appealed from is hereby affirmed, with costs against the
petitioners.
G.R. No. L-30173 September 30, 1971
TUMALAD vs. VICENCIO
Case certified to this Court by the Court of Appeals (CA-G.R. No. 27824-R) for the
reason that only questions of law are involved.
This case was originally commenced by defendants-appellants in the municipal court of
Manila in Civil Case No. 43073, for ejectment. Having lost therein, defendants-appellants
appealed to the court a quo (Civil Case No. 30993) which also rendered a decision
against them, the dispositive portion of which follows:
WHEREFORE, the court hereby renders judgment in favor of the
plaintiffs and against the defendants, ordering the latter to pay jointly and
severally the former a monthly rent of P200.00 on the house, subject-
matter of this action, from March 27, 1956, to January 14, 1967, with
interest at the legal rate from April 18, 1956, the filing of the complaint,
until fully paid, plus attorney's fees in the sum of P300.00 and to pay the
costs.
It appears on the records that on 1 September 1955 defendants-appellants executed a
chattel mortgage in favor of plaintiffs-appellees over their house of strong materials
located at No. 550 Int. 3, Quezon Boulevard, Quiapo, Manila, over Lot Nos. 6-B and 7-B,
Block No. 2554, which were being rented from Madrigal & Company, Inc. The mortgage
was registered in the Registry of Deeds of Manila on 2 September 1955. The herein
mortgage was executed to guarantee a loan of P4,800.00 received from plaintiffs-
appellees, payable within one year at 12% per annum. The mode of payment was
P150.00 monthly, starting September, 1955, up to July 1956, and the lump sum of
P3,150 was payable on or before August, 1956. It was also agreed that default in the
payment of any of the amortizations, would cause the remaining unpaid balance to
becomeimmediately due and Payable and —
the Chattel Mortgage will be enforceable in accordance with the
provisions of Special Act No. 3135, and for this purpose, the Sheriff of the
City of Manila or any of his deputies is hereby empowered and authorized
to sell all the Mortgagor's property after the necessary publication in order
to settle the financial debts of P4,800.00, plus 12% yearly interest, and
attorney's fees... 2
When defendants-appellants defaulted in paying, the mortgage was extrajudicially
foreclosed, and on 27 March 1956, the house was sold at public auction pursuant to the
said contract. As highest bidder, plaintiffs-appellees were issued the corresponding
certificate of sale. 3 Thereafter, on 18 April 1956, plaintiffs-appellant commenced Civil Case
No. 43073 in the municipal court of Manila, praying, among other things, that the house be
vacated and its possession surrendered to them, and for defendants-appellants to pay rent of
P200.00 monthly from 27 March 1956 up to the time the possession is surrendered. 4 On 21
September 1956, the municipal court rendered its decision —
... ordering the defendants to vacate the premises described in the
complaint; ordering further to pay monthly the amount of P200.00 from
March 27, 1956, until such (time that) the premises is (sic) completely
vacated; plus attorney's fees of P100.00 and the costs of the suit. 5
Defendants-appellants, in their answers in both the municipal court and court a
quo impugned the legality of the chattel mortgage, claiming that they are still the owners
of the house; but they waived the right to introduce evidence, oral or documentary.
Instead, they relied on their memoranda in support of their motion to dismiss, predicated
mainly on the grounds that: (a) the municipal court did not have jurisdiction to try and
decide the case because (1) the issue involved, is ownership, and (2) there was no
allegation of prior possession; and (b) failure to prove prior demand pursuant to Section
2, Rule 72, of the Rules of Court. 6
During the pendency of the appeal to the Court of First Instance, defendants-appellants
failed to deposit the rent for November, 1956 within the first 10 days of December, 1956
as ordered in the decision of the municipal court. As a result, the court granted plaintiffs-
appellees' motion for execution, and it was actually issued on 24 January 1957.
However, the judgment regarding the surrender of possession to plaintiffs-appellees
could not be executed because the subject house had been already demolished on 14
January 1957 pursuant to the order of the court in a separate civil case (No. 25816) for
13
ejectment against the present defendants for non-payment of rentals on the land on
which the house was constructed.
The motion of plaintiffs for dismissal of the appeal, execution of the supersedeas bond
and withdrawal of deposited rentals was denied for the reason that the liability therefor
was disclaimed and was still being litigated, and under Section 8, Rule 72, rentals
deposited had to be held until final disposition of the appeal. 7
On 7 October 1957, the appellate court of First Instance rendered its decision, the
dispositive portion of which is quoted earlier. The said decision was appealed by
defendants to the Court of Appeals which, in turn, certified the appeal to this Court.
Plaintiffs-appellees failed to file a brief and this appeal was submitted for decision without
it.
Defendants-appellants submitted numerous assignments of error which can be
condensed into two questions, namely: .
(a) Whether the municipal court from which the case originated had
jurisdiction to adjudicate the same;
(b) Whether the defendants are, under the law, legally bound to pay
rentals to the plaintiffs during the period of one (1) year provided by law
for the redemption of the extrajudicially foreclosed house.
We will consider these questions seriatim.
(a) Defendants-appellants mortgagors question the jurisdiction of the municipal court
from which the case originated, and consequently, the appellate jurisdiction of the Court
of First Instance a quo, on the theory that the chattel mortgage is void ab initio; whence it
would follow that the extrajudicial foreclosure, and necessarily the consequent auction
sale, are also void. Thus, the ownership of the house still remained with defendants-
appellants who are entitled to possession and not plaintiffs-appellees. Therefore, it is
argued by defendants-appellants, the issue of ownership will have to be adjudicated first
in order to determine possession. lt is contended further that ownership being in issue, it
is the Court of First Instance which has jurisdiction and not the municipal court.
Defendants-appellants predicate their theory of nullity of the chattel mortgage on two
grounds, which are: (a) that, their signatures on the chattel mortgage were obtained
through fraud, deceit, or trickery; and (b) that the subject matter of the mortgage is a
house of strong materials, and, being an immovable, it can only be the subject of a real
estate mortgage and not a chattel mortgage.
On the charge of fraud, deceit or trickery, the Court of First Instance found defendants-
appellants' contentions as not supported by evidence and accordingly dismissed the
charge, 8 confirming the earlier finding of the municipal court that "the defense of ownership
as well as the allegations of fraud and deceit ... are mere allegations." 9
It has been held in Supia and Batiaco vs. Quintero and Ayala 10 that "the answer is a mere
statement of the facts which the party filing it expects to prove, but it is not evidence; 11 and
further, that when the question to be determined is one of title, the Court is given the authority
to proceed with the hearing of the cause until this fact is clearly established. In the case of Sy
vs. Dalman, 12 wherein the defendant was also a successful bidder in an auction sale, it was
likewise held by this Court that in detainer cases the aim of ownership "is a matter of defense
and raises an issue of fact which should be determined from the evidence at the trial." What
determines jurisdiction are the allegations or averments in the complaint and the relief asked
for. 13
Moreover, even granting that the charge is true, fraud or deceit does not render a
contract void ab initio, and can only be a ground for rendering the contract voidable or
annullable pursuant to Article 1390 of the New Civil Code, by a proper action in
court. 14 There is nothing on record to show that the mortgage has been annulled. Neither is it
disclosed that steps were taken to nullify the same. Hence, defendants-appellants' claim of
ownership on the basis of a voidable contract which has not been voided fails.
It is claimed in the alternative by defendants-appellants that even if there was no fraud,
deceit or trickery, the chattel mortgage was still null and void ab initio because only
personal properties can be subject of a chattel mortgage. The rule about the status of
buildings as immovable property is stated in Lopez vs. Orosa, Jr. and Plaza Theatre
Inc., 15 cited in Associated Insurance Surety Co., Inc. vs. Iya, et al. 16 to the effect that —
... it is obvious that the inclusion of the building, separate and distinct
from the land, in the enumeration of what may constitute real properties
(art. 415, New Civil Code) could only mean one thing — that a building is
by itself an immovable property irrespective of whether or not said
structure and the land on which it is adhered to belong to the same
owner.
Certain deviations, however, have been allowed for various reasons. In the case
of Manarang and Manarang vs. Ofilada, 17 this Court stated that "it is undeniable that the
parties to a contract may by agreement treat as personal property that which by nature would
be real property", citing Standard Oil Company of New York vs. Jaramillo. 18 In the latter case,
the mortgagor conveyed and transferred to the mortgagee by way of mortgage "the following
described personal property."19 The "personal property" consisted of leasehold rights and a
building. Again, in the case of Luna vs. Encarnacion, 20 the subject of the contract designated
14
as Chattel Mortgage was a house of mixed materials, and this Court hold therein that it was a
valid Chattel mortgage because it was so expressly designated and specifically that the
property given as security "is a house of mixed materials, which by its very nature is
considered personal property." In the later case of Navarro vs. Pineda, 21 this Court stated
that —
The view that parties to a deed of chattel mortgage may agree to
consider a house as personal property for the purposes of said contract,
"is good only insofar as the contracting parties are concerned. It is based,
partly, upon the principle of estoppel" (Evangelista vs. Alto Surety, No. L-
11139, 23 April 1958). In a case, a mortgaged house built on a rented
land was held to be a personal property, not only because the deed of
mortgage considered it as such, but also because it did not form part of
the land (Evangelists vs. Abad, [CA]; 36 O.G. 2913), for it is now settled
that an object placed on land by one who had only a temporary right to
the same, such as the lessee or usufructuary, does not become
immobilized by attachment (Valdez vs. Central Altagracia, 222 U.S. 58,
cited in Davao Sawmill Co., Inc. vs. Castillo, et al., 61 Phil. 709). Hence, if
a house belonging to a person stands on a rented land belonging to
another person, it may be mortgaged as a personal property as so
stipulated in the document of mortgage. (Evangelista vs. Abad, Supra.) It
should be noted, however that the principle is predicated on statements
by the owner declaring his house to be a chattel, a conduct that may
conceivably estop him from subsequently claiming otherwise. (Ladera vs.
C.N. Hodges, [CA] 48 O.G. 5374): 22
In the contract now before Us, the house on rented land is not only expressly designated
as Chattel Mortgage; it specifically provides that "the mortgagor ... voluntarily CEDES,
SELLS and TRANSFERS by way of Chattel Mortgage 23 the property together with its
leasehold rights over the lot on which it is constructed and participation ..." 24Although there is
no specific statement referring to the subject house as personal property, yet by ceding,
selling or transferring a property by way of chattel mortgage defendants-appellants could only
have meant to convey the house as chattel, or at least, intended to treat the same as such,
so that they should not now be allowed to make an inconsistent stand by claiming otherwise.
Moreover, the subject house stood on a rented lot to which defendats-appellants merely had
a temporary right as lessee, and although this can not in itself alone determine the status of
the property, it does so when combined with other factors to sustain the interpretation that the
parties, particularly the mortgagors, intended to treat the house as personalty. Finally unlike
in the Iya cases, Lopez vs. Orosa, Jr. and Plaza Theatre, Inc. 25 and Leung Yee vs. F. L.
Strong Machinery and Williamson, 26 wherein third persons assailed the validity of the chattel
mortgage, 27 it is the defendants-appellants themselves, as debtors-mortgagors, who are
attacking the validity of the chattel mortgage in this case. The doctrine of estoppel therefore
applies to the herein defendants-appellants, having treated the subject house as personalty.
(b) Turning to the question of possession and rentals of the premises in question. The
Court of First Instance noted in its decision that nearly a year after the foreclosure sale
the mortgaged house had been demolished on 14 and 15 January 1957 by virtue of a
decision obtained by the lessor of the land on which the house stood. For this reason,
the said court limited itself to sentencing the erstwhile mortgagors to pay plaintiffs a
monthly rent of P200.00 from 27 March 1956 (when the chattel mortgage was foreclosed
and the house sold) until 14 January 1957 (when it was torn down by the Sheriff), plus
P300.00 attorney's fees.
Appellants mortgagors question this award, claiming that they were entitled to remain in
possession without any obligation to pay rent during the one year redemption period after
the foreclosure sale, i.e., until 27 March 1957. On this issue, We must rule for the
appellants.
Chattel mortgages are covered and regulated by the Chattel Mortgage Law, Act No.
1508. 28 Section 14 of this Act allows the mortgagee to have the property mortgaged sold at
public auction through a public officer in almost the same manner as that allowed by Act No.
3135, as amended by Act No. 4118, provided that the requirements of the law relative to
notice and registration are complied with. 29 In the instant case, the parties specifically
stipulated that "the chattel mortgage will be enforceable in accordance with the provisions of
Special Act No. 3135 ... ." 30 (Emphasis supplied).
Section 6 of the Act referred to 31 provides that the debtor-mortgagor (defendants-appellants
herein) may, at any time within one year from and after the date of the auction sale, redeem
the property sold at the extra judicial foreclosure sale. Section 7 of the same Act 32 allows the
purchaser of the property to obtain from the court the possession during the period of
redemption: but the same provision expressly requires the filing of a petition with the proper
Court of First Instance and the furnishing of a bond. It is only upon filing of the proper motion
and the approval of the corresponding bond that the order for a writ of possession issues as a
matter of course. No discretion is left to the court. 33 In the absence of such a compliance, as
in the instant case, the purchaser can not claim possession during the period of redemption
as a matter of right. In such a case, the governing provision is Section 34, Rule 39, of the
Revised Rules of Court 34 which also applies to properties purchased in extrajudicial
foreclosure proceedings. 35 Construing the said section, this Court stated in the aforestated
case of Reyes vs. Hamada.
In other words, before the expiration of the 1-year period within which the
judgment-debtor or mortgagor may redeem the property, the purchaser
thereof is not entitled, as a matter of right, to possession of the same.
Thus, while it is true that the Rules of Court allow the purchaser to
receive the rentals if the purchased property is occupied by tenants, he
is, nevertheless, accountable to the judgment-debtor or mortgagor as the
15
 case may be, for the amount so received and the same will be duly
credited against the redemption price when the said debtor or mortgagor
effects the redemption.Differently stated, the rentals receivable from
tenants, although they may be collected by the purchaser during the
redemption period, do not belong to the latter but still pertain to the
debtor of mortgagor. The rationale for the Rule, it seems, is to secure for
the benefit of the debtor or mortgagor, the payment of the redemption
amount and the consequent return to him of his properties sold at public
auction. (Emphasis supplied)
The Hamada case reiterates the previous ruling in Chan vs. Espe. 36
Since the defendants-appellants were occupying the house at the time of the auction
sale, they are entitled to remain in possession during the period of redemption or within
one year from and after 27 March 1956, the date of the auction sale, and to collect the
rents or profits during the said period.
It will be noted further that in the case at bar the period of redemption had not yet expired
when action was instituted in the court of origin, and that plaintiffs-appellees did not
choose to take possession under Section 7, Act No. 3135, as amended, which is the law
selected by the parties to govern the extrajudicial foreclosure of the chattel mortgage.
Neither was there an allegation to that effect. Since plaintiffs-appellees' right to possess
was not yet born at the filing of the complaint, there could be no violation or breach
thereof. Wherefore, the original complaint stated no cause of action and was prematurely
filed. For this reason, the same should be ordered dismissed, even if there was no
assignment of error to that effect. The Supreme Court is clothed with ample authority to
review palpable errors not assigned as such if it finds that their consideration is
necessary in arriving at a just decision of the cases. 37
It follows that the court below erred in requiring the mortgagors to pay rents for the year
following the foreclosure sale, as well as attorney's fees.
FOR THE FOREGOING REASONS, the decision appealed from is reversed and another
one entered, dismissing the complaint. With costs against plaintiffs-appellees.
G.R. No. L-55729 March 28, 1983
PUNSALAN vs. VDA. LACSAMANA
The sole issue presented by petitioner for resolution is whether or not respondent Court
erred in denying the Motion to Set Case for Pre-trial with respect to respondent
Remedios Vda. de Lacsamana as the case had been dismissed on the ground of
improper venue upon motion of co-respondent Philippine National Bank (PNB).
It appears that petitioner, Antonio Punsalan, Jr., was the former registered owner of a
parcel of land consisting of 340 square meters situated in Bamban, Tarlac. In 1963,
petitioner mortgaged said land to respondent PNB (Tarlac Branch) in the amount of
P10,000.00, but for failure to pay said amount, the property was foreclosed on December
16, 1970. Respondent PNB (Tarlac Branch) was the highest bidder in said foreclosure
proceedings. However, the bank secured title thereto only on December 14, 1977.
In the meantime, in 1974, while the properly was still in the alleged possession of
petitioner and with the alleged acquiescence of respondent PNB (Tarlac Branch), and
upon securing a permit from the Municipal Mayor, petitioner constructed a warehouse on
said property. Petitioner declared said warehouse for tax purposes for which he was
issued Tax Declaration No. 5619. Petitioner then leased the warehouse to one
Hermogenes Sibal for a period of 10 years starting January 1975.
On July 26, 1978, a Deed of Sale was executed between respondent PNB (Tarlac
Branch) and respondent Lacsamana over the property. This contract was amended on
July 31, 1978, particularly to include in the sale, the building and improvement thereon.
By virtue of said instruments, respondent - Lacsamana secured title over the property in
her name (TCT No. 173744) as well as separate tax declarations for the land and
building. 1
On November 22, 1979, petitioner commenced suit for "Annulment of Deed of Sale with
Damages" against herein respondents PNB and Lacsamana before respondent Court of
First Instance of Rizal, Branch XXXI, Quezon City, essentially impugning the validity of
the sale of the building as embodied in the Amended Deed of Sale. In this connection,
petitioner alleged:
xxx xxx xxx
22. That defendant, Philippine National Bank, through its Branch
Manager ... by virtue of the request of defendant ... executed a document
dated July 31, 1978, entitled Amendment to Deed of Absolute Sale ...
wherein said defendant bank as Vendor sold to defendant Lacsamana
the building owned by the plaintiff under Tax Declaration No. 5619,
notwithstanding the fact that said building is not owned by the bank either
by virtue of the public auction sale conducted by the Sheriff and sold to
the Philippine National Bank or by virtue of the Deed of Sale executed by
the bank itself in its favor on September 21, 1977 ...;
16
 23. That said defendant bank fraudulently mentioned ... that the sale in its
favor should likewise have included the building, notwithstanding no legal
basis for the same and despite full knowledge that the Certificate of Sale
executed by the sheriff in its favor ... only limited the sale to the land,
hence, by selling the building which never became the property of
defendant, they have violated the principle against 'pactum
commisorium'.
Petitioner prayed that the Deed of Sale of the building in favor of respondent Lacsamana
be declared null and void and that damages in the total sum of P230,000.00, more or
less, be awarded to him. 2
In her Answer filed on March 4, 1980,-respondent Lacsamana averred the affirmative
defense of lack of cause of action in that she was a purchaser for value and invoked the
principle in Civil Law that the "accessory follows the principal". 3
On March 14, 1980, respondent PNB filed a Motion to Dismiss on the ground that venue
was improperly laid considering that the building was real property under article 415 (1)
of the New Civil Code and therefore section 2(a) of Rule 4 should apply. 4
Opposing said Motion to Dismiss, petitioner contended that the action for annulment of
deed of sale with damages is in the nature of a personal action, which seeks to recover
not the title nor possession of the property but to compel payment of damages, which is
not an action affecting title to real property.
On April 25, 1980, respondent Court granted respondent PNB's Motion to Dismiss as
follows:
Acting upon the 'Motion to Dismiss' of the defendant Philippine National
Bank dated March 13, 1980, considered against the plaintiff's opposition
thereto dated April 1, 1980, including the reply therewith of said
defendant, this Court resolves to DISMISS the plaintiff's complaint for
improper venue considering that the plaintiff's complaint which seeks for
the declaration as null and void, the amendment to Deed of Absolute
Sale executed by the defendant Philippine National Bank in favor of the
defendant Remedios T. Vda. de Lacsamana, on July 31, 1978, involves a
warehouse allegedly owned and constructed by the plaintiff on the land of
the defendant Philippine National Bank situated in the Municipality of
Bamban, Province of Tarlac, which warehouse is an immovable property
pursuant to Article 415, No. 1 of the New Civil Code; and, as such the
action of the plaintiff is a real action affecting title to real property which,
under Section 2, Rule 4 of the New Rules of Court, must be tried in the
province where the property or any part thereof lies. 5
In his Motion for Reconsideration of the aforestated Order, petitioner reiterated the
argument that the action to annul does not involve ownership or title to property but is
limited to the validity of the deed of sale and emphasized that the case should proceed
with or without respondent PNB as respondent Lacsamana had already filed her Answer
to the Complaint and no issue on venue had been raised by the latter.
On September 1, 1980,.respondent Court denied reconsideration for lack of merit.
Petitioner then filed a Motion to Set Case for Pre-trial, in so far as respondent
Lacsamana was concerned, as the issues had already been joined with the filing of
respondent Lacsamana's Answer.
In the Order of November 10, 1980 respondent Court denied said Motion to Set Case for
Pre-trial as the case was already dismissed in the previous Orders of April 25, 1980 and
September 1, 1980.
Hence, this Petition for Certiorari, to which we gave due course.
We affirm respondent Court's Order denying the setting for pre-trial.
The warehouse claimed to be owned by petitioner is an immovable or real property as
provided in article 415(l) of the Civil Code. 6 Buildings are always immovable under the
Code. 7 A building treated separately from the land on which it stood is immovable property
and the mere fact that the parties to a contract seem to have dealt with it separate and apart
from the land on which it stood in no wise changed its character as immovable property. 8
While it is true that petitioner does not directly seek the recovery of title or possession of
the property in question, his action for annulment of sale and his claim for damages are
closely intertwined with the issue of ownership of the building which, under the law, is
considered immovable property, the recovery of which is petitioner's primary objective.
The prevalent doctrine is that an action for the annulment or rescission of a sale of real
property does not operate to efface the fundamental and prime objective and nature of
the case, which is to recover said real property. It is a real action. 9
Respondent Court, therefore, did not err in dismissing the case on the ground of
improper venue (Section 2, Rule 4) 10, which was timely raised (Section 1, Rule 16) 11.
17
Petitioner's other contention that the case should proceed in so far as respondent
Lacsamana is concerned as she had already filed an Answer, which did not allege
improper venue and, therefore, issues had already been joined, is likewise untenable.
Respondent PNB is an indispensable party as the validity of the Amended Contract of
Sale between the former and respondent Lacsamana is in issue. It would, indeed, be
futile to proceed with the case against respondent Lacsamana alone.
WHEREFORE, the petition is hereby denied without prejudice to the refiling of the case
by petitioner Antonio Punsalan, Jr. in the proper forum.
Costs against petitioner.
SO ORDERED.
G.R. No. L-47943 May 31, 1982
MERALCO vs. CENTRAL BOARD OF ASSESSMENT APPEALS
This case is about the imposition of the realty tax on two oil storage tanks installed in
1969 by Manila Electric Company on a lot in San Pascual, Batangas which it leased in
1968 from Caltex (Phil.), Inc. The tanks are within the Caltex refinery compound. They
have a total capacity of 566,000 barrels. They are used for storing fuel oil for Meralco's
power plants.
According to Meralco, the storage tanks are made of steel plates welded and assembled
on the spot. Their bottoms rest on a foundation consisting of compacted earth as the
outermost layer, a sand pad as the intermediate layer and a two-inch thick bituminous
asphalt stratum as the top layer. The bottom of each tank is in contact with the asphalt
layer,
The steel sides of the tank are directly supported underneath by a circular wall made of
concrete, eighteen inches thick, to prevent the tank from sliding. Hence, according to
Meralco, the tank is not attached to its foundation. It is not anchored or welded to the
concrete circular wall. Its bottom plate is not attached to any part of the foundation by
bolts, screws or similar devices. The tank merely sits on its foundation. Each empty tank
can be floated by flooding its dike-inclosed location with water four feet deep. (pp. 29-30,
Rollo.)
On the other hand, according to the hearing commissioners of the Central Board of
Assessment Appeals, the area where the two tanks are located is enclosed with earthen
dikes with electric steel poles on top thereof and is divided into two parts as the site of
each tank. The foundation of the tanks is elevated from the remaining area. On both
sides of the earthen dikes are two separate concrete steps leading to the foundation of
each tank.
Tank No. 2 is supported by a concrete foundation with an asphalt lining about an inch
thick. Pipelines were installed on the sides of each tank and are connected to the
pipelines of the Manila Enterprises Industrial Corporation whose buildings and pumping
station are near Tank No. 2.
The Board concludes that while the tanks rest or sit on their foundation, the foundation
itself and the walls, dikes and steps, which are integral parts of the tanks, are affixed to
the land while the pipelines are attached to the tanks. (pp. 60-61, Rollo.) In 1970, the
municipal treasurer of Bauan, Batangas, on the basis of an assessment made by the
provincial assessor, required Meralco to pay realty taxes on the two tanks. For the five-
year period from 1970 to 1974, the tax and penalties amounted to P431,703.96 (p. 27,
Rollo). The Board required Meralco to pay the tax and penalties as a condition for
entertaining its appeal from the adverse decision of the Batangas board of assessment
appeals.
The Central Board of Assessment Appeals (composed of Acting Secretary of Finance
Pedro M. Almanzor as chairman and Secretary of Justice Vicente Abad Santos and
Secretary of Local Government and Community Development Jose Roño as members)
in its decision dated November 5, 1976 ruled that the tanks together with the foundation,
walls, dikes, steps, pipelines and other appurtenances constitute taxable improvements.
Meralco received a copy of that decision on February 28, 1977. On the fifteenth day, it
filed a motion for reconsideration which the Board denied in its resolution of November
25, 1977, a copy of which was received by Meralco on February 28, 1978.
On March 15, 1978, Meralco filed this special civil action of certiorari to annul the Board's
decision and resolution. It contends that the Board acted without jurisdiction and
committed a grave error of law in holding that its storage tanks are taxable real property.
Meralco contends that the said oil storage tanks do not fall within any of the kinds of real
property enumerated in article 415 of the Civil Code and, therefore, they cannot be
categorized as realty by nature, by incorporation, by destination nor by analogy. Stress is
laid on the fact that the tanks are not attached to the land and that they were placed on
leased land, not on the land owned by Meralco.
This is one of those highly controversial, borderline or penumbral cases on the
classification of property where strong divergent opinions are inevitable. The issue raised
by Meralco has to be resolved in the light of the provisions of the Assessment Law,
18
Commonwealth Act No. 470, and the Real Property Tax Code, Presidential Decree No.
464 which took effect on June 1, 1974.
Section 2 of the Assessment Law provides that the realty tax is due "on real property,
including land, buildings, machinery, and other improvements" not specifically exempted
in section 3 thereof. This provision is reproduced with some modification in the Real
Property Tax Code which provides:
Sec. 38. Incidence of Real Property Tax. — They shall be levied,
assessed and collected in all provinces, cities and municipalities an
annual ad valorem tax on real property, such as land, buildings,
machinery and other improvements affixed or attached to real property
not hereinafter specifically exempted.
The Code contains the following definition in its section 3:
k) Improvements — is a valuable addition made to property or an
amelioration in its condition, amounting to more than mere repairs or
replacement of waste, costing labor or capital and intended to enhance
its value, beauty or utility or to adapt it for new or further purposes.
We hold that while the two storage tanks are not embedded in the land, they may,
nevertheless, be considered as improvements on the land, enhancing its utility and
rendering it useful to the oil industry. It is undeniable that the two tanks have been
installed with some degree of permanence as receptacles for the considerable quantities
of oil needed by Meralco for its operations.
Oil storage tanks were held to be taxable realty in Standard Oil Co. of New Jersey vs.
Atlantic City, 15 Atl. 2nd 271.
For purposes of taxation, the term "real property" may include things which should
generally be regarded as personal property(84 C.J.S. 171, Note 8). It is a familiar
phenomenon to see things classed as real property for purposes of taxation which on
general principle might be considered personal property (Standard Oil Co. of New York
vs. Jaramillo, 44 Phil. 630, 633).
The case of Board of Assessment Appeals vs. Manila Electric Company, 119 Phil. 328,
wherein Meralco's steel towers were held not to be subject to realty tax, is not in point
because in that case the steel towers were regarded as poles and under its franchise
Meralco's poles are exempt from taxation. Moreover, the steel towers were not attached
to any land or building. They were removable from their metal frames.
Nor is there any parallelism between this case and Mindanao Bus Co. vs. City Assessor,
116 Phil. 501, where the tools and equipment in the repair, carpentry and blacksmith
shops of a transportation company were held not subject to realty tax because they were
personal property.
WHEREFORE, the petition is dismissed. The Board's questioned decision and resolution
are affirmed. No costs.
SO ORDERED.
G.R. No. L-50466 May 31, 1982
CALTEX vs. CENTRAL BOARD of ASSESSMENT APPEALS
This case is about the realty tax on machinery and equipment installed by Caltex
(Philippines) Inc. in its gas stations located on leased land.
The machines and equipment consists of underground tanks, elevated tank, elevated
water tanks, water tanks, gasoline pumps, computing pumps, water pumps, car washer,
car hoists, truck hoists, air compressors and tireflators. The city assessor described the
said equipment and machinery in this manner:
A gasoline service station is a piece of lot where a building or shed is
erected, a water tank if there is any is placed in one corner of the lot, car
hoists are placed in an adjacent shed, an air compressor is attached in
the wall of the shed or at the concrete wall fence.
The controversial underground tank, depository of gasoline or crude oil, is
dug deep about six feet more or less, a few meters away from the shed.
This is done to prevent conflagration because gasoline and other
combustible oil are very inflammable.
This underground tank is connected with a steel pipe to the gasoline
pump and the gasoline pump is commonly placed or constructed under
the shed. The footing of the pump is a cement pad and this cement pad is
imbedded in the pavement under the shed, and evidence that the
gasoline underground tank is attached and connected to the shed or
building through the pipe to the pump and the pump is attached and
affixed to the cement pad and pavement covered by the roof of the
building or shed.
19
 The building or shed, the elevated water tank, the car hoist under a
separate shed, the air compressor, the underground gasoline tank, neon
lights signboard, concrete fence and pavement and the lot where they are
all placed or erected, all of them used in the pursuance of the gasoline
service station business formed the entire gasoline service-station.
As to whether the subject properties are attached and affixed to the
tenement, it is clear they are, for the tenement we consider in this
particular case are (is) the pavement covering the entire lot which was
constructed by the owner of the gasoline station and the improvement
which holds all the properties under question, they are attached and
affixed to the pavement and to the improvement.
The pavement covering the entire lot of the gasoline service station, as
well as all the improvements, machines, equipments and apparatus are
allowed by Caltex (Philippines) Inc. ...
The underground gasoline tank is attached to the shed by the steel pipe
to the pump, so with the water tank it is connected also by a steel pipe to
the pavement, then to the electric motor which electric motor is placed
under the shed. So to say that the gasoline pumps, water pumps and
underground tanks are outside of the service station, and to consider only
the building as the service station is grossly erroneous. (pp. 58-60, Rollo).
The said machines and equipment are loaned by Caltex to gas station operators under
an appropriate lease agreement or receipt. It is stipulated in the lease contract that the
operators, upon demand, shall return to Caltex the machines and equipment in good
condition as when received, ordinary wear and tear excepted.
The lessor of the land, where the gas station is located, does not become the owner of
the machines and equipment installed therein. Caltex retains the ownership thereof
during the term of the lease.
The city assessor of Pasay City characterized the said items of gas station equipment
and machinery as taxable realty. The realty tax on said equipment amounts to P4,541.10
annually (p. 52, Rollo). The city board of tax appeals ruled that they are personalty. The
assessor appealed to the Central Board of Assessment Appeals.
The Board, which was composed of Secretary of Finance Cesar Virata as chairman,
Acting Secretary of Justice Catalino Macaraig, Jr. and Secretary of Local Government
and Community Development Jose Roño, held in its decision of June 3, 1977 that the
said machines and equipment are real property within the meaning of sections 3(k) & (m)
and 38 of the Real Property Tax Code, Presidential Decree No. 464, which took effect on
June 1, 1974, and that the definitions of real property and personal property in articles
415 and 416 of the Civil Code are not applicable to this case.
The decision was reiterated by the Board (Minister Vicente Abad Santos took Macaraig's
place) in its resolution of January 12, 1978, denying Caltex's motion for reconsideration,
a copy of which was received by its lawyer on April 2, 1979.
On May 2, 1979 Caltex filed this certiorari petition wherein it prayed for the setting aside
of the Board's decision and for a declaration that t he said machines and equipment are
personal property not subject to realty tax (p. 16, Rollo).
The Solicitor General's contention that the Court of Tax Appeals has exclusive appellate
jurisdiction over this case is not correct. When Republic act No. 1125 created the Tax
Court in 1954, there was as yet no Central Board of Assessment Appeals. Section 7(3)
of that law in providing that the Tax Court had jurisdiction to review by appeal decisions
of provincial or city boards of assessment appeals had in mind the local boards of
assessment appeals but not the Central Board of Assessment Appeals which under the
Real Property Tax Code has appellate jurisdiction over decisions of the said local boards
of assessment appeals and is, therefore, in the same category as the Tax Court.
Section 36 of the Real Property Tax Code provides that the decision of the Central Board
of Assessment Appeals shall become final and executory after the lapse of fifteen days
from the receipt of its decision by the appellant. Within that fifteen-day period, a petition
for reconsideration may be filed. The Code does not provide for the review of the Board's
decision by this Court.
Consequently, the only remedy available for seeking a review by this Court of the
decision of the Central Board of Assessment Appeals is the special civil action of
certiorari, the recourse resorted to herein by Caltex (Philippines), Inc.
The issue is whether the pieces of gas station equipment and machinery already
enumerated are subject to realty tax. This issue has to be resolved primarily under the
provisions of the Assessment Law and the Real Property Tax Code.
Section 2 of the Assessment Law provides that the realty tax is due "on real property,
including land, buildings, machinery, and other improvements" not specifically exempted
in section 3 thereof. This provision is reproduced with some modification in the Real
Property Tax Code which provides:
20
 SEC. 38. Incidence of Real Property Tax.— There shall be levied,
assessed and collected in all provinces, cities and municipalities an
annual ad valorem tax on real property, such as land, buildings,
machinery and other improvements affixed or attached to real property
not hereinafter specifically exempted.
The Code contains the following definitions in its section 3:
k) Improvements — is a valuable addition made to property or an
amelioration in its condition, amounting to more than mere repairs or
replacement of waste, costing labor or capital and intended to enhance
its value, beauty or utility or to adapt it for new or further purposes.
m) Machinery — shall embrace machines, mechanical contrivances,
instruments, appliances and apparatus attached to the real estate. It
includes the physical facilities available for production, as well as the
installations and appurtenant service facilities, together with all other
equipment designed for or essential to its manufacturing, industrial or
agricultural purposes (See sec. 3[f], Assessment Law).
We hold that the said equipment and machinery, as appurtenances to the gas station
building or shed owned by Caltex (as to which it is subject to realty tax) and which
fixtures are necessary to the operation of the gas station, for without them the gas station
would be useless, and which have been attached or affixed permanently to the gas
station site or embedded therein, are taxable improvements and machinery within the
meaning of the Assessment Law and the Real Property Tax Code.
Caltex invokes the rule that machinery which is movable in its nature only becomes
immobilized when placed in a plant by the owner of the property or plant but not when so
placed by a tenant, a usufructuary, or any person having only a temporary right, unless
such person acted as the agent of the owner (Davao Saw Mill Co. vs. Castillo, 61 Phil
709).
That ruling is an interpretation of paragraph 5 of article 415 of the Civil Code regarding
machinery that becomes real property by destination. In the Davao Saw Mills case the
question was whether the machinery mounted on foundations of cement and installed by
the lessee on leased land should be regarded as real property forpurposes of execution
of a judgment against the lessee. The sheriff treated the machinery as personal property.
This Court sustained the sheriff's action. (Compare with Machinery & Engineering
Supplies, Inc. vs. Court of Appeals, 96 Phil. 70, where in a replevin case machinery was
treated as realty).
Here, the question is whether the gas station equipment and machinery permanently
affixed by Caltex to its gas station and pavement (which are indubitably taxable realty)
should be subject to the realty tax. This question is different from the issue raised in
the Davao Saw Mill case.
Improvements on land are commonly taxed as realty even though for some purposes
they might be considered personalty (84 C.J.S. 181-2, Notes 40 and 41). "It is a familiar
phenomenon to see things classed as real property for purposes of taxation which on
general principle might be considered personal property" (Standard Oil Co. of New York
vs. Jaramillo, 44 Phil. 630, 633).
This case is also easily distinguishable from Board of Assessment Appeals vs. Manila
Electric Co., 119 Phil. 328, where Meralco's steel towers were considered poles within
the meaning of paragraph 9 of its franchise which exempts its poles from taxation. The
steel towers were considered personalty because they were attached to square metal
frames by means of bolts and could be moved from place to place when unscrewed and
dismantled.
Nor are Caltex's gas station equipment and machinery the same as tools and equipment
in the repair shop of a bus company which were held to be personal property not subject
to realty tax (Mindanao Bus Co. vs. City Assessor, 116 Phil. 501).
The Central Board of Assessment Appeals did not commit a grave abuse of discretion in
upholding the city assessor's is imposition of the realty tax on Caltex's gas station and
equipment.
WHEREFORE, the questioned decision and resolution of the Central Board of
Assessment Appeals are affirmed. The petition for certiorari is dismissed for lack of
merit. No costs.
SO ORDERED.
G.R. No. L-50008 August 31, 1987
PRUDENTIAL BANK vs. PANIS
This is a petition for review on certiorari of the November 13, 1978 Decision * of the then Court
of First Instance of Zambales and Olongapo City in Civil Case No. 2443-0 entitled "Spouses Fernando A. Magcale and
Teodula Baluyut-Magcale vs. Hon. Ramon Y. Pardo and Prudential Bank" declaring that the deeds of real estate mortgage
executed by respondent spouses in favor of petitioner bank are null and void.
The undisputed facts of this case by stipulation of the parties are as follows:
21
... on November 19, 1971, plaintiffs-spouses Fernando A. Magcale and
Teodula Baluyut Magcale secured a loan in the sum of P70,000.00 from
the defendant Prudential Bank. To secure payment of this loan, plaintiffs
executed in favor of defendant on the aforesaid date a deed of Real
Estate Mortgage over the following described properties:
l. A 2-STOREY, SEMI-CONCRETE, residential building with warehouse
spaces containing a total floor area of 263 sq. meters, more or less,
generally constructed of mixed hard wood and concrete materials, under
a roofing of cor. g. i. sheets; declared and assessed in the name of
FERNANDO MAGCALE under Tax Declaration No. 21109, issued by the
Assessor of Olongapo City with an assessed value of P35,290.00. This
building is the only improvement of the lot.
2. THE PROPERTY hereby conveyed by way of MORTGAGE includes
the right of occupancy on the lot where the above property is erected,
and more particularly described and bounded, as follows:
A first class residential land Identffied as Lot No. 720, (Ts-
308, Olongapo Townsite Subdivision) Ardoin Street, East
Bajac-Bajac, Olongapo City, containing an area of 465 sq.
m. more or less, declared and assessed in the name of
FERNANDO MAGCALE under Tax Duration No. 19595
issued by the Assessor of Olongapo City with an
assessed value of P1,860.00; bounded on the
NORTH: By No. 6, Ardoin
Street
SOUTH: By No. 2, Ardoin
Street
EAST: By 37 Canda
Street, and
WEST: By Ardoin Street.
All corners of the lot marked by conc.
cylindrical monuments of the Bureau of
Lands as visible limits. ( Exhibit "A, " also
Exhibit "1" for defendant).
Apart from the stipulations in the printed portion of the
aforestated deed of mortgage, there appears a rider typed
at the bottom of the reverse side of the document under
the lists of the properties mortgaged which reads, as
follows:
AND IT IS FURTHER AGREED that in the
event the Sales Patent on the lot applied
for by the Mortgagors as herein stated is
released or issued by the Bureau of
Lands, the Mortgagors hereby authorize
the Register of Deeds to hold the
Registration of same until this Mortgage is
cancelled, or to annotate this
encumbrance on the Title upon authority
from the Secretary of Agriculture and
Natural Resources, which title with
annotation, shall be released in favor of
the herein Mortgage.
From the aforequoted stipulation, it is obvious that the
mortgagee (defendant Prudential Bank) was at the outset
aware of the fact that the mortgagors (plaintiffs) have
already filed a Miscellaneous Sales Application over the
lot, possessory rights over which, were mortgaged to it.
Exhibit "A" (Real Estate Mortgage) was registered under
the Provisions of Act 3344 with the Registry of Deeds of
Zambales on November 23, 1971.
On May 2, 1973, plaintiffs secured an additional loan from
defendant Prudential Bank in the sum of P20,000.00. To
secure payment of this additional loan, plaintiffs executed
in favor of the said defendant another deed of Real Estate
Mortgage over the same properties previously mortgaged
in Exhibit "A." (Exhibit "B;" also Exhibit "2" for defendant).
This second deed of Real Estate Mortgage was likewise
registered with the Registry of Deeds, this time in
Olongapo City, on May 2,1973.
22
 On April 24, 1973, the Secretary of Agriculture issued Miscellaneous
Sales Patent No. 4776 over the parcel of land, possessory rights over
which were mortgaged to defendant Prudential Bank, in favor of plaintiffs.
On the basis of the aforesaid Patent, and upon its transcription in the
Registration Book of the Province of Zambales, Original Certificate of
Title No. P-2554 was issued in the name of Plaintiff Fernando Magcale,
by the Ex-Oficio Register of Deeds of Zambales, on May 15, 1972.
For failure of plaintiffs to pay their obligation to defendant Bank after it
became due, and upon application of said defendant, the deeds of Real
Estate Mortgage (Exhibits "A" and "B") were extrajudicially foreclosed.
Consequent to the foreclosure was the sale of the properties therein
mortgaged to defendant as the highest bidder in a public auction sale
conducted by the defendant City Sheriff on April 12, 1978 (Exhibit "E").
The auction sale aforesaid was held despite written request from plaintiffs
through counsel dated March 29, 1978, for the defendant City Sheriff to
desist from going with the scheduled public auction sale (Exhibit "D")."
(Decision, Civil Case No. 2443-0, Rollo, pp. 29-31).
Respondent Court, in a Decision dated November 3, 1978 declared the deeds of Real
Estate Mortgage as null and void (Ibid., p. 35).
On December 14, 1978, petitioner filed a Motion for Reconsideration (Ibid., pp. 41-53),
opposed by private respondents on January 5, 1979 (Ibid., pp. 54-62), and in an Order
dated January 10, 1979 (Ibid., p. 63), the Motion for Reconsideration was denied for lack
of merit. Hence, the instant petition (Ibid., pp. 5-28).
The first Division of this Court, in a Resolution dated March 9, 1979, resolved to require
the respondents to comment (Ibid., p. 65), which order was complied with the Resolution
dated May 18,1979, (Ibid., p. 100), petitioner filed its Reply on June 2,1979 (Ibid., pp.
101-112).
Thereafter, in the Resolution dated June 13, 1979, the petition was given due course and
the parties were required to submit simultaneously their respective memoranda. (Ibid., p.
114).
On July 18, 1979, petitioner filed its Memorandum (Ibid., pp. 116-144), while private
respondents filed their Memorandum on August 1, 1979 (Ibid., pp. 146-155).
In a Resolution dated August 10, 1979, this case was considered submitted for decision
(Ibid., P. 158).
In its Memorandum, petitioner raised the following issues:
1. WHETHER OR NOT THE DEEDS OF REAL ESTATE MORTGAGE ARE VALID; AND
2. WHETHER OR NOT THE SUPERVENING ISSUANCE IN FAVOR OF PRIVATE
RESPONDENTS OF MISCELLANEOUS SALES PATENT NO. 4776 ON APRIL 24,
1972 UNDER ACT NO. 730 AND THE COVERING ORIGINAL CERTIFICATE OF TITLE
NO. P-2554 ON MAY 15,1972 HAVE THE EFFECT OF INVALIDATING THE DEEDS OF
REAL ESTATE MORTGAGE. (Memorandum for Petitioner, Rollo, p. 122).
This petition is impressed with merit.
The pivotal issue in this case is whether or not a valid real estate mortgage can be
constituted on the building erected on the land belonging to another.
The answer is in the affirmative.
In the enumeration of properties under Article 415 of the Civil Code of the Philippines,
this Court ruled that, "it is obvious that the inclusion of "building" separate and distinct
from the land, in said provision of law can only mean that a building is by itself an
immovable property." (Lopez vs. Orosa, Jr., et al., L-10817-18, Feb. 28, 1958;
Associated Inc. and Surety Co., Inc. vs. Iya, et al., L-10837-38, May 30,1958).
Thus, while it is true that a mortgage of land necessarily includes, in the absence of
stipulation of the improvements thereon, buildings, still a building by itself may be
mortgaged apart from the land on which it has been built. Such a mortgage would be still
a real estate mortgage for the building would still be considered immovable property
even if dealt with separately and apart from the land (Leung Yee vs. Strong Machinery
Co., 37 Phil. 644). In the same manner, this Court has also established that possessory
rights over said properties before title is vested on the grantee, may be validly transferred
or conveyed as in a deed of mortgage (Vda. de Bautista vs. Marcos, 3 SCRA 438
[1961]).
Coming back to the case at bar, the records show, as aforestated that the original
mortgage deed on the 2-storey semi-concrete residential building with warehouse and on
the right of occupancy on the lot where the building was erected, was executed on
November 19, 1971 and registered under the provisions of Act 3344 with the Register of
Deeds of Zambales on November 23, 1971. Miscellaneous Sales Patent No. 4776 on the
land was issued on April 24, 1972, on the basis of which OCT No. 2554 was issued in
the name of private respondent Fernando Magcale on May 15, 1972. It is therefore
without question that the original mortgage was executed before the issuance of the final
23
patent and before the government was divested of its title to the land, an event which
takes effect only on the issuance of the sales patent and its subsequent registration in
the Office of the Register of Deeds (Visayan Realty Inc. vs. Meer, 96 Phil. 515; Director
of Lands vs. De Leon, 110 Phil. 28; Director of Lands vs. Jurado, L-14702, May 23,
1961; Pena "Law on Natural Resources", p. 49). Under the foregoing considerations, it is
evident that the mortgage executed by private respondent on his own building which was
erected on the land belonging to the government is to all intents and purposes a valid
mortgage.
As to restrictions expressly mentioned on the face of respondents' OCT No. P-2554, it
will be noted that Sections 121, 122 and 124 of the Public Land Act, refer to land already
acquired under the Public Land Act, or any improvement thereon and therefore have no
application to the assailed mortgage in the case at bar which was executed before such
eventuality. Likewise, Section 2 of Republic Act No. 730, also a restriction appearing on
the face of private respondent's title has likewise no application in the instant case,
despite its reference to encumbrance or alienation before the patent is issued because it
refers specifically to encumbrance or alienation on the land itself and does not mention
anything regarding the improvements existing thereon.
But it is a different matter, as regards the second mortgage executed over the same
properties on May 2, 1973 for an additional loan of P20,000.00 which was registered with
the Registry of Deeds of Olongapo City on the same date. Relative thereto, it is evident
that such mortgage executed after the issuance of the sales patent and of the Original
Certificate of Title, falls squarely under the prohibitions stated in Sections 121, 122 and
124 of the Public Land Act and Section 2 of Republic Act 730, and is therefore null and
void.
Petitioner points out that private respondents, after physically possessing the title for five
years, voluntarily surrendered the same to the bank in 1977 in order that the mortgaged
may be annotated, without requiring the bank to get the prior approval of the Ministry of
Natural Resources beforehand, thereby implicitly authorizing Prudential Bank to cause
the annotation of said mortgage on their title.
However, the Court, in recently ruling on violations of Section 124 which refers to
Sections 118, 120, 122 and 123 of Commonwealth Act 141, has held:
... Nonetheless, we apply our earlier rulings because we believe that as
in pari delicto may not be invoked to defeat the policy of the State neither
may the doctrine of estoppel give a validating effect to a void contract.
Indeed, it is generally considered that as between parties to a contract,
validity cannot be given to it by estoppel if it is prohibited by law or is
against public policy (19 Am. Jur. 802). It is not within the competence of
any citizen to barter away what public policy by law was to preserve
(Gonzalo Puyat & Sons, Inc. vs. De los Amas and Alino supra). ...
(Arsenal vs. IAC, 143 SCRA 54 [1986]).
This pronouncement covers only the previous transaction already alluded to and does
not pass upon any new contract between the parties (Ibid), as in the case at bar. It
should not preclude new contracts that may be entered into between petitioner bank and
private respondents that are in accordance with the requirements of the law. After all,
private respondents themselves declare that they are not denying the legitimacy of their
debts and appear to be open to new negotiations under the law (Comment; Rollo, pp. 95-
96). Any new transaction, however, would be subject to whatever steps the Government
may take for the reversion of the land in its favor.
PREMISES CONSIDERED, the decision of the Court of First Instance of Zambales &
Olongapo City is hereby MODIFIED, declaring that the Deed of Real Estate Mortgage for
P70,000.00 is valid but ruling that the Deed of Real Estate Mortgage for an additional
loan of P20,000.00 is null and void, without prejudice to any appropriate action the
Government may take against private respondents.
SO ORDERED.
G.R. No. 106041 January 29, 1993
BENGUET CORPORATION vs. CENTRAL BOARD OF ASSESSMENT APPEALS
The realty tax assessment involved in this case amounts to P11,319,304.00. It has been
imposed on the petitioner's tailings dam and the land thereunder over its protest.
The controversy arose in 1985 when the Provincial Assessor of Zambales assessed the
said properties as taxable improvements. The assessment was appealed to the Board of
Assessment Appeals of the Province of Zambales. On August 24, 1988, the appeal was
dismissed mainly on the ground of the petitioner's "failure to pay the realty taxes that fell
due during the pendency of the appeal."
The petitioner seasonably elevated the matter to the Central Board of Assessment
Appeals, 1 one of the herein respondents. In its decision dated March 22, 1990, the Board
reversed the dismissal of the appeal but, on the merits, agreed that "the tailings dam and the
lands submerged thereunder (were) subject to realty tax."
For purposes of taxation the dam is considered as real property as it
comes within the object mentioned in paragraphs (a) and (b) of Article
24
 415 of the New Civil Code. It is a construction adhered to the soil which
cannot be separated or detached without breaking the material or
causing destruction on the land upon which it is attached. The immovable
nature of the dam as an improvement determines its character as real
property, hence taxable under Section 38 of the Real Property Tax Code.
(P.D. 464).
Although the dam is partly used as an anti-pollution device, this Board
cannot accede to the request for tax exemption in the absence of a law
authorizing the same.
xxx xxx xxx
We find the appraisal on the land submerged as a result of the
construction of the tailings dam, covered by Tax Declaration Nos.
002-0260 and 002-0266, to be in accordance with the Schedule of
Market Values for Zambales which was reviewed and allowed for use by
the Ministry (Department) of Finance in the 1981-1982 general revision.
No serious attempt was made by Petitioner-Appellant Benguet
Corporation to impugn its reasonableness, i.e., that the P50.00 per
square meter applied by Respondent-Appellee Provincial Assessor is
indeed excessive and unconscionable. Hence, we find no cause to
disturb the market value applied by Respondent Appellee Provincial
Assessor of Zambales on the properties of Petitioner-Appellant Benguet
Corporation covered by Tax Declaration Nos. 002-0260 and 002-0266.
This petition for certiorari now seeks to reverse the above ruling.
The principal contention of the petitioner is that the tailings dam is not subject to realty
tax because it is not an "improvement" upon the land within the meaning of the Real
Property Tax Code. More particularly, it is claimed —
(1) as regards the tailings dam as an "improvement":
(a) that the tailings dam has no value separate from and
independent of the mine; hence, by itself it cannot be
considered an improvement separately assessable;
(b) that it is an integral part of the mine;
(c) that at the end of the mining operation of the petitioner
corporation in the area, the tailings dam will benefit the
local community by serving as an irrigation facility;
(d) that the building of the dam has stripped the property
of any commercial value as the property is submerged
under water wastes from the mine;
(e) that the tailings dam is an environmental pollution
control device for which petitioner must be commended
rather than penalized with a realty tax assessment;
(f) that the installation and utilization of the tailings dam as
a pollution control device is a requirement imposed by
law;
(2) as regards the valuation of the tailings dam and the submerged lands:
(a) that the subject properties have no market value as
they cannot be sold independently of the mine;
(b) that the valuation of the tailings dam should be based
on its incidental use by petitioner as a water reservoir and
not on the alleged cost of construction of the dam and the
annual build-up expense;
(c) that the "residual value formula" used by the Provincial
Assessor and adopted by respondent CBAA is arbitrary
and erroneous; and
(3) as regards the petitioner's liability for penalties for
non-declaration of the tailings dam and the submerged lands for realty
tax purposes:
(a) that where a tax is not paid in an honest belief that it is
not due, no penalty shall be collected in addition to the
basic tax;
25
 (b) that no other mining companies in the Philippines
operating a tailings dam have been made to declare the
dam for realty tax purposes.
The petitioner does not dispute that the tailings dam may be considered realty within the
meaning of Article 415. It insists, however, that the dam cannot be subjected to realty tax
as a separate and independent property because it does not constitute an "assessable
improvement" on the mine although a considerable sum may have been spent in
constructing and maintaining it.
To support its theory, the petitioner cites the following cases:
1. Municipality of Cotabato v. Santos (105 Phil. 963), where this Court considered the
dikes and gates constructed by the taxpayer in connection with a fishpond operation as
integral parts of the fishpond.
2. Bislig Bay Lumber Co. v. Provincial Government of Surigao (100 Phil. 303), involving a
road constructed by the timber concessionaire in the area, where this Court did not
impose a realty tax on the road primarily for two reasons:
In the first place, it cannot be disputed that the ownership of the road that
was constructed by appellee belongs to the government by right of
accession not only because it is inherently incorporated or attached to the
timber land . . . but also because upon the expiration of the concession
said road would ultimately pass to the national government. . . . In the
second place, while the road was constructed by appellee primarily for its
use and benefit, the privilege is not exclusive, for . . . appellee cannot
prevent the use of portions of the concession for homesteading purposes.
It is also duty bound to allow the free use of forest products within the
concession for the personal use of individuals residing in or within the
vicinity of the land. . . . In other words, the government has practically
reserved the rights to use the road to promote its varied activities. Since,
as above shown, the road in question cannot be considered as an
improvement which belongs to appellee, although in part is for its benefit,
it is clear that the same cannot be the subject of assessment within the
meaning of Section 2 of C.A.
No. 470.
Apparently, the realty tax was not imposed not because the road was an integral part of
the lumber concession but because the government had the right to use the road to
promote its varied activities.
3. Kendrick v. Twin Lakes Reservoir Co. (144 Pacific 884), an American case, where it
was declared that the reservoir dam went with and formed part of the reservoir and that
the dam would be "worthless and useless except in connection with the outlet canal, and
the water rights in the reservoir represent and include whatever utility or value there is in
the dam and headgates."
4. Ontario Silver Mining Co. v. Hixon (164 Pacific 498), also from the United States. This
case involved drain tunnels constructed by plaintiff when it expanded its mining
operations downward, resulting in a constantly increasing flow of water in the said mine.
It was held that:
Whatever value they have is connected with and in fact is an integral part
of the mine itself. Just as much so as any shaft which descends into the
earth or an underground incline, tunnel, or drift would be which was used
in connection with the mine.
On the other hand, the Solicitor General argues that the dam is an assessable
improvement because it enhances the value and utility of the mine. The primary function
of the dam is to receive, retain and hold the water coming from the operations of the
mine, and it also enables the petitioner to impound water, which is then recycled for use
in the plant.
There is also ample jurisprudence to support this view, thus:
. . . The said equipment and machinery, as appurtenances to the gas
station building or shed owned by Caltex (as to which it is subject to
realty tax) and which fixtures are necessary to the operation of the gas
station, for without them the gas station would be useless and which have
been attached or affixed permanently to the gas station site or embedded
therein, are taxable improvements and machinery within the meaning of
the Assessment Law and the Real Property Tax Code. (Caltex [Phil.] Inc.
v. CBAA, 114 SCRA 296).
We hold that while the two storage tanks are not embedded in the land,
they may, nevertheless, be considered as improvements on the land,
enhancing its utility and rendering it useful to the oil industry. It is
undeniable that the two tanks have been installed with some degree of
permanence as receptacles for the considerable quantities of oil needed
by MERALCO for its operations. (Manila Electric Co. v. CBAA, 114 SCRA
273).
26
 The pipeline system in question is indubitably a construction adhering to
the soil. It is attached to the land in such a way that it cannot be
separated therefrom without dismantling the steel pipes which were
welded to form the pipeline. (MERALCO Securities Industrial Corp. v.
CBAA, 114 SCRA 261).
The tax upon the dam was properly assessed to the plaintiff as a tax
upon real estate. (Flax-Pond Water Co. v. City of Lynn, 16 N.E. 742).
The oil tanks are structures within the statute, that they are designed and
used by the owner as permanent improvement of the free hold, and that
for such reasons they were properly assessed by the respondent taxing
district as improvements. (Standard Oil Co. of New Jersey v. Atlantic City,
15 A 2d. 271)
The Real Property Tax Code does not carry a definition of "real property" and simply
says that the realty tax is imposed on "real property, such as lands, buildings, machinery
and other improvements affixed or attached to real property." In the absence of such a
definition, we apply Article 415 of the Civil Code, the pertinent portions of which state:
Art. 415. The following are immovable property.
(1) Lands, buildings and constructions of all kinds adhered to the soil;
xxx xxx xxx
(3) Everything attached to an immovable in a fixed manner, in such a way
that it cannot be separated therefrom without breaking the material or
deterioration of the object.
Section 2 of C.A. No. 470, otherwise known as the Assessment Law, provides that the
realty tax is due "on the real property, including land, buildings, machinery and other
improvements" not specifically exempted in Section 3 thereof. A reading of that section
shows that the tailings dam of the petitioner does not fall under any of the classes of
exempt real properties therein enumerated.
Is the tailings dam an improvement on the mine? Section 3(k) of the Real Property Tax
Code defines improvement as follows:
(k) Improvements — is a valuable addition made to property or an
amelioration in its condition, amounting to more than mere repairs or
replacement of waste, costing labor or capital and intended to enhance
its value, beauty or utility or to adopt it for new or further purposes.
The term has also been interpreted as "artificial alterations of the physical condition of
the ground that arereasonably permanent in character." 2
The Court notes that in the Ontario case the plaintiff admitted that the mine involved
therein could not be operated without the aid of the drain tunnels, which were
indispensable to the successful development and extraction of the minerals therein. This
is not true in the present case.
Even without the tailings dam, the petitioner's mining operation can still be carried out
because the primary function of the dam is merely to receive and retain the wastes and
water coming from the mine. There is no allegation that the water coming from the dam
is the sole source of water for the mining operation so as to make the dam an integral
part of the mine. In fact, as a result of the construction of the dam, the petitioner can now
impound and recycle water without having to spend for the building of a water reservoir.
And as the petitioner itself points out, even if the petitioner's mine is shut down or ceases
operation, the dam may still be used for irrigation of the surrounding areas, again unlike
in the Ontario case.
As correctly observed by the CBAA, the Kendrick case is also not applicable because it
involved water reservoir dams used for different purposes and for the benefit of the
surrounding areas. By contrast, the tailings dam in question is being used exclusively for
the benefit of the petitioner.
Curiously, the petitioner, while vigorously arguing that the tailings dam has no separate
existence, just as vigorously contends that at the end of the mining operation the tailings
dam will serve the local community as an irrigation facility, thereby implying that it can
exist independently of the mine.
From the definitions and the cases cited above, it would appear that whether a structure
constitutes an improvement so as to partake of the status of realty would depend upon
the degree of permanence intended in its construction and use. The expression
"permanent" as applied to an improvement does not imply that the improvement must be
used perpetually but only until the purpose to which the principal realty is devoted has
been accomplished. It is sufficient that the improvement is intended to remain as long as
the land to which it is annexed is still used for the said purpose.
27
The Court is convinced that the subject dam falls within the definition of an
"improvement" because it is permanent in character and it enhances both the value and
utility of petitioner's mine. Moreover, the immovable nature of the dam defines its
character as real property under Article 415 of the Civil Code and thus makes it taxable
under Section 38 of the Real Property Tax Code.
The Court will also reject the contention that the appraisal at P50.00 per square meter
made by the Provincial Assessor is excessive and that his use of the "residual value
formula" is arbitrary and erroneous.
Respondent Provincial Assessor explained the use of the "residual value formula" as
follows:
A 50% residual value is applied in the computation because, while it is
true that when slime fills the dike, it will then be covered by another dike
or stage, the stage covered is still there and still exists and since only one
face of the dike is filled, 50% or the other face is unutilized.
In sustaining this formula, the CBAA gave the following justification:
We find the appraisal on the land submerged as a result of the
construction of the tailings dam, covered by Tax Declaration Nos.
002-0260 and 002-0266, to be in accordance with the Schedule of
Market Values for San Marcelino, Zambales, which is fifty (50.00) pesos
per square meter for third class industrial land (TSN, page 17, July 5,
1989) and Schedule of Market Values for Zambales which was reviewed
and allowed for use by the Ministry (Department) of Finance in the 1981-
1982 general revision. No serious attempt was made by Petitioner-
Appellant Benguet Corporation to impugn its reasonableness, i.e, that the
P50.00 per square meter applied by Respondent-Appellee Provincial
Assessor is indeed excessive and unconscionable. Hence, we find no
cause to disturb the market value applied by Respondent-Appellee
Provincial Assessor of Zambales on the properties of Petitioner-Appellant
Benguet Corporation covered by Tax Declaration Nos. 002-0260 and
002-0266.
It has been the long-standing policy of this Court to respect the conclusions of quasi-
judicial agencies like the CBAA, which, because of the nature of its functions and its
frequent exercise thereof, has developed expertise in the resolution of assessment
problems. The only exception to this rule is where it is clearly shown that the
administrative body has committed grave abuse of discretion calling for the intervention
of this Court in the exercise of its own powers of review. There is no such showing in the
case at bar.
We disagree, however, with the ruling of respondent CBAA that it cannot take
cognizance of the issue of the propriety of the penalties imposed upon it, which was
raised by the petitioner for the first time only on appeal. The CBAA held that this "is an
entirely new matter that petitioner can take up with the Provincial Assessor (and) can be
the subject of another protest before the Local Board or a negotiation with the
local sanggunian . . ., and in case of an adverse decision by either the Local Board or the
local sanggunian, (it can) elevate the same to this Board for appropriate action."
There is no need for this time-wasting procedure. The Court may resolve the issue in this
petition instead of referring it back to the local authorities. We have studied the facts and
circumstances of this case as above discussed and find that the petitioner has acted in
good faith in questioning the assessment on the tailings dam and the land submerged
thereunder. It is clear that it has not done so for the purpose of evading or delaying the
payment of the questioned tax. Hence, we hold that the petitioner is not subject to
penalty for its
non-declaration of the tailings dam and the submerged lands for realty tax purposes.
WHEREFORE, the petition is DISMISSED for failure to show that the questioned
decision of respondent Central Board of Assessment Appeals is tainted with grave abuse
of discretion except as to the imposition of penalties upon the petitioner which is hereby
SET ASIDE. Costs against the petitioner. It is so ordered.
G.R. No. 137705 August 22, 2000
SERG'S PRODUCTS, INC. vs. PCI LEASING AND FINANCE, INC.,
After agreeing to a contract stipulating that a real or immovable property be considered
as personal or movable, a party is estopped from subsequently claiming otherwise.
Hence, such property is a proper subject of a writ of replevin obtained by the other
contracting party.
The Case
Before us is a Petition for Review on Certiorari assailing the January 6, 1999 Decision1 of
the Court of Appeals (CA)2 in CA-GR SP No. 47332 and its February 26, 1999
Resolution3 denying reconsideration. The decretal portion of the CA Decision reads as
follows:
28
"WHEREFORE, premises considered, the assailed Order dated February 18, 1998 and
Resolution dated March 31, 1998 in Civil Case No. Q-98-33500 are hereby AFFIRMED.
The writ of preliminary injunction issued on June 15, 1998 is hereby LIFTED."4
In its February 18, 1998 Order,5 the Regional Trial Court (RTC) of Quezon City (Branch
218)6 issued a Writ of Seizure.7 The March 18, 1998 Resolution8 denied petitioners’
Motion for Special Protective Order, praying that the deputy sheriff be enjoined "from
seizing immobilized or other real properties in (petitioners’) factory in Cainta, Rizal and to
return to their original place whatever immobilized machineries or equipments he may
have removed."9
The Facts
The undisputed facts are summarized by the Court of Appeals as follows:10
"On February 13, 1998, respondent PCI Leasing and Finance, Inc. ("PCI Leasing" for
short) filed with the RTC-QC a complaint for [a] sum of money (Annex ‘E’), with an
application for a writ of replevin docketed as Civil Case No. Q-98-33500.
"On March 6, 1998, upon an ex-parte application of PCI Leasing, respondent judge
issued a writ of replevin (Annex ‘B’) directing its sheriff to seize and deliver the
machineries and equipment to PCI Leasing after 5 days and upon the payment of the
necessary expenses.
"On March 24, 1998, in implementation of said writ, the sheriff proceeded to petitioner’s
factory, seized one machinery with [the] word that he [would] return for the other
machineries.
"On March 25, 1998, petitioners filed a motion for special protective order (Annex ‘C’),
invoking the power of the court to control the conduct of its officers and amend and
control its processes, praying for a directive for the sheriff to defer enforcement of the
writ of replevin.
"This motion was opposed by PCI Leasing (Annex ‘F’), on the ground that the properties
[were] still personal and therefore still subject to seizure and a writ of replevin.
"In their Reply, petitioners asserted that the properties sought to be seized [were]
immovable as defined in Article 415 of the Civil Code, the parties’ agreement to the
contrary notwithstanding. They argued that to give effect to the agreement would be
prejudicial to innocent third parties. They further stated that PCI Leasing [was] estopped
from treating these machineries as personal because the contracts in which the alleged
agreement [were] embodied [were] totally sham and farcical.
"On April 6, 1998, the sheriff again sought to enforce the writ of seizure and take
possession of the remaining properties. He was able to take two more, but was
prevented by the workers from taking the rest.
"On April 7, 1998, they went to [the CA] via an original action for certiorari."
Ruling of the Court of Appeals
Citing the Agreement of the parties, the appellate court held that the subject machines
were personal property, and that they had only been leased, not owned, by petitioners. It
also ruled that the "words of the contract are clear and leave no doubt upon the true
intention of the contracting parties." Observing that Petitioner Goquiolay was an
experienced businessman who was "not unfamiliar with the ways of the trade," it ruled
that he "should have realized the import of the document he signed." The CA further
held:
"Furthermore, to accord merit to this petition would be to preempt the trial court in ruling
upon the case below, since the merits of the whole matter are laid down before us via a
petition whose sole purpose is to inquire upon the existence of a grave abuse of
discretion on the part of the [RTC] in issuing the assailed Order and Resolution. The
issues raised herein are proper subjects of a full-blown trial, necessitating presentation of
evidence by both parties. The contract is being enforced by one, and [its] validity is
attacked by the other – a matter x x x which respondent court is in the best position to
determine."
Hence, this Petition.11
The Issues
In their Memorandum, petitioners submit the following issues for our consideration:
"A. Whether or not the machineries purchased and imported by SERG’S became real
property by virtue of immobilization.
B. Whether or not the contract between the parties is a loan or a lease."12
29
In the main, the Court will resolve whether the said machines are personal, not
immovable, property which may be a proper subject of a writ of replevin. As a preliminary
matter, the Court will also address briefly the procedural points raised by respondent.
The Court’s Ruling
The Petition is not meritorious.
Preliminary Matter:Procedural Questions
Respondent contends that the Petition failed to indicate expressly whether it was being
filed under Rule 45 or Rule 65 of the Rules of Court. It further alleges that the Petition
erroneously impleaded Judge Hilario Laqui as respondent.
There is no question that the present recourse is under Rule 45. This conclusion finds
support in the very title of the Petition, which is "Petition for Review on Certiorari."13
While Judge Laqui should not have been impleaded as a respondent, substantial
14
justice requires that such lapse by itself should not warrant the dismissal of the present
Petition. In this light, the Court deems it proper to remove, motu proprio, the name of
Judge Laqui from the caption of the present case.
Main Issue: Nature of the Subject Machinery
Petitioners contend that the subject machines used in their factory were not proper
subjects of the Writ issued by the RTC, because they were in fact real property. Serious
policy considerations, they argue, militate against a contrary characterization.
Rule 60 of the Rules of Court provides that writs of replevin are issued for the recovery of
personal property only.15 Section 3 thereof reads:
"SEC. 3. Order. -- Upon the filing of such affidavit and approval of the bond, the court
shall issue an order and the corresponding writ of replevin describing the personal
property alleged to be wrongfully detained and requiring the sheriff forthwith to take such
property into his custody."
On the other hand, Article 415 of the Civil Code enumerates immovable or real property
as follows:
"ART. 415. The following are immovable property:
xxx xxx xxx
(5) Machinery, receptacles, instruments or implements intended by the owner of the
tenement for an industry or works which may be carried on in a building or on a piece of
land, and which tend directly to meet the needs of the said industry or works;
xxx xxx x x x"
In the present case, the machines that were the subjects of the Writ of Seizure were
placed by petitioners in the factory built on their own land. Indisputably, they were
essential and principal elements of their chocolate-making industry. Hence, although
each of them was movable or personal property on its own, all of them have become
"immobilized by destination because they are essential and principal elements in the
industry."16 In that sense, petitioners are correct in arguing that the said machines are
real, not personal, property pursuant to Article 415 (5) of the Civil Code.17
Be that as it may, we disagree with the submission of the petitioners that the said
machines are not proper subjects of the Writ of Seizure.
The Court has held that contracting parties may validly stipulate that a real property be
considered as personal.18After agreeing to such stipulation, they are consequently
estopped from claiming otherwise. Under the principle of estoppel, a party to a contract is
ordinarily precluded from denying the truth of any material fact found therein.
Hence, in Tumalad v. Vicencio,19 the Court upheld the intention of the parties to treat
a house as a personal property because it had been made the subject of a chattel
mortgage. The Court ruled:
"x x x. Although there is no specific statement referring to the subject house as personal
property, yet by ceding, selling or transferring a property by way of chattel mortgage
defendants-appellants could only have meant to convey the house as chattel, or at least,
intended to treat the same as such, so that they should not now be allowed to make an
inconsistent stand by claiming otherwise."
Applying Tumalad, the Court in Makati Leasing and Finance Corp. v. Wearever Textile
Mills20 also held that the machinery used in a factory and essential to the industry, as in
the present case, was a proper subject of a writ of replevin because it was treated as
personal property in a contract. Pertinent portions of the Court’s ruling are reproduced
hereunder:
30
"x x x. If a house of strong materials, like what was involved in the above Tumalad case,
may be considered as personal property for purposes of executing a chattel mortgage
thereon as long as the parties to the contract so agree and no innocent third party will be
prejudiced thereby, there is absolutely no reason why a machinery, which is movable in
its nature and becomes immobilized only by destination or purpose, may not be likewise
treated as such. This is really because one who has so agreed is estopped from denying
the existence of the chattel mortgage."
In the present case, the Lease Agreement clearly provides that the machines in question
are to be considered as personal property. Specifically, Section 12.1 of the Agreement
reads as follows:21
"12.1 The PROPERTY is, and shall at all times be and remain, personal property
notwithstanding that the PROPERTY or any part thereof may now be, or hereafter
become, in any manner affixed or attached to or embedded in, or permanently resting
upon, real property or any building thereon, or attached in any manner to what is
permanent."
Clearly then, petitioners are estopped from denying the characterization of the subject
machines as personal property. Under the circumstances, they are proper subjects of the
Writ of Seizure.
It should be stressed, however, that our holding -- that the machines should be deemed
personal property pursuant to the Lease Agreement – is good only insofar as the
contracting parties are concerned.22 Hence, while the parties are bound by the
Agreement, third persons acting in good faith are not affected by its stipulation
characterizing the subject machinery as personal.23 In any event, there is no showing
that any specific third party would be adversely affected.
Validity of the Lease Agreement
In their Memorandum, petitioners contend that the Agreement is a loan and not a
lease.24 Submitting documents supposedly showing that they own the subject machines,
petitioners also argue in their Petition that the Agreement suffers from "intrinsic ambiguity
which places in serious doubt the intention of the parties and the validity of the lease
agreement itself."25 In their Reply to respondent’s Comment, they further allege that the
Agreement is invalid.26
These arguments are unconvincing. The validity and the nature of the contract are the lis
mota of the civil action pending before the RTC. A resolution of these questions,
therefore, is effectively a resolution of the merits of the case. Hence, they should be
threshed out in the trial, not in the proceedings involving the issuance of the Writ of
Seizure.
Indeed, in La Tondeña Distillers v. CA,27 the Court explained that the policy under Rule
60 was that questions involving title to the subject property – questions which petitioners
are now raising -- should be determined in the trial. In that case, the Court noted that the
remedy of defendants under Rule 60 was either to post a counter-bond or to question the
sufficiency of the plaintiff’s bond. They were not allowed, however, to invoke the title to
the subject property. The Court ruled:
"In other words, the law does not allow the defendant to file a motion to dissolve or
discharge the writ of seizure (or delivery) on ground of insufficiency of the complaint or of
the grounds relied upon therefor, as in proceedings on preliminary attachment or
injunction, and thereby put at issue the matter of the title or right of possession over the
specific chattel being replevied, the policy apparently being that said matter should be
ventilated and determined only at the trial on the merits."28
Besides, these questions require a determination of facts and a presentation of evidence,
both of which have no place in a petition for certiorari in the CA under Rule 65 or in a
petition for review in this Court under Rule 45.29
Reliance on the Lease Agreement
It should be pointed out that the Court in this case may rely on the Lease Agreement, for
nothing on record shows that it has been nullified or annulled. In fact, petitioners assailed
it first only in the RTC proceedings, which had ironically been instituted by respondent.
Accordingly, it must be presumed valid and binding as the law between the parties.
Makati Leasing and Finance Corporation30 is also instructive on this point. In that case,
the Deed of Chattel Mortgage, which characterized the subject machinery as personal
property, was also assailed because respondent had allegedly been required "to sign a
printed form of chattel mortgage which was in a blank form at the time of signing." The
Court rejected the argument and relied on the Deed, ruling as follows:
"x x x. Moreover, even granting that the charge is true, such fact alone does not render a
contract void ab initio, but can only be a ground for rendering said contract voidable, or
annullable pursuant to Article 1390 of the new Civil Code, by a proper action in court.
There is nothing on record to show that the mortgage has been annulled. Neither is it
disclosed that steps were taken to nullify the same. x x x"
Alleged Injustice Committed on the Part of Petitioners
31
Petitioners contend that "if the Court allows these machineries to be seized, then its (REAL AND CHATTEL)
workers would be out of work and thrown into the streets."31 They also allege that the
seizure would nullify all efforts to rehabilitate the corporation. xxx xxx xxx

Petitioners’ arguments do not preclude the implementation of the Writ. As earlier

1âwphi1

The MORTGAGOR(S) hereby transfer(s) and convey(s), by way of First

discussed, law and jurisprudence support its propriety. Verily, the above-mentioned Mortgage, to the MORTGAGEE, . . . certain parcel(s) of land, together with all the
consequences, if they come true, should not be blamed on this Court, but on the buildings and improvements now existing or which may hereafter exist thereon,
petitioners for failing to avail themselves of the remedy under Section 5 of Rule 60, which situated in . . .
allows the filing of a counter-bond. The provision states:
"Annex A"
"SEC. 5. Return of property. -- If the adverse party objects to the sufficiency of the
applicant’s bond, or of the surety or sureties thereon, he cannot immediately require the (Real and Chattel Mortgage executed by Ever Textile Mills in favor of
return of the property, but if he does not so object, he may, at any time before the PBCommunications — continued)
delivery of the property to the applicant, require the return thereof, by filing with the court
where the action is pending a bond executed to the applicant, in double the value of the
LIST OF MACHINERIES & EQUIPMENT
property as stated in the applicant’s affidavit for the delivery thereof to the applicant, if
such delivery be adjudged, and for the payment of such sum to him as may be recovered
against the adverse party, and by serving a copy bond on the applicant." A. Forty Eight (48) units of Vayrow Knitting Machines-Tompkins made in
Hongkong:
WHEREFORE, the Petition is DENIED and the assailed Decision of the Court of
Appeals AFFIRMED. Costs against petitioners. Serial Numbers Size of Machines

SO ORDERED. xxx xxx xxx

G.R. No. 120098 October 2, 2001 B. Sixteen (16) sets of Vayrow Knitting Machines made in Taiwan.
TSAI vs. CA
xxx xxx xxx
These consolidated cases assail the decision1 of the Court of Appeals in CA-G.R. CV
No. 32986, affirming the decision2 of the Regional Trial Court of Manila, Branch 7, in Civil C. Two (2) Circular Knitting Machines made in West Germany.
Case No. 89-48265. Also assailed is respondent court's resolution denying petitioners'
motion for reconsideration. xxx xxx xxx

On November 26, 1975, respondent Ever Textile Mills, Inc. (EVERTEX) obtained a three D. Four (4) Winding Machines.
million peso (P3,000,000.00) loan from petitioner Philippine Bank of Communications
(PBCom). As security for the loan, EVERTEX executed in favor of PBCom, a deed of xxx xxx xxx
Real and Chattel Mortgage over the lot under TCT No. 372097, where its factory stands,
and the chattels located therein as enumerated in a schedule attached to the mortgage SCHEDULE "A"
contract. The pertinent portions of the Real and Chattel Mortgage are quoted below:
I. TCT # 372097 - RIZAL
MORTGAGE

32
 xxx xxx xxx
II. Any and all buildings and improvements now existing or hereafter to exist on
the above-mentioned lot.
III. MACHINERIES & EQUIPMENT situated, located and/or installed on the
above-mentioned lot located at . . .
(a) Forty eight sets (48) Vayrow Knitting Machines . . .
(b) Sixteen sets (16) Vayrow Knitting Machines . . .
(c) Two (2) Circular Knitting Machines . . .
(d) Two (2) Winding Machines . . .
(e) Two (2) Winding Machines . . .
IV. Any and all replacements, substitutions, additions, increases and accretions
to above properties.
xxx xxx xxx3
On April 23, 1979, PBCom granted a second loan of P3,356,000.00 to EVERTEX. The
loan was secured by a Chattel Mortgage over personal properties enumerated in a list
attached thereto. These listed properties were similar to those listed in Annex A of the
first mortgage deed.
After April 23, 1979, the date of the execution of the second mortgage mentioned above,
EVERTEX purchased various machines and equipments.
On November 19, 1982, due to business reverses, EVERTEX filed insolvency
proceedings docketed as SP Proc. No. LP-3091-P before the defunct Court of First
Instance of Pasay City, Branch XXVIII. The CFI issued an order on November 24, 1982
declaring the corporation insolvent. All its assets were taken into the custody of the
Insolvency Court, including the collateral, real and personal, securing the two mortgages
as abovementioned.
In the meantime, upon EVERTEX's failure to meet its obligation to PBCom, the latter
commenced extrajudicial foreclosure proceedings against EVERTEX under Act 3135,
otherwise known as "An Act to Regulate the Sale of Property under Special Powers
Inserted in or Annexed to Real Estate Mortgages" and Act 1506 or "The Chattel
Mortgage Law". A Notice of Sheriff's Sale was issued on December 1, 1982.
On December 15, 1982, the first public auction was held where petitioner PBCom
emerged as the highest bidder and a Certificate of Sale was issued in its favor on the
same date. On December 23, 1982, another public auction was held and again, PBCom
was the highest bidder. The sheriff issued a Certificate of Sale on the same day.
On March 7, 1984, PBCom consolidated its ownership over the lot and all the properties
in it. In November 1986, it leased the entire factory premises to petitioner Ruby L. Tsai
for P50,000.00 a month. On May 3, 1988, PBCom sold the factory, lock, stock and barrel
to Tsai for P9,000,000.00, including the contested machineries.
On March 16, 1989, EVERTEX filed a complaint for annulment of sale, reconveyance,
and damages with the Regional Trial Court against PBCom, alleging inter alia that the
extrajudicial foreclosure of subject mortgage was in violation of the Insolvency Law.
EVERTEX claimed that no rights having been transmitted to PBCom over the assets of
insolvent EVERTEX, therefore Tsai acquired no rights over such assets sold to her, and
should reconvey the assets.
Further, EVERTEX averred that PBCom, without any legal or factual basis, appropriated
the contested properties, which were not included in the Real and Chattel Mortgage of
November 26, 1975 nor in the Chattel Mortgage of April 23, 1979, and neither were
those properties included in the Notice of Sheriff's Sale dated December 1, 1982 and
Certificate of Sale . . . dated December 15, 1982.
The disputed properties, which were valued at P4,000,000.00, are: 14 Interlock Circular
Knitting Machines, 1 Jet Drying Equipment, 1 Dryer Equipment, 1 Raisin Equipment and
1 Heatset Equipment.
The RTC found that the lease and sale of said personal properties were irregular and
illegal because they were not duly foreclosed nor sold at the December 15, 1982 auction
sale since these were not included in the schedules attached to the mortgage contracts.
The trial court decreed:
WHEREFORE, judgment is hereby rendered in favor of plaintiff corporation and
against the defendants:
1. Ordering the annulment of the sale executed by defendant Philippine Bank of
Communications in favor of defendant Ruby L. Tsai on May 3, 1988 insofar as it
33
 affects the personal properties listed in par. 9 of the complaint, and their return to
the plaintiff corporation through its assignee, plaintiff Mamerto R. Villaluz, for
disposition by the Insolvency Court, to be done within ten (10) days from finality
of this decision;
2. Ordering the defendants to pay jointly and severally the plaintiff corporation the
sum of P5,200,000.00 as compensation for the use and possession of the
properties in question from November 1986 to February 1991 and P100,000.00
every month thereafter, with interest thereon at the legal rate per annum until full
payment;
3. Ordering the defendants to pay jointly and severally the plaintiff corporation the
sum of P50,000.00 as and for attorney's fees and expenses of litigation;
4. Ordering the defendants to pay jointly and severally the plaintiff corporation the
sum of P200,000.00 by way of exemplary damages;
5. Ordering the dismissal of the counterclaim of the defendants; and
6. Ordering the defendants to proportionately pay the costs of suit.
SO ORDERED.4
Dissatisfied, both PBCom and Tsai appealed to the Court of Appeals, which issued its
decision dated August 31, 1994, the dispositive portion of which reads:
WHEREFORE, except for the deletion therefrom of the award; for exemplary damages,
and reduction of the actual damages, from P100,000.00 to P20,000.00 per month, from
November 1986 until subject personal properties are restored to appellees, the judgment
appealed from is hereby AFFIRMED, in all other respects. No pronouncement as to
costs.5
Motion for reconsideration of the above decision having been denied in the resolution of
April 28, 1995, PBCom and Tsai filed their separate petitions for review with this Court.
In G.R No. 120098, petitioner Tsai ascribed the following errors to the respondent court:
I UNDER PARAGRAPH 9 OF THE COMPLAINT BELOW AS PERSONAL PROPERTY
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN
EFFECT MAKING A CONTRACT FOR THE PARTIES BY TREATING THE 1981
ACQUIRED MACHINERIES AS CHATTELS INSTEAD OF REAL PROPERTIES
WITHIN THEIR EARLIER 1975 DEED OF REAL AND CHATTEL MORTGAGE
OR 1979 DEED OF CHATTEL MORTGAGE.
II
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN
HOLDING THAT THE DISPUTED 1981 MACHINERIES ARE NOT REAL
PROPERTIES DEEMED PART OF THE MORTGAGE — DESPITE THE CLEAR
IMPORT OF THE EVIDENCE AND APPLICABLE RULINGS OF THE SUPREME
COURT.
III
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN
DEEMING PETITIONER A PURCHASER IN BAD FAITH.
IV
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN
ASSESSING PETITIONER ACTUAL DAMAGES, ATTORNEY'S FEES AND
EXPENSES OF LITIGATION — FOR WANT OF VALID FACTUAL AND LEGAL
BASIS.
V
THE HONORABLE COURT OF APPEALS (SECOND DIVISION) ERRED IN
HOLDING AGAINST PETITIONER'S ARGUMENTS ON PRESCRIPTION AND
LACHES.6
In G.R. No. 120098, PBCom raised the following issues:
I.
DID THE COURT OF APPEALS VALIDLY DECREE THE MACHINERIES LISTED
OUTSIDE OF THE 1975 DEED OF REAL ESTATE MORTGAGE AND EXCLUDED
THEM FROM THE REAL PROPERTY EXTRAJUDICIALLY FORECLOSED BY PBCOM
34
DESPITE THE PROVISION IN THE 1975 DEED THAT ALL AFTER-ACQUIRED
PROPERTIES DURING THE LIFETIME OF THE MORTGAGE SHALL FORM PART
THEREOF, AND DESPITE THE UNDISPUTED FACT THAT SAID MACHINERIES ARE
BIG AND HEAVY, BOLTED OR CEMENTED ON THE REAL PROPERTY
MORTGAGED BY EVER TEXTILE MILLS TO PBCOM, AND WERE ASSESSED FOR
REAL ESTATE TAX PURPOSES?
II
CAN PBCOM, WHO TOOK POSSESSION OF THE MACHINERIES IN QUESTION IN
GOOD FAITH, EXTENDED CREDIT FACILITIES TO EVER TEXTILE MILLS WHICH AS
OF 1982 TOTALLED P9,547,095.28, WHO HAD SPENT FOR MAINTENANCE AND
SECURITY ON THE DISPUTED MACHINERIES AND HAD TO PAY ALL THE BACK
TAXES OF EVER TEXTILE MILLS BE LEGALLY COMPELLED TO RETURN TO EVER
THE SAID MACHINERIES OR IN LIEU THEREOF BE ASSESSED DAMAGES. IS THAT
SITUATION TANTAMOUNT TO A CASE OF UNJUST ENRICHMENT?7
The principal issue, in our view, is whether or not the inclusion of the questioned
properties in the foreclosed properties is proper. The secondary issue is whether or not
the sale of these properties to petitioner Ruby Tsai is valid.
For her part, Tsai avers that the Court of Appeals in effect made a contract for the parties
by treating the 1981 acquired units of machinery as chattels instead of real properties
within their earlier 1975 deed of Real and Chattel Mortgage or 1979 deed of Chattel
Mortgage.8 Additionally, Tsai argues that respondent court erred in holding that the
disputed 1981 machineries are not real properties.9 Finally, she contends that the Court
of Appeals erred in holding against petitioner's arguments on prescription and
laches10 and in assessing petitioner actual damages, attorney's fees and expenses of
litigation, for want of valid factual and legal basis.11
Essentially, PBCom contends that respondent court erred in affirming the lower court's
judgment decreeing that the pieces of machinery in dispute were not duly foreclosed and
could not be legally leased nor sold to Ruby Tsai. It further argued that the Court of
Appeals' pronouncement that the pieces of machinery in question were personal
properties have no factual and legal basis. Finally, it asserts that the Court of Appeals
erred in assessing damages and attorney's fees against PBCom.
In opposition, private respondents argue that the controverted units of machinery are not
"real properties" but chattels, and, therefore, they were not part of the foreclosed real
properties, rendering the lease and the subsequent sale thereof to Tsai a nullity.12
Considering the assigned errors and the arguments of the parties, we find the petitions
devoid of merit and ought to be denied.
Well settled is the rule that the jurisdiction of the Supreme Court in a petition for review
on certiorari under Rule 45 of the Revised Rules of Court is limited to reviewing only
errors of law, not of fact, unless the factual findings complained of are devoid of support
by the evidence on record or the assailed judgment is based on misapprehension of
facts.13 This rule is applied more stringently when the findings of fact of the RTC is
affirmed by the Court of Appeals.14
The following are the facts as found by the RTC and affirmed by the Court of Appeals
that are decisive of the issues: (1) the "controverted machineries" are not covered by, or
included in, either of the two mortgages, the Real Estate and Chattel Mortgage, and the
pure Chattel Mortgage; (2) the said machineries were not included in the list of properties
appended to the Notice of Sale, and neither were they included in the Sheriff's Notice of
Sale of the foreclosed properties.15
Petitioners contend that the nature of the disputed machineries, i.e., that they were
heavy, bolted or cemented on the real property mortgaged by EVERTEX to PBCom,
make them ipso facto immovable under Article 415 (3) and (5) of the New Civil Code.
This assertion, however, does not settle the issue. Mere nuts and bolts do not foreclose
the controversy. We have to look at the parties' intent.
While it is true that the controverted properties appear to be immobile, a perusal of the
contract of Real and Chattel Mortgage executed by the parties herein gives us a contrary
indication. In the case at bar, both the trial and the appellate courts reached the same
finding that the true intention of PBCOM and the owner, EVERTEX, is to treat machinery
and equipment as chattels. The pertinent portion of respondent appellate court's ruling is
quoted below:
As stressed upon by appellees, appellant bank treated the machineries as
chattels; never as real properties. Indeed, the 1975 mortgage contract, which
was actually real and chattel mortgage, militates against appellants' posture. It
should be noted that the printed form used by appellant bank was mainly for real
estate mortgages. But reflective of the true intention of appellant PBCOM and
appellee EVERTEX was the typing in capital letters, immediately following the
printed caption of mortgage, of the phrase "real and chattel." So also, the
"machineries and equipment" in the printed form of the bank had to be inserted in
the blank space of the printed contract and connected with the word "building" by
typewritten slash marks. Now, then, if the machineries in question were
contemplated to be included in the real estate mortgage, there would have been
35
 no necessity to ink a chattel mortgage specifically mentioning as part III of
Schedule A a listing of the machineries covered thereby. It would have sufficed to
list them as immovables in the Deed of Real Estate Mortgage of the land and
building involved.
As regards the 1979 contract, the intention of the parties is clear and beyond
question. It refers solely tochattels. The inventory list of the mortgaged properties
is an itemization of sixty-three (63) individually described machineries while the
schedule listed only machines and 2,996,880.50 worth of finished cotton fabrics
and natural cotton fabrics.16
In the absence of any showing that this conclusion is baseless, erroneous or
uncorroborated by the evidence on record, we find no compelling reason to depart
therefrom.
Too, assuming arguendo that the properties in question are immovable by nature,
nothing detracts the parties from treating it as chattels to secure an obligation under the
principle of estoppel. As far back as Navarro v. Pineda, 9 SCRA 631 (1963), an
immovable may be considered a personal property if there is a stipulation as when it is
used as security in the payment of an obligation where a chattel mortgage is executed
over it, as in the case at bar.
In the instant case, the parties herein: (1) executed a contract styled as "Real Estate
Mortgage and Chattel Mortgage," instead of just "Real Estate Mortgage" if indeed their
intention is to treat all properties included therein as immovable, and (2) attached to the
said contract a separate "LIST OF MACHINERIES & EQUIPMENT". These facts, taken
together, evince the conclusion that the parties' intention is to treat these units of
machinery as chattels. A fortiori, the contested after-acquired properties, which are of the
same description as the units enumerated under the title "LIST OF MACHINERIES &
EQUIPMENT," must also be treated as chattels.
Accordingly, we find no reversible error in the respondent appellate court's ruling that
inasmuch as the subject mortgages were intended by the parties to involve chattels,
insofar as equipment and machinery were concerned, the Chattel Mortgage Law applies,
which provides in Section 7 thereof that: "a chattel mortgage shall be deemed to
cover only the property described therein and not like or substituted property thereafter
acquired by the mortgagor and placed in the same depository as the property originally
mortgaged, anything in the mortgage to the contrary notwithstanding."
And, since the disputed machineries were acquired in 1981 and could not have been
involved in the 1975 or 1979 chattel mortgages, it was consequently an error on the part
of the Sheriff to include subject machineries with the properties enumerated in said
chattel mortgages.
As the auction sale of the subject properties to PBCom is void, no valid title passed in its
favor. Consequently, the sale thereof to Tsai is also a nullity under the elementary
principle of nemo dat quod non habet, one cannot give what one does not have.17
Petitioner Tsai also argued that assuming that PBCom's title over the contested
properties is a nullity, she is nevertheless a purchaser in good faith and for value who
now has a better right than EVERTEX.
To the contrary, however, are the factual findings and conclusions of the trial court that
she is not a purchaser in good faith. Well-settled is the rule that the person who asserts
the status of a purchaser in good faith and for value has the burden of proving such
assertion.18 Petitioner Tsai failed to discharge this burden persuasively.
Moreover, a purchaser in good faith and for value is one who buys the property of
another without notice that some other person has a right to or interest in such
property and pays a full and fair price for the same, at the time of purchase, or before he
has notice of the claims or interest of some other person in the property.19Records
reveal, however, that when Tsai purchased the controverted properties, she knew of
respondent's claim thereon. As borne out by the records, she received the letter of
respondent's counsel, apprising her of respondent's claim, dated February 27,
1987.20 She replied thereto on March 9, 1987.21 Despite her knowledge of respondent's
claim, she proceeded to buy the contested units of machinery on May 3, 1988. Thus, the
RTC did not err in finding that she was not a purchaser in good faith.
Petitioner Tsai's defense of indefeasibility of Torrens Title of the lot where the disputed
properties are located is equally unavailing. This defense refers to sale of lands and not
to sale of properties situated therein. Likewise, the mere fact that the lot where the
factory and the disputed properties stand is in PBCom's name does not automatically
make PBCom the owner of everything found therein, especially in view of EVERTEX's
letter to Tsai enunciating its claim.
Finally, petitioners' defense of prescription and laches is less than convincing. We find no
cogent reason to disturb the consistent findings of both courts below that the case for the
reconveyance of the disputed properties was filed within the reglementary period. Here,
in our view, the doctrine of laches does not apply. Note that upon petitioners' adamant
refusal to heed EVERTEX's claim, respondent company immediately filed an action to
recover possession and ownership of the disputed properties. There is no evidence
showing any failure or neglect on its part, for an unreasonable and unexplained length of
36
time, to do that which, by exercising due diligence, could or should have been done
earlier. The doctrine of stale demands would apply only where by reason of the lapse of
time, it would be inequitable to allow a party to enforce his legal rights. Moreover, except
for very strong reasons, this Court is not disposed to apply the doctrine of laches to
prejudice or defeat the rights of an owner.22
As to the award of damages, the contested damages are the actual compensation,
representing rentals for the contested units of machinery, the exemplary damages, and
attorney's fees.
As regards said actual compensation, the RTC awarded P100,000.00 corresponding to
the unpaid rentals of the contested properties based on the testimony of John Chua, who
testified that the P100,000.00 was based on the accepted practice in banking and
finance, business and investments that the rental price must take into account the cost of
money used to buy them. The Court of Appeals did not give full credence to Chua's
projection and reduced the award to P20,000.00.
Basic is the rule that to recover actual damages, the amount of loss must not only be
capable of proof but must actually be proven with reasonable degree of certainty,
premised upon competent proof or best evidence obtainable of the actual amount
thereof.23 However, the allegations of respondent company as to the amount of
unrealized rentals due them as actual damages remain mere assertions unsupported by
documents and other competent evidence. In determining actual damages, the court
cannot rely on mere assertions, speculations, conjectures or guesswork but must depend
on competent proof and on the best evidence obtainable regarding the actual amount of
loss.24 However, we are not prepared to disregard the following dispositions of the
respondent appellate court:
. . . In the award of actual damages under scrutiny, there is nothing on record
warranting the said award of P5,200,000.00, representing monthly rental income
of P100,000.00 from November 1986 to February 1991, and the additional award
of P100,000.00 per month thereafter.
As pointed out by appellants, the testimonial evidence, consisting of the
testimonies of Jonh (sic) Chua and Mamerto Villaluz, is shy of what is necessary
to substantiate the actual damages allegedly sustained by appellees, by way of
unrealized rental income of subject machineries and equipments.
The testimony of John Cua (sic) is nothing but an opinion or projection based on
what is claimed to be a practice in business and industry. But such a testimony
cannot serve as the sole basis for assessing the actual damages complained of.
What is more, there is no showing that had appellant Tsai not taken possession
of the machineries and equipments in question, somebody was willing and ready
to rent the same for P100,000.00 a month.
xxx xxx xxx
Then, too, even assuming arguendo that the said machineries and equipments
could have generated a rental income of P30,000.00 a month, as projected by
witness Mamerto Villaluz, the same would have been a gross income. Therefrom
should be deducted or removed, expenses for maintenance and repairs . . .
Therefore, in the determination of the actual damages or unrealized rental
income sued upon, there is a good basis to calculate that at least four months in
a year, the machineries in dispute would have been idle due to absence of a
lessee or while being repaired. In the light of the foregoing rationalization and
computation, We believe that a net unrealized rental income of P20,000.00 a
month, since November 1986, is more realistic and fair.25
As to exemplary damages, the RTC awarded P200,000.00 to EVERTEX which the Court
of Appeals deleted. But according to the CA, there was no clear showing that petitioners
acted malevolently, wantonly and oppressively. The evidence, however, shows
otherwise.It is a requisite to award exemplary damages that the wrongful act must be
accompanied by bad faith,26 and the guilty acted in a wanton, fraudulent, oppressive,
reckless or malevolent manner.27 As previously stressed, petitioner Tsai's act of
purchasing the controverted properties despite her knowledge of EVERTEX's claim was
oppressive and subjected the already insolvent respondent to gross disadvantage.
Petitioner PBCom also received the same letters of Atty. Villaluz, responding thereto on
March 24, 1987.28 Thus, PBCom's act of taking all the properties found in the factory of
the financially handicapped respondent, including those properties not covered by or
included in the mortgages, is equally oppressive and tainted with bad faith. Thus, we are
in agreement with the RTC that an award of exemplary damages is proper.
The amount of P200,000.00 for exemplary damages is, however, excessive. Article 2216
of the Civil Code provides that no proof of pecuniary loss is necessary for the
adjudication of exemplary damages, their assessment being left to the discretion of the
court in accordance with the circumstances of each case.29 While the imposition of
exemplary damages is justified in this case, equity calls for its reduction. In Inhelder
Corporation v. Court of Appeals, G.R. No. L-52358, 122 SCRA 576, 585, (May 30, 1983),
we laid down the rule that judicial discretion granted to the courts in the assessment of
damages must always be exercised with balanced restraint and measured objectivity.
Thus, here the award of exemplary damages by way of example for the public good
should be reduced to P100,000.00.
37
By the same token, attorney's fees and other expenses of litigation may be recovered
when exemplary damages are awarded.30 In our view, RTC's award of P50,000.00 as
attorney's fees and expenses of litigation is reasonable, given the circumstances in these
cases.
WHEREFORE, the petitions are DENIED. The assailed decision and resolution of the
Court of Appeals in CA-G.R. CV No. 32986 are AFFIRMED WITH MODIFICATIONS.
Petitioners Philippine Bank of Communications and Ruby L. Tsai are hereby ordered to
pay jointly and severally Ever Textile Mills, Inc. the following: (1) P20,000.00 per month,
as compensation for the use and possession of the properties in question from
November 198631 until subject personal properties are restored to respondent
corporation; (2) P100,000.00 by way of exemplary damages, and (3) P50,000.00 as
attorney's fees and litigation expenses. Costs against petitioners.
SO ORDERED.
------- x x END OF MOVABLE PROPERTY CASES x x ------
G.R. No. L-28379 March 27, 1929
GOVERNMENT vs. CABANGIS
The Government of the Philippine Islands appeals to this court from the judgment of the
Court of First Instance of Manila in cadastral proceeding No. 373 of the Court of First
Instance of Manila, G. L. R. O. Cadastral Record No. 373, adjudicating the title and
decreeing the registration of lots Nos. 36, 39 and 40, block 3055 of the cadastral survey
of the City of Manila in favor of Consuelo, Consorcia, Elvira and Tomas, surnamed
Cabangis, in equal parts, and dismissing the claims presented by the Government of the
Philippine Islands and the City of Manila.
In support of its appeal, the appellant assigns the following alleged errors as committed
by the trial court in its judgment, to wit:
1. The lower court erred in not holding that the lots in question are of the public
domain, the same having been gained from the sea (Manila Bay) by accession,
by fillings made by the Bureau of Public Works and by the construction of the
break-water (built by the Bureau of Navigation) near the mouth of Vitas Estero.
2. The lower court erred in holding that the lots in question formed part of the big
parcel of land belonging to the spouses Maximo Cabangis and Tita Andres, and
in holding that these spouses and their successors in interest have been in
continuous, public, peaceful and uninterrupted possession of said lots up to the
time this case came up.
3. The lower court erred in holding that said lots existed before, but that due to
the current of the Pasig River and to the action of the big waves in Manila Bay
during the south-west monsoons, the same disappeared.
4. The lower court erred in adjudicating the registration of the lands in question in
the name of the appellees, and in denying the appellant's motion for a new trial.
A preponderance of the evidence in the record which may properly be taken into
consideration in deciding the case, proves the following facts:
Lots 36, 39 and 40, block 3035 of cadastral proceeding No. 71 of the City of Manila, G. L.
R. O. Record No. 373, were formerly a part of a large parcel of land belonging to the
predecessor of the herein claimants and appellees. From the year 1896 said land began
to wear away, due to the action of the waves of Manila Bay, until the year 1901 when the
said lots became completely submerged in water in ordinary tides, and remained in such
a state until 1912 when the Government undertook the dredging of Vitas Estuary in order
to facilitate navigation, depositing all the sand and silt taken from the bed of the estuary
on the low lands which were completely covered with water, surrounding that belonging
to the Philippine Manufacturing Company, thereby slowly and gradually forming the lots,
the subject matter of this proceeding.
Up to the month of February, 1927 nobody had declared lot 39 for the purposes of
taxation, and it was only in the year 1926 that Dr. Pedro Gil, in behalf of the claimants
and appellees, declared lot No. 40 for such purpose.
In view of the facts just stated, as proved by a preponderance of the evidence, the
question arises: Who owns lots 36, 39 and 40 in question?
The claimants-appellees contend that inasmuch as the said lots once formed a part of a
large parcel of land belonging to their predecessors, whom they succeeded, and their
immediate predecessor in interest, Tomas Cabangis, having taken possession thereof as
soon as they were reclaimed, giving his permission to some fishermen to dry their fishing
nets and deposit their bancas thereon, said lots belong to them.
Article 339, subsection 1, of the Civil Code, reads:
Article 339. Property of public ownership is —
38
 1. That devoted to public use, such as roads, canals, rivers, torrents, ports and
bridges constructed by the State, riverbanks, shorts, roadsteads, and that of a
similar character.
xxx xxx xxx
Article 1, case 3, of the Law of Waters of August 3, 1866, provides as follows:
ARTICLE 1. The following are part of the national domain open to public use:
xxx xxx xxx
3. The Shores. By the shore is understood that space covered and uncovered by
the movement of the tide. Its interior or terrestrial limit is the line reached by the
highest equinoctial tides. Where the tides are not appreciable, the shore begins
on the land side at the line reached by the sea during ordinary storms or
tempests.
In the case of Aragon vs. Insular Government (19 Phil., 223), with reference to article
339 of the Civil Code just quoted, this court said:
We should not be understood, by this decision, to hold that in a case of gradual
encroachment or erosion by the ebb and flow of the tide, private property may not
become 'property of public ownership,' as defined in article 339 of the code, where it
appears that the owner has to all intents and purposes abandoned it and permitted it to
be totally destroyed, so as to become a part of the 'playa' (shore of the seas), 'rada'
(roadstead), or the like. . . .
In the Enciclopedia Juridica Espanola, volume XII, page 558, we read the following:
With relative frequency the opposite phenomenon occurs; that is, the sea
advances and private properties are permanently invaded by the waves, and in
this case they become part of the shore or beach. They then pass to the public
domain, but the owner thus dispossessed does not retain any right to the natural
products resulting from their new nature; it is a de facto case of eminent domain,
and not subject to indemnity.
Now then , when said land was reclaimed, did the claimants-appellees or their
predecessors recover it as their original property?
As we have seen, the land belonging to the predecessors of the herein claimants-
appellees began to wear way in 1896, owing to the gradual erosion caused by the ebb
and flow of the tide, until the year 1901, when the waters of Manila Bay completely
submerged a portion of it, included within lots 36, 39 and 40 here in question, remaining
thus under water until reclaimed as a result of certain work done by the Government in
1912. According to the above-cited authorities said portion of land, that is, lots 36, 39 and
40, which was private property, became a part of the public domain. The predecessors of
the herein claimants-appellees could have protected their land by building a retaining
wall, with the consent of competent authority, in 1896 when the waters of the sea began
to wear it away, in accordance with the provisions of Article 29 of the aforecited Law of
Waters of August 3, 1866, and their failure to do so until 1901, when a portion of the
same became completely covered by said waters, remaining thus submerged until 1912,
constitutes abandonment.
Now then: The lots under discussion having been reclaimed from the seas as a result of
certain work done by the Government, to whom do they belong?
The answer to this question is found in article 5 of the aforementioned Law of Waters,
which is as follows:
ART. 5. Lands reclaimed from the sea in consequence of works constructed by
the State, or by the provinces, pueblos or private persons, with proper
permission, shall become the property of the party constructing such works,
unless otherwise provided by the terms of the grant of authority.
The fact that from 1912 some fishermen had been drying their fishing nets and
depositing their bancas on lots 36, 39 and 40, by permission of Tomas Cabangis, does
not confer on the latter or his successors the ownership of said lots, because, as they
were converted into public land, no private person could acquire title thereto except in
the form and manner established by the law.
In the case of Buzon vs. Insular Government and City of Manila (13 Phil., 324), cited by
the claimants-appellees, this court, admitting the findings and holdings of the lower court,
said the following:
If we heed the parol evidence, we find that the seashore was formerly about one
hundred brazas distant from the land in question; that, in the course of time, and
by the removal of a considerable quantity of sand from the shore at the back of
39
 the land for the use of the street car company in filling in Calle Cervantes, the
sea water in ordinary tides now covers part of the land described in the petition.
The fact that certain land, not the bed of a river or of the sea, is covered by sea
water during the period of ordinary high tide, is not a reason established by any
law to cause the loss thereof, especially when, as in the present case, it
becomes covered by water owing to circumstances entirely independent of the
will of the owner.
In the case of Director of Lands vs. Aguilar (G.R. No. 22034),1 also cited by the
claimants-appellees, wherein the Government adduced no evidence in support of its
contention, the lower court said in part:
The contention of the claimants Cabangis is to the effect that said lots are a part
of the adjoining land adjudicated to their deceased father, Don Tomas Cabangis,
which, for over fifty years had belonged to their deceased grandmother, Tita
Andres, and that, due to certain improvements made in Manila Bay, the waters of
the sea covered a large part of the lots herein claimed.
The Government of the Philippine Islands also claims the ownership of said lots,
because, at ordinary high tide, they are covered by the sea.
Upon petition of the parties, the lower court made an ocular inspection of said
lots on September 12, 1923, and on said inspection found some light material
houses built thereon, and that on that occasion the waters of the sea did not
reach the aforesaid lots.
From the evidence adduced at the trial of this cause, it may be inferred that Tita
Andres, during her lifetime was the owner of a rather large parcel of land which
was adjudicated by a decree to her son Tomas Cabangis; the lots now in
question are contiguous to that land and are covered by the waters of the sea at
extraordinary high tide; some 50 years before the sea did not reach said strip of
land, and on it were constructed, for the most part, light material houses,
occupied by the tenants of Tita Andres, to whom they paid rent. Upon her death,
her son Tomas Cabangis succeeded to the possession, and his children
succeeded him, they being the present claimants, Consuelo, Jesus, Tomas, and
Consorcia Cabangis.
The Government of the Philippine Islands did not adduce any evidence in
support of its contention, with the exception of registry record No. 8147, to show
that the lots here in question were not excluded from the application presented in
said proceeding.
It will be seen that in the case of Buzon vs. Insular Government and City of Manila, cited
above, the rise of the waters of the sea that covered the lands there in dispute, was due
not to the action of the tide but to the fact that a large quantity of sand was taken from
the sea at the side of said land in order to fill in Cervantes Street, and this court properly
held that because of this act, entirely independent of the will of the owner of said land,
the latter could not lose the ownership thereof, and the mere fact that the waters of the
sea covered it as a result of said act, is not sufficient to convert it into public land,
especially, as the land was high and appropriate for building purposes.
In the case of the Director of Lands vs. Aguilar also cited by the claimants-appellees, the
Insular Government did not present any evidence in support of its contention, thus
leaving uncontradicted the evidence adduced by the claimants Aguilar et al., as to the
ownership, possession and occupation of said lots.
In the instant case the evidence shows that from 1896, the waves of Manila Bay had
been gradually and constantly washing away the sand that formed the lots here in
question, until 1901, when the sea water completely covered them, and thus they
remained until the year 1912. In the latter year they were reclaimed from the sea by filling
in with sand and silt extracted from the bed of Vitas Estuary when the Government
dredged said estuary in order to facilitate navigation. Neither the herein claimants-
appellees nor their predecessors did anything to prevent their destruction.
In conclusion, then, we hold that the lots in question having disappeared on account of
the gradual erosion due to the ebb and flow of the tide, and having remained in such a
state until they were reclaimed from the sea by the filling in done by the Government,
they are public land. (Aragon vs. Insular Government, 19 Phil., 223; Francisco vs.
Government of the Philippine Islands, 28 Phil., 505).
By virtue whereof, the judgment appealed from is reversed and lots Nos. 36, 39 and 40
of cadastral proceeding No. 373 of the City of Manila are held to be public land belonging
to the Government of the United States under the administration and control of the
Government of the Philippine Islands. So ordered.
G.R. No. L40474 August 29, 1975
CEBU OXYGEN & ACETYLENE CO., INC vs. BERCILLES
40
This is a petition for the review of the order of the Court of First Instance of Cebu
dismissing petitioner's application for registration of title over a parcel of land situated in
the City of Cebu.
The parcel of land sought to be registered was only a portion of M. Borces Street,
Mabolo, Cebu City. On September 23, 1968, the City Council of Cebu, through
Resolution No. 2193, approved on October 3, 1968, declared the terminal portion of M.
Borces Street, Mabolo, Cebu City, as an abandoned road, the same not being included
in the City Development Plan. 1 Subsequently, on December 19, 1968, the City Council of
Cebu passed Resolution No. 2755, authorizing the Acting City Mayor to sell the land through
a public bidding. 2 Pursuant thereto, the lot was awarded to the herein petitioner being the
highest bidder and on March 3, 1969, the City of Cebu, through the Acting City Mayor,
executed a deed of absolute sale to the herein petitioner for a total consideration of
P10,800.00. 3 By virtue of the aforesaid deed of absolute sale, the petitioner filed an
application with the Court of First instance of Cebu to have its title to the land registered. 4
On June 26, 1974, the Assistant Provincial Fiscal of Cebu filed a motion to dismiss the
application on the ground that the property sought to be registered being a public road
intended for public use is considered part of the public domain and therefore outside the
commerce of man. Consequently, it cannot be subject to registration by any private
individual. 5
After hearing the parties, on October 11, 1974 the trial court issued an order dismissing
the petitioner's application for registration of title. 6 Hence, the instant petition for review.
For the resolution of this case, the petitioner poses the following questions:
(1) Does the City Charter of Cebu City (Republic Act No. 3857) under
Section 31, paragraph 34, give the City of Cebu the valid right to declare
a road as abandoned? and
(2) Does the declaration of the road, as abandoned, make it the
patrimonial property of the City of Cebu which may be the object of a
common contract?
(1) The pertinent portions of the Revised Charter of Cebu City provides:
Section 31. Legislative Powers. Any provision of law and executive order
to the contrary notwithstanding, the City Council shall have the following
legislative powers:
xxx xxx xxx
(34) ...; to close any city road, street or alley, boulevard, avenue, park or
square. Property thus withdrawn from public servitude may be used or
conveyed for any purpose for which other real property belonging to the
City may be lawfully used or conveyed.
From the foregoing, it is undoubtedly clear that the City of Cebu is empowered to close a
city road or street. In the case of Favis vs. City of Baguio, 7 where the power of the city
Council of Baguio City to close city streets and to vacate or withdraw the same from public
use was similarly assailed, this court said:
5. So it is, that appellant may not challenge the city council's act of
withdrawing a strip of Lapu-Lapu Street at its dead end from public use
and converting the remainder thereof into an alley. These are acts well
within the ambit of the power to close a city street. The city council, it
would seem to us, is the authority competent to determine whether or not
a certain property is still necessary for public use.
Such power to vacate a street or alley is discretionary. And the discretion
will not ordinarily be controlled or interfered with by the courts, absent a
plain case of abuse or fraud or collusion. Faithfulness to the public trust
will be presumed. So the fact that some private interests may be served
incidentally will not invalidate the vacation ordinance.
(2) Since that portion of the city street subject of petitioner's application for registration of
title was withdrawn from public use, it follows that such withdrawn portion becomes
patrimonial property which can be the object of an ordinary contract.
Article 422 of the Civil Code expressly provides that "Property of public dominion, when
no longer intended for public use or for public service, shall form part of the patrimonial
property of the State."
Besides, the Revised Charter of the City of Cebu heretofore quoted, in very clear and
unequivocal terms, states that: "Property thus withdrawn from public servitude may be
used or conveyed for any purpose for which other real property belonging to the City may
be lawfully used or conveyed."
Accordingly, the withdrawal of the property in question from public use and its
subsequent sale to the petitioner is valid. Hence, the petitioner has a registerable title
over the lot in question.
41
WHEREFORE, the order dated October 11, 1974, rendered by the respondent court in
Land Reg. Case No. N-948, LRC Rec. No. N-44531 is hereby set aside, and the
respondent court is hereby ordered to proceed with the hearing of the petitioner's
application for registration of title.
SO ORDERED.
G.R. No. L-24950 March 25, 1926
VIUDA DE TAN TOCO vs. THE MUNICIPAL COUNCIL OF ILOILO
It appears from the record that the widow of Tan Toco had sued the municipal council of
Iloilo for the amount of P42,966.40, being the purchase price of two strips of land, one on
Calle J. M. Basa consisting of 592 square meters, and the other on Calle Aldiguer
consisting of 59 square meters, which the municipality of Iloilo had appropriated for
widening said street. The Court of First Instance of Iloilo sentenced the said municipality
to pay the plaintiff the amount so claimed, plus the interest, and the said judgment was
on appeal affirmed by this court.1
On account of lack of funds the municipality of Iloilo was unable to pay the said
judgment, wherefore plaintiff had a writ of execution issue against the property of the
said municipality, by virtue of which the sheriff attached two auto trucks used for street
sprinkling, one police patrol automobile, the police stations on Mabini street, and in Molo
and Mandurriao and the concrete structures, with the corresponding lots, used as
markets by Iloilo, Molo, and Mandurriao.
After notice of the sale of said property had been made, and a few days before the sale,
the provincial fiscal of Iloilo filed a motion which the Court of First Instance praying that
the attachment on the said property be dissolved, that the said attachment be declared
null and void as being illegal and violative of the rights of the defendant municipality.
Plaintiffs counsel objected o the fiscal's motion but the court, by order of August 12,
1925, declared the attachment levied upon the aforementioned property of the defendant
municipality null and void, thereby dissolving the said attachment.
From this order the plaintiff has appealed by bill of exceptions. The fundamental question
raised by appellant in her four assignments of error is whether or not the property levied
upon is exempt from execution.
The municipal law, section 2165 of the Administrative Code, provides that:
Municipalities are political bodies corporate, and as such are endowed with the
faculties of municipal corporations, to be exercised by and through their
respective municipal government in conformity with law.
It shall be competent for them, in their proper corporate name, to sue and be
sued, to contract and be contracted with, to acquire and hold real and personal
property for municipal purposes, and generally to exercise the powers hereinafter
specified or otherwise conferred upon them by law.
For the purposes of the matter here in question, the Administrative Code does not
specify the kind of property that a municipality may acquire. However, article 343 of the
Civil Code divides the property of provinces and towns (municipalities) into property for
public use and patrimonial property. According to article 344 of the same Code,
provincial roads and foot-path, squares, streets, fountains and public waters, drives and
public improvements of general benefit built at the expense of the said towns or
provinces, are property for public use.
All other property possessed by the said towns and provinces is patrimonial and shall be
subject to the provisions of the Civil Code except as provided by special laws.
Commenting upon article 344, Mr. Manresa says that "In accordance with administrative
legislation" (Spanish) we must distinguish, as to the patrimonial property of the towns,
"between that a common benefit and that which is private property of the town. The first
differs from property for public use in that generally its enjoyment is less, as it is limited to
neighbors or to a group or class thereof; and, furthermore, such use, more or less
general, is not intrinsic with this kind of property, for by its very nature it may be enjoyed
as though it were private property. The third group, that is, private property, is used in the
name of the town or province by the entities representing it and, like and private property,
giving a source of revenue."
Such distinction, however, is of little practical importance in this jurisdiction in view of the
different principles underlying the functions of a municipality under the American rule.
Notwithstanding this, we believe that the principle governing property of the public
domain of the State is applicable to property for public use of the municipalities as said
municipal is similar in character. The principle is that the property for public use of the
State is not within the commerce of man and, consequently, is inalienable and not
subject to prescription. Likewise, property for public of the municipality is not within the
commerce of man so long as it is used by the public and, consequently, said property is
also inalienable.
42
The American Law is more explicit about this matter as expounded by Mcquilin in
Municipal Corporations, volume 3, paragraph 1160, where he says that:
States statutes often provide the court houses, jails and other buildings owned by
municipalities and the lots on which they stand shall be exempt from attachment
and execution. But independent of express statutory exemption, as a general
proposition, property, real and personal, held by municipal corporations, in trust
for the benefit of their inhabitants, and used for public purposes, is exempt.
For example, public buildings, school houses, streets, squares, parks, wharves,
engines and engine houses, and the like, are not subject to execution. So city
waterworks, and a stock of liquors carried in a town dispensary, are exempt. The
reason for the exemption is obvious. Municipal corporations are created for
public purposes and for the good of the citizens in their aggregate or public
capacity. That they may properly discharge such public functions corporate
property and revenues are essential, and to deny them these means the very
purpose of their creation would be materially impeded, and in some instances
practically destroy it. Respecting this subject the Supreme Court of Louisiana
remarked: "On the first view of this question there is something very repugnant to
the moral sense in the idea that a municipal corporation should contract debts,
and that, having no resources but the taxes which are due to it, these should not
be subjected by legal process to the satisfaction of its creditors. This
consideration, deduced from the principles of moral equity has only given way to
the more enlarged contemplation of the great and paramount interests of public
order and the principles of government."
It is generally held that property owned by a municipality, where not used for a
public purpose but for quasi private purposes, is subject to execution on a
judgment against the municipality, and may be sold. This rule applies to shares
of stock owned by a municipal corporation, and the like. But the mere fact that
corporate property held for public uses is being temporarily used for private
purposes does not make it subject execution.
If municipal property exempt from execution is destroyed, the insurance money
stands in lieu thereof and is also exempt.
The members or inhabitants of a municipal corporation proper are not personally
liable for the debts of the municipality, except that in the New England States the
individual liability of the inhabitant is generally maintained.
In Corpus Juris, vol 23, page 355, the following is found:
Where property of a municipal or other public corporation is sough to be
subjected to execution to satisfy judgments recovered against such corporation,
the question as to whether such property is leviable or not is to be determined by
the usage and purposes for which it is held. The rule is that property held for
public uses, such as public buildings, streets, squares parks, promenades,
wharves, landing places fire engines, hose and hose carriages, engine houses,
public markets, hospitals, cemeteries, and generally everything held for
governmental purposes, is not subject to levy and sale under execution against
such corporation. The rule also applies to funds in the hands of a public officer.
Likewise it has been held that taxes due to a municipal corporation or country
cannot be seized under execution by a creditor of such corporation. But where a
municipal corporation or country owns in its proprietary, as distinguished from its
public or governmental capacity, property not useful or used for a public purpose
but for quasi private purposes, the general rule is that such property may be
seized and sold under execution against the corporation, precisely as similar
property of individuals is seized and sold. But property held for public purposes is
not subject to execution merely because it is temporarily used for private
purposes, although if the public use is wholly abandoned it becomes subject to
execution. Whether or not property held as public property is necessary for the
public use is a political, rather than a judicial question.
In the case of City of New Orleans vs. Louisiana Construction Co., Ltd. (140 U. S., 654;
35 Law. ed., 556), it was held that a wharf for unloading sugar and molasses, open to the
public, was property for the public use of the City of New Orleans and was not subject to
attachment for the payment of the debts of the said city.
In that case it was proven that the said wharf was a parcel of land adjacent to the
Mississippi River where all shipments of sugar and molasses taken to New Orleans were
unloaded.
That city leased the said wharf to the Louisiana Construction Company, Ltd., in order that
it might erect warehouses so that the merchandise upon discharge might not be spoiled
by the elements. The said company was given the privilege of charging certain fees for
storing merchandise in the said warehouses and the public in general had the right to
unload sugar and molasses there by paying the required fees, 10 per cent of which was
turned over to the city treasury.
The United States Supreme Court on an appeal held that the wharf was public property,
that it never ceased to be such in order to become private property of the city; wherefore
the company could not levy execution upon the wharf in order to collect the amount of
the judgment rendered in favor thereof.
43
In the case of Klein vs. City of New Orleans (98 U. S., 149; 25 Law. ed., 430), the
Supreme Court of the United States that a public wharf on the banks of the Mississippi
River was public property and not subject to execution for the payment of a debt of the
City of New Orleans where said wharf was located.
In this case a parcel of land adjacent to the Mississippi River, which formerly was the
shore of the river and which later enlarged itself by accession, was converted into a
wharf by the city for public use, who charged a certain fee for its use.
It was held that the land was public property as necessary as a public street and was not
subject to execution on account of the debts of the city. It was further held that the fees
collected where also exempt from execution because they were a part of the income of
the city.
In the case of Tufexis vs. Olaguera and Municipal Council of Guinobatan (32 Phil., 654),
the question raised was whether for the payment of a debt to a third person by the
concessionaire of a public market, the said public market could be attached and sold at
public auction. The Supreme Court held that:
Even though a creditor is unquestionably entitled to recover out of his debtor's
property, yet when among such property there is included the special right
granted by the Government of usufruct in a building intended for a public service,
and when this privilege is closely related to a service of a public character, such
right of the creditor to the collection of a debt owed him by the debtor who enjoys
the said special privilege of usufruct in a public market is not absolute and may
be exercised only through the action of court of justice with respect to the profits
or revenue obtained under the special right of usufruct enjoyed by debtor.
The special concession of the right of usufruct in a public market cannot be
attached like any ordinary right, because that would be to permit a person who
has contracted with the state or with the administrative officials thereof to conduct
and manage a service of a public character, to be substituted, without the
knowledge and consent of the administrative authorities, by one who took no part
in the contract, thus giving rise to the possibility of the regular course of a public
service being disturbed by the more or less legal action of a grantee, to the
prejudice of the state and the public interests.
The privilege or franchise granted to a private person to enjoy the usufruct of a
public market cannot lawfully be attached and sold, and a creditor of such person
can recover his debt only out of the income or revenue obtained by the debtor
from the enjoyment or usufruct of the said privilege, in the same manner that the
rights of such creditors of a railroad company can be exercised and their credit
collected only out of the gross receipts remaining after deduction has been made
therefrom of the operating expenses of the road. (Law of November 12, 1896,
extended to the overseas provinces by the royal order of August 3, 1886.)
For the reasons contained in the authorities above quoted we believe that this court
would have reached the same conclusion if the debtor had been municipality of
Guinobatan and the public market had been levied upon by virtue of the execution.
It is evident that the movable and immovable property of a municipality, necessary for
governmental purpose, may not be attached and sold for the payment of a judgment
against the municipality. The supreme reason for this rule is the character of the public
use to which such kind of property is devoted. The necessity for government service
justifies that the property of public of the municipality be exempt from execution just as it
is necessary to exempt certain property of private individuals in accordance with section
452 of the Code of Civil Procedure.
Even the municipal income, according to the above quoted authorities, is exempt from
levy and execution. In volume 1, page 467, Municipal Corporations by Dillon we find that:
Municipal corporations are instituted by the supreme authority of a state for the
public good. They exercise, by delegation from the legislature, a portion of the
sovereign power. The main object of their creation is to act as administrative
agencies for the state, and to provide for the police and local government of
certain designated civil divisions of its territory. To this end they are invested with
certain governmental powers and charged with civil, political, and municipal
duties. To enable them beneficially to exercise these powers and discharge
these duties, they are clothed with the authority to raise revenues, chiefly by
taxation, and subordinately by other modes as by licenses, fines, and penalties.
The revenue of the public corporation is the essential means by which it is
enabled to perform its appointed work. Deprived of its regular and adequate
supply of revenue, such a corporation is practically destroyed and the ends of its
erection thwarted. Based upon considerations of this character, it is the settled
doctrine of the law that only the public property but also the taxes and public
revenues of such corporations cannot be seized under execution against them,
either in the treasury or when in transit to it. Judgments rendered for taxes, and
the proceeds of such judgments in the hands of officers of the law, are not
subject to execution unless so declared by statute. The doctrine of the
inviolability of the public revenues by the creditor is maintained, although the
corporation is in debt, and has no means of payment but the taxes which it is
authorized to collect.
44
Another error assigned by counsel for appellant is the holding of the court a quo that the
proper remedy for collecting the judgment in favor of the plaintiff was by way or
mandamus.
While this question is not necessarily included in the one which is the subject of this
appeal, yet we believe that the holding of the court, assigned as error by appellant's
counsel, is true when, after a judgment is rendered against a municipality, it has no
property subject to execution. This doctrine is maintained by Dillon (Municipal
Corporations, vol. 4, par. 1507, 5th ed.) based upon the decisions of several States of
the Union upholding the same principle and which are cited on page 2679 of the
aforesaid work. In this sense this assignment of error, we believe, is groundless.
By virtue of all the foregoing, the judgment appealed from should be and is hereby
affirmed with costs against the appellant. So ordered.
G.R. No. L-29788 August 30, 1972
SALAS vs. JARENCIO
This is a petition for review of the decision of the Court of First Instance of Manila,
Branch XXIII, in Civil Case No. 67946, dated September 23, 1968, the dispositive portion
of which is as follows:
WHEREFORE, the Court renders judgment declaring Republic Act No.
4118 unconstitutional and invalid in that it deprived the City of Manila of
its property without due process and payment of just compensation.
Respondent Executive Secretary and Governor of the Land Authority are
hereby restrained and enjoined from implementing the provisions of said
law. Respondent Register of Deeds of the City of Manila is ordered to
cancel Transfer Certificate of Title No. 80876 which he had issued in the
name of the Land Tenure Administration and reinstate Transfer
Certificate of Title No. 22547 in the name of the City of Manila which he
cancelled, if that is feasible, or issue a new certificate of title for the same
parcel of land in the name of the City of Manila. 1
The facts necessary for a clear understanding of this case are as follows:
On February 24, 1919, the 4th Branch of the Court of First Instance of Manila, acting as
a land registration court, rendered judgment in Case No. 18, G.L.R.O. Record No. 111,
declaring the City of Manila the owner in fee simple of a parcel of land known as Lot No.
1, Block 557 of the Cadastral Survey of the City of Mani1a, containing an area of 9,689.8
square meters, more or less. Pursuant to said judgment the Register of Deeds of Manila
on August 21, 1920, issued in favor of the City of Manila, Original Certificate of Title No.
4329 covering the aforementioned parcel of land. On various dates in 1924, the City of
Manila sold portions of the aforementioned parcel of land in favor of Pura Villanueva. As
a consequence of the transactions Original Certificate of Title No. 4329 was cancelled
and transfer certificates of title were issued in favor of Pura Villanueva for the portions
purchased by her. When the last sale to Pura Villanueva was effected on August 22,
1924, Transfer Certificate of Title No. 21974 in the name of the City of Manila was
cancelled and in lieu thereof Transfer Certificate of Title (TCT) No. 22547 covering the
residue thereof known as Lot 1-B-2-B of Block 557, with an area of 7,490.10 square
meters, was issued in the name of the City of Manila.
On September 21, 1960, the Municipal Board of Manila, presided by then Vice-Mayor
Antono J. Villegas, adopted a resolution requesting His Excellency, the President of the
Philippines to consider the feasibility of declaring the City property bounded by Florida,
San Andres, and Nebraska Streets, under Transfer Certificate of Title Nos. 25545 and
22547, containing a total area of 7,450 square meters as a patrimonial property of the
City of Manila for the purpose of reselling these lots to the actual occupants thereof. 2
The said resolution of the Municipil Board of the City of Manila was officially transmitted
to the President of the Philippines by then Vice-Mayor Antonio J. Villegas on September
21, 1960, with the information that the same resolution was, on the same date,
transmitted to the Senate and House of Representatives of the Congress of the
Philippines. 3
During the First Session of the Fifth Congress of the Philippines, House Bill No. 191 was
filed in the House of Representatives by then Congressman Bartolome Cabangbang
seeking to declare the property in question as patrimonial property of the City of Manila,
and for other purposes. The explanatory note of the Bill gave the grounds for its
enactment, to wit:
In the particular case of the property subject of this bill, the City of Manila
does not seem to have use thereof as a public communal property. As a
matter of fact, a resolution was adopted by the Municipal Board of Manila
at its regular session held on September 21, 1960, to request the
feasibility of declaring the city property bounded by Florida, San Andres
and Nebraska Streets as a patrimonial property of the City of Manila for
the purpose of reselling these lots to the actual occupants thereof.
Therefore, it will be to the best interest of society that the said property be
used in one way or another. Since this property has been occupied for a
long time by the present occupants thereof and since said occupants
45
 have expressed their willingness to buy the said property, it is but proper
that the same be sold to them. 4
Subsequently, a revised version of the Bill was introduced in the House of
Representatives by Congressmen Manuel Cases, Antonio Raquiza and Nicanor Yñiguez
as House Bill No. 1453, with the following explanatory note:
The accompanying bill seeks to convert one (1) parcel of land in the
district of Malate, which is reserved as communal property into a
disposable or alienable property of the State and to provide its
subdivision and sale to bona fide occupants or tenants.
This parcel of land in question was originally an aggregate part of a piece
of land with an area of 9,689.8 square meters, more or less. ... On
September 21, 1960, the Municipal Board of Manila in its regular session
unanimously adopted a resolution requesting the President of the
Philippines and Congress of the Philippines the feasibility of declaring this
property into disposable or alienable property of the State. There is
therefore a precedent that this parcel of land could be subdivided and
sold to bona fide occupants. This parcel of land will not serve any useful
public project because it is bounded on all sides by private properties
which were formerly parts of this lot in question.
Approval of this bill will implement the policy of the Administration of land
for the landless and the Fifth Declaration of Principles of the Constitution,
which states that the promotion of Social Justice to insure the well-being
and economic security of all people should be the concern of the State.
We are ready and willing to enact legislation promoting the social and
economic well-being of the people whenever an opportunity for enacting
such kind of legislation arises.
In view of the foregoing consideration and to insure fairness and justice to the present
bona fide occupants thereof, approval of this Bill is strongly urged. 5
The Bill having been passed by the House of Representatives, the same was thereafter
sent to the Senate where it was thoroughly discussed, as evidenced by the
Congressional Records for May 20, 1964, pertinent portion of which is as follows:
SENATOR FERNANDEZ: Mr. President, it will be re called that when the
late Mayor Lacson was still alive, we approved a similar bill. But
afterwards, the late Mayor Lacson came here and protested against the
approval, and the approval was reconsidered. May I know whether the
defect in the bill which we approved, has already been eliminated in this
present bill?
SENATOR TOLENTINO: I understand Mr. President, that that has
already been eliminated and that is why the City of Manila has no more
objection to this bill.
SENATOR FERNANDEZ: Mr. President, in view of that manifestation and
considering that Mayor Villegas and Congressman Albert of the Fourth
District of Manila are in favor of the bill. I would not want to pretend to
know more what is good for the City of Manila.
SENATOR TOLENTINO: Mr. President, there being no objection, I move
that we approve this bill on second reading.
PRESIDENT PRO-TEMPORE: The biII is approved on second reading
after several Senetors said aye and nobody said nay.
The bill was passed by the Senate, approved by the President on June 20, 1964, and
became Republic Act No. 4118. It reads as follows:
Lot I-B-2-B of Block 557 of the cadastral survey of the City of Manila,
situated in the District of Malate, City of Manila, which is reserved as
communal property, is hereby converted into disposal or alienable land of
the State, to be placed under the disposal of the Land Tenure
Administration. The Land Tenure Administration shall subdivide the
property into small lots, none of which shall exceed one hundred and
twenty square meters in area and sell the same on installment basis to
the tenants or bona fide occupants thereof and to individuals, in the order
mentioned: Provided, That no down payment shall be required of tenants
or bona fide occupants who cannot afford to pay such down
payment: Provided, further, That no person can purchase more than one
lot: Provided, furthermore, That if the tenant or bona fide occupant of any
given lot is not able to purchase the same, he shall be given a lease from
month to month until such time that he is able to purchase the
lot: Provided, still further, That in the event of lease the rentals which may
be charged shall not exceed eight per cent per annum of the assessed
value of the property leased: And provided, finally, That in fixing the price
of each lot, which shall not exceed twenty pesos per square meter, the
cost of subdivision and survey shall not be included.
46
 Sec. 2. Upon approval of this Act no ejectment proceedings against any
tenant or bona fide occupant of the above lots shall be instituted and any
ejectment proceedings pending in court against any such tenant or bona
fide occupant shall be dismissed upon motion of the defendant: Provided,
That any demolition order directed against any tenant or bona fide
occupant shall be lifted.
Sec. 3. Upon approval of this Act, if the tenant or bona fide occupant is in
arrears in the payment of any rentals, the amount legally due shall be
liquidated and shall be payable in twenty-four equal monthly installments
from the date of liquidation.
Sec. 4. No property acquired by virtue of this Act shall be transferred,
sold, mortgaged, or otherwise disposed of within a period of five years
from the date full ownership thereof has been vested in the purchaser
without the consent of the Land Tenure Administration.
Sec. 5. In the event of the death of the purchaser prior to the complete
payment of the price of the lot purchased by him, his widow and children
shall succeed in all his rights and obligations with respect to his lot.
Sec. 6. The Chairman of the Land Tenure Administration shall implement
and issue such rules and regulations as may be necessary to carry out
the provisions of this Act.
Sec. 7. The sum of one hundred fifty thousand pesos is appropriated out
of any funds in the National Treasury not otherwise appropriated, to carry
out the purposes of this Act.
Sec. 8. All laws or parts of laws inconsistent with this Act are repealed or
modified accordingly.
Sec. 9. This Act shall take effect upon its approval.
Approved, June 20, 1964.
To implement the provisions of Republic Act No. 4118, and pursuant to the request of the
occupants of the property involved, then Deputy Governor Jose V. Yap of the Land
Authority (which succeeded the Land Tenure Administration) addressed a letter, dated
February 18, 1965, to Mayor Antonio Villegas, furnishing him with a copy of the proposed
subdivision plan of said lot as prepared for the Republic of the Philippines for resale of
the subdivision lots by the Land Authority to bona fide applicants. 6
On March 2, 1965, the City Mayor of Manila, through his Executive and Technical
Adviser, acknowledged receipt of the proposed subdivision plan of the property in
question and informed the Land Authority that his office would interpose no objection to
the implementation of said law, provided that its provisions be strictly complied with. 7
With the above-mentioned written conformity of the City of Manila for the implementation
of Republic Act No. 4118, the Land Authority, thru then Deputy Governor Jose V. Yap,
requested the City Treasurer of Manila, thru the City Mayor, for the surrender and
delivery to the former of the owner's duplicate of Transfer Certificate of Title No. 22547 in
order to obtain title thereto in the name of the Land Authority. The request was duly
granted with the knowledge and consent of the Office of the City Mayor. 8
With the presentation of Transfer Certificate of Title No. 22547, which had been yielded
as above stated by the, City authorities to the Land Authority, Transfer Certificate of Title
(T.C.T. No. 22547) was cancelled by the Register of Deeds of Manila and in lieu thereof
Transfer Certificate of Title No. 80876 was issued in the name of the Land Tenure
Administration (now Land Authority) pursuant to the provisions of Republic Act No.
4118. 9
But due to reasons which do not appear in the record, the City of Manila made a
complete turn-about, for on December 20, 1966, Antonio J. Villegas, in his capacity as
the City Mayor of Manila and the City of Manila as a duly organized public corporation,
brought an action for injunction and/or prohibition with preliminary injunction to restrain,
prohibit and enjoin the herein appellants, particularly the Governor of the Land Authority
and the Register of Deeds of Manila, from further implementing Republic Act No. 4118,
and praying for the declaration of Republic Act No. 4118 as unconstitutional.
With the foregoing antecedent facts, which are all contained in the partial stipulation of
facts submitted to the trial court and approved by respondent Judge, the parties waived
the presentation of further evidence and submitted the case for decision. On September
23, 1968, judgment was rendered by the trial court declaring Republic Act No. 4118
unconstitutional and invalid on the ground that it deprived the City of Manila of its
property without due process of law and payment of just compensation. The respondents
were ordered to undo all that had been done to carry out the provisions of said Act and
were restrained from further implementing the same.
Two issues are presented for determination, on the resolution of which the decision in
this case hinges, to wit:
47
 I. Is the property involved private or patrimonial property of the City of
Manila?
II. Is Republic Act No. 4118 valid and not repugnant to the Constitution?
I.
As regards the first issue, appellants maintain that the land involved is a communal land
or "legua comunal" which is a portion of the public domain owned by the State; that it
came into existence as such when the City of Manila, or any pueblo or town in the
Philippines for that matter, was founded under the laws of Spain, the former sovereign;
that upon the establishment of a pueblo, the administrative authority was required to allot
and set aside portions of the public domain for a public plaza, a church site, a site for
public buildings, lands to serve as common pastures and for streets and roads; that in
assigning these lands some lots were earmarked for strictly public purposes, and
ownership of these lots (for public purposes) immediately passed to the new municipality;
that in the case of common lands or "legua comunal", there was no such immediate
acquisition of ownership by the pueblo, and the land though administered thereby, did
not automatically become its property in the absence of an express grant from the
Central Government, and that the reason for this arrangement is that this class of land
was not absolutely needed for the discharge of the municipality's governmental
functions.
It is argued that the parcel of land involved herein has not been used by the City of
Manila for any public purpose and had not been officially earmarked as a site for the
erection of some public buildings; that this circumstance confirms the fact that it was
originally "communal" land alloted to the City of Manila by the Central Government not
because it was needed in connection with its organization as a municipality but simply for
the common use of its inhabitants; that the present City of Manila as successor of the
Ayuntamiento de Manila under the former Spanish sovereign merely enjoys the usufruct
over said land, and its exercise of acts of ownership by selling parts thereof did not
necessarily convert the land into a patrimonial property of the City of Manila nor divest
the State of its paramount title.
Appellants further argue that a municipal corporation, like a city is a governmental agent
of the State with authority to govern a limited portion of its territory or to administer purely
local affairs in a given political subdivision, and the extent of its authority is strictly
delimited by the grant of power conferred by the State; that Congress has the exclusive
power to create, change or destroy municipal corporations; that even if We admit that
legislative control over municipal corporations is not absolute and even if it is true that
the City of Manila has a registered title over the property in question, the mere transfer of
such land by an act of the legislature from one class of public land to another, without
compensation, does not invade the vested rights of the City.
Appellants finally argue that Republic Act No. 4118 has treated the land involved as one
reserved for communal use, and this classification is conclusive upon the courts; that if
the City of Manila feels that this is wrong and its interests have been thereby prejudiced,
the matter should be brought to the attention of Congress for correction; and that since
Congress, in the exercise of its wide discretionary powers has seen fit to classify the land
in question as communal, the Courts certainly owe it to a coordinate branch of the
Government to respect such determination and should not interfere with the enforcement
of the law.
Upon the other hand, appellees argue by simply quoting portions of the appealed
decision of the trial court, which read thus:
The respondents (petitioners-appellants herein) contend, among other
defenses, that the property in question is communal property. This
contention is, however, disproved by Original Certificate of Title No. 4329
issued on August 21, 1920 in favor of the City of Manila after the land in
question was registered in the City's favor. The Torrens Title expressly
states that the City of Manila was the owner in 'fee simple' of the said
land. Under Sec. 38 of the Land Registration Act, as amended, the
decree of confirmation and registration in favor of the City of Manila ...
shall be conclusive upon and against all persons including the Insular
Government and all the branches there ... There is nothing in the said
certificate of title indicating that the land was 'communal' land as
contended by the respondents. The erroneous assumption by the
Municipal Board of Manila that the land in question was communal land
did not make it so. The Municipal Board had no authority to do that.
The respondents, however, contend that Congress had the power and
authority to declare that the land in question was 'communal' land and the
courts have no power or authority to make a contrary finding. This
contention is not entirely correct or accurate. Congress has the power to
classify 'land of the public domain', transfer them from one classification
to another and declare them disposable or not. Such power does not,
however, extend to properties which are owned by cities, provinces and
municipalities in their 'patrimonial' capacity.
Art. 324 of the Civil Code provides that properties of provinces, cities and
municipalities are divided into properties for public use and patrimonial
48
 property. Art. 424 of the same code provides that properties for public
use consist of provincial roads, city streets, municipal streets, the
squares, fountains, public waters, promenades and public works for
public service paid for by said province, cities or municipalities. All other
property possessed by any of them is patrimonial. Tested by this criterion
the Court finds and holds that the land in question is patrimonial property
of the City of Manila.
Respondents contend that Congress has declared the land in question to
be 'communal' and, therefore, such designation is conclusive upon the
courts. The Courts holds otherwise. When a statute is assailed as
unconstitutional the Courts have the power and authority to inquire into
the question and pass upon it. This has long ago been settled in Marbury
vs. Madison, 2 L. ed. 60, when the United States Supreme Court
speaking thru Chief Justice Marshall held:
... If an act of the legislature, repugnant to the
constitution, is void, does it, notwithstanding its validity,
bind the courts, and oblige them to give effect? It is
emphatically the province and duty of the judicial
department to say what the law is ... So if a law be in
opposition to the constitution; if both the law and the
constitution apply to a particular case, so that the court
must either decide that case conformable to the
constitution, disregarding the law, the court must
determine which of these conflicting rules governs the
case. This is of the very essence of unconstitutional
judicial duty.
Appellees finally concluded that when the courts declare a law unconstitutional it does
not mean that the judicial power is superior to the legislative power. It simply means that
the power of the people is superior to both and that when the will of the legislature,
declared in statutes, stands in opposition to that of the people, declared in the
Constitution, the judges ought to be governed by the Constitution rather than by the
statutes.
There is one outstanding factor that should be borne in mind in resolving the character of
the land involved, and it is that the City of Manila, although declared by the Cadastral
Court as owner in fee simple, has not shown by any shred of evidence in what manner it
acquired said land as its private or patrimonial property. It is true that the City of Manila
as well as its predecessor, the Ayuntamiento de Manila, could validly acquire property in
its corporate or private capacity, following the accepted doctrine on the dual character —
public and private — of a municipal corporation. And when it acquires property in its
private capacity, it acts like an ordinary person capable of entering into contracts or
making transactions for the transmission of title or other real rights. When it comes to
acquisition of land, it must have done so under any of the modes established by law for
the acquisition of ownership and other real rights. In the absence of a title deed to any
land claimed by the City of Manila as its own, showing that it was acquired with its private
or corporate funds, the presumption is that such land came from the State upon the
creation of the municipality (Unson vs. Lacson, et al., 100 Phil. 695). Originally the
municipality owned no patrimonial property except those that were granted by the State
not for its public but for private use. Other properties it owns are acquired in the course of
the exercise of its corporate powers as a juridical entity to which category a municipal
corporation pertains.
Communal lands or "legua comunal" came into existence when a town or pueblo was
established in this country under the laws of Spain (Law VII, Title III, Book VI,
Recopilacion de las Leyes de Indios). The municipalities of the Philippines were not
entitled, as a matter of right, to any part of the public domain for use as communal lands.
The Spanish law provided that the usufruct of a portion of the public domain adjoining
municipal territory might be granted by the Government for communal purposes, upon
proper petition, but, until granted, no rights therein passed to the municipalities, and, in
any event, the ultimate title remained in the sovereign (City of Manila vs. Insular
Government, 10 Phil. 327).
For the establishment, then, of new pueblos the administrative authority
of the province, in representation of the Governor General, designated
the territory for their location and extension and the metes and bounds of
the same; and before alloting the lands among the new settlers, a special
demarcation was made of the places which were to serve as the public
square of the pueblo, for the erection of the church, and as sites for the
public buildings, among others, the municipal building or the casa real, as
well as of the lands whick were to constitute the common pastures, and
propios of the municipality and the streets and roads which were to
intersect the new town were laid out, ... . (Municipality of Catbalogan vs.
Director of Lands, 17 Phil. 216, 220) (Emphasis supplied)
It may, therefore, be laid down as a general rule that regardless of the source or
classification of land in the possession of a municipality, excepting those acquired with its
own funds in its private or corporate capacity, such property is held in trust for the State
for the benefit of its inhabitants, whether it be for governmental or proprietary purposes. It
holds such lands subject to the paramount power of the legislature to dispose of the
same, for after all it owes its creation to it as an agent for the performance of a part of its
49
public work, the municipality being but a subdivision or instrumentality thereof for
purposes of local administration. Accordingly, the legal situation is the same as if the
State itself holds the property and puts it to a different use (2 McQuilin,Municipal
Corporations, 3rd Ed., p. 197, citing Monagham vs. Armatage, 218 Minn. 27, 15 N. W.
2nd 241).
True it is that the legislative control over a municipal corporation is not absolute even
when it comes to its property devoted to public use, for such control must not be
exercised to the extent of depriving persons of their property or rights without due
process of law, or in a manner impairing the obligations of contracts. Nevertheless, when
it comes to property of the municipality which it did not acquire in its private or corporate
capacity with its own funds, the legislature can transfer its administration and disposition
to an agency of the National Government to be disposed of according to its discretion.
Here it did so in obedience to the constitutional mandate of promoting social justice to
insure the well-being and economic security of the people.
It has been held that a statute authorizing the transfer of a Municipal airport to an Airport
Commission created by the legislature, even without compensation to the city, was not
violative of the due process clause of the American Federal Constitution. The Supreme
Court of Minnessota in Monagham vs. Armatage, supra, said:
... The case is controlled by the further rule that the legislature, having
plenary control of the local municipality, of its creation and of all its affairs,
has the right to authorize or direct the expenditures of money in its
treasury, though raised, for a particular purpose, for any legitimate
municipal purpose, or to order and direct a distribution thereof upon a
division of the territory into separate municipalities ... . The local
municipality has no such vested right in or to its public funds, like that
which the Constitution protects in the individual as precludes legislative
interferences. People vs. Power, 25 Ill. 187; State Board (of Education)
vs. City, 56 Miss. 518. As remarked by the supreme court of Maryland
in Mayor vs. Sehner, 37 Md. 180: "It is of the essence of such a
corporation, that the government has the sole right as trustee of the
public interest, at its own good will and pleasure, to inspect, regulate,
control, and direct the corporation, its funds, and franchises."
We therefore hold that c.500, in authorizing the transfer of the use and
possession of the municipal airport to the commission without
compensation to the city or to the park board, does not violate the
Fourteenth Amendment to the Constitution of the United States.
The Congress has dealt with the land involved as one reserved for communal use
(terreno comunal). The act of classifying State property calls for the exercise of wide
discretionary legislative power and it should not be interfered with by the courts.
This brings Us to the second question as regards the validity of Republic Act No. 4118,
viewed in the light of Article III, Sections 1, subsection (1) and (2) of the Constitution
which ordain that no person shall be deprived of his property without due process of law
and that no private property shall be taken for public use without just compensation.
II .
The trial court declared Republic Act No. 4118 unconstitutional for allegedly depriving the
City of Manila of its property without due process of law and without payment of just
compensation. It is now well established that the presumption is always in favor of the
constitutionality of a law (U S. vs. Ten Yu, 24 Phil. 1; Go Ching, et al. vs. Dinglasan, et
al., 45 O.G. No. 2, pp. 703, 705). To declare a law unconstitutional, the repugnancy of
that law to the Constitution must be clear and unequivocal, for even if a law is aimed at
the attainment of some public good, no infringement of constitutional rights is allowed. To
strike down a law there must be a clear showing that what the fundamental law
condemns or prohibits, the statute allows it to be done (Morfe vs. Mutuc, et al., G.R. No.
L-20387, Jan. 31, 1968; 22 SCRA 424). That situation does not obtain in this case as the
law assailed does not in any manner trench upon the constitution as will hereafter be
shown. Republic Act No. 4118 was intended to implement the social justice policy of the
Constitution and the Government program of "Land for the Landless". The explanatory
note of House Bill No. 1453 which became Republic Act No. 4118, reads in part as
follows:
Approval of this bill will implement the policy of the administration of "land
for the landless" and the Fifth Declaration of Principles of the Constitution
which states that "the promotion of social justice to insure the well-being
and economic security of all people should be the concern of the State."
We are ready and willing to enact legislation promoting the social and
economic well-being of the people whenever an opportunity for enacting
such kind of legislation arises.
The respondent Court held that Republic Act No. 4118, "by converting the land in
question — which is the patrimonial property of the City of Manila into disposable
alienable land of the State and placing it under the disposal of the Land Tenure
Administration — violates the provisions of Article III (Secs. 1 and 2) of the Constitution
which ordain that "private property shall not be taken for public use without just
compensation, and that no person shall be deprived of life, liberty or property without due
50
process of law". In support thereof reliance is placed on the ruling in Province of
Zamboanga del Norte vs. City of Zamboanga, G.R. No. 2440, March 28, 1968; 22 SCRA
1334, which holds that Congress cannot deprive a municipality of its private or
patrimonial property without due process of law and without payment of just
compensation since it has no absolute control thereof. There is no quarrel over this rule if
it is undisputed that the property sought to be taken is in reality a private or patrimonial
property of the municipality or city. But it would be simply begging the question to classify
the land in question as such. The property, as has been previously shown, was not
acquired by the City of Manila with its own funds in its private or proprietary capacity.
That it has in its name a registered title is not questioned, but this title should be deemed
to be held in trust for the State as the land covered thereby was part of the territory of the
City of Manila granted by the sovereign upon its creation. That the National Government,
through the Director of Lands, represented by the Solicitor General, in the cadastral
proceedings did not contest the claim of the City of Manila that the land is its property,
does not detract from its character as State property and in no way divests the legislature
of its power to deal with it as such, the state not being bound by the mistakes and/or
negligence of its officers.
One decisive fact that should be noted is that the City of Manila expressly recognized the
paramount title of the State over said land when by its resolution of September 20, 1960,
the Municipal Board, presided by then Vice-Mayor Antonio Villegas, requested "His
Excellency the President of the Philippines to consider the feasibility of declaring the city
property bounded by Florida, San Andres and Nebraska Streets, under Transfer
Certificate of Title Nos. 25545 and 25547, containing an area of 7,450 square meters, as
patrimonial property of the City of Manila for the purpose of reselling these lots to the
actual occupants thereof." (See Annex E, Partial Stipulation of Facts, Civil Case No.
67945, CFI, Manila, p. 121, Record of the Case) [Emphasis Supplied]
The alleged patrimonial character of the land under the ownership of the City of Manila is
totally belied by the City's own official act, which is fatal to its claim since the Congress
did not do as bidden. If it were its patrimonial property why should the City of Manila be
requesting the President to make representation to the legislature to declare it as such
so it can be disposed of in favor of the actual occupants? There could be no more blatant
recognition of the fact that said land belongs to the State and was simply granted in
usufruct to the City of Manila for municipal purposes. But since the City did not actually
use said land for any recognized public purpose and allowed it to remain idle and
unoccupied for a long time until it was overrun by squatters, no presumption of State
grant of ownership in favor of the City of Manila may be acquiesced in to justify the claim
that it is its own private or patrimonial property (Municipality of Tigbauan vs. Director of
Lands, 35 Phil. 798; City of Manila vs. Insular Government, 10 Phil. 327; Municipality of
Luzuriaga vs. Director of Lands, 24 Phil. 193). The conclusion of the respondent court
that Republic Act No. 4118 converted a patrimonial property of the City of Manila into a
parcel of disposable land of the State and took it away from the City without
compensation is, therefore, unfounded. In the last analysis the land in question pertains
to the State and the City of Manila merely acted as trustee for the benefit of the people
therein for whom the State can legislate in the exercise of its legitimate powers.
Republic Act No. 4118 was never intended to expropriate the property involved but
merely to confirm its character as communal land of the State and to make it available for
disposition by the National Government: And this was done at the instance or upon the
request of the City of Manila itself. The subdivision of the land and conveyance of the
resulting subdivision lots to the occupants by Congressional authorization does not
operate as an exercise of the power of eminent domain without just compensation in
violation of Section 1, subsection (2), Article III of the Constitution, but simply as a
manifestation of its right and power to deal with state property.
It should be emphasized that the law assailed was enacted upon formal written petition
of the Municipal Board of Manila in the form of a legally approved resolution. The
certificate of title over the property in the name of the City of Manila was accordingly
cancelled and another issued to the Land Tenure Administration after the voluntary
surrender of the City's duplicate certificate of title by the City Treasurer with the
knowledge and consent of the City Mayor. To implement the provisions of Republic Act
No. 4118, the then Deputy Governor of the Land Authority sent a letter, dated February
18, 1965, to the City Mayor furnishing him with a copy of the "proposed subdivision plan
of the said lot as prepared for the Republic of the Philippines for subdivision and resale
by the Land Authority to bona fide applicants." On March 2, 1965, the Mayor of Manila,
through his Executive and Technical Adviser, acknowledged receipt of the subdivision
plan and informed the Land Authority that his Office "will interpose no objection to the
implementation of said law provided that its provisions are strictly complied with." The
foregoing sequence of events, clearly indicate a pattern of regularity and observance of
due process in the reversion of the property to the National Government. All such acts
were done in recognition by the City of Manila of the right and power of the Congress to
dispose of the land involved.
Consequently, the City of Manila was not deprived of anything it owns, either under the
due process clause or under the eminent domain provisions of the Constitution. If it failed
to get from the Congress the concession it sought of having the land involved given to it
as its patrimonial property, the Courts possess no power to grant that relief. Republic Act
No. 4118 does not, therefore, suffer from any constitutional infirmity.
WHEREFORE, the appealed decision is hereby reversed, and petitioners shall proceed
with the free and untrammeled implementation of Republic Act No. 4118 without any
obstacle from the respondents. Without costs.
51
G.R. No. L-61744 June 25, 1984
MUNICIPALITY OF SAN MIGUEL, BULACAN vs. HONORABLE OSCAR C.
FERNANDEZ
In Civil Case No. 604-B, entitled "Margarita D. Vda. de Imperio, et al. vs. Municipal
Government of San Miguel, Bulacan, et al.", the then Court of First Instance of Bulacan,
on April 28, 1978, rendered judgment holding herein petitioner municipality liable to
private respondents, as follows:
WHEREFORE, premises considered, judgment is hereby rendered in
favor of the plaintiffs and against the defendant Municipal Government of
San Miguel Bulacan, represented by Mayor Mar Marcelo G. Aure and its
Municipal Treasurer:
1. ordering the partial revocation of the Deed of Donation signed by the
deceased Carlos Imperio in favor of the Municipality of San Miguel
Bulacan, dated October 27, 1947 insofar as Lots Nos. 1, 2, 3, 4 and 5,
Block 11 of Subdivision Plan Psd-20831 are concerned, with an
aggregate total area of 4,646 square meters, which lots are among those
covered and described under TCT No. T-1831 of the Register of Deeds
of Bulacan in the name of the Municipal Government of San Miguel
Bulacan,
2. ordering the defendant to execute the corresponding Deed of
Reconveyance over the aforementioned five lots in favor of the plaintiffs
in the proportion of the undivided one-half (½) share in the name of
plaintiffs Margarita D. Vda. de Imperio, Adoracion, Rodolfo, Conrado,
Ernesto, Alfredo, Carlos, Jr. and Juan, all surnamed Imperio, and the
remaining undivided one-half (½) share in favor of plaintiffs uses Marcelo
E. Pineda and Lucila Pongco;
3. ordering the defendant municipality to pay to the plaintiffs in the
proportion mentioned in the immediately preceding paragraph the sum of
P64,440.00 corresponding to the rentals it has collected from the
occupants for their use and occupation of the premises from 1970 up to
and including 1975, plus interest thereon at the legal rate from January
1970 until fully paid;
4. ordering the restoration of ownership and possession over the five lots
in question in favor of the plaintiffs in the same proportion
aforementioned;
5. ordering the defendant to pay the plaintiffs the sum of P3,000.00 for
attomey's fees; and to pay the cost of suit.
The counterclaim of the defendant is hereby ordered dismissed for lack of
evidence presented to substantiate the same.
SO ORDERED. (pp. 11-12, Rollo)
The foregoing judgment became final when herein petitioner's appeal was dismissed due
to its failure to file the record on appeal on time. The dismissal was affirmed by the then
Court of Appeals in CA-G.R. No. SP-12118 and by this Court in G.R. No. 59938.
Thereafter, herein private respondents moved for issuance of a writ of execution for the
satisfaction of the judgment. Respondent judge, on July 27, 1982, issued an order, to wit:
Considering that an entry of judgment had already been made on June
14, 1982 in G. R. No. L-59938 and;
Considering further that there is no opposition to plaintiffs' motion for
execution dated July 23, 1983;
Let a writ of execution be so issued, as prayed for in the aforestated
motion. (p. 10, Rollo)
Petitioner, on July 30, 1982, filed a Motion to Quash the writ of execution on the ground
that the municipality's property or funds are all public funds exempt from execution. The
said motion to quash was, however, denied by the respondent judge in an order dated
August 23, 1982 and the alias writ of execution stands in full force and effect.
On September 13, 1982, respondent judge issued an order which in part, states:
It is clear and evident from the foregoing that defendant has more than
enough funds to meet its judgment obligation. Municipal Treasurer Miguel
C, Roura of San Miguel, Bulacan and Provincial Treasurer of Bulacan
Agustin O. Talavera are therefor hereby ordered to comply with the
money judgment rendered by Judge Agustin C. Bagasao against said
municipality. In like manner, the municipal authorities of San Miguel,
Bulacan are likewise ordered to desist from plaintiffs' legal possession of
the property already returned to plaintiffs by virtue of the alias writ of
execution.
52
 Finally, defendants are hereby given an inextendible period of ten (10)
days from receipt of a copy of this order by the Office of the Provincial
Fiscal of Bulacan within which to submit their written compliance, (p. 24,
Rollo)
When the treasurers (provincial and municipal) failed to comply with the order of
September 13, 1982, respondent judge issued an order for their arrest and that they will
be release only upon compliance thereof.
Hence, the present petition on the issue whether the funds of the Municipality of San
Miguel, Bulacan, in the hands of the provincial and municipal treasurers of Bulacan and
San Miguel, respectively, are public funds which are exempt from execution for the
satisfaction of the money judgment in Civil Case No. 604-B.
Well settled is the rule that public funds are not subject to levy and execution. The
reason for this was explained in the case of Municipality of Paoay vs. Manaois, 86 Phil.
629 "that they are held in trust for the people, intended and used for the accomplishment
of the purposes for which municipal corporations are created, and that to subject said
properties and public funds to execution would materially impede, even defeat and in
some instances destroy said purpose." And, in Tantoco vs. Municipal Council of Iloilo, 49
Phil. 52, it was held that "it is the settled doctrine of the law that not only the public
property but also the taxes and public revenues of such corporations Cannot be seized
under execution against them, either in the treasury or when in transit to it. Judgments
rendered for taxes, and the proceeds of such judgments in the hands of officers of the
law, are not subject to execution unless so declared by statute." Thus, it is clear that all
the funds of petitioner municipality in the possession of the Municipal Treasurer of San
Miguel, as well as those in the possession of the Provincial Treasurer of Bulacan, are
also public funds and as such they are exempt from execution.
Besides, Presidential Decree No. 477, known as "The Decree on Local Fiscal
Administration", Section 2 (a), provides:
SEC. 2. Fundamental Principles. — Local government financial affairs,
transactions, and operations shall be governed by the fundamental
principles set forth hereunder:
(a) No money shall be paid out of the treasury except in pursuance of a
lawful appropriation or other specific statutory authority.
xxx xxx xxx
Otherwise stated, there must be a corresponding appropriation in the form of an
ordinance duly passed by the Sangguniang Bayan before any money of the municipality
may be paid out. In the case at bar, it has not been shown that the Sangguniang Bayan
has passed an ordinance to this effect.
Furthermore, Section 15, Rule 39 of the New Rules of Court, outlines the procedure for
the enforcement of money judgment:
(a) By levying on all the property of the debtor, whether real or personal,
not otherwise exempt from execution, or only on such part of the property
as is sufficient to satisfy the judgment and accruing cost, if he has more
than sufficient property for the purpose;
(b) By selling the property levied upon;
(c) By paying the judgment-creditor so much of the proceeds as will
satisfy the judgment and accruing costs; and
(d) By delivering to the judgment-debtor the excess, if any, unless
otherwise, directed by judgment or order of the court.
The foregoing has not been followed in the case at bar.
ACCORDINGLY, the petition is granted and the order of respondent judge, dated July
27, 1982, granting issuance of a writ of execution; the alias writ of execution, dated July
27, 1982; and the order of respondent judge, dated September 13, 1982, directing the
Provincial Treasurer of Bulacan and the Municipal Treasurer of San Miguel, Bulacan to
comply with the money judgments, are SET ASIDE; and respondents are hereby
enjoined from implementing the writ of execution.
SO ORDERED.
G.R. No. L-24440 March 28, 1968
ZAMBOANGA DEL NORTE vs. CITY OF ZAMBOANGA
Prior to its incorporation as a chartered city, the Municipality of Zamboanga used to be
the provincial capital of the then Zamboanga Province. On October 12, 1936,
Commonwealth Act 39 was approved converting the Municipality of Zamboanga into
Zamboanga City. Sec. 50 of the Act also provided that —
53
 Buildings and properties which the province shall abandon upon the
transfer of the capital to another place will be acquired and paid for by the City of
Zamboanga at a price to be fixed by the Auditor General.
The properties and buildings referred to consisted of 50 lots and some buildings
constructed thereon, located in the City of Zamboanga and covered individually by
Torrens certificates of title in the name of Zamboanga Province. As far as can be
gleaned from the records, 1 said properties were being utilized as follows —
No. of Lots Use
1 ................................................ Capitol Site
3 ................................................ School Site
3 ................................................ Hospital Site
3 ................................................ Leprosarium
1 ................................................ Curuan School
1 ................................................ Trade School
2 ................................................ Burleigh School
2 ................................................ High School Playground
9 ................................................ Burleighs
1 ................................................ Hydro-Electric Site (Magay)
1 ................................................ San Roque
23 ................................................ vacant
It appears that in 1945, the capital of Zamboanga Province was transferred to
Dipolog. 2 Subsequently, or on June 16, 1948, Republic Act 286 was approved creating
the municipality of Molave and making it the capital of Zamboanga Province.
On May 26, 1949, the Appraisal Committee formed by the Auditor General,
pursuant to Commonwealth Act 39, fixed the value of the properties and buildings in
question left by Zamboanga Province in Zamboanga City at P1,294,244.00. 3
On June 6, 1952, Republic Act 711 was approved dividing the province of
Zamboanga into two (2): Zamboanga del Norte and Zamboanga del Sur. As to how the
assets and obligations of the old province were to be divided between the two new ones,
Sec. 6 of that law provided:
Upon the approval of this Act, the funds, assets and other properties and
the obligations of the province of Zamboanga shall be divided equitably between
the Province of Zamboanga del Norte and the Province of Zamboanga del Sur by
the President of the Philippines, upon the recommendation of the Auditor
General.
Pursuant thereto, the Auditor General, on January 11, 1955, apportioned the
assets and obligations of the defunct Province of Zamboanga as follows: 54.39% for
Zamboanga del Norte and 45.61% for Zamboanga del Sur. Zamboanga del Norte
therefore became entitled to 54.39% of P1,294,244.00, the total value of the lots and
buildings in question, or P704,220.05 payable by Zamboanga City.
On March 17, 1959, the Executive Secretary, by order of the President, issued a
ruling 4 holding that Zamboanga del Norte had a vested right as owner (should be co-
owner pro-indiviso) of the properties mentioned in Sec. 50 of Commonwealth Act 39, and
is entitled to the price thereof, payable by Zamboanga City. This ruling revoked the
previous Cabinet Resolution of July 13, 1951 conveying all the said 50 lots and buildings
thereon to Zamboanga City for P1.00, effective as of 1945, when the provincial capital of
the then Zamboanga Province was transferred to Dipolog.
The Secretary of Finance then authorized the Commissioner of Internal Revenue
to deduct an amount equal to 25% of the regular internal revenue allotment for the City of
Zamboanga for the quarter ending March 31, 1960, then for the quarter ending June 30,
1960, and again for the first quarter of the fiscal year 1960-1961. The deductions, all
aggregating P57,373.46, was credited to the province of Zamboanga del Norte, in partial
payment of the P764,220.05 due it.
However, on June 17, 1961, Republic Act 3039 was approved amending Sec. 50
of Commonwealth Act 39 by providing that —
All buildings, properties and assets belonging to the former province of
Zamboanga and located within the City of Zamboanga are hereby transferred,
free of charge, in favor of the said City of Zamboanga. (Stressed for emphasis).
Consequently, the Secretary of Finance, on July 12, 1961, ordered the
Commissioner of Internal Revenue to stop from effecting further payments to
Zamboanga del Norte and to return to Zamboanga City the sum of P57,373.46 taken
from it out of the internal revenue allotment of Zamboanga del Norte. Zamboanga City
admits that since the enactment of Republic Act 3039, P43,030.11 of the P57,373.46 has
already been returned to it.
This constrained plaintiff-appellee Zamboanga del Norte to file on March 5, 1962,
a complaint entitled "Declaratory Relief with Preliminary Mandatory Injunction" in the
54
Court of First Instance of Zamboanga del Norte against defendants-appellants
Zamboanga City, the Secretary of Finance and the Commissioner of Internal Revenue. It
was prayed that: (a) Republic Act 3039 be declared unconstitutional for depriving plaintiff
province of property without due process and just compensation; (b) Plaintiff's rights and
obligations under said law be declared; (c) The Secretary of Finance and the Internal
Revenue Commissioner be enjoined from reimbursing the sum of P57,373.46 to
defendant City; and (d) The latter be ordered to continue paying the balance of
P704,220.05 in quarterly installments of 25% of its internal revenue allotments.
On June 4, 1962, the lower court ordered the issuance of preliminary injunction as
prayed for. After defendants filed their respective answers, trial was held. On August 12,
1963, judgment was rendered, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered declaring Republic Act No.
3039 unconstitutional insofar as it deprives plaintiff Zamboanga del Norte of its
private properties, consisting of 50 parcels of land and the improvements thereon
under certificates of title (Exhibits "A" to "A-49") in the name of the defunct
province of Zamboanga; ordering defendant City of Zamboanga to pay to the
plaintiff the sum of P704,220.05 payment thereof to be deducted from its regular
quarterly internal revenue allotment equivalent to 25% thereof every quarter until
said amount shall have been fully paid; ordering defendant Secretary of Finance
to direct defendant Commissioner of Internal Revenue to deduct 25% from the
regular quarterly internal revenue allotment for defendant City of Zamboanga and
to remit the same to plaintiff Zamboanga del Norte until said sum of P704,220.05
shall have been fully paid; ordering plaintiff Zamboanga del Norte to execute
through its proper officials the corresponding public instrument deeding to
defendant City of Zamboanga the 50 parcels of land and the improvements
thereon under the certificates of title (Exhibits "A" to "A-49") upon payment by the
latter of the aforesaid sum of P704,220.05 in full; dismissing the counterclaim of
defendant City of Zamboanga; and declaring permanent the preliminary
mandatory injunction issued on June 8, 1962, pursuant to the order of the Court
dated June 4, 1962. No costs are assessed against the defendants.
It is SO ORDERED.
Subsequently, but prior to the perfection of defendants' appeal, plaintiff province
filed a motion to reconsider praying that Zamboanga City be ordered instead to pay the
P704,220.05 in lump sum with 6% interest per annum. Over defendants' opposition, the
lower court granted plaintiff province's motion.
The defendants then brought the case before Us on appeal.
Brushing aside the procedural point concerning the property of declaratory relief
filed in the lower court on the assertion that the law had already been violated and that
plaintiff sought to give it coercive effect, since assuming the same to be true, the Rules
anyway authorize the conversion of the proceedings to an ordinary action, 5 We proceed
to the more important and principal question of the validity of Republic Act 3039.
The validity of the law ultimately depends on the nature of the 50 lots and buildings
thereon in question. For, the matter involved here is the extent of legislative control over
the properties of a municipal corporation, of which a province is one. The principle itself
is simple: If the property is owned by the municipality (meaning municipal corporation) in
its public and governmental capacity, the property is public and Congress has absolute
control over it. But if the property is owned in its private or proprietary capacity, then it is
patrimonial and Congress has no absolute control. The municipality cannot be deprived
of it without due process and payment of just compensation. 6
The capacity in which the property is held is, however, dependent on the use to
which it is intended and devoted. Now, which of two norms, i.e., that of the Civil Code or
that obtaining under the law of Municipal Corporations, must be used in classifying the
properties in question?
The Civil Code classification is embodied in its Arts. 423 and 424 which provide: 1äw phï1.ñët
ART. 423. The property of provinces, cities, and municipalities is divided
into property for public use and patrimonial property.
ART. 424. Property for public use, in the provinces, cities, and
municipalities, consists of the provincial roads, city streets, municipal streets, the
squares, fountains, public waters, promenades, and public works for public
service paid for by said provinces, cities, or municipalities.
All other property possessed by any of them is patrimonial and shall be governed
by this Code, without prejudice to the provisions of special laws. (Stressed for
emphasis).
Applying the above cited norm, all the properties in question, except the two (2)
lots used as High School playgrounds, could be considered as patrimonial properties of
the former Zamboanga province. Even the capital site, the hospital and leprosarium
sites, and the school sites will be considered patrimonial for they are not for public use.
They would fall under the phrase "public works for public service" for it has been held
that under theejusdem generis rule, such public works must be for free and
55
indiscriminate use by anyone, just like the preceding enumerated properties in the first Number
paragraph of Art 424. 7 The playgrounds, however, would fit into this category. 2200 ...................................... 4-B ...................................... Capitol Site
2816 ...................................... 149 ...................................... School Site
This was the norm applied by the lower court. And it cannot be said that its
actuation was without jurisprudential precedent for in Municipality of Catbalogan v. 3281 ...................................... 1224 ...................................... Hospital Site
Director of Lands, 8 and in Municipality of Tacloban v. Director of Lands, 9 it was held that 3282 ...................................... 1226 ...................................... Hospital Site
the capitol site and the school sites in municipalities constitute their patrimonial 3283 ...................................... 1225 ...................................... Hospital Site
properties. This result is understandable because, unlike in the classification regarding
3748 ...................................... 434-A-1 ...................................... School Site
State properties, properties for public service in the municipalities are not classified as
public. Assuming then the Civil Code classification to be the chosen norm, the lower 5406 ...................................... 171 ...................................... School Site
court must be affirmed except with regard to the two (2) lots used as playgrounds. High School
5564 ...................................... 168 ......................................
Play-ground
On the other hand, applying the norm obtaining under the principles constituting 157 &
the law of Municipal Corporations, all those of the 50 properties in question which are 5567 ...................................... ...................................... Trade School
158
devoted to public service are deemed public; the rest remain patrimonial. Under this High School
norm, to be considered public, it is enough that the property be held and, devoted for 5583 ...................................... 167 ......................................
Play-ground
governmental purposes like local administration, public education, public health, etc. 10
Curuan
6181 ...................................... (O.C.T.) ......................................
School
Supporting jurisprudence are found in the following cases: (1) HINUNANGAN V.
DIRECTOR OF LANDS, 11where it was stated that "... where the municipality has 11942 ...................................... 926 ...................................... Leprosarium
occupied lands distinctly for public purposes, such as for the municipal court house, the 11943 ...................................... 927 ...................................... Leprosarium
public school, the public market, or other necessary municipal building, we will, in the 11944 ...................................... 925 ...................................... Leprosarium
absence of proof to the contrary, presume a grant from the States in favor of the Burleigh
municipality; but, as indicated by the wording, that rule may be invoked only as to 5557 ...................................... 170 ......................................
School
property which is used distinctly for public purposes...." (2) VIUDA DE TANTOCO V.
MUNICIPAL COUNCIL OF ILOILO 12 held that municipal properties necessary for Burleigh
5562 ...................................... 180 ......................................
governmental purposes are public in nature. Thus, the auto trucks used by the School
municipality for street sprinkling, the police patrol automobile, police stations and 5565 ...................................... 172-B ...................................... Burleigh
concrete structures with the corresponding lots used as markets were declared exempt 5570 ...................................... 171-A ...................................... Burleigh
from execution and attachment since they were not patrimonial properties. (3) 5571 ...................................... 172-C ...................................... Burleigh
MUNICIPALITY OF BATANGAS VS. CANTOS 13 held squarely that a municipal lot which
had always been devoted to school purposes is one dedicated to public use and is not 5572 ...................................... 174 ...................................... Burleigh
patrimonial property of a municipality. 5573 ...................................... 178 ...................................... Burleigh
5585 ...................................... 171-B ...................................... Burleigh
Following this classification, Republic Act 3039 is valid insofar as it affects the lots 5586 ...................................... 173 ...................................... Burleigh
used as capitol site, school sites and its grounds, hospital and leprosarium sites and the
5587 ...................................... 172-A ...................................... Burleigh
high school playground sites — a total of 24 lots — since these were held by the former
Zamboanga province in its governmental capacity and therefore are subject to the
absolute control of Congress. Said lots considered as public property are the following: We noticed that the eight Burleigh lots above described are adjoining each other
and in turn are between the two lots wherein the Burleigh schools are built, as per
records appearing herein and in the Bureau of Lands. Hence, there is sufficient basis for
TCT Lot Number Use
56
holding that said eight lots constitute the appurtenant grounds of the Burleigh schools, 5579 ...................................... 197 ...................................... "
and partake of the nature of the same. 5580 ...................................... 195 ...................................... "
5581 ...................................... 159-B ...................................... "
Regarding the several buildings existing on the lots above-mentioned, the records
do not disclose whether they were constructed at the expense of the former Province of 5582 ...................................... 194 ...................................... "
Zamboanga. Considering however the fact that said buildings must have been erected 5584 ...................................... 190 ...................................... "
even before 1936 when Commonwealth Act 39 was enacted and the further fact that 5588 ...................................... 184 ...................................... "
provinces then had no power to authorize construction of buildings such as those in the
5589 ...................................... 187 ...................................... "
case at bar at their own expense, 14 it can be assumed that said buildings were erected
by the National Government, using national funds. Hence, Congress could very well 5590 ...................................... 189 ...................................... "
dispose of said buildings in the same manner that it did with the lots in question. 5591 ...................................... 192 ...................................... "
5592 ...................................... 193 ...................................... "
But even assuming that provincial funds were used, still the buildings constitute 5593 ...................................... 185 ...................................... "
mere accessories to the lands, which are public in nature, and so, they follow the nature
7379 ...................................... 4147 ...................................... "
of said lands, i.e., public. Moreover, said buildings, though located in the city, will not be
for the exclusive use and benefit of city residents for they could be availed of also by the
provincial residents. The province then — and its successors-in-interest — are not really Moreover, the fact that these 26 lots are registered strengthens the proposition
deprived of the benefits thereof. that they are truly private in nature. On the other hand, that the 24 lots used for
governmental purposes are also registered is of no significance since registration cannot
But Republic Act 3039 cannot be applied to deprive Zamboanga del Norte of its convert public property to private. 16
share in the value of the rest of the 26 remaining lots which are patrimonial properties
since they are not being utilized for distinctly, governmental purposes. Said lots are: We are more inclined to uphold this latter view. The controversy here is more
along the domains of the Law of Municipal Corporations — State vs. Province — than
along that of Civil Law. Moreover, this Court is not inclined to hold that municipal property
TCT Number Lot Number Use
held and devoted to public service is in the same category as ordinary private property.
5577 ...................................... 177 ...................................... Mydro, Magay The consequences are dire. As ordinary private properties, they can be levied upon and
13198 ...................................... 127-0 ...................................... San Roque attached. They can even be acquired thru adverse possession — all these to the
5569 ...................................... 169 ...................................... Burleigh 15 detriment of the local community. Lastly, the classification of properties other than those
for public use in the municipalities as patrimonial under Art. 424 of the Civil Code — is "...
5558 ...................................... 175 ...................................... Vacant
without prejudice to the provisions of special laws." For purpose of this article, the
5559 ...................................... 188 ...................................... " principles, obtaining under the Law of Municipal Corporations can be considered as
5560 ...................................... 183 ...................................... " "special laws". Hence, the classification of municipal property devoted for distinctly
5561 ...................................... 186 ...................................... " governmental purposes as public should prevail over the Civil Code classification in this
particular case.
5563 ...................................... 191 ...................................... "
5566 ...................................... 176 ...................................... "
Defendants' claim that plaintiff and its predecessor-in-interest are "guilty of laches
5568 ...................................... 179 ...................................... " is without merit. Under Commonwealth Act 39, Sec. 50, the cause of action in favor of
5574 ...................................... 196 ...................................... " the defunct Zamboanga Province arose only in 1949 after the Auditor General fixed the
5575 ...................................... 181-A ...................................... " value of the properties in question. While in 1951, the Cabinet resolved transfer said
properties practically for free to Zamboanga City, a reconsideration thereof was
5576 ...................................... 181-B ...................................... "
seasonably sought. In 1952, the old province was dissolved. As successor-in-interest to
5578 ...................................... 182 ...................................... "
57
more than half of the properties involved, Zamboanga del Norte was able to get a
reconsideration of the Cabinet Resolution in 1959. In fact, partial payments were effected
subsequently and it was only after the passage of Republic Act 3039 in 1961 that the
present controversy arose. Plaintiff brought suit in 1962. All the foregoing, negative
laches.
It results then that Zamboanga del Norte is still entitled to collect from the City of
Zamboanga the former's 54.39% share in the 26 properties which are patrimonial in
nature, said share to computed on the basis of the valuation of said 26 properties as
contained in Resolution No. 7, dated March 26, 1949, of the Appraisal Committee formed
by the Auditor General.
Plaintiff's share, however, cannot be paid in lump sum, except as to the
P43,030.11 already returned to defendant City. The return of said amount to defendant
was without legal basis. Republic Act 3039 took effect only on June 17, 1961 after a
partial payment of P57,373.46 had already been made. Since the law did not provide for
retroactivity, it could not have validly affected a completed act. Hence, the amount of
P43,030.11 should be immediately returned by defendant City to plaintiff province. The
remaining balance, if any, in the amount of plaintiff's 54.39% share in the 26 lots should
then be paid by defendant City in the same manner originally adopted by the Secretary
of Finance and the Commissioner of Internal Revenue, and not in lump sum. Plaintiff's
prayer, particularly pars. 5 and 6, read together with pars. 10 and 11 of the first cause of
action recited in the complaint 17 clearly shows that the relief sought was merely the
continuance of the quarterly payments from the internal revenue allotments of defendant
City. Art. 1169 of the Civil Code on reciprocal obligations invoked by plaintiff to justify
lump sum payment is inapplicable since there has been so far in legal contemplation no
complete delivery of the lots in question. The titles to the registered lots are not yet in the
name of defendant Zamboanga City.
WHEREFORE, the decision appealed from is hereby set aside and another
judgment is hereby entered as follows:.
(1) Defendant Zamboanga City is hereby ordered to return to plaintiff Zamboanga
del Norte in lump sum the amount of P43,030.11 which the former took back from the
latter out of the sum of P57,373.46 previously paid to the latter; and
(2) Defendants are hereby ordered to effect payments in favor of plaintiff of
whatever balance remains of plaintiff's 54.39% share in the 26 patrimonial properties,
after deducting therefrom the sum of P57,373.46, on the basis of Resolution No. 7 dated
March 26, 1949 of the Appraisal Committee formed by the Auditor General, by way of
quarterly payments from the allotments of defendant City, in the manner originally
adopted by the Secretary of Finance and the Commissioner of Internal Revenue. No
costs. So ordered.
G.R. No. L-61311 September 2l, 1987
FELICIDAD VILLANUEVA vs. HON. MARIANO CASTAÑEDA, JR.
There is in the vicinity of the public market of San Fernando, Pampanga, along Mercado
Street, a strip of land measuring 12 by 77 meters on which stands a conglomeration of
vendors stalls together forming what is commonly known as a talipapa. This is the
subject of the herein petition. The petitioners claim they have a right to remain in and
conduct business in this area by virtue of a previous authorization granted to them by the
municipal government. The respondents deny this and justify the demolition of their stalls
as illegal constructions on public property. At the petitioners' behest, we have issued a
temporary restraining order to preserve the status quobetween the parties pending our
decision. 1 Now we shall rule on the merits.
This dispute goes back to November 7, 1961, when the municipal council of San
Fernando adopted Resolution No. 218 authorizing some 24 members of the Fernandino
United Merchants and Traders Association to construct permanent stags and sell in the
above-mentioned place. 2 The action was protested on November 10, 1961, in Civil Case
No. 2040, where the Court of First Instance of Pampanga, Branch 2, issued a writ of
preliminary injunction that prevented the defendants from constructing the said stalls until
final resolution of the controversy. 3 On January 18, 1964, while this case was pending, the
municipal council of San Fernando adopted Resolution G.R. No. 29, which declared the
subject area as "the parking place and as the public plaza of the municipality, 4 thereby
impliedly revoking Resolution No. 218, series of 1961. Four years later, on November 2,
1968, Judge Andres C. Aguilar decided the aforesaid case and held that the land occupied by
the petitioners, being public in nature, was beyond the commerce of man and therefore could
not be the subject of private occupancy. 5 The writ of preliminary injunction was made
permanent. 6
The decision was apparently not enforced, for the petitioners were not evicted from the
place; in fact, according to then they and the 128 other persons were in 1971 assigned
specific areas or space allotments therein for which they paid daily fees to the municipal
government. 7 The problem appears to have festered for some more years under a
presumably uneasy truce among the protagonists, none of whom made any move, for some
reason that does not appear in the record. Then, on January 12, 1982, the Association of
Concerned Citizens and Consumers of San Fernando filed a petition for the immediate
implementation of Resolution No. 29, to restore the subject property "to its original and
customary use as a public plaza. 8
58
Acting thereon after an investigation conducted by the municipal attorney, 9 respondent
Vicente A. Macalino, as officer-in-charge of the office of the mayor of San Fernando, issued
on June 14, 1982, a resolution requiring the municipal treasurer and the municipal engineer
to demolish the stalls in the subject place beginning July 1, 1982. 10 The reaction of the petitioners
was to file a petition for prohibition with the Court of First Instance of Pampanga, docketed as Civil Case No. 6470, on June
26, 1982. The respondent judge denied the petition on July 19, 1982, 11 and the motion for reconsideration on August 5,
1982, 12 prompting the petitioners to come to this Court on certiorari to challenge his decision. 13
As required, respondent Macalino filed his comment 14 on the petition, and the petitioners countered
with their reply. 15 In compliance with our resolution of February 2, 1983, the petitioners submitted their
memorandum 16 and respondent Macalino, for his part, asked that his comment be considered his memorandum. 17 On
July 28, 1986, the new officer-in-charge of the office of the mayor of San Fernando, Paterno S. Guevarra, was impleaded in
lieu of Virgilio Sanchez, who had himself earlier replaced the original respondent Macalino. 18
After considering the issues and the arguments raised by the parties in their respective
pleadings, we rule for the respondents. The petition must be dismissed.
There is no question that the place occupied by the petitioners and from which they are
sought to be evicted is a public plaza, as found by the trial court in Civil Case No. 2040.
This finding was made after consideration of the antecedent facts as especially
established by the testimony of former San Fernando Mayor Rodolfo Hizon, who later
became governor of Pampanga, that the National Planning Commission had reserved
the area for a public plaza as early as 1951. This intention was reiterated in 1964 through
the adoption of Resolution No. 29. 19
It does not appear that the decision in this case was appealed or has been reversed. In
Civil Case G.R. No. 6740, which is the subject of this petition, the respondent judge saw
no reason to disturb the finding in Civil Case No. 2040 and indeed used it as a basis for
his own decision sustaining the questioned order. 20
The basic contention of the petitioners is that the disputed area is under lease to them by
virtue of contracts they had entered into with the municipal government, first in 1961
insofar as the original occupants were concerned, and later with them and the other
petitioners by virtue of the space allocations made in their favor in 1971 for which they
saw they are paying daily fees. 21 The municipal government has denied making such
agreements. In any case, they argue, since the fees were collected daily, the leases,
assuming their validity, could be terminated at will, or any day, as the claimed rentals
indicated that the period of the leases was from day to day. 22
The parties belabor this argument needlessly.
A public plaza is beyond the commerce of man and so cannot be the subject of lease or
any other contractual undertaking. This is elementary. Indeed, this point was settled as
early as in Municipality of Cavite vs. Rojas, 23decided in 1915, where the Court declared as
null and void the lease of a public plaza of the said municipality in favor of a private person.
Justice Torres said in that case:
According to article 344 of the Civil Code: "Property for public use in
provinces and in towns comprises the provincial and town roads, the
squares, streets, fountains, and public waters, the promenades, and
public works of general service supported by said towns or provinces.
The said Plaza Soledad being a promenade for public use, the municipal
council of Cavite could not in 1907 withdraw or exclude from public use a
portion thereof in order to lease it for the sole benefit of the defendant
Hilaria Rojas. In leasing a portion of said plaza or public place to the
defendant for private use the plaintiff municipality exceeded its authority
in the exercise of its powers by executing a contract over a thing of which
it could not dispose, nor is it empowered so to do.
The Civil Code, article 1271, prescribes that everything which is not
outside the commerce of man may be the object of a contract, and plazas
and streets are outside of this commerce, as was decided by the
supreme court of Spain in its decision of February 12, 1895, which says:
"communal things that cannot be sold because they are by their very
nature outside of commerce are those for public use, such as the plazas,
streets, common lands, rivers, fountains, etc."
Therefore, it must be concluded that the contract, Exhibit C, whereby the
municipality of Cavite leased to Hilaria Rojas a portion of the Plaza
Soledad is null and void and of no force or effect, because it is contrary to
the law and the thing leased cannot be the object of a was held that the
City of contract.
In Muyot vs. de la Fuente, 24 it was held that the City of Manila could not lease a portion of a
public sidewalk on Plaza Sta. Cruz, being likewise beyond the commerce of man.
Echoing Rojas, the decision said:
Appellants claim that they had obtained permit from the present of the
City of Manila, to connect booths Nos. 1 and 2, along the premises in
question, and for the use of spaces where the booths were constructed,
they had paid and continued paying the corresponding rentals. Granting
59
 this claim to be true, one should not entertain any doubt that such permit
was not legal, because the City of Manila does not have any power or
authority at all to lease a portion of a public sidewalk. The sidewalk in
question, forming part of the public plaza of Sta. Cruz, could not be a
proper subject matter of the contract, as it was not within the commerce
of man (Article 1347, new Civil Code, and article 1271, old Civil Code).
Any contract entered into by the City of Manila in connection with the
sidewalk, is ipso facto null and ultra vires. (Municipality of Cavite vs.
Roxas, et a1, 30 Phil. 603.) The sidewalk in question was intended for
and was used by the public, in going from one place to another. "The
streets and public places of the city shall be kept free and clear for the
use of the public, and the sidewalks and crossings for the pedestrians,
and the same shall only be used or occupied for other purpose as
provided by ordinance or regulation; ..." (Sec. 1119, Revised Ordinances
of the City of Manila.) The booths in question served as fruit stands for
their owners and often, if not always, blocked the fire passage of
pedestrians who had to take the plaza itself which used to be clogged
with vehicular traffic.
Exactly in point is Espiritu vs. Municipal Council of Pozorrubio, 25 where the Supreme
Court declared:
There is absolutely no question that the town plaza cannot be used for
the construction of market stalls, specially of residences, and that such
structures constitute a nuisance subject to abatement according to law.
Town plazas are properties of public dominion, to be devoted to public
use and to be made available to the public in general They are outside
the common of man and cannot be disposed of or even leased by the
municipality to private parties.
Applying this well-settled doctrine, we rule that the petitioners had no right in the first
place to occupy the disputed premises and cannot insist in remaining there now on the
strength of their alleged lease contracts. They should have realized and accepted this
earlier, considering that even before Civil Case No. 2040 was decided, the
municipalcouncil of San Fernando had already adopted Resolution No. 29, series of
1964, declaring the area as the parking place and public plaza of the municipality.
It is the decision in Civil Case No. 2040 and the said resolution of the municipal council
of San Fernando that respondent Macalino was seeking to enforce when he ordered the
demolition of the stags constructed in the disputed area. As officer-in-charge of the office
of the mayor, he had the duty to clear the area and restore it to its intended use as a
parking place and public plaza of the municipality of San Fernando, conformably to the
aforementioned orders from the court and the council. It is, therefore, not correct to say
that he had acted without authority or taken the law into his hands in issuing his order.
Neither can it be said that he acted whimsically in exercising his authority for it has been
established that he directed the demolition of the stalls only after, upon his instructions,
the municipal attorney had conducted an investigation, to look into the complaint filed by
the Association of Concerned Citizens and Consumers of San Fernando. 26 There is
evidence that the petitioners were notified of this hearing, 27which they chose to disregard.
Photographs of the disputed area, 28 which does look congested and ugly, show that the
complaint was valid and that the area really needed to be cleared, as recommended by the
municipal attorney.
The Court observes that even without such investigation and recommendation, the
respondent mayor was justified in ordering the area cleared on the strength alone of its
status as a public plaza as declared by the judicial and legislative authorities. In calling
first for the investigation (which the petitioner saw fit to boycott), he was just scrupulously
paying deference to the requirements of due process, to remove an taint of arbitrariness
in the action he was caged upon to take.
Since the occupation of the place in question in 1961 by the original 24 stallholders
(whose number later ballooned to almost 200), it has deteriorated increasingly to the
great prejudice of the community in general. The proliferation of stags therein, most of
them makeshift and of flammable materials, has converted it into a veritable fire trap,
which, added to the fact that it obstructs access to and from the public market itself, has
seriously endangered public safety. The filthy condition of the talipapa, where fish and
other wet items are sold, has aggravated health and sanitation problems, besides
pervading the place with a foul odor that has spread into the surrounding areas. The
entire place is unsightly, to the dismay and embarrassment of the inhabitants, who want
it converted into a showcase of the town of which they can all be proud. The vendors in
the talipapa have also spilled into the street and obstruct the flow of traffic, thereby
impairing the convenience of motorists and pedestrians alike. The regular stallholders in
the public market, who pay substantial rentals to the municipality, are deprived of a
sizable volume of business from prospective customers who are intercepted by
the talipapa vendors before they can reach the market proper. On top of all these, the
people are denied the proper use of the place as a public plaza, where they may spend
their leisure in a relaxed and even beautiful environment and civic and other communal
activities of the town can be held.
The problems caused by the usurpation of the place by the petitioners are covered by
the police power as delegated to the municipality under the general welfare
clause. 29 This authorizes the municipal council "to enact such ordinances and make such
60
regulations, not repugnant to law, as may be necessary to carry into effect and discharge the
powers and duties conferred upon it by law and such as shall seem necessary and proper to
provide for the health and safety, promote the prosperity, improve the morals, peace, good
order, comfort, and convenience of the municipality and the inhabitants thereof, and for the
protection of property therein." This authority was validly exercised in this casethrough the
adoption of Resolution No. 29, series of 1964, by the municipal council of San Fernando.
Even assuming a valid lease of the property in dispute, the resolution could have
effectively terminated the agreement for it is settled that the police power cannot be
surrendered or bargained away through the medium of a contract. 30 In fact, every contract
affecting the public interest suffers a congenital infirmity in that it contains an implied
reservation of the police power as a postulate of the existing legal order. 31 This power can be
activated at any time to change the provisions of the contract, or even abrogate it entirely, for
the promotion or protection of the general welfare. Such an act will not militate against the
impairment clause, which is subject to and limited by the paramount police power. 32
We hold that the respondent judge did not commit grave abuse of discretion in denying
the petition for prohibition. On the contrary, he acted correctly in sustaining the right and
responsibility of the mayor to evict the petitioners from the disputed area and clear it of
an the structures illegally constructed therein.
The Court feels that it would have been far more amiable if the petitioners themselves,
recognizing their own civic duty, had at the outset desisted from their original stance and
withdrawn in good grace from the disputed area to permit its peaceful restoration as a
public plaza and parking place for the benefit of the whole municipality. They owned this
little sacrifice to the community in general which has suffered all these many years
because of their intransigence. Regrettably, they have refused to recognize that in the
truly democratic society, the interests of the few should yield to those of the greater
number in deference to the principles that the welfare of the people is the supreme law
and overriding purpose. We do not see any altruism here. The traditional ties of sharing
are absent here. What we find, sad to say, is a cynical disdaining of the spirit of
"bayanihan," a selfish rejection of the cordial virtues of "pakikisama " and "pagbibigayan"
which are the hallmarks of our people.
WHEREFORE, the petition is DISMISSED. The decision dated July 19, 1982, and the
order-dated August 5, 1982, are AFFIRMED. The temporary restraining order dated
August 9, 1982, is LIFTED. This decision is immediately executory. Costs against the
petitioners.
G.R. No. L-66575 September 30, 1986
MANECLANG vs. IAC
Petitioners Adriano Maneclang, et. al. filed before the then Court of First Instance of
Pangasinan, Branch XI a complaint for quieting of title over a certain fishpond located
within the four [41 parcels of land belonging to them situated in Barrio Salomague,
Bugallon, Pangasinan, and the annulment of Resolutions Nos. 38 and 95 of the
Municipal Council of Bugallon Pangasinan. The trial court dismissed the complaint in a
decision dated August 15, 1975 upon a finding that the body of water traversing the titled
properties of petitioners is a creek constituting a tributary of the Agno River; therefore
public in nature and not subject to private appropriation. The lower court likewise held
that Resolution No. 38, ordering an ocular inspection of the Cayangan Creek situated
between Barrios Salomague Sur and Salomague Norte, and Resolution No. 95
authorizing public bidding for the lease of all municipal ferries and fisheries, including the
fishpond under consideration, were passed by respondents herein as members of the
Municipal Council of Bugallon, Pangasinan in the exercise of their legislative powers.
Petitioners appealed said decision to the Intermediate Appellate Court, which affirmed
the same on April 29, 1983. Hence, this petition for review on certiorari.
Acting on the petition, the Court required the respondents to comment thereon. However,
before respondents could do so, petitioners manifested that for lack of interest on the
part of respondent Alfredo Maza, the awardee in the public bidding of the fishpond, the
parties desire to amicably settle the case by submitting to the Court a Compromise
Agreement praying that judgment be rendered recognizing the ownership of petitioners
over the land the body of water found within their titled properties, stating therein, among
other things, that "to pursue the case, the same will not amount to any benefit of the
parties, on the other hand it is to the advantage and benefit of the municipality if the
ownership of the land and the water found therein belonging to petitioners be recognized
in their favor as it is now clear that after the National Irrigation Administration [NIA] had
built the dike around the land, no water gets in or out of the land. 1
The stipulations contained in the Compromise Agreement partake of the nature of an
adjudication of ownership in favor of herein petitioners of the fishpond in dispute, which,
as clearly found by the lower and appellate courts, was originally a creek forming a
tributary of the Agno River. Considering that as held in the case of Mercado vs. Municipal
President of Macabebe, 59 Phil. 592 [1934], a creek, defined as a recess or arm
extending from a river and participating in the ebb and flow of the sea, is a property
belonging to the public domain which is not susceptible to private appropriation and
acquisitive prescription, and as a public water, it cannot be registered under the Torrens
System in the name of any individual [Diego v. Court of Appeals, 102 Phil. 494;
Mangaldan v. Manaoag, 38 Phil. 4551; and considering further that neither the mere
construction of irrigation dikes by the National Irrigation Administration which prevented
the water from flowing in and out of the subject fishpond, nor its conversion into a
fishpond, alter or change the nature of the creek as a property of the public domain, the
61
Court finds the Compromise Agreement null and void and of no legal effect, the same
being contrary to law and public policy.
The finding that the subject body of water is a creek belonging to the public domain is a
factual determination binding upon this Court. The Municipality of Bugallon, acting thru its
duly-constituted municipal council is clothed with authority to pass, as it did the two
resolutions dealing with its municipal waters, and it cannot be said that petitioners were
deprived of their right to due process as mere publication of the notice of the public
bidding suffices as a constructive notice to the whole world.
IN VIEW OF THE FOREGOING, the Court Resolved to set aside the Compromise
Agreement and declare the same null and void for being contrary to law and public
policy. The Court further resolved to DISMISS the instant petition for lack of merit.
SO ORDERED.
G.R. No. L-57461 September 11, 1987
DIRECTOR OF LANDS vs. MERALCO
This is an appeal by certiorari of a decision of the respondent Judge in Land Registration
Case No. N-10317 LRC Record No. N-54803 entitled "In Re: Application for Registration
of Title, Manila Electric Company, applicant," dated May 29, 1981.
The facts are not disputed. Manila Electric Company filed an amended application for
registration of a parcel of land located in Taguig, Metro Manila on December 4, 1979. On
August 17, 1976, applicant acquired the land applied for registration by purchase from
Ricardo Natividad (Exhibit E) who in turn acquired the same from his father Gregorio
Natividad as evidenced by a Deed of Original Absolute Sale executed on December 28,
1970 (Exhibit E). Applicant's predecessors-in-interest have possessed the property
under the concept of an owner for more than 30 years. The property was declared for
taxation purposes under the name of the applicant (Exhibit 1) and the taxes due thereon
have been paid (Exhibits J and J-1).
On May 29, 1981 respondent Judge rendered a decision ordering the registration of the
property in the name of the private respondent. The Director of Lands interposed this
petition raising the issue of whether or not a corporation may apply for registration of title
to land. After comments were filed by the respondents, the Court gave the petition due
course. The legal issue raised by the petitioner Director of Lands has been squarely
dealt with in two recent cases (The Director of Lands v. Intermediate Appellate Court and
Acme Plywood & Veneer Co., Inc., etc., No. L-73002 (December 29, 1986), 146 SCRA
509. The Director of Lands v. Hon. Bengzon and Dynamarine Corporation, etc., No.
54045 (July 28, 1987)], and resolved in the affirmative. There can be no different answer
in the case at bar.
In the Acme decision, this Court upheld the doctrine that open, exclusive and undisputed
possession of alienable public land for the period prescribed by law creates the legal
fiction whereby the land, upon completion of the requisite period ipso jure and without the
need of judicial or other sanction, ceases to be public land and becomes private
property.
As the Court said in that case:
Nothing can more clearly demonstrate the logical inevitability of
considering possession of public land which is of the character and
duration prescribed by statute as the equivalent of an express grant from
the State than the dictum of the statute itself that the possessor(s) "...
shall be conclusively presumed to have performed all the conditions
essential to a Government grant and shall be entitled to a certificate of
title .... " No proof being admissible to overcome a conclusive
presumption, confirmation proceedings would in truth be little more than a
formality, at the most limited to ascertaining whether the possession
claimed is of the required character and length of time; and registration
thereunder would not confer title, but simply recognize a title already
vested. The proceedings would not originally convert the land from public
to private land, but only confirm such a conversion already affected (sic)
from the moment the required period of possession became complete.
Coming to the case at bar, if the land was already private at the time Meralco bought it
from Natividad, then the prohibition in the 1973 Constitution against corporations holding
alienable lands of the public domain except by lease (1973 Const., Art. XIV, See. 11)
does not apply.
Petitioner, however, contends that a corporation is not among those that may apply for
confirmation of title under Section 48 of Commonwealth Act No. 141, the Public Land
Act.
As ruled in the Acme case, the fact that the confirmation proceedings were instituted by a
corporation is simply another accidental circumstance, "productive of a defect hardly
more than procedural and in nowise affecting the substance and merits of the right of
ownership sought to be confirmed in said proceedings." Considering that it is not
disputed that the Natividads could have had their title confirmed, only a rigid
62
subservience to the letter of the law would deny private respondent the right to register
its property which was validly acquired.
WHEREFORE, the petition is DENIED. The questioned decision of the respondent
Judge is AFFIRMED.
SO ORDERED.
G.R. No. 92013 July 25, 1990
LAUREL vs. GARCIA
These are two petitions for prohibition seeking to enjoin respondents, their
representatives and agents from proceeding with the bidding for the sale of the 3,179
square meters of land at 306 Roppongi, 5-Chome Minato-ku Tokyo, Japan scheduled on
February 21, 1990. We granted the prayer for a temporary restraining order effective
February 20, 1990. One of the petitioners (in G.R. No. 92047) likewise prayes for a writ
of mandamus to compel the respondents to fully disclose to the public the basis of their
decision to push through with the sale of the Roppongi property inspire of strong public
opposition and to explain the proceedings which effectively prevent the participation of
Filipino citizens and entities in the bidding process.
The oral arguments in G.R. No. 92013, Laurel v. Garcia, et al. were heard by the Court
on March 13, 1990. After G.R. No. 92047, Ojeda v. Secretary Macaraig, et al. was filed,
the respondents were required to file a comment by the Court's resolution dated
February 22, 1990. The two petitions were consolidated on March 27, 1990 when the
memoranda of the parties in the Laurel case were deliberated upon.
The Court could not act on these cases immediately because the respondents filed a
motion for an extension of thirty (30) days to file comment in G.R. No. 92047, followed by
a second motion for an extension of another thirty (30) days which we granted on May 8,
1990, a third motion for extension of time granted on May 24, 1990 and a fourth motion
for extension of time which we granted on June 5, 1990 but calling the attention of the
respondents to the length of time the petitions have been pending. After the comment
was filed, the petitioner in G.R. No. 92047 asked for thirty (30) days to file a reply. We
noted his motion and resolved to decide the two (2) cases.
I agreement with a Japanese firm - Kajima Corporation — which shall construct two (2)
The subject property in this case is one of the four (4) properties in Japan acquired by
the Philippine government under the Reparations Agreement entered into with Japan on
May 9, 1956, the other lots being:
(1) The Nampeidai Property at 11-24 Nampeidai-machi, Shibuya-ku, Tokyo which has an
area of approximately 2,489.96 square meters, and is at present the site of the Philippine
Embassy Chancery;
(2) The Kobe Commercial Property at 63 Naniwa-cho, Kobe, with an area of around
764.72 square meters and categorized as a commercial lot now being used as a
warehouse and parking lot for the consulate staff; and
(3) The Kobe Residential Property at 1-980-2 Obanoyama-cho, Shinohara, Nada-ku,
Kobe, a residential lot which is now vacant.
The properties and the capital goods and services procured from the Japanese
government for national development projects are part of the indemnification to the
Filipino people for their losses in life and property and their suffering during World War II.
The Reparations Agreement provides that reparations valued at $550 million would be
payable in twenty (20) years in accordance with annual schedules of procurements to be
fixed by the Philippine and Japanese governments (Article 2, Reparations Agreement).
Rep. Act No. 1789, the Reparations Law, prescribes the national policy on procurement
and utilization of reparations and development loans. The procurements are divided into
those for use by the government sector and those for private parties in projects as the
then National Economic Council shall determine. Those intended for the private sector
shall be made available by sale to Filipino citizens or to one hundred (100%) percent
Filipino-owned entities in national development projects.
The Roppongi property was acquired from the Japanese government under the Second
Year Schedule and listed under the heading "Government Sector", through Reparations
Contract No. 300 dated June 27, 1958. The Roppongi property consists of the land and
building "for the Chancery of the Philippine Embassy" (Annex M-D to Memorandum for
Petitioner, p. 503). As intended, it became the site of the Philippine Embassy until the
latter was transferred to Nampeidai on July 22, 1976 when the Roppongi building needed
major repairs. Due to the failure of our government to provide necessary funds, the
Roppongi property has remained undeveloped since that time.
A proposal was presented to President Corazon C. Aquino by former Philippine
Ambassador to Japan, Carlos J. Valdez, to make the property the subject of a lease
buildings in Roppongi and one (1) building in Nampeidai and renovate the present
Philippine Chancery in Nampeidai. The consideration of the construction would be the
lease to the foreign corporation of one (1) of the buildings to be constructed in Roppongi
and the two (2) buildings in Nampeidai. The other building in Roppongi shall then be
63
used as the Philippine Embassy Chancery. At the end of the lease period, all the three
leased buildings shall be occupied and used by the Philippine government. No change of
ownership or title shall occur. (See Annex "B" to Reply to Comment) The Philippine
government retains the title all throughout the lease period and thereafter. However, the
government has not acted favorably on this proposal which is pending approval and
ratification between the parties. Instead, on August 11, 1986, President Aquino created a
committee to study the disposition/utilization of Philippine government properties in
Tokyo and Kobe, Japan through Administrative Order No. 3, followed by Administrative
Orders Numbered 3-A, B, C and D.
On July 25, 1987, the President issued Executive Order No. 296 entitling non-Filipino
citizens or entities to avail of separations' capital goods and services in the event of sale,
lease or disposition. The four properties in Japan including the Roppongi were
specifically mentioned in the first "Whereas" clause.
Amidst opposition by various sectors, the Executive branch of the government has been
pushing, with great vigor, its decision to sell the reparations properties starting with the
Roppongi lot. The property has twice been set for bidding at a minimum floor price of
$225 million. The first bidding was a failure since only one bidder qualified. The second
one, after postponements, has not yet materialized. The last scheduled bidding on
February 21, 1990 was restrained by his Court. Later, the rules on bidding were changed
such that the $225 million floor price became merely a suggested floor price.
The Court finds that each of the herein petitions raises distinct issues. The petitioner in
G.R. No. 92013 objects to the alienation of the Roppongi property to anyone while the
petitioner in G.R. No. 92047 adds as a principal objection the alleged unjustified bias of
the Philippine government in favor of selling the property to non-Filipino citizens and
entities. These petitions have been consolidated and are resolved at the same time for
the objective is the same - to stop the sale of the Roppongi property.
The petitioner in G.R. No. 92013 raises the following issues:
(1) Can the Roppongi property and others of its kind be alienated by the Philippine
Government?; and
(2) Does the Chief Executive, her officers and agents, have the authority and jurisdiction,
to sell the Roppongi property?
Petitioner Dionisio Ojeda in G.R. No. 92047, apart from questioning the authority of the
government to alienate the Roppongi property assails the constitutionality of Executive
Order No. 296 in making the property available for sale to non-Filipino citizens and
entities. He also questions the bidding procedures of the Committee on the Utilization or
Disposition of Philippine Government Properties in Japan for being discriminatory against
Filipino citizens and Filipino-owned entities by denying them the right to be informed
about the bidding requirements.
II
In G.R. No. 92013, petitioner Laurel asserts that the Roppongi property and the related
lots were acquired as part of the reparations from the Japanese government for
diplomatic and consular use by the Philippine government. Vice-President Laurel states
that the Roppongi property is classified as one of public dominion, and not of private
ownership under Article 420 of the Civil Code (See infra).
The petitioner submits that the Roppongi property comes under "property intended for
public service" in paragraph 2 of the above provision. He states that being one of public
dominion, no ownership by any one can attach to it, not even by the State. The Roppongi
and related properties were acquired for "sites for chancery, diplomatic, and consular
quarters, buildings and other improvements" (Second Year Reparations Schedule). The
petitioner states that they continue to be intended for a necessary service. They are held
by the State in anticipation of an opportune use. (Citing 3 Manresa 65-66). Hence, it
cannot be appropriated, is outside the commerce of man, or to put it in more simple
terms, it cannot be alienated nor be the subject matter of contracts (Citing Municipality of
Cavite v. Rojas, 30 Phil. 20 [1915]). Noting the non-use of the Roppongi property at the
moment, the petitioner avers that the same remains property of public dominion so long
as the government has not used it for other purposes nor adopted any measure
constituting a removal of its original purpose or use.
The respondents, for their part, refute the petitioner's contention by saying that the
subject property is not governed by our Civil Code but by the laws of Japan where the
property is located. They rely upon the rule of lex situs which is used in determining the
applicable law regarding the acquisition, transfer and devolution of the title to a property.
They also invoke Opinion No. 21, Series of 1988, dated January 27, 1988 of the
Secretary of Justice which used the lex situs in explaining the inapplicability of Philippine
law regarding a property situated in Japan.
The respondents add that even assuming for the sake of argument that the Civil Code is
applicable, the Roppongi property has ceased to become property of public dominion. It
has become patrimonial property because it has not been used for public service or for
diplomatic purposes for over thirteen (13) years now (Citing Article 422, Civil Code) and
because the intention by the Executive Department and the Congress to convert it to
private use has been manifested by overt acts, such as, among others: (1) the transfer of
64
the Philippine Embassy to Nampeidai (2) the issuance of administrative orders for the
possibility of alienating the four government properties in Japan; (3) the issuance of
Executive Order No. 296; (4) the enactment by the Congress of Rep. Act No. 6657 [the
Comprehensive Agrarian Reform Law] on June 10, 1988 which contains a provision
stating that funds may be taken from the sale of Philippine properties in foreign countries;
(5) the holding of the public bidding of the Roppongi property but which failed; (6) the
deferment by the Senate in Resolution No. 55 of the bidding to a future date; thus an
acknowledgment by the Senate of the government's intention to remove the Roppongi
property from the public service purpose; and (7) the resolution of this Court dismissing
the petition in Ojeda v. Bidding Committee, et al., G.R. No. 87478 which sought to enjoin
the second bidding of the Roppongi property scheduled on March 30, 1989.
III
In G.R. No. 94047, petitioner Ojeda once more asks this Court to rule on the
constitutionality of Executive Order No. 296. He had earlier filed a petition in G.R. No.
87478 which the Court dismissed on August 1, 1989. He now avers that the executive
order contravenes the constitutional mandate to conserve and develop the national
patrimony stated in the Preamble of the 1987 Constitution. It also allegedly violates:
(1) The reservation of the ownership and acquisition of alienable lands of the public
domain to Filipino citizens. (Sections 2 and 3, Article XII, Constitution; Sections 22 and
23 of Commonwealth Act 141). i•t•c-aüsl
(2) The preference for Filipino citizens in the grant of rights, privileges and concessions
covering the national economy and patrimony (Section 10, Article VI, Constitution);
(3) The protection given to Filipino enterprises against unfair competition and trade
practices;
(4) The guarantee of the right of the people to information on all matters of public
concern (Section 7, Article III, Constitution);
(5) The prohibition against the sale to non-Filipino citizens or entities not wholly owned
by Filipino citizens of capital goods received by the Philippines under the Reparations
Act (Sections 2 and 12 of Rep. Act No. 1789); and
(6) The declaration of the state policy of full public disclosure of all transactions involving
public interest (Section 28, Article III, Constitution).
Petitioner Ojeda warns that the use of public funds in the execution of an unconstitutional
executive order is a misapplication of public funds He states that since the details of the
bidding for the Roppongi property were never publicly disclosed until February 15, 1990
(or a few days before the scheduled bidding), the bidding guidelines are available only in
Tokyo, and the accomplishment of requirements and the selection of qualified bidders
should be done in Tokyo, interested Filipino citizens or entities owned by them did not
have the chance to comply with Purchase Offer Requirements on the Roppongi. Worse,
the Roppongi shall be sold for a minimum price of $225 million from which price capital
gains tax under Japanese law of about 50 to 70% of the floor price would still be
deducted.
IV
The petitioners and respondents in both cases do not dispute the fact that the Roppongi
site and the three related properties were through reparations agreements, that these
were assigned to the government sector and that the Roppongi property itself was
specifically designated under the Reparations Agreement to house the Philippine
Embassy.
The nature of the Roppongi lot as property for public service is expressly spelled out. It is
dictated by the terms of the Reparations Agreement and the corresponding contract of
procurement which bind both the Philippine government and the Japanese government.
There can be no doubt that it is of public dominion unless it is convincingly shown that
the property has become patrimonial. This, the respondents have failed to do.
As property of public dominion, the Roppongi lot is outside the commerce of man. It
cannot be alienated. Its ownership is a special collective ownership for general use and
enjoyment, an application to the satisfaction of collective needs, and resides in the social
group. The purpose is not to serve the State as a juridical person, but the citizens; it is
intended for the common and public welfare and cannot be the object of appropration.
(Taken from 3 Manresa, 66-69; cited in Tolentino, Commentaries on the Civil Code of the
Philippines, 1963 Edition, Vol. II, p. 26).
The applicable provisions of the Civil Code are:
ART. 419. Property is either of public dominion or of private ownership.
ART. 420. The following things are property of public dominion
65
 (1) Those intended for public use, such as roads, canals, rivers, torrents,
ports and bridges constructed by the State, banks shores roadsteads,
and others of similar character;
(2) Those which belong to the State, without being for public use, and are
intended for some public service or for the development of the national
wealth.
ART. 421. All other property of the State, which is not of the character
stated in the preceding article, is patrimonial property.
The Roppongi property is correctly classified under paragraph 2 of Article 420 of the Civil
Code as property belonging to the State and intended for some public service.
Has the intention of the government regarding the use of the property been changed
because the lot has been Idle for some years? Has it become patrimonial?
The fact that the Roppongi site has not been used for a long time for actual Embassy
service does not automatically convert it to patrimonial property. Any such conversion
happens only if the property is withdrawn from public use (Cebu Oxygen and Acetylene
Co. v. Bercilles, 66 SCRA 481 [1975]). A property continues to be part of the public
domain, not available for private appropriation or ownership until there is a formal
declaration on the part of the government to withdraw it from being such (Ignacio v.
Director of Lands, 108 Phil. 335 [1960]).
The respondents enumerate various pronouncements by concerned public officials
insinuating a change of intention. We emphasize, however, that an abandonment of the
intention to use the Roppongi property for public service and to make it patrimonial
property under Article 422 of the Civil Code must be definite Abandonment cannot be
inferred from the non-use alone specially if the non-use was attributable not to the
government's own deliberate and indubitable will but to a lack of financial support to
repair and improve the property (See Heirs of Felino Santiago v. Lazaro, 166 SCRA 368
[1988]). Abandonment must be a certain and positive act based on correct legal
premises.
A mere transfer of the Philippine Embassy to Nampeidai in 1976 is not relinquishment of
the Roppongi property's original purpose. Even the failure by the government to repair
the building in Roppongi is not abandonment since as earlier stated, there simply was a
shortage of government funds. The recent Administrative Orders authorizing a study of
the status and conditions of government properties in Japan were merely directives for
investigation but did not in any way signify a clear intention to dispose of the properties.
Executive Order No. 296, though its title declares an "authority to sell", does not have a
provision in its text expressly authorizing the sale of the four properties procured from
Japan for the government sector. The executive order does not declare that the
properties lost their public character. It merely intends to make the properties available to
foreigners and not to Filipinos alone in case of a sale, lease or other disposition. It merely
eliminates the restriction under Rep. Act No. 1789 that reparations goods may be sold
only to Filipino citizens and one hundred (100%) percent Filipino-owned entities. The text
of Executive Order No. 296 provides:
Section 1. The provisions of Republic Act No. 1789, as amended, and of
other laws to the contrary notwithstanding, the above-mentioned
properties can be made available for sale, lease or any other manner of
disposition to non-Filipino citizens or to entities owned by non-Filipino
citizens.
Executive Order No. 296 is based on the wrong premise or assumption that the
Roppongi and the three other properties were earlier converted into alienable real
properties. As earlier stated, Rep. Act No. 1789 differentiates the procurements for the
government sector and the private sector (Sections 2 and 12, Rep. Act No. 1789). Only
the private sector properties can be sold to end-users who must be Filipinos or entities
owned by Filipinos. It is this nationality provision which was amended by Executive Order
No. 296.
Section 63 (c) of Rep. Act No. 6657 (the CARP Law) which provides as one of the
sources of funds for its implementation, the proceeds of the disposition of the properties
of the Government in foreign countries, did not withdraw the Roppongi property from
being classified as one of public dominion when it mentions Philippine properties abroad.
Section 63 (c) refers to properties which are alienable and not to those reserved for
public use or service. Rep Act No. 6657, therefore, does not authorize the Executive
Department to sell the Roppongi property. It merely enumerates possible sources of
future funding to augment (as and when needed) the Agrarian Reform Fund created
under Executive Order No. 299. Obviously any property outside of the commerce of man
cannot be tapped as a source of funds.
The respondents try to get around the public dominion character of the Roppongi
property by insisting that Japanese law and not our Civil Code should apply.
It is exceedingly strange why our top government officials, of all people, should be the
ones to insist that in the sale of extremely valuable government property, Japanese law
and not Philippine law should prevail. The Japanese law - its coverage and effects, when
enacted, and exceptions to its provision — is not presented to the Court It is simply
66
asserted that the lex loci rei sitae or Japanese law should apply without stating what that
law provides. It is a ed on faith that Japanese law would allow the sale.
We see no reason why a conflict of law rule should apply when no conflict of law
situation exists. A conflict of law situation arises only when: (1) There is a dispute over
the title or ownership of an immovable, such that the capacity to take and transfer
immovables, the formalities of conveyance, the essential validity and effect of the
transfer, or the interpretation and effect of a conveyance, are to be determined (See
Salonga, Private International Law, 1981 ed., pp. 377-383); and (2) A foreign law on land
ownership and its conveyance is asserted to conflict with a domestic law on the same
matters. Hence, the need to determine which law should apply.
In the instant case, none of the above elements exists.
The issues are not concerned with validity of ownership or title. There is no question that
the property belongs to the Philippines. The issue is the authority of the respondent
officials to validly dispose of property belonging to the State. And the validity of the
procedures adopted to effect its sale. This is governed by Philippine Law. The rule of lex
situs does not apply.
The assertion that the opinion of the Secretary of Justice sheds light on the relevance of
the lex situsrule is misplaced. The opinion does not tackle the alienability of the real
properties procured through reparations nor the existence in what body of the authority to
sell them. In discussing who are capableof acquiring the lots, the Secretary merely
explains that it is the foreign law which should determine who can acquire the
properties so that the constitutional limitation on acquisition of lands of the public domain
to Filipino citizens and entities wholly owned by Filipinos is inapplicable. We see no point
in belaboring whether or not this opinion is correct. Why should we discuss who can
acquire the Roppongi lot when there is no showing that it can be sold?
The subsequent approval on October 4, 1988 by President Aquino of the
recommendation by the investigating committee to sell the Roppongi property was
premature or, at the very least, conditioned on a valid change in the public character of
the Roppongi property. Moreover, the approval does not have the force and effect of law
since the President already lost her legislative powers. The Congress had already
convened for more than a year.
Assuming for the sake of argument, however, that the Roppongi property is no longer of
public dominion, there is another obstacle to its sale by the respondents.
There is no law authorizing its conveyance.
Section 79 (f) of the Revised Administrative Code of 1917 provides
Section 79 (f ) Conveyances and contracts to which the Government is a
party. — In cases in which the Government of the Republic of the
Philippines is a party to any deed or other instrument conveying the title
to real estate or to any other property the value of which is in excess of
one hundred thousand pesos, the respective Department Secretary shall
prepare the necessary papers which, together with the proper
recommendations, shall be submitted to the Congress of the Philippines
for approval by the same. Such deed, instrument, or contract shall be
executed and signed by the President of the Philippines on behalf of the
Government of the Philippines unless the Government of the Philippines
unless the authority therefor be expressly vested by law in another
officer. (Emphasis supplied)
The requirement has been retained in Section 48, Book I of the Administrative Code of
1987 (Executive Order No. 292).
SEC. 48. Official Authorized to Convey Real Property. — Whenever real
property of the Government is authorized by law to be conveyed, the
deed of conveyance shall be executed in behalf of the government by the
following:
(1) For property belonging to and titled in the name of the Republic of the
Philippines, by the President, unless the authority therefor is expressly
vested by law in another officer.
(2) For property belonging to the Republic of the Philippines but titled in
the name of any political subdivision or of any corporate agency or
instrumentality, by the executive head of the agency or instrumentality.
(Emphasis supplied)
It is not for the President to convey valuable real property of the government on his or
her own sole will. Any such conveyance must be authorized and approved by a law
enacted by the Congress. It requires executive and legislative concurrence.
Resolution No. 55 of the Senate dated June 8, 1989, asking for the deferment of the sale
of the Roppongi property does not withdraw the property from public domain much less
authorize its sale. It is a mere resolution; it is not a formal declaration abandoning the
public character of the Roppongi property. In fact, the Senate Committee on Foreign
Relations is conducting hearings on Senate Resolution No. 734 which raises serious
67
policy considerations and calls for a fact-finding investigation of the circumstances
behind the decision to sell the Philippine government properties in Japan.
The resolution of this Court in Ojeda v. Bidding Committee, et al., supra, did not pass
upon the constitutionality of Executive Order No. 296. Contrary to respondents'
assertion, we did not uphold the authority of the President to sell the Roppongi property.
The Court stated that the constitutionality of the executive order was not the real issue
and that resolving the constitutional question was "neither necessary nor finally
determinative of the case." The Court noted that "[W]hat petitioner ultimately questions is
the use of the proceeds of the disposition of the Roppongi property." In emphasizing that
"the decision of the Executive to dispose of the Roppongi property to finance the CARP
... cannot be questioned" in view of Section 63 (c) of Rep. Act No. 6657, the Court did
not acknowledge the fact that the property became alienable nor did it indicate that the
President was authorized to dispose of the Roppongi property. The resolution should be
read to mean that in case the Roppongi property is re-classified to be patrimonial and
alienable by authority of law, the proceeds of a sale may be used for national economic
development projects including the CARP.
Moreover, the sale in 1989 did not materialize. The petitions before us question the
proposed 1990 sale of the Roppongi property. We are resolving the issues raised in
these petitions, not the issues raised in 1989.
Having declared a need for a law or formal declaration to withdraw the Roppongi
property from public domain to make it alienable and a need for legislative authority to
allow the sale of the property, we see no compelling reason to tackle the constitutional
issues raised by petitioner Ojeda.
The Court does not ordinarily pass upon constitutional questions unless these questions
are properly raised in appropriate cases and their resolution is necessary for the
determination of the case (People v. Vera, 65 Phil. 56 [1937]). The Court will not pass
upon a constitutional question although properly presented by the record if the case can
be disposed of on some other ground such as the application of a statute or general law
(Siler v. Louisville and Nashville R. Co., 213 U.S. 175, [1909], Railroad Commission v.
Pullman Co., 312 U.S. 496 [1941]).
The petitioner in G.R. No. 92013 states why the Roppongi property should not be sold:
The Roppongi property is not just like any piece of property. It was given
to the Filipino people in reparation for the lives and blood of Filipinos who
died and suffered during the Japanese military occupation, for the
suffering of widows and orphans who lost their loved ones and kindred,
for the homes and other properties lost by countless Filipinos during the
war. The Tokyo properties are a monument to the bravery and sacrifice of
the Filipino people in the face of an invader; like the monuments of Rizal,
Quezon, and other Filipino heroes, we do not expect economic or
financial benefits from them. But who would think of selling these
monuments? Filipino honor and national dignity dictate that we keep our
properties in Japan as memorials to the countless Filipinos who died and
suffered. Even if we should become paupers we should not think of
selling them. For it would be as if we sold the lives and blood and tears of
our countrymen. (Rollo- G.R. No. 92013, p.147)
The petitioner in G.R. No. 92047 also states:
Roppongi is no ordinary property. It is one ceded by the Japanese
government in atonement for its past belligerence for the valiant sacrifice
of life and limb and for deaths, physical dislocation and economic
devastation the whole Filipino people endured in World War II.
It is for what it stands for, and for what it could never bring back to life,
that its significance today remains undimmed, inspire of the lapse of 45
years since the war ended, inspire of the passage of 32 years since the
property passed on to the Philippine government.
Roppongi is a reminder that cannot — should not — be dissipated ...
(Rollo-92047, p. 9)
It is indeed true that the Roppongi property is valuable not so much because of the
inflated prices fetched by real property in Tokyo but more so because of its symbolic
value to all Filipinos — veterans and civilians alike. Whether or not the Roppongi and
related properties will eventually be sold is a policy determination where both the
President and Congress must concur. Considering the properties' importance and value,
the laws on conversion and disposition of property of public dominion must be faithfully
followed.
WHEREFORE, IN VIEW OF THE FOREGOING, the petitions are GRANTED. A writ of
prohibition is issued enjoining the respondents from proceeding with the sale of the
Roppongi property in Tokyo, Japan. The February 20, 1990 Temporary Restraining
Order is made PERMANENT.
SO ORDERED.
68
G.R. No. 97764 August 10, 1992
MACASIANO vs. DIOKNO
This is a petition for certiorari under Rule 65 of the Rules of Court seeking the annulment
of the decision of the Regional Trial Court of Makati, Branch 62, which granted the writ of
preliminary injunction applied for by respondents Municipality of Parañaque and
Palanyag Kilusang Bayan for Service (Palanyag for brevity) against petitioner herein.
The antecedent facts are as follows:
On June 13, 1990, the respondent municipality passed Ordinance No. 86, Series of 1990
which authorized the closure of J. Gabriel, G.G. Cruz, Bayanihan, Lt. Garcia Extension
and Opena Streets located at Baclaran, Parañaque, Metro Manila and the establishment
of a flea market thereon. The said ordinance was approved by the municipal council
pursuant to MMC Ordinance No. 2, Series of 1979, authorizing and regulating the use of
certain city and/or municipal streets, roads and open spaces within Metropolitan Manila
as sites for flea market and/or vending areas, under certain terms and conditions.
On July 20, 1990, the Metropolitan Manila Authority approved Ordinance No. 86, s. 1990
of the municipal council of respondent municipality subject to the following conditions:
1. That the aforenamed streets are not used for vehicular traffic, and that
the majority of the residents do not oppose the establishment of the flea
market/vending areas thereon;
2. That the 2-meter middle road to be used as flea market/vending area
shall be marked distinctly, and that the 2 meters on both sides of the road
shall be used by pedestrians;
3. That the time during which the vending area is to be used shall be
clearly designated;
4. That the use of the vending areas shall be temporary and shall be
closed once the reclaimed areas are developed and donated by the
Public Estate Authority.
On June 20, 1990, the municipal council of Parañaque issued a resolution authorizing
Parañaque Mayor Walfrido N. Ferrer to enter into contract with any service cooperative
for the establishment, operation, maintenance and management of flea markets and/or
vending areas.
On August 8, 1990, respondent municipality and respondent Palanyag, a service
cooperative, entered into an agreement whereby the latter shall operate, maintain and
manage the flea market in the aforementioned streets with the obligation to remit dues to
the treasury of the municipal government of Parañaque. Consequently, market stalls
were put up by respondent Palanyag on the said streets.
On September 13, 1990, petitioner Brig. Gen. Macasiano, PNP Superintendent of the
Metropolitan Traffic Command, ordered the destruction and confiscation of stalls along
G.G. Cruz and J. Gabriel St. in Baclaran. These stalls were later returned to respondent
Palanyag.
On October 16, 1990, petitioner Brig. General Macasiano wrote a letter to respondent
Palanyag giving the latter ten (10) days to discontinue the flea market; otherwise, the
market stalls shall be dismantled.
Hence, on October 23, 1990, respondents municipality and Palanyag filed with the trial
court a joint petition for prohibition and mandamus with damages and prayer for
preliminary injunction, to which the petitioner filed his memorandum/opposition to the
issuance of the writ of preliminary injunction.
On October 24, 1990, the trial court issued a temporary restraining order to enjoin
petitioner from enforcing his letter-order of October 16, 1990 pending the hearing on the
motion for writ of preliminary injunction.
On December 17, 1990, the trial court issued an order upholding the validity of
Ordinance No. 86 s. 1990 of the Municipality' of Parañaque and enjoining petitioner Brig.
Gen. Macasiano from enforcing his letter-order against respondent Palanyag.
Hence, this petition was filed by the petitioner thru the Office of the Solicitor General
alleging grave abuse of discretion tantamount to lack or excess of jurisdiction on the part
of the trial judge in issuing the assailed order.
The sole issue to be resolved in this case is whether or not an ordinance or resolution
issued by the municipal council of Parañaque authorizing the lease and use of public
streets or thoroughfares as sites for flea markets is valid.
The Solicitor General, in behalf of petitioner, contends that municipal roads are used for
public service and are therefore public properties; that as such, they cannot be subject to
private appropriation or private contract by any person, even by the respondent
Municipality of Parañaque. Petitioner submits that a property already dedicated to public
use cannot be used for another public purpose and that absent a clear showing that the
69
Municipality of Parañaque has been granted by the legislature specific authority to
convert a property already in public use to another public use, respondent municipality is,
therefore, bereft of any authority to close municipal roads for the establishment of a flea
market. Petitioner also submits that assuming that the respondent municipality is
authorized to close streets, it failed to comply with the conditions set forth by the
Metropolitan Manila Authority for the approval of the ordinance providing for the
establishment of flea markets on public streets. Lastly, petitioner contends that by
allowing the municipal streets to be used by market vendors the municipal council of
respondent municipality violated its duty under the Local Government Code to promote
the general welfare of the residents of the municipality.
In upholding the legality of the disputed ordinance, the trial court ruled:
. . . that Chanter II Section 10 of the Local Government Code is a
statutory grant of power given to local government units, the Municipality
of Parañaque as such, is empowered under that law to close its roads,
streets or alley subject to limitations stated therein (i.e., that it is in
accordance with existing laws and the provisions of this code).
xxx xxx xxx
The actuation of the respondent Brig. Gen. Levi Macasiano, though
apparently within its power is in fact an encroachment of power legally
vested to the municipality, precisely because when the municipality
enacted the ordinance in question — the authority of the respondent as
Police Superintendent ceases to be operative on the ground that the
streets covered by the ordinance ceases to be a public thoroughfare. (pp.
33-34, Rollo)
We find the petition meritorious. In resolving the question of whether the disputed
municipal ordinance authorizing the flea market on the public streets is valid, it is
necessary to examine the laws in force during the time the said ordinance was enacted,
namely, Batas Pambansa Blg. 337, otherwise known as Local Government Code, in
connection with established principles embodied in the Civil Code an property and
settled jurisprudence on the matter.
The property of provinces, cities and municipalities is divided into property for public use
and patrimonial property (Art. 423, Civil Code). As to what consists of property for public
use, Article 424 of Civil Code states:
Art. 424. Property for public use, in the provinces, cities and
municipalities, consists of the provincial roads, city streets, the squares,
fountains, public waters, promenades, and public works for public service
paid for by said provinces, cities or municipalities.
All other property possessed by any of them is patrimonial and shall be
governed by this Code, without prejudice to the provisions of special
laws.
Based on the foregoing, J. Gabriel G.G. Cruz, Bayanihan, Lt. Garcia Extension and
Opena streets are local roads used for public service and are therefore considered public
properties of respondent municipality. Properties of the local government which are
devoted to public service are deemed public and are under the absolute control of
Congress (Province of Zamboanga del Norte v. City of Zamboanga, L-24440, March 28,
1968, 22 SCRA 1334). Hence, local governments have no authority whatsoever to
control or regulate the use of public properties unless specific authority is vested upon
them by Congress. One such example of this authority given by Congress to the local
governments is the power to close roads as provided in Section 10, Chapter II of the
Local Government Code, which states:
Sec. 10. Closure of roads. — A local government unit may likewise,
through its head acting pursuant to a resolution of its sangguniang and in
accordance with existing law and the provisions of this Code, close any
barangay, municipal, city or provincial road, street, alley, park or
square. No such way or place or any part of thereof shall be close without
indemnifying any person prejudiced thereby. A property thus withdrawn
from public use may be used or conveyed for any purpose for which other
real property belonging to the local unit concerned might be lawfully used
or conveyed. (Emphasis ours).
However, the aforestated legal provision which gives authority to local government units
to close roads and other similar public places should be read and interpreted in
accordance with basic principles already established by law. These basic principles have
the effect of limiting such authority of the province, city or municipality to close a public
street or thoroughfare. Article 424 of the Civil Code lays down the basic principle that
properties of public dominion devoted to public use and made available to the public in
general are outside the commerce of man and cannot be disposed of or leased by the
local government unit to private persons. Aside from the requirement of due process
which should be complied with before closing a road, street or park, the closure should
be for the sole purpose of withdrawing the road or other public property from public use
when circumstances show that such property is no longer intended or necessary for
70
public use or public service. When it is already withdrawn from public use, the property
then becomes patrimonial property of the local government unit concerned (Article 422,
Civil Code; Cebu Oxygen, etc. et al. v. Bercilles, et al., G.R. No. L-40474, August 29,
1975, 66 SCRA 481). It is only then that the respondent municipality can "use or convey
them for any purpose for which other real property belonging to the local unit concerned
might be lawfully used or conveyed" in accordance with the last sentence of Section 10,
Chapter II of Blg. 337, known as Local Government Code. In one case, the City Council
of Cebu, through a resolution, declared the terminal road of M. Borces Street, Mabolo,
Cebu City as an abandoned road, the same not being included in the City Development
Plan. Thereafter, the City Council passes another resolution authorizing the sale of the
said abandoned road through public bidding. We held therein that the City of Cebu is
empowered to close a city street and to vacate or withdraw the same from public use.
Such withdrawn portion becomes patrimonial property which can be the object of an
ordinary contract (Cebu Oxygen and Acetylene Co., Inc. v. Bercilles, et al., G.R. No.
L-40474, August 29, 1975, 66 SCRA 481). However, those roads and streets which are
available to the public in general and ordinarily used for vehicular traffic are still
considered public property devoted to public use. In such case, the local government has
no power to use it for another purpose or to dispose of or lease it to private persons. This
limitation on the authority of the local government over public properties has been
discussed and settled by this Court en banc in "Francisco V. Dacanay, petitioner v.
Mayor Macaria Asistio, Jr., et al., respondents, G.R. No. 93654, May 6, 1992." This Court
ruled:
There is no doubt that the disputed areas from which the private
respondents' market stalls are sought to be evicted are public streets, as
found by the trial court in Civil Case No. C-12921. A public street is
property for public use hence outside the commerce of man (Arts. 420,
424, Civil Code). Being outside the commerce of man, it may not be the
subject of lease or others contract (Villanueva, et al. v. Castañeda and
Macalino, 15 SCRA 142 citing the Municipality of Cavite v. Rojas, 30
SCRA 602; Espiritu v. Municipal Council of Pozorrubio, 102 Phil. 869;
And Muyot v. De la Fuente, 48 O.G. 4860).
As the stallholders pay fees to the City Government for the right to
occupy portions of the public street, the City Government, contrary to law,
has been leasing portions of the streets to them. Such leases or licenses
are null and void for being contrary to law. The right of the public to use
the city streets may not be bargained away through contract. The
interests of a few should not prevail over the good of the greater number
in the community whose health, peace, safety, good order and general
welfare, the respondent city officials are under legal obligation to protect.
The Executive Order issued by acting Mayor Robles authorizing the use
of Heroes del '96 Street as a vending area for stallholders who were
granted licenses by the city government contravenes the general law that
reserves city streets and roads for public use. Mayor Robles' Executive
Order may not infringe upon the vested right of the public to use city
streets for the purpose they were intended to serve: i.e., as arteries of
travel for vehicles and pedestrians.
Even assuming, in gratia argumenti, that respondent municipality has the authority to
pass the disputed ordinance, the same cannot be validly implemented because it cannot
be considered approved by the Metropolitan Manila Authority due to non-compliance by
respondent municipality of the conditions imposed by the former for the approval of the
ordinance, to wit:
1. That the aforenamed streets are not used for vehicular traffic, and that
the majority of the residents do(es) not oppose the establishment of the
flea market/vending areas thereon;
2. That the 2-meter middle road to be used as flea market/vending area
shall be marked distinctly, and that the 2 meters on both sides of the road
shall be used by pedestrians;
3. That the time during which the vending area is to be used shall be
clearly designated;
4. That the use of the vending areas shall be temporary and shall be
closed once the reclaimed areas are developed and donated by the
Public Estate Authority. (p. 38, Rollo)
Respondent municipality has not shown any iota of proof that it has complied with the
foregoing conditions precedent to the approval of the ordinance. The allegations of
respondent municipality that the closed streets were not used for vehicular traffic and
that the majority of the residents do not oppose the establishment of a flea market on
said streets are unsupported by any evidence that will show that this first condition has
been met. Likewise, the designation by respondents of a time schedule during which the
flea market shall operate is absent.
Further, it is of public notice that the streets along Baclaran area are congested with
people, houses and traffic brought about by the proliferation of vendors occupying the
streets. To license and allow the establishment of a flea market along J. Gabriel, G.G.
Cruz, Bayanihan, Lt. Garcia Extension and Opena streets in Baclaran would not help in
71
solving the problem of congestion. We take note of the other observations of the Solicitor
General when he said:
. . . There have been many instances of emergencies and fires where
ambulances and fire engines, instead of using the roads for a more direct
access to the fire area, have to maneuver and look for other streets which
are not occupied by stalls and vendors thereby losing valuable time which
could, otherwise, have been spent in saving properties and lives.
Along G.G. Cruz Street is a hospital, the St. Rita Hospital. However, its
ambulances and the people rushing their patients to the hospital cannot
pass through G.G. Cruz because of the stalls and the vendors. One can
only imagine the tragedy of losing a life just because of a few seconds
delay brought about by the inaccessibility of the streets leading to the
hospital.
The children, too, suffer. In view of the occupancy of the roads by stalls
and vendors, normal transportation flow is disrupted and school children
have to get off at a distance still far from their schools and walk, rain or
shine.
Indeed one can only imagine the garbage and litter left by vendors on the
streets at the end of the day. Needless to say, these cause further
pollution, sickness and deterioration of health of the residents therein.
(pp. 21-22, Rollo)
Respondents do not refute the truth of the foregoing findings and observations of
petitioners. Instead, respondents want this Court to focus its attention solely on the
argument that the use of public spaces for the establishment of a flea market is well
within the powers granted by law to a local government which should not be interfered
with by the courts.
Verily, the powers of a local government unit are not absolute. They are subject to
limitations laid down by toe Constitution and the laws such as our Civil Code. Moreover,
the exercise of such powers should be subservient to paramount considerations of health
and well-being of the members of the community. Every local government unit has the
sworn obligation to enact measures that will enhance the public health, safety and
convenience, maintain peace and order, and promote the general prosperity of the
inhabitants of the local units. Based on this objective, the local government should refrain
from acting towards that which might prejudice or adversely affect the general welfare.
As what we have said in the Dacanay case, the general public have a legal right to
demand the demolition of the illegally constructed stalls in public roads and streets and
the officials of respondent municipality have the corresponding duty arising from public
office to clear the city streets and restore them to their specific public purpose.
The instant case as well as the Dacanay case, involves an ordinance which is void and
illegal for lack of basis and authority in laws applicable during its time. However, at this
point, We find it worthy to note that Batas Pambansa Blg. 337, known as Local
Government Lode, has already been repealed by Republic Act No. 7160 known as Local
Government Code of 1991 which took effect on January 1, 1992. Section 5(d) of the new
Code provides that rights and obligations existing on the date of effectivity of the new
Code and arising out of contracts or any other source of prestation involving a local
government unit shall be governed by the original terms and conditions of the said
contracts or the law in force at the time such rights were vested.
ACCORDINGLY, the petition is GRANTED and the decision of the respondent Regional
Trial Court dated December 17, 1990 which granted the writ of preliminary injunction
enjoining petitioner as PNP Superintendent, Metropolitan Traffic Command from
enforcing the demolition of market stalls along J. Gabriel, G.G. Cruz, Bayanihan, Lt.
Garcia Extension and Opena streets is hereby RESERVED and SET ASIDE.
SO ORDERED.
G.R. No. 133250 July 9, 2002
CHAVEZ vs. PEA
This is an original Petition for Mandamus with prayer for a writ of preliminary injunction
and a temporary restraining order. The petition seeks to compel the Public Estates
Authority ("PEA" for brevity) to disclose all facts on PEA's then on-going renegotiations
with Amari Coastal Bay and Development Corporation ("AMARI" for brevity) to reclaim
portions of Manila Bay. The petition further seeks to enjoin PEA from signing a new
agreement with AMARI involving such reclamation.
The Facts
On November 20, 1973, the government, through the Commissioner of Public Highways,
signed a contract with the Construction and Development Corporation of the Philippines
("CDCP" for brevity) to reclaim certain foreshore and offshore areas of Manila Bay. The
contract also included the construction of Phases I and II of the Manila-Cavite Coastal
Road. CDCP obligated itself to carry out all the works in consideration of fifty percent of
the total reclaimed land.
72
On February 4, 1977, then President Ferdinand E. Marcos issued Presidential Decree
No. 1084 creating PEA. PD No. 1084 tasked PEA "to reclaim land, including foreshore
and submerged areas," and "to develop, improve, acquire, x x x lease and sell any and
all kinds of lands."1 On the same date, then President Marcos issued Presidential Decree
No. 1085 transferring to PEA the "lands reclaimed in the foreshore and offshore of the
Manila Bay"2 under the Manila-Cavite Coastal Road and Reclamation Project
(MCCRRP).
On December 29, 1981, then President Marcos issued a memorandum directing PEA to
amend its contract with CDCP, so that "[A]ll future works in MCCRRP x x x shall be
funded and owned by PEA." Accordingly, PEA and CDCP executed a Memorandum of
Agreement dated December 29, 1981, which stated:
"(i) CDCP shall undertake all reclamation, construction, and such other works in
the MCCRRP as may be agreed upon by the parties, to be paid according to
progress of works on a unit price/lump sum basis for items of work to be agreed
upon, subject to price escalation, retention and other terms and conditions
provided for in Presidential Decree No. 1594. All the financing required for such
works shall be provided by PEA.
xxx
(iii) x x x CDCP shall give up all its development rights and hereby agrees to
cede and transfer in favor of PEA, all of the rights, title, interest and participation
of CDCP in and to all the areas of land reclaimed by CDCP in the MCCRRP as of
December 30, 1981 which have not yet been sold, transferred or otherwise
disposed of by CDCP as of said date, which areas consist of approximately
Ninety-Nine Thousand Four Hundred Seventy Three (99,473) square meters in
the Financial Center Area covered by land pledge No. 5 and approximately Three
Million Three Hundred Eighty Two Thousand Eight Hundred Eighty Eight
(3,382,888) square meters of reclaimed areas at varying elevations above Mean
Low Water Level located outside the Financial Center Area and the First
Neighborhood Unit."3
On January 19, 1988, then President Corazon C. Aquino issued Special Patent No.
3517, granting and transferring to PEA "the parcels of land so reclaimed under the
Manila-Cavite Coastal Road and Reclamation Project (MCCRRP) containing a total area
of one million nine hundred fifteen thousand eight hundred ninety four (1,915,894)
square meters." Subsequently, on April 9, 1988, the Register of Deeds of the Municipality
of Parañaque issued Transfer Certificates of Title Nos. 7309, 7311, and 7312, in the
name of PEA, covering the three reclaimed islands known as the "Freedom Islands"
located at the southern portion of the Manila-Cavite Coastal Road, Parañaque City. The
Freedom Islands have a total land area of One Million Five Hundred Seventy Eight
Thousand Four Hundred and Forty One (1,578,441) square meters or 157.841 hectares.
On April 25, 1995, PEA entered into a Joint Venture Agreement ("JVA" for brevity) with
AMARI, a private corporation, to develop the Freedom Islands. The JVA also required
the reclamation of an additional 250 hectares of submerged areas surrounding these
islands to complete the configuration in the Master Development Plan of the Southern
Reclamation Project-MCCRRP. PEA and AMARI entered into the JVA through
negotiation without public bidding.4 On April 28, 1995, the Board of Directors of PEA, in
its Resolution No. 1245, confirmed the JVA.5On June 8, 1995, then President Fidel V.
Ramos, through then Executive Secretary Ruben Torres, approved the JVA.6
On November 29, 1996, then Senate President Ernesto Maceda delivered a privilege
speech in the Senate and denounced the JVA as the "grandmother of all scams." As a
result, the Senate Committee on Government Corporations and Public Enterprises, and
the Committee on Accountability of Public Officers and Investigations, conducted a joint
investigation. The Senate Committees reported the results of their investigation in
Senate Committee Report No. 560 dated September 16, 1997.7 Among the conclusions
of their report are: (1) the reclaimed lands PEA seeks to transfer to AMARI under the
JVA are lands of the public domain which the government has not classified as alienable
lands and therefore PEA cannot alienate these lands; (2) the certificates of title covering
the Freedom Islands are thus void, and (3) the JVA itself is illegal.
On December 5, 1997, then President Fidel V. Ramos issued Presidential Administrative
Order No. 365 creating a Legal Task Force to conduct a study on the legality of the JVA
in view of Senate Committee Report No. 560. The members of the Legal Task Force
were the Secretary of Justice,8 the Chief Presidential Legal Counsel,9 and the
Government Corporate Counsel.10 The Legal Task Force upheld the legality of the JVA,
contrary to the conclusions reached by the Senate Committees.11
On April 4 and 5, 1998, the Philippine Daily Inquirer and Today published reports that
there were on-going renegotiations between PEA and AMARI under an order issued by
then President Fidel V. Ramos. According to these reports, PEA Director Nestor Kalaw,
PEA Chairman Arsenio Yulo and retired Navy Officer Sergio Cruz composed the
negotiating panel of PEA.
On April 13, 1998, Antonio M. Zulueta filed before the Court a Petition for Prohibition with
Application for the Issuance of a Temporary Restraining Order and Preliminary
Injunction docketed as G.R. No. 132994 seeking to nullify the JVA. The Court dismissed
73
the petition "for unwarranted disregard of judicial hierarchy, without prejudice to the
refiling of the case before the proper court."12
On April 27, 1998, petitioner Frank I. Chavez ("Petitioner" for brevity) as a taxpayer, filed
the instant Petition for Mandamus with Prayer for the Issuance of a Writ of Preliminary
Injunction and Temporary Restraining Order. Petitioner contends the government stands
to lose billions of pesos in the sale by PEA of the reclaimed lands to AMARI. Petitioner
prays that PEA publicly disclose the terms of any renegotiation of the JVA, invoking
Section 28, Article II, and Section 7, Article III, of the 1987 Constitution on the right of the
people to information on matters of public concern. Petitioner assails the sale to AMARI
of lands of the public domain as a blatant violation of Section 3, Article XII of the 1987
Constitution prohibiting the sale of alienable lands of the public domain to private
corporations. Finally, petitioner asserts that he seeks to enjoin the loss of billions of
pesos in properties of the State that are of public dominion.
After several motions for extension of time,13 PEA and AMARI filed their Comments on
October 19, 1998 and June 25, 1998, respectively. Meanwhile, on December 28, 1998,
petitioner filed an Omnibus Motion: (a) to require PEA to submit the terms of the
renegotiated PEA-AMARI contract; (b) for issuance of a temporary restraining order; and
(c) to set the case for hearing on oral argument. Petitioner filed a Reiterative Motion for
Issuance of a TRO dated May 26, 1999, which the Court denied in a Resolution dated
June 22, 1999.
In a Resolution dated March 23, 1999, the Court gave due course to the petition and
required the parties to file their respective memoranda.
On March 30, 1999, PEA and AMARI signed the Amended Joint Venture Agreement
("Amended JVA," for brevity). On May 28, 1999, the Office of the President under the
administration of then President Joseph E. Estrada approved the Amended JVA.
Due to the approval of the Amended JVA by the Office of the President, petitioner now
prays that on "constitutional and statutory grounds the renegotiated contract be declared
null and void."14
The Issues
The issues raised by petitioner, PEA15 and AMARI16 are as follows:
I. WHETHER THE PRINCIPAL RELIEFS PRAYED FOR IN THE PETITION ARE
MOOT AND ACADEMIC BECAUSE OF SUBSEQUENT EVENTS;
II. WHETHER THE PETITION MERITS DISMISSAL FOR FAILING TO
OBSERVE THE PRINCIPLE GOVERNING THE HIERARCHY OF COURTS;
III. WHETHER THE PETITION MERITS DISMISSAL FOR NON-EXHAUSTION
OF ADMINISTRATIVE REMEDIES;
IV. WHETHER PETITIONER HAS LOCUS STANDI TO BRING THIS SUIT;
V. WHETHER THE CONSTITUTIONAL RIGHT TO INFORMATION INCLUDES
OFFICIAL INFORMATION ON ON-GOING NEGOTIATIONS BEFORE A FINAL
AGREEMENT;
VI. WHETHER THE STIPULATIONS IN THE AMENDED JOINT VENTURE
AGREEMENT FOR THE TRANSFER TO AMARI OF CERTAIN LANDS,
RECLAIMED AND STILL TO BE RECLAIMED, VIOLATE THE 1987
CONSTITUTION; AND
VII. WHETHER THE COURT IS THE PROPER FORUM FOR RAISING THE
ISSUE OF WHETHER THE AMENDED JOINT VENTURE AGREEMENT IS
GROSSLY DISADVANTAGEOUS TO THE GOVERNMENT.
The Court's Ruling
First issue: whether the principal reliefs prayed for in the petition are moot and
academic because of subsequent events.
The petition prays that PEA publicly disclose the "terms and conditions of the on-going
negotiations for a new agreement." The petition also prays that the Court enjoin PEA
from "privately entering into, perfecting and/or executing any new agreement with
AMARI."
PEA and AMARI claim the petition is now moot and academic because AMARI furnished
petitioner on June 21, 1999 a copy of the signed Amended JVA containing the terms and
conditions agreed upon in the renegotiations. Thus, PEA has satisfied petitioner's prayer
for a public disclosure of the renegotiations. Likewise, petitioner's prayer to enjoin the
signing of the Amended JVA is now moot because PEA and AMARI have already signed
the Amended JVA on March 30, 1999. Moreover, the Office of the President has
approved the Amended JVA on May 28, 1999.
74
Petitioner counters that PEA and AMARI cannot avoid the constitutional issue by simply
fast-tracking the signing and approval of the Amended JVA before the Court could act on
the issue. Presidential approval does not resolve the constitutional issue or remove it
from the ambit of judicial review.
We rule that the signing of the Amended JVA by PEA and AMARI and its approval by the
President cannot operate to moot the petition and divest the Court of its jurisdiction. PEA
and AMARI have still to implement the Amended JVA. The prayer to enjoin the signing of
the Amended JVA on constitutional grounds necessarily includes preventing its
implementation if in the meantime PEA and AMARI have signed one in violation of the
Constitution. Petitioner's principal basis in assailing the renegotiation of the JVA is its
violation of Section 3, Article XII of the Constitution, which prohibits the government from
alienating lands of the public domain to private corporations. If the Amended JVA indeed
violates the Constitution, it is the duty of the Court to enjoin its implementation, and if
already implemented, to annul the effects of such unconstitutional contract.
The Amended JVA is not an ordinary commercial contract but one which seeks
to transfer title and ownership to 367.5 hectares of reclaimed lands and submerged
areas of Manila Bay to a single private corporation. It now becomes more compelling
for the Court to resolve the issue to insure the government itself does not violate a
provision of the Constitution intended to safeguard the national patrimony. Supervening
events, whether intended or accidental, cannot prevent the Court from rendering a
decision if there is a grave violation of the Constitution. In the instant case, if the
Amended JVA runs counter to the Constitution, the Court can still prevent the transfer of
title and ownership of alienable lands of the public domain in the name of AMARI. Even
in cases where supervening events had made the cases moot, the Court did not hesitate
to resolve the legal or constitutional issues raised to formulate controlling principles to
guide the bench, bar, and the public.17
Also, the instant petition is a case of first impression. All previous decisions of the Court
involving Section 3, Article XII of the 1987 Constitution, or its counterpart provision in the
1973 Constitution,18 covered agricultural landssold to private corporations which
acquired the lands from private parties. The transferors of the private corporations
claimed or could claim the right to judicial confirmation of their imperfect
titles19 under Title II of Commonwealth Act. 141 ("CA No. 141" for brevity). In the instant
case, AMARI seeks to acquire from PEA, a public corporation, reclaimed lands and
submerged areas for non-agricultural purposes by purchase under PD No. 1084
(charter of PEA) and Title III of CA No. 141. Certain undertakings by AMARI under the
Amended JVA constitute the consideration for the purchase. Neither AMARI nor PEA
can claim judicial confirmation of their titles because the lands covered by the Amended
JVA are newly reclaimed or still to be reclaimed. Judicial confirmation of imperfect title
requires open, continuous, exclusive and notorious occupation of agricultural lands of the
public domain for at least thirty years since June 12, 1945 or earlier. Besides, the
deadline for filing applications for judicial confirmation of imperfect title expired on
December 31, 1987.20
Lastly, there is a need to resolve immediately the constitutional issue raised in this
petition because of the possible transfer at any time by PEA to AMARI of title and
ownership to portions of the reclaimed lands. Under the Amended JVA, PEA is obligated
to transfer to AMARI the latter's seventy percent proportionate share in the reclaimed
areas as the reclamation progresses. The Amended JVA even allows AMARI to
mortgage at any time the entire reclaimed area to raise financing for the reclamation
project.21
Second issue: whether the petition merits dismissal for failing to observe the
principle governing the hierarchy of courts.
PEA and AMARI claim petitioner ignored the judicial hierarchy by seeking relief directly
from the Court. The principle of hierarchy of courts applies generally to cases involving
factual questions. As it is not a trier of facts, the Court cannot entertain cases involving
factual issues. The instant case, however, raises constitutional issues of transcendental
importance to the public.22 The Court can resolve this case without determining any
factual issue related to the case. Also, the instant case is a petition for mandamus which
falls under the original jurisdiction of the Court under Section 5, Article VIII of the
Constitution. We resolve to exercise primary jurisdiction over the instant case.
Third issue: whether the petition merits dismissal for non-exhaustion of
administrative remedies.
PEA faults petitioner for seeking judicial intervention in compelling PEA to disclose
publicly certain information without first asking PEA the needed information. PEA claims
petitioner's direct resort to the Court violates the principle of exhaustion of administrative
remedies. It also violates the rule that mandamus may issue only if there is no other
plain, speedy and adequate remedy in the ordinary course of law.
PEA distinguishes the instant case from Tañada v. Tuvera23 where the Court granted the
petition for mandamus even if the petitioners there did not initially demand from the
Office of the President the publication of the presidential decrees. PEA points out that in
Tañada, the Executive Department had an affirmative statutory duty under Article 2 of
the Civil Code24 and Section 1 of Commonwealth Act No. 63825 to publish the presidential
decrees. There was, therefore, no need for the petitioners in Tañada to make an initial
demand from the Office of the President. In the instant case, PEA claims it has no
affirmative statutory duty to disclose publicly information about its renegotiation of the
75
JVA. Thus, PEA asserts that the Court must apply the principle of exhaustion of
administrative remedies to the instant case in view of the failure of petitioner here to
demand initially from PEA the needed information.
The original JVA sought to dispose to AMARI public lands held by PEA, a government
corporation. Under Section 79 of the Government Auditing Code,26 the disposition of
government lands to private parties requires public bidding. PEA was under a positive
legal duty to disclose to the public the terms and conditions for the sale of its
lands. The law obligated PEA to make this public disclosure even without demand from
petitioner or from anyone. PEA failed to make this public disclosure because the original
JVA, like the Amended JVA, was the result of a negotiated contract, not of a public
bidding. Considering that PEA had an affirmative statutory duty to make the public
disclosure, and was even in breach of this legal duty, petitioner had the right to seek
direct judicial intervention.
Moreover, and this alone is determinative of this issue, the principle of exhaustion of
administrative remedies does not apply when the issue involved is a purely legal or
constitutional question.27 The principal issue in the instant case is the capacity of AMARI
to acquire lands held by PEA in view of the constitutional ban prohibiting the alienation of
lands of the public domain to private corporations. We rule that the principle of
exhaustion of administrative remedies does not apply in the instant case.
Fourth issue: whether petitioner has locus standi to bring this suit
PEA argues that petitioner has no standing to institute mandamus proceedings to
enforce his constitutional right to information without a showing that PEA refused to
perform an affirmative duty imposed on PEA by the Constitution. PEA also claims that
petitioner has not shown that he will suffer any concrete injury because of the signing or
implementation of the Amended JVA. Thus, there is no actual controversy requiring the
exercise of the power of judicial review.
The petitioner has standing to bring this taxpayer's suit because the petition seeks to
compel PEA to comply with its constitutional duties. There are two constitutional issues
involved here. First is the right of citizens to information on matters of public concern.
Second is the application of a constitutional provision intended to insure the equitable
distribution of alienable lands of the public domain among Filipino citizens. The thrust of
the first issue is to compel PEA to disclose publicly information on the sale of
government lands worth billions of pesos, information which the Constitution and
statutory law mandate PEA to disclose. The thrust of the second issue is to prevent PEA
from alienating hundreds of hectares of alienable lands of the public domain in violation
of the Constitution, compelling PEA to comply with a constitutional duty to the nation.
Moreover, the petition raises matters of transcendental importance to the public.
In Chavez v. PCGG,28 the Court upheld the right of a citizen to bring a taxpayer's suit on
matters of transcendental importance to the public, thus -
"Besides, petitioner emphasizes, the matter of recovering the ill-gotten wealth of
the Marcoses is an issue of 'transcendental importance to the public.' He asserts
that ordinary taxpayers have a right to initiate and prosecute actions questioning
the validity of acts or orders of government agencies or instrumentalities, if the
issues raised are of 'paramount public interest,' and if they 'immediately affect the
social, economic and moral well being of the people.'
Moreover, the mere fact that he is a citizen satisfies the requirement of personal
interest, when the proceeding involves the assertion of a public right, such as in
this case. He invokes several decisions of this Court which have set aside the
procedural matter of locus standi, when the subject of the case involved public
interest.
xxx
In Tañada v. Tuvera, the Court asserted that when the issue concerns a public
right and the object of mandamus is to obtain the enforcement of a public duty,
the people are regarded as the real parties in interest; and because it is sufficient
that petitioner is a citizen and as such is interested in the execution of the laws,
he need not show that he has any legal or special interest in the result of the
action. In the aforesaid case, the petitioners sought to enforce their right to be
informed on matters of public concern, a right then recognized in Section 6,
Article IV of the 1973 Constitution, in connection with the rule that laws in order to
be valid and enforceable must be published in the Official Gazette or otherwise
effectively promulgated. In ruling for the petitioners' legal standing, the Court
declared that the right they sought to be enforced 'is a public right recognized by
no less than the fundamental law of the land.'
Legaspi v. Civil Service Commission, while reiterating Tañada, further declared
that 'when a mandamus proceeding involves the assertion of a public right, the
requirement of personal interest is satisfied by the mere fact that petitioner is a
citizen and, therefore, part of the general 'public' which possesses the right.'
Further, in Albano v. Reyes, we said that while expenditure of public funds may
not have been involved under the questioned contract for the development,
management and operation of the Manila International Container Terminal,
'public interest [was] definitely involved considering the important role [of the
76
 subject contract] . . . in the economic development of the country and the
magnitude of the financial consideration involved.' We concluded that, as a
consequence, the disclosure provision in the Constitution would constitute
sufficient authority for upholding the petitioner's standing.
Similarly, the instant petition is anchored on the right of the people to information
and access to official records, documents and papers — a right guaranteed
under Section 7, Article III of the 1987 Constitution. Petitioner, a former solicitor
general, is a Filipino citizen. Because of the satisfaction of the two basic
requisites laid down by decisional law to sustain petitioner's legal standing, i.e.
(1) the enforcement of a public right (2) espoused by a Filipino citizen, we rule
that the petition at bar should be allowed."
We rule that since the instant petition, brought by a citizen, involves the enforcement of
constitutional rights - to information and to the equitable diffusion of natural resources -
matters of transcendental public importance, the petitioner has the requisite locus standi.
Fifth issue: whether the constitutional right to information includes official
information on on-going negotiations before a final agreement.
Section 7, Article III of the Constitution explains the people's right to information on
matters of public concern in this manner:
"Sec. 7. The right of the people to information on matters of public concern shall
be recognized. Access to official records, and to documents, and papers
pertaining to official acts, transactions, or decisions, as well as to
government research data used as basis for policy development, shall be
afforded the citizen, subject to such limitations as may be provided by law."
(Emphasis supplied)
The State policy of full transparency in all transactions involving public interest reinforces
the people's right to information on matters of public concern. This State policy is
expressed in Section 28, Article II of the Constitution, thus:
"Sec. 28. Subject to reasonable conditions prescribed by law, the State adopts
and implements a policy of full public disclosure of all its transactions
involving public interest." (Emphasis supplied)
These twin provisions of the Constitution seek to promote transparency in policy-making
and in the operations of the government, as well as provide the people sufficient
information to exercise effectively other constitutional rights. These twin provisions are
essential to the exercise of freedom of expression. If the government does not disclose
its official acts, transactions and decisions to citizens, whatever citizens say, even if
expressed without any restraint, will be speculative and amount to nothing. These twin
provisions are also essential to hold public officials "at all times x x x accountable to the
people,"29 for unless citizens have the proper information, they cannot hold public officials
accountable for anything. Armed with the right information, citizens can participate in
public discussions leading to the formulation of government policies and their effective
implementation. An informed citizenry is essential to the existence and proper functioning
of any democracy. As explained by the Court in Valmonte v. Belmonte, Jr.30 –
"An essential element of these freedoms is to keep open a continuing dialogue or
process of communication between the government and the people. It is in the
interest of the State that the channels for free political discussion be maintained
to the end that the government may perceive and be responsive to the people's
will. Yet, this open dialogue can be effective only to the extent that the citizenry is
informed and thus able to formulate its will intelligently. Only when the
participants in the discussion are aware of the issues and have access to
information relating thereto can such bear fruit."
PEA asserts, citing Chavez v. PCGG,31 that in cases of on-going negotiations the right to
information is limited to "definite propositions of the government." PEA maintains the
right does not include access to "intra-agency or inter-agency recommendations or
communications during the stage when common assertions are still in the process of
being formulated or are in the 'exploratory stage'."
Also, AMARI contends that petitioner cannot invoke the right at the pre-decisional stage
or before the closing of the transaction. To support its contention, AMARI cites the
following discussion in the 1986 Constitutional Commission:
"Mr. Suarez. And when we say 'transactions' which should be distinguished from
contracts, agreements, or treaties or whatever, does the Gentleman refer to the
steps leading to the consummation of the contract, or does he refer to the
contract itself?
Mr. Ople: The 'transactions' used here, I suppose is generic and therefore,
it can cover both steps leading to a contract and already a consummated
contract, Mr. Presiding Officer.
Mr. Suarez: This contemplates inclusion of negotiations leading to the
consummation of the transaction.
77
 Mr. Ople: Yes, subject only to reasonable safeguards on the national
interest.
Mr. Suarez: Thank you."32 (Emphasis supplied)
AMARI argues there must first be a consummated contract before petitioner can invoke
the right. Requiring government officials to reveal their deliberations at the pre-decisional
stage will degrade the quality of decision-making in government agencies. Government
officials will hesitate to express their real sentiments during deliberations if there is
immediate public dissemination of their discussions, putting them under all kinds of
pressure before they decide.
We must first distinguish between information the law on public bidding requires PEA to
disclose publicly, and information the constitutional right to information requires PEA to
release to the public. Before the consummation of the contract, PEA must, on its own
and without demand from anyone, disclose to the public matters relating to the
disposition of its property. These include the size, location, technical description and
nature of the property being disposed of, the terms and conditions of the disposition, the
parties qualified to bid, the minimum price and similar information. PEA must prepare all
these data and disclose them to the public at the start of the disposition process, long
before the consummation of the contract, because the Government Auditing Code
requires public bidding. If PEA fails to make this disclosure, any citizen can demand
from PEA this information at any time during the bidding process.
Information, however, on on-going evaluation or review of bids or proposals being
undertaken by the bidding or review committee is not immediately accessible under the
right to information. While the evaluation or review is still on-going, there are no "official
acts, transactions, or decisions" on the bids or proposals. However, once the committee
makes its official recommendation, there arises a "definite proposition" on the part of
the government. From this moment, the public's right to information attaches, and any
citizen can access all the non-proprietary information leading to such definite proposition.
In Chavez v. PCGG,33 the Court ruled as follows:
"Considering the intent of the framers of the Constitution, we believe that it is
incumbent upon the PCGG and its officers, as well as other government
representatives, to disclose sufficient public information on any proposed
settlement they have decided to take up with the ostensible owners and holders
of ill-gotten wealth. Such information, though, must pertain to definite
propositions of the government, not necessarily to intra-agency or inter-
agency recommendations or communications during the stage when common
assertions are still in the process of being formulated or are in the "exploratory"
stage. There is need, of course, to observe the same restrictions on disclosure of
information in general, as discussed earlier – such as on matters involving
national security, diplomatic or foreign relations, intelligence and other classified
information." (Emphasis supplied)
Contrary to AMARI's contention, the commissioners of the 1986 Constitutional
Commission understood that the right to information "contemplates inclusion of
negotiations leading to the consummation of the transaction." Certainly, a
consummated contract is not a requirement for the exercise of the right to information.
Otherwise, the people can never exercise the right if no contract is consummated, and if
one is consummated, it may be too late for the public to expose its defects. 1âwphi1.nêt
Requiring a consummated contract will keep the public in the dark until the contract,
which may be grossly disadvantageous to the government or even illegal, becomes a fait
accompli. This negates the State policy of full transparency on matters of public concern,
a situation which the framers of the Constitution could not have intended. Such a
requirement will prevent the citizenry from participating in the public discussion of
any proposedcontract, effectively truncating a basic right enshrined in the Bill of Rights.
We can allow neither an emasculation of a constitutional right, nor a retreat by the State
of its avowed "policy of full disclosure of all its transactions involving public interest."
The right covers three categories of information which are "matters of public concern,"
namely: (1) official records; (2) documents and papers pertaining to official acts,
transactions and decisions; and (3) government research data used in formulating
policies. The first category refers to any document that is part of the public records in the
custody of government agencies or officials. The second category refers to documents
and papers recording, evidencing, establishing, confirming, supporting, justifying or
explaining official acts, transactions or decisions of government agencies or officials. The
third category refers to research data, whether raw, collated or processed, owned by the
government and used in formulating government policies.
The information that petitioner may access on the renegotiation of the JVA includes
evaluation reports, recommendations, legal and expert opinions, minutes of meetings,
terms of reference and other documents attached to such reports or minutes, all relating
to the JVA. However, the right to information does not compel PEA to prepare lists,
abstracts, summaries and the like relating to the renegotiation of the JVA.34 The right
only affords access to records, documents and papers, which means the opportunity to
inspect and copy them. One who exercises the right must copy the records, documents
and papers at his expense. The exercise of the right is also subject to reasonable
regulations to protect the integrity of the public records and to minimize disruption to
78
government operations, like rules specifying when and how to conduct the inspection
and copying.35
The right to information, however, does not extend to matters recognized as privileged
information under the separation of powers.36 The right does not also apply to information
on military and diplomatic secrets, information affecting national security, and information
on investigations of crimes by law enforcement agencies before the prosecution of the
accused, which courts have long recognized as confidential.37 The right may also be
subject to other limitations that Congress may impose by law.
There is no claim by PEA that the information demanded by petitioner is privileged
information rooted in the separation of powers. The information does not cover
Presidential conversations, correspondences, or discussions during closed-door Cabinet
meetings which, like internal deliberations of the Supreme Court and other collegiate
courts, or executive sessions of either house of Congress,38 are recognized as
confidential. This kind of information cannot be pried open by a co-equal branch of
government. A frank exchange of exploratory ideas and assessments, free from the glare
of publicity and pressure by interested parties, is essential to protect the independence of
decision-making of those tasked to exercise Presidential, Legislative and Judicial
power.39This is not the situation in the instant case.
We rule, therefore, that the constitutional right to information includes official information
on on-going negotiations before a final contract. The information, however, must
constitute definite propositions by the government and should not cover recognized
exceptions like privileged information, military and diplomatic secrets and similar matters
affecting national security and public order.40 Congress has also prescribed other
limitations on the right to information in several legislations.41
Sixth issue: whether stipulations in the Amended JVA for the transfer to AMARI of
lands, reclaimed or to be reclaimed, violate the Constitution.
The Regalian Doctrine
The ownership of lands reclaimed from foreshore and submerged areas is rooted in the
Regalian doctrine which holds that the State owns all lands and waters of the public
domain. Upon the Spanish conquest of the Philippines, ownership of all "lands, territories
and possessions" in the Philippines passed to the Spanish Crown.42The King, as the
sovereign ruler and representative of the people, acquired and owned all lands and
territories in the Philippines except those he disposed of by grant or sale to private
individuals.
The 1935, 1973 and 1987 Constitutions adopted the Regalian doctrine substituting,
however, the State, in lieu of the King, as the owner of all lands and waters of the public
domain. The Regalian doctrine is the foundation of the time-honored principle of land
ownership that "all lands that were not acquired from the Government, either by
purchase or by grant, belong to the public domain."43 Article 339 of the Civil Code of
1889, which is now Article 420 of the Civil Code of 1950, incorporated the Regalian
doctrine.
Ownership and Disposition of Reclaimed Lands
The Spanish Law of Waters of 1866 was the first statutory law governing the ownership
and disposition of reclaimed lands in the Philippines. On May 18, 1907, the Philippine
Commission enacted Act No. 1654 which provided for the lease, but not the sale, of
reclaimed lands of the government to corporations and individuals. Later, on
November 29, 1919, the Philippine Legislature approved Act No. 2874, the Public Land
Act, which authorized the lease, but not the sale, of reclaimed lands of the
government to corporations and individuals. On November 7, 1936, the National
Assembly passed Commonwealth Act No. 141, also known as the Public Land Act,
which authorized the lease, but not the sale, of reclaimed lands of the government
to corporations and individuals. CA No. 141 continues to this day as the general law
governing the classification and disposition of lands of the public domain.
The Spanish Law of Waters of 1866 and the Civil Code of 1889
Under the Spanish Law of Waters of 1866, the shores, bays, coves, inlets and all waters
within the maritime zone of the Spanish territory belonged to the public domain for public
use.44 The Spanish Law of Waters of 1866 allowed the reclamation of the sea under
Article 5, which provided as follows:
"Article 5. Lands reclaimed from the sea in consequence of works constructed by
the State, or by the provinces, pueblos or private persons, with proper
permission, shall become the property of the party constructing such works,
unless otherwise provided by the terms of the grant of authority."
Under the Spanish Law of Waters, land reclaimed from the sea belonged to the party
undertaking the reclamation, provided the government issued the necessary permit and
did not reserve ownership of the reclaimed land to the State.
Article 339 of the Civil Code of 1889 defined property of public dominion as follows:
"Art. 339. Property of public dominion is –
79
 1. That devoted to public use, such as roads, canals, rivers, torrents, ports and
bridges constructed by the State, riverbanks, shores, roadsteads, and that of a
similar character;
2. That belonging exclusively to the State which, without being of general public
use, is employed in some public service, or in the development of the national
wealth, such as walls, fortresses, and other works for the defense of the territory,
and mines, until granted to private individuals."
Property devoted to public use referred to property open for use by the public. In
contrast, property devoted to public service referred to property used for some specific
public service and open only to those authorized to use the property.
Property of public dominion referred not only to property devoted to public use, but also
to property not so used but employed to develop the national wealth. This class of
property constituted property of public dominion although employed for some economic
or commercial activity to increase the national wealth.
Article 341 of the Civil Code of 1889 governed the re-classification of property of public
dominion into private property, to wit:
"Art. 341. Property of public dominion, when no longer devoted to public use or to
the defense of the territory, shall become a part of the private property of the
State."
This provision, however, was not self-executing. The legislature, or the executive
department pursuant to law, must declare the property no longer needed for public use
or territorial defense before the government could lease or alienate the property to
private parties.45
Act No. 1654 of the Philippine Commission
On May 8, 1907, the Philippine Commission enacted Act No. 1654 which regulated the
lease of reclaimed and foreshore lands. The salient provisions of this law were as
follows:
"Section 1. The control and disposition of the foreshore as defined in existing
law, and the title to all Government or public lands made or reclaimed by the
Government by dredging or filling or otherwise throughout the Philippine
Islands, shall be retained by the Government without prejudice to vested rights
and without prejudice to rights conceded to the City of Manila in the Luneta
Extension.
Section 2. (a) The Secretary of the Interior shall cause all Government or public
lands made or reclaimed by the Government by dredging or filling or otherwise to
be divided into lots or blocks, with the necessary streets and alleyways located
thereon, and shall cause plats and plans of such surveys to be prepared and filed
with the Bureau of Lands.
(b) Upon completion of such plats and plans the Governor-General shall give
notice to the public that such parts of the lands so made or reclaimed as
are not needed for public purposes will be leased for commercial and
business purposes, x x x.
xxx
(e) The leases above provided for shall be disposed of to the highest and
best bidder therefore, subject to such regulations and safeguards as the
Governor-General may by executive order prescribe." (Emphasis supplied)
Act No. 1654 mandated that the government should retain title to all lands reclaimed
by the government. The Act also vested in the government control and disposition of
foreshore lands. Private parties could lease lands reclaimed by the government only if
these lands were no longer needed for public purpose. Act No. 1654 mandated public
bidding in the lease of government reclaimed lands. Act No. 1654 made government
reclaimed lands sui generis in that unlike other public lands which the government could
sell to private parties, these reclaimed lands were available only for lease to private
parties.
Act No. 1654, however, did not repeal Section 5 of the Spanish Law of Waters of 1866.
Act No. 1654 did not prohibit private parties from reclaiming parts of the sea under
Section 5 of the Spanish Law of Waters. Lands reclaimed from the sea by private parties
with government permission remained private lands.
Act No. 2874 of the Philippine Legislature
On November 29, 1919, the Philippine Legislature enacted Act No. 2874, the Public
Land Act.46 The salient provisions of Act No. 2874, on reclaimed lands, were as follows:
80
"Sec. 6. The Governor-General, upon the recommendation of the Secretary
of Agriculture and Natural Resources, shall from time to time classify the
lands of the public domain into –
(a) Alienable or disposable,
(b) Timber, and
(c) Mineral lands, x x x.
Sec. 7. For the purposes of the government and disposition of alienable or
disposable public lands, the Governor-General, upon recommendation by the
Secretary of Agriculture and Natural Resources, shall from time to time
declare what lands are open to disposition or concession under this Act."
Sec. 8. Only those lands shall be declared open to disposition or
concession which have been officially delimited or classified x x x.
xxx
Sec. 55. Any tract of land of the public domain which, being neither timber nor
mineral land, shall be classified as suitable for residential purposes or for
commercial, industrial, or other productive purposes other than
agricultural purposes, and shall be open to disposition or concession, shall be
disposed of under the provisions of this chapter, and not otherwise.
Sec. 56. The lands disposable under this title shall be classified as follows:
(a) Lands reclaimed by the Government by dredging, filling, or other
means;
(b) Foreshore;
(c) Marshy lands or lands covered with water bordering upon the shores
or banks of navigable lakes or rivers;
(d) Lands not included in any of the foregoing classes.
x x x.
Sec. 58. The lands comprised in classes (a), (b), and (c) of section fifty-six
shall be disposed of to private parties by lease only and not otherwise, as
soon as the Governor-General, upon recommendation by the Secretary of
Agriculture and Natural Resources, shall declare that the same are not
necessary for the public service and are open to disposition under this
chapter. The lands included in class (d) may be disposed of by sale or lease
under the provisions of this Act." (Emphasis supplied)
Section 6 of Act No. 2874 authorized the Governor-General to "classify lands of the
public domain into x x x alienable or disposable"47 lands. Section 7 of the Act empowered
the Governor-General to "declare what lands are open to disposition or concession."
Section 8 of the Act limited alienable or disposable lands only to those lands which have
been "officially delimited and classified."
Section 56 of Act No. 2874 stated that lands "disposable under this title48 shall be
classified" as government reclaimed, foreshore and marshy lands, as well as other lands.
All these lands, however, must be suitable for residential, commercial, industrial or other
productive non-agricultural purposes. These provisions vested upon the Governor-
General the power to classify inalienable lands of the public domain into disposable
lands of the public domain. These provisions also empowered the Governor-General to
classify further such disposable lands of the public domain into government reclaimed,
foreshore or marshy lands of the public domain, as well as other non-agricultural lands.
Section 58 of Act No. 2874 categorically mandated that disposable lands of the public
domain classified as government reclaimed, foreshore and marshy lands "shall be
disposed of to private parties by lease only and not otherwise." The Governor-
General, before allowing the lease of these lands to private parties, must formally declare
that the lands were "not necessary for the public service." Act No. 2874 reiterated the
State policy to lease and not to sell government reclaimed, foreshore and marshy lands
of the public domain, a policy first enunciated in 1907 in Act No. 1654. Government
reclaimed, foreshore and marshy lands remained sui generis, as the only alienable or
disposable lands of the public domain that the government could not sell to private
parties.
The rationale behind this State policy is obvious. Government reclaimed, foreshore and
marshy public lands for non-agricultural purposes retain their inherent potential as areas
for public service. This is the reason the government prohibited the sale, and only
allowed the lease, of these lands to private parties. The State always reserved these
lands for some future public service.
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Act No. 2874 did not authorize the reclassification of government reclaimed, foreshore
and marshy lands into other non-agricultural lands under Section 56 (d). Lands falling
under Section 56 (d) were the only lands for non-agricultural purposes the government
could sell to private parties. Thus, under Act No. 2874, the government could not sell
government reclaimed, foreshore and marshy lands to private parties, unless the
legislature passed a law allowing their sale.49
Act No. 2874 did not prohibit private parties from reclaiming parts of the sea pursuant to
Section 5 of the Spanish Law of Waters of 1866. Lands reclaimed from the sea by
private parties with government permission remained private lands.
Dispositions under the 1935 Constitution
On May 14, 1935, the 1935 Constitution took effect upon its ratification by the Filipino
people. The 1935 Constitution, in adopting the Regalian doctrine, declared in Section 1,
Article XIII, that –
"Section 1. All agricultural, timber, and mineral lands of the public domain,
waters, minerals, coal, petroleum, and other mineral oils, all forces of potential
energy and other natural resources of the Philippines belong to the State, and
their disposition, exploitation, development, or utilization shall be limited to
citizens of the Philippines or to corporations or associations at least sixty per
centum of the capital of which is owned by such citizens, subject to any existing
right, grant, lease, or concession at the time of the inauguration of the
Government established under this Constitution. Natural resources, with the
exception of public agricultural land, shall not be alienated, and no license,
concession, or lease for the exploitation, development, or utilization of any of the
natural resources shall be granted for a period exceeding twenty-five years,
renewable for another twenty-five years, except as to water rights for irrigation,
water supply, fisheries, or industrial uses other than the development of water
power, in which cases beneficial use may be the measure and limit of the grant."
(Emphasis supplied)
The 1935 Constitution barred the alienation of all natural resources except public
agricultural lands, which were the only natural resources the State could alienate. Thus,
foreshore lands, considered part of the State's natural resources, became inalienable by
constitutional fiat, available only for lease for 25 years, renewable for another 25 years.
The government could alienate foreshore lands only after these lands were reclaimed
and classified as alienable agricultural lands of the public domain. Government reclaimed
and marshy lands of the public domain, being neither timber nor mineral lands, fell under
the classification of public agricultural lands.50 However, government reclaimed and
marshy lands, although subject to classification as disposable public agricultural lands,
could only be leased and not sold to private parties because of Act No. 2874.
The prohibition on private parties from acquiring ownership of government reclaimed and
marshy lands of the public domain was only a statutory prohibition and the legislature
could therefore remove such prohibition. The 1935 Constitution did not prohibit
individuals and corporations from acquiring government reclaimed and marshy lands of
the public domain that were classified as agricultural lands under existing public land
laws. Section 2, Article XIII of the 1935 Constitution provided as follows:
"Section 2. No private corporation or association may acquire, lease, or hold
public agricultural lands in excess of one thousand and twenty four
hectares, nor may any individual acquire such lands by purchase in excess
of one hundred and forty hectares, or by lease in excess of one thousand
and twenty-four hectares, or by homestead in excess of twenty-four hectares.
Lands adapted to grazing, not exceeding two thousand hectares, may be leased
to an individual, private corporation, or association." (Emphasis supplied)
Still, after the effectivity of the 1935 Constitution, the legislature did not repeal Section 58
of Act No. 2874 to open for sale to private parties government reclaimed and marshy
lands of the public domain. On the contrary, the legislature continued the long
established State policy of retaining for the government title and ownership of
government reclaimed and marshy lands of the public domain.
Commonwealth Act No. 141 of the Philippine National Assembly
On November 7, 1936, the National Assembly approved Commonwealth Act No. 141,
also known as the Public Land Act, which compiled the then existing laws on lands of the
public domain. CA No. 141, as amended, remains to this day the existing general
law governing the classification and disposition of lands of the public domain other than
timber and mineral lands.51
Section 6 of CA No. 141 empowers the President to classify lands of the public domain
into "alienable or disposable"52 lands of the public domain, which prior to such
classification are inalienable and outside the commerce of man. Section 7 of CA No. 141
authorizes the President to "declare what lands are open to disposition or concession."
Section 8 of CA No. 141 states that the government can declare open for disposition or
concession only lands that are "officially delimited and classified." Sections 6, 7 and 8 of
CA No. 141 read as follows:
82
 "Sec. 6. The President, upon the recommendation of the Secretary of
Agriculture and Commerce, shall from time to time classify the lands of the
public domain into –
(a) Alienable or disposable,
(b) Timber, and
(c) Mineral lands,
and may at any time and in like manner transfer such lands from one class to
another,53 for the purpose of their administration and disposition.
Sec. 7. For the purposes of the administration and disposition of alienable or
disposable public lands, the President, upon recommendation by the
Secretary of Agriculture and Commerce, shall from time to time declare
what lands are open to disposition or concession under this Act.
Sec. 8. Only those lands shall be declared open to disposition or
concession which have been officially delimited and classified and, when
practicable, surveyed, and which have not been reserved for public or quasi-
public uses, nor appropriated by the Government, nor in any manner become
private property, nor those on which a private right authorized and recognized by
this Act or any other valid law may be claimed, or which, having been reserved or
appropriated, have ceased to be so. x x x."
Thus, before the government could alienate or dispose of lands of the public domain, the
President must first officially classify these lands as alienable or disposable, and then
declare them open to disposition or concession. There must be no law reserving these
lands for public or quasi-public uses.
The salient provisions of CA No. 141, on government reclaimed, foreshore and marshy
lands of the public domain, are as follows:
"Sec. 58. Any tract of land of the public domain which, being neither timber
nor mineral land, is intended to be used for residential purposes or for
commercial, industrial, or other productive purposes other than
agricultural, and is open to disposition or concession, shall be disposed of
under the provisions of this chapter and not otherwise.
Sec. 59. The lands disposable under this title shall be classified as follows:
(a) Lands reclaimed by the Government by dredging, filling, or other
means;
(b) Foreshore;
(c) Marshy lands or lands covered with water bordering upon the shores
or banks of navigable lakes or rivers;
(d) Lands not included in any of the foregoing classes.
Sec. 60. Any tract of land comprised under this title may be leased or sold, as the
case may be, to any person, corporation, or association authorized to purchase
or lease public lands for agricultural purposes. x x x.
Sec. 61. The lands comprised in classes (a), (b), and (c) of section fifty-nine
shall be disposed of to private parties by lease only and not otherwise, as
soon as the President, upon recommendation by the Secretary of
Agriculture, shall declare that the same are not necessary for the public
service and are open to disposition under this chapter. The lands included in
class (d) may be disposed of by sale or lease under the provisions of this
Act." (Emphasis supplied)
Section 61 of CA No. 141 readopted, after the effectivity of the 1935 Constitution,
Section 58 of Act No. 2874 prohibiting the sale of government reclaimed, foreshore and
marshy disposable lands of the public domain. All these lands are intended for
residential, commercial, industrial or other non-agricultural purposes. As before, Section
61 allowed only the lease of such lands to private parties. The government could sell to
private parties only lands falling under Section 59 (d) of CA No. 141, or those lands for
non-agricultural purposes not classified as government reclaimed, foreshore and marshy
disposable lands of the public domain. Foreshore lands, however, became inalienable
under the 1935 Constitution which only allowed the lease of these lands to qualified
private parties.
Section 58 of CA No. 141 expressly states that disposable lands of the public domain
intended for residential, commercial, industrial or other productive purposes other than
agricultural "shall be disposed of under the provisions of this chapter and not
otherwise." Under Section 10 of CA No. 141, the term "disposition" includes lease of the
land. Any disposition of government reclaimed, foreshore and marshy disposable lands
83
for non-agricultural purposes must comply with Chapter IX, Title III of CA No.
141,54 unless a subsequent law amended or repealed these provisions.
In his concurring opinion in the landmark case of Republic Real Estate Corporation v.
Court of Appeals,55Justice Reynato S. Puno summarized succinctly the law on this
matter, as follows:
"Foreshore lands are lands of public dominion intended for public use. So too are
lands reclaimed by the government by dredging, filling, or other means. Act 1654
mandated that the control and disposition of the foreshore and lands under water
remained in the national government. Said law allowed only the 'leasing' of
reclaimed land. The Public Land Acts of 1919 and 1936 also declared that the
foreshore and lands reclaimed by the government were to be "disposed of to
private parties by lease only and not otherwise." Before leasing, however, the
Governor-General, upon recommendation of the Secretary of Agriculture and
Natural Resources, had first to determine that the land reclaimed was not
necessary for the public service. This requisite must have been met before the
land could be disposed of. But even then, the foreshore and lands under
water were not to be alienated and sold to private parties. The disposition
of the reclaimed land was only by lease. The land remained property of the
State." (Emphasis supplied)
As observed by Justice Puno in his concurring opinion, "Commonwealth Act No. 141 has
remained in effect at present."
The State policy prohibiting the sale to private parties of government reclaimed,
foreshore and marshy alienable lands of the public domain, first implemented in 1907
was thus reaffirmed in CA No. 141 after the 1935 Constitution took effect. The prohibition
on the sale of foreshore lands, however, became a constitutional edict under the 1935
Constitution. Foreshore lands became inalienable as natural resources of the State,
unless reclaimed by the government and classified as agricultural lands of the public
domain, in which case they would fall under the classification of government reclaimed
lands.
After the effectivity of the 1935 Constitution, government reclaimed and marshy
disposable lands of the public domain continued to be only leased and not sold to private
parties.56 These lands remained sui generis, as the only alienable or disposable lands of
the public domain the government could not sell to private parties.
Since then and until now, the only way the government can sell to private parties
government reclaimed and marshy disposable lands of the public domain is for the
legislature to pass a law authorizing such sale. CA No. 141 does not authorize the
President to reclassify government reclaimed and marshy lands into other non-
agricultural lands under Section 59 (d). Lands classified under Section 59 (d) are the only
alienable or disposable lands for non-agricultural purposes that the government could
sell to private parties.
Moreover, Section 60 of CA No. 141 expressly requires congressional authority before
lands under Section 59 that the government previously transferred to government units
or entities could be sold to private parties. Section 60 of CA No. 141 declares that –
"Sec. 60. x x x The area so leased or sold shall be such as shall, in the judgment
of the Secretary of Agriculture and Natural Resources, be reasonably necessary
for the purposes for which such sale or lease is requested, and shall not exceed
one hundred and forty-four hectares: Provided, however, That this limitation shall
not apply to grants, donations, or transfers made to a province, municipality or
branch or subdivision of the Government for the purposes deemed by said
entities conducive to the public interest;but the land so granted, donated, or
transferred to a province, municipality or branch or subdivision of the
Government shall not be alienated, encumbered, or otherwise disposed of
in a manner affecting its title, except when authorized by Congress: x x x."
(Emphasis supplied)
The congressional authority required in Section 60 of CA No. 141 mirrors the legislative
authority required in Section 56 of Act No. 2874.
One reason for the congressional authority is that Section 60 of CA No. 141 exempted
government units and entities from the maximum area of public lands that could be
acquired from the State. These government units and entities should not just turn around
and sell these lands to private parties in violation of constitutional or statutory limitations.
Otherwise, the transfer of lands for non-agricultural purposes to government units and
entities could be used to circumvent constitutional limitations on ownership of alienable
or disposable lands of the public domain. In the same manner, such transfers could also
be used to evade the statutory prohibition in CA No. 141 on the sale of government
reclaimed and marshy lands of the public domain to private parties. Section 60 of CA No.
141 constitutes by operation of law a lien on these lands.57
In case of sale or lease of disposable lands of the public domain falling under Section 59
of CA No. 141, Sections 63 and 67 require a public bidding. Sections 63 and 67 of CA
No. 141 provide as follows:
84
 "Sec. 63. Whenever it is decided that lands covered by this chapter are not
needed for public purposes, the Director of Lands shall ask the Secretary of
Agriculture and Commerce (now the Secretary of Natural Resources) for
authority to dispose of the same. Upon receipt of such authority, the Director of
Lands shall give notice by public advertisement in the same manner as in the
case of leases or sales of agricultural public land, x x x.
Sec. 67. The lease or sale shall be made by oral bidding; and adjudication
shall be made to the highest bidder. x x x." (Emphasis supplied)
Thus, CA No. 141 mandates the Government to put to public auction all leases or sales
of alienable or disposable lands of the public domain.58
Like Act No. 1654 and Act No. 2874 before it, CA No. 141 did not repeal Section 5 of the
Spanish Law of Waters of 1866. Private parties could still reclaim portions of the sea with
government permission. However, thereclaimed land could become private land only
if classified as alienable agricultural land of the public domain open to disposition
under CA No. 141. The 1935 Constitution prohibited the alienation of all natural
resources except public agricultural lands.
The Civil Code of 1950
The Civil Code of 1950 readopted substantially the definition of property of public
dominion found in the Civil Code of 1889. Articles 420 and 422 of the Civil Code of 1950
state that –
"Art. 420. The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports
and bridges constructed by the State, banks, shores, roadsteads, and others of
similar character;
(2) Those which belong to the State, without being for public use, and are
intended for some public service or for the development of the national wealth.
x x x.
Art. 422. Property of public dominion, when no longer intended for public use or
for public service, shall form part of the patrimonial property of the State."
Again, the government must formally declare that the property of public dominion is no
longer needed for public use or public service, before the same could be classified as
patrimonial property of the State.59 In the case of government reclaimed and marshy
lands of the public domain, the declaration of their being disposable, as well as the
manner of their disposition, is governed by the applicable provisions of CA No. 141.
Like the Civil Code of 1889, the Civil Code of 1950 included as property of public
dominion those properties of the State which, without being for public use, are intended
for public service or the "development of the national wealth." Thus, government
reclaimed and marshy lands of the State, even if not employed for public use or public
service, if developed to enhance the national wealth, are classified as property of public
dominion.
Dispositions under the 1973 Constitution
The 1973 Constitution, which took effect on January 17, 1973, likewise adopted the
Regalian doctrine. Section 8, Article XIV of the 1973 Constitution stated that –
"Sec. 8. All lands of the public domain, waters, minerals, coal, petroleum and
other mineral oils, all forces of potential energy, fisheries, wildlife, and other
natural resources of the Philippines belong to the State. With the exception of
agricultural, industrial or commercial, residential, and resettlement lands of
the public domain, natural resources shall not be alienated, and no license,
concession, or lease for the exploration, development, exploitation, or utilization
of any of the natural resources shall be granted for a period exceeding twenty-
five years, renewable for not more than twenty-five years, except as to water
rights for irrigation, water supply, fisheries, or industrial uses other than the
development of water power, in which cases, beneficial use may be the measure
and the limit of the grant." (Emphasis supplied)
The 1973 Constitution prohibited the alienation of all natural resources with the exception
of "agricultural, industrial or commercial, residential, and resettlement lands of the public
domain." In contrast, the 1935 Constitution barred the alienation of all natural resources
except "public agricultural lands." However, the term "public agricultural lands" in the
1935 Constitution encompassed industrial, commercial, residential and resettlement
lands of the public domain.60 If the land of public domain were neither timber nor mineral
land, it would fall under the classification of agricultural land of the public domain. Both
the 1935 and 1973 Constitutions, therefore, prohibited the alienation of all natural
resources except agricultural lands of the public domain.
85
The 1973 Constitution, however, limited the alienation of lands of the public domain to
individuals who were citizens of the Philippines. Private corporations, even if wholly
owned by Philippine citizens, were no longer allowed to acquire alienable lands of the
public domain unlike in the 1935 Constitution. Section 11, Article XIV of the 1973
Constitution declared that –
"Sec. 11. The Batasang Pambansa, taking into account conservation, ecological,
and development requirements of the natural resources, shall determine by law
the size of land of the public domain which may be developed, held or acquired
by, or leased to, any qualified individual, corporation, or association, and the
conditions therefor. No private corporation or association may hold alienable
lands of the public domain except by lease not to exceed one thousand
hectares in area nor may any citizen hold such lands by lease in excess of five
hundred hectares or acquire by purchase, homestead or grant, in excess of
twenty-four hectares. No private corporation or association may hold by lease,
concession, license or permit, timber or forest lands and other timber or forest
resources in excess of one hundred thousand hectares. However, such area may
be increased by the Batasang Pambansa upon recommendation of the National
Economic and Development Authority." (Emphasis supplied)
Thus, under the 1973 Constitution, private corporations could hold alienable lands of the
public domain only through lease. Only individuals could now acquire alienable lands of
the public domain, and private corporations became absolutely barred from
acquiring any kind of alienable land of the public domain. The constitutional ban
extended to all kinds of alienable lands of the public domain, while the statutory ban
under CA No. 141 applied only to government reclaimed, foreshore and marshy
alienable lands of the public domain.
PD No. 1084 Creating the Public Estates Authority
On February 4, 1977, then President Ferdinand Marcos issued Presidential Decree No.
1084 creating PEA, a wholly government owned and controlled corporation with a special
charter. Sections 4 and 8 of PD No. 1084, vests PEA with the following purposes and
powers:
"Sec. 4. Purpose. The Authority is hereby created for the following purposes:
(a) To reclaim land, including foreshore and submerged areas, by dredging,
filling or other means, or to acquire reclaimed land;
(b) To develop, improve, acquire, administer, deal in, subdivide, dispose, lease
and sell any and all kinds of lands, buildings, estates and other forms of real
property, owned, managed, controlled and/or operated by the government;
(c) To provide for, operate or administer such service as may be necessary for
the efficient, economical and beneficial utilization of the above properties.
Sec. 5. Powers and functions of the Authority. The Authority shall, in carrying out
the purposes for which it is created, have the following powers and functions:
(a)To prescribe its by-laws.
xxx
(i) To hold lands of the public domain in excess of the area permitted to
private corporations by statute.
(j) To reclaim lands and to construct work across, or otherwise, any stream,
watercourse, canal, ditch, flume x x x.
xxx
(o) To perform such acts and exercise such functions as may be necessary for
the attainment of the purposes and objectives herein specified." (Emphasis
supplied)
PD No. 1084 authorizes PEA to reclaim both foreshore and submerged areas of the
public domain. Foreshore areas are those covered and uncovered by the ebb and flow of
the tide.61 Submerged areas are those permanently under water regardless of the ebb
and flow of the tide.62 Foreshore and submerged areas indisputably belong to the public
domain63 and are inalienable unless reclaimed, classified as alienable lands open to
disposition, and further declared no longer needed for public service.
The ban in the 1973 Constitution on private corporations from acquiring alienable lands
of the public domain did not apply to PEA since it was then, and until today, a fully owned
government corporation. The constitutional ban applied then, as it still applies now, only
to "private corporations and associations." PD No. 1084 expressly empowers PEA "to
hold lands of the public domain" even "in excess of the area permitted to private
corporations by statute." Thus, PEA can hold title to private lands, as well as title to
lands of the public domain.
86
In order for PEA to sell its reclaimed foreshore and submerged alienable lands of the
public domain, there must be legislative authority empowering PEA to sell these lands.
This legislative authority is necessary in view of Section 60 of CA No.141, which states –
"Sec. 60. x x x; but the land so granted, donated or transferred to a province,
municipality, or branch or subdivision of the Government shall not be alienated,
encumbered or otherwise disposed of in a manner affecting its title, except when
authorized by Congress; x x x." (Emphasis supplied)
Without such legislative authority, PEA could not sell but only lease its reclaimed
foreshore and submerged alienable lands of the public domain. Nevertheless, any
legislative authority granted to PEA to sell its reclaimed alienable lands of the public
domain would be subject to the constitutional ban on private corporations from acquiring
alienable lands of the public domain. Hence, such legislative authority could only benefit
private individuals.
Dispositions under the 1987 Constitution
The 1987 Constitution, like the 1935 and 1973 Constitutions before it, has adopted the
Regalian doctrine. The 1987 Constitution declares that all natural resources are "owned
by the State," and except for alienable agricultural lands of the public domain, natural
resources cannot be alienated. Sections 2 and 3, Article XII of the 1987 Constitution
state that –
"Section 2. All lands of the public domain, waters, minerals, coal, petroleum and
other mineral oils, all forces of potential energy, fisheries, forests or timber,
wildlife, flora and fauna, and other natural resources are owned by the State.
With the exception of agricultural lands, all other natural resources shall
not be alienated. The exploration, development, and utilization of natural
resources shall be under the full control and supervision of the State. x x x.
Section 3. Lands of the public domain are classified into agricultural, forest or
timber, mineral lands, and national parks. Agricultural lands of the public domain
may be further classified by law according to the uses which they may be
devoted. Alienable lands of the public domain shall be limited to agricultural
lands. Private corporations or associations may not hold such alienable
lands of the public domain except by lease, for a period not exceeding
twenty-five years, renewable for not more than twenty-five years, and not to
exceed one thousand hectares in area. Citizens of the Philippines may lease
not more than five hundred hectares, or acquire not more than twelve hectares
thereof by purchase, homestead, or grant.
Taking into account the requirements of conservation, ecology, and
development, and subject to the requirements of agrarian reform, the Congress
shall determine, by law, the size of lands of the public domain which may be
acquired, developed, held, or leased and the conditions therefor." (Emphasis
supplied)
The 1987 Constitution continues the State policy in the 1973 Constitution banning private
corporations fromacquiring any kind of alienable land of the public domain. Like the
1973 Constitution, the 1987 Constitution allows private corporations to hold alienable
lands of the public domain only through lease. As in the 1935 and 1973 Constitutions,
the general law governing the lease to private corporations of reclaimed, foreshore and
marshy alienable lands of the public domain is still CA No. 141.
The Rationale behind the Constitutional Ban
The rationale behind the constitutional ban on corporations from acquiring, except
through lease, alienable lands of the public domain is not well understood. During the
deliberations of the 1986 Constitutional Commission, the commissioners probed the
rationale behind this ban, thus:
"FR. BERNAS: Mr. Vice-President, my questions have reference to page 3, line 5
which says:
`No private corporation or association may hold alienable lands of the public
domain except by lease, not to exceed one thousand hectares in area.'
If we recall, this provision did not exist under the 1935 Constitution, but this was
introduced in the 1973 Constitution. In effect, it prohibits private corporations
from acquiring alienable public lands. But it has not been very clear in
jurisprudence what the reason for this is. In some of the cases decided in
1982 and 1983, it was indicated that the purpose of this is to prevent large
landholdings. Is that the intent of this provision?
MR. VILLEGAS: I think that is the spirit of the provision.
FR. BERNAS: In existing decisions involving the Iglesia ni Cristo, there were
instances where the Iglesia ni Cristo was not allowed to acquire a mere 313-
square meter land where a chapel stood because the Supreme Court said it
would be in violation of this." (Emphasis supplied)
87
In Ayog v. Cusi,64 the Court explained the rationale behind this constitutional ban in this
way:
"Indeed, one purpose of the constitutional prohibition against purchases of public
agricultural lands by private corporations is to equitably diffuse land ownership or
to encourage 'owner-cultivatorship and the economic family-size farm' and to
prevent a recurrence of cases like the instant case. Huge landholdings by
corporations or private persons had spawned social unrest."
However, if the constitutional intent is to prevent huge landholdings, the Constitution
could have simply limited the size of alienable lands of the public domain that
corporations could acquire. The Constitution could have followed the limitations on
individuals, who could acquire not more than 24 hectares of alienable lands of the public
domain under the 1973 Constitution, and not more than 12 hectares under the 1987
Constitution.
If the constitutional intent is to encourage economic family-size farms, placing the land in
the name of a corporation would be more effective in preventing the break-up of
farmlands. If the farmland is registered in the name of a corporation, upon the death of
the owner, his heirs would inherit shares in the corporation instead of subdivided parcels
of the farmland. This would prevent the continuing break-up of farmlands into smaller
and smaller plots from one generation to the next.
In actual practice, the constitutional ban strengthens the constitutional limitation on
individuals from acquiring more than the allowed area of alienable lands of the public
domain. Without the constitutional ban, individuals who already acquired the maximum
area of alienable lands of the public domain could easily set up corporations to acquire
more alienable public lands. An individual could own as many corporations as his means
would allow him. An individual could even hide his ownership of a corporation by putting
his nominees as stockholders of the corporation. The corporation is a convenient vehicle
to circumvent the constitutional limitation on acquisition by individuals of alienable lands
of the public domain.
The constitutional intent, under the 1973 and 1987 Constitutions, is to transfer ownership
of only a limited area of alienable land of the public domain to a qualified individual. This
constitutional intent is safeguarded by the provision prohibiting corporations from
acquiring alienable lands of the public domain, since the vehicle to circumvent the
constitutional intent is removed. The available alienable public lands are gradually
decreasing in the face of an ever-growing population. The most effective way to insure
faithful adherence to this constitutional intent is to grant or sell alienable lands of the
public domain only to individuals. This, it would seem, is the practical benefit arising from
the constitutional ban.
The Amended Joint Venture Agreement
The subject matter of the Amended JVA, as stated in its second Whereas clause,
consists of three properties, namely:
1. "[T]hree partially reclaimed and substantially eroded islands along Emilio
Aguinaldo Boulevard in Paranaque and Las Pinas, Metro Manila, with a
combined titled area of 1,578,441 square meters;"
2. "[A]nother area of 2,421,559 square meters contiguous to the three islands;"
and
3. "[A]t AMARI's option as approved by PEA, an additional 350 hectares more or
less to regularize the configuration of the reclaimed area."65
PEA confirms that the Amended JVA involves "the development of the Freedom Islands
and further reclamation of about 250 hectares x x x," plus an option "granted to AMARI to
subsequently reclaim another 350 hectares x x x."66
In short, the Amended JVA covers a reclamation area of 750 hectares. Only 157.84
hectares of the 750-hectare reclamation project have been reclaimed, and the rest
of the 592.15 hectares are still submerged areas forming part of Manila Bay.
Under the Amended JVA, AMARI will reimburse PEA the sum of P1,894,129,200.00 for
PEA's "actual cost" in partially reclaiming the Freedom Islands. AMARI will also
complete, at its own expense, the reclamation of the Freedom Islands. AMARI will further
shoulder all the reclamation costs of all the other areas, totaling 592.15 hectares, still to
be reclaimed. AMARI and PEA will share, in the proportion of 70 percent and 30 percent,
respectively, the total net usable area which is defined in the Amended JVA as the total
reclaimed area less 30 percent earmarked for common areas. Title to AMARI's share in
the net usable area, totaling 367.5 hectares, will be issued in the name of AMARI.
Section 5.2 (c) of the Amended JVA provides that –
"x x x, PEA shall have the duty to execute without delay the necessary deed of
transfer or conveyance of the title pertaining to AMARI's Land share based on
the Land Allocation Plan. PEA, when requested in writing by AMARI, shall
then cause the issuance and delivery of the proper certificates of title
covering AMARI's Land Share in the name of AMARI, x x x; provided, that if
88
 more than seventy percent (70%) of the titled area at any given time pertains to
AMARI, PEA shall deliver to AMARI only seventy percent (70%) of the titles
pertaining to AMARI, until such time when a corresponding proportionate area of
additional land pertaining to PEA has been titled." (Emphasis supplied)
Indisputably, under the Amended JVA AMARI will acquire and own a maximum of
367.5 hectares of reclaimed land which will be titled in its name.
To implement the Amended JVA, PEA delegated to the unincorporated PEA-AMARI joint
venture PEA's statutory authority, rights and privileges to reclaim foreshore and
submerged areas in Manila Bay. Section 3.2.a of the Amended JVA states that –
"PEA hereby contributes to the joint venture its rights and privileges to perform
Rawland Reclamation and Horizontal Development as well as own the
Reclamation Area, thereby granting the Joint Venture the full and exclusive right,
authority and privilege to undertake the Project in accordance with the Master
Development Plan."
The Amended JVA is the product of a renegotiation of the original JVA dated April 25,
1995 and its supplemental agreement dated August 9, 1995.
The Threshold Issue
The threshold issue is whether AMARI, a private corporation, can acquire and own under
the Amended JVA 367.5 hectares of reclaimed foreshore and submerged areas in
Manila Bay in view of Sections 2 and 3, Article XII of the 1987 Constitution which state
that:
"Section 2. All lands of the public domain, waters, minerals, coal, petroleum, and
other mineral oils, all forces of potential energy, fisheries, forests or timber,
wildlife, flora and fauna, and other natural resources are owned by the
State. With the exception of agricultural lands, all other natural resources
shall not be alienated. x x x.
xxx
Section 3. x x x Alienable lands of the public domain shall be limited to
agricultural lands. Private corporations or associations may not hold such
alienable lands of the public domain except by lease, x x x."(Emphasis
supplied)
Classification of Reclaimed Foreshore and Submerged Areas
PEA readily concedes that lands reclaimed from foreshore or submerged areas of Manila
Bay are alienable or disposable lands of the public domain. In its Memorandum,67 PEA
admits that –
"Under the Public Land Act (CA 141, as amended), reclaimed lands are
classified as alienable and disposable lands of the public domain:
'Sec. 59. The lands disposable under this title shall be classified as
follows:
(a) Lands reclaimed by the government by dredging, filling, or other
means;
x x x.'" (Emphasis supplied)
Likewise, the Legal Task Force68 constituted under Presidential Administrative Order No.
365 admitted in its Report and Recommendation to then President Fidel V.
Ramos, "[R]eclaimed lands are classified as alienable and disposable lands of the
public domain."69 The Legal Task Force concluded that –
"D. Conclusion
Reclaimed lands are lands of the public domain. However, by statutory authority,
the rights of ownership and disposition over reclaimed lands have been
transferred to PEA, by virtue of which PEA, as owner, may validly convey the
same to any qualified person without violating the Constitution or any statute.
The constitutional provision prohibiting private corporations from holding public
land, except by lease (Sec. 3, Art. XVII,70 1987 Constitution), does not apply to
reclaimed lands whose ownership has passed on to PEA by statutory grant."
Under Section 2, Article XII of the 1987 Constitution, the foreshore and submerged areas
of Manila Bay are part of the "lands of the public domain, waters x x x and other natural
resources" and consequently "owned by the State." As such, foreshore and submerged
areas "shall not be alienated," unless they are classified as "agricultural lands" of the
public domain. The mere reclamation of these areas by PEA does not convert these
inalienable natural resources of the State into alienable or disposable lands of the public
domain. There must be a law or presidential proclamation officially classifying these
89
reclaimed lands as alienable or disposable and open to disposition or concession.
Moreover, these reclaimed lands cannot be classified as alienable or disposable if the
law has reserved them for some public or quasi-public use.71
Section 8 of CA No. 141 provides that "only those lands shall be declared open to
disposition or concession which have been officially delimited and classified."72 The
President has the authority to classify inalienable lands of the public domain into
alienable or disposable lands of the public domain, pursuant to Section 6 of CA No. 141.
In Laurel vs. Garcia,73 the Executive Department attempted to sell the Roppongi property
in Tokyo, Japan, which was acquired by the Philippine Government for use as the
Chancery of the Philippine Embassy. Although the Chancery had transferred to another
location thirteen years earlier, the Court still ruled that, under Article 42274of the Civil
Code, a property of public dominion retains such character until formally declared
otherwise. The Court ruled that –
"The fact that the Roppongi site has not been used for a long time for actual
Embassy service does not automatically convert it to patrimonial property. Any
such conversion happens only if the property is withdrawn from public use (Cebu
Oxygen and Acetylene Co. v. Bercilles, 66 SCRA 481 [1975]. A property
continues to be part of the public domain, not available for private
appropriation or ownership 'until there is a formal declaration on the part of
the government to withdraw it from being such'(Ignacio v. Director of Lands,
108 Phil. 335 [1960]." (Emphasis supplied)
PD No. 1085, issued on February 4, 1977, authorized the issuance of special land
patents for lands reclaimed by PEA from the foreshore or submerged areas of Manila
Bay. On January 19, 1988 then President Corazon C. Aquino issued Special Patent No.
3517 in the name of PEA for the 157.84 hectares comprising the partially reclaimed
Freedom Islands. Subsequently, on April 9, 1999 the Register of Deeds of the
Municipality of Paranaque issued TCT Nos. 7309, 7311 and 7312 in the name of PEA
pursuant to Section 103 of PD No. 1529 authorizing the issuance of certificates of title
corresponding to land patents. To this day, these certificates of title are still in the name
of PEA.
PD No. 1085, coupled with President Aquino's actual issuance of a special patent
covering the Freedom Islands, is equivalent to an official proclamation classifying the
Freedom Islands as alienable or disposable lands of the public domain. PD No. 1085 and
President Aquino's issuance of a land patent also constitute a declaration that the
Freedom Islands are no longer needed for public service. The Freedom Islands are
thus alienable or disposable lands of the public domain, open to disposition or
concession to qualified parties.
At the time then President Aquino issued Special Patent No. 3517, PEA had already
reclaimed the Freedom Islands although subsequently there were partial erosions on
some areas. The government had also completed the necessary surveys on these
islands. Thus, the Freedom Islands were no longer part of Manila Bay but part of the land
mass. Section 3, Article XII of the 1987 Constitution classifies lands of the public domain
into "agricultural, forest or timber, mineral lands, and national parks." Being neither
timber, mineral, nor national park lands, the reclaimed Freedom Islands necessarily fall
under the classification of agricultural lands of the public domain. Under the 1987
Constitution, agricultural lands of the public domain are the only natural resources that
the State may alienate to qualified private parties. All other natural resources, such as
the seas or bays, are "waters x x x owned by the State" forming part of the public
domain, and are inalienable pursuant to Section 2, Article XII of the 1987 Constitution.
AMARI claims that the Freedom Islands are private lands because CDCP, then a private
corporation, reclaimed the islands under a contract dated November 20, 1973 with the
Commissioner of Public Highways. AMARI, citing Article 5 of the Spanish Law of Waters
of 1866, argues that "if the ownership of reclaimed lands may be given to the party
constructing the works, then it cannot be said that reclaimed lands are lands of the public
domain which the State may not alienate."75 Article 5 of the Spanish Law of Waters reads
as follows:
"Article 5. Lands reclaimed from the sea in consequence of works constructed by
the State, or by the provinces, pueblos or private persons, with proper
permission, shall become the property of the party constructing such
works, unless otherwise provided by the terms of the grant of authority."
(Emphasis supplied)
Under Article 5 of the Spanish Law of Waters of 1866, private parties could reclaim from
the sea only with "proper permission" from the State. Private parties could own the
reclaimed land only if not "otherwise provided by the terms of the grant of authority." This
clearly meant that no one could reclaim from the sea without permission from the State
because the sea is property of public dominion. It also meant that the State could grant
or withhold ownership of the reclaimed land because any reclaimed land, like the sea
from which it emerged, belonged to the State. Thus, a private person reclaiming from the
sea without permission from the State could not acquire ownership of the reclaimed land
which would remain property of public dominion like the sea it replaced.76 Article 5 of the
Spanish Law of Waters of 1866 adopted the time-honored principle of land ownership
that "all lands that were not acquired from the government, either by purchase or by
grant, belong to the public domain."77
90
Article 5 of the Spanish Law of Waters must be read together with laws subsequently
enacted on the disposition of public lands. In particular, CA No. 141 requires that lands of
the public domain must first be classified as alienable or disposable before the
government can alienate them. These lands must not be reserved for public or quasi-
public purposes.78 Moreover, the contract between CDCP and the government was
executed after the effectivity of the 1973 Constitution which barred private corporations
from acquiring any kind of alienable land of the public domain. This contract could not
have converted the Freedom Islands into private lands of a private corporation.
Presidential Decree No. 3-A, issued on January 11, 1973, revoked all laws authorizing
the reclamation of areas under water and revested solely in the National Government the
power to reclaim lands. Section 1 of PD No. 3-A declared that –
"The provisions of any law to the contrary notwithstanding, the reclamation
of areas under water, whether foreshore or inland, shall be limited to the
National Government or any person authorized by it under a proper
contract. (Emphasis supplied)
x x x."
PD No. 3-A repealed Section 5 of the Spanish Law of Waters of 1866 because
reclamation of areas under water could now be undertaken only by the National
Government or by a person contracted by the National Government. Private parties may
reclaim from the sea only under a contract with the National Government, and no longer
by grant or permission as provided in Section 5 of the Spanish Law of Waters of 1866.
Executive Order No. 525, issued on February 14, 1979, designated PEA as the National
Government's implementing arm to undertake "all reclamation projects of the
government," which "shall be undertaken by the PEA or through a proper contract
executed by it with any person or entity." Under such contract, a private party
receives compensation for reclamation services rendered to PEA. Payment to the
contractor may be in cash, or in kind consisting of portions of the reclaimed land, subject
to the constitutional ban on private corporations from acquiring alienable lands of the
public domain. The reclaimed land can be used as payment in kind only if the reclaimed
land is first classified as alienable or disposable land open to disposition, and then
declared no longer needed for public service.
The Amended JVA covers not only the Freedom Islands, but also an additional 592.15
hectares which are still submerged and forming part of Manila Bay. There is no
legislative or Presidential act classifying these submerged areas as alienable or
disposable lands of the public domain open to disposition. These submerged areas
are not covered by any patent or certificate of title. There can be no dispute that these
submerged areas form part of the public domain, and in their present state
are inalienable and outside the commerce of man. Until reclaimed from the sea, these
submerged areas are, under the Constitution, "waters x x x owned by the State," forming
part of the public domain and consequently inalienable. Only when actually reclaimed
from the sea can these submerged areas be classified as public agricultural lands, which
under the Constitution are the only natural resources that the State may alienate. Once
reclaimed and transformed into public agricultural lands, the government may then
officially classify these lands as alienable or disposable lands open to disposition.
Thereafter, the government may declare these lands no longer needed for public service.
Only then can these reclaimed lands be considered alienable or disposable lands of the
public domain and within the commerce of man.
The classification of PEA's reclaimed foreshore and submerged lands into alienable or
disposable lands open to disposition is necessary because PEA is tasked under its
charter to undertake public services that require the use of lands of the public domain.
Under Section 5 of PD No. 1084, the functions of PEA include the following: "[T]o own or
operate railroads, tramways and other kinds of land transportation, x x x; [T]o construct,
maintain and operate such systems of sanitary sewers as may be necessary; [T]o
construct, maintain and operate such storm drains as may be necessary." PEA is
empowered to issue "rules and regulations as may be necessary for the proper use by
private parties of any or all of the highways, roads, utilities, buildings and/or any of
its properties and to impose or collect fees or tolls for their use." Thus, part of the
reclaimed foreshore and submerged lands held by the PEA would actually be needed for
public use or service since many of the functions imposed on PEA by its charter
constitute essential public services.
Moreover, Section 1 of Executive Order No. 525 provides that PEA "shall be primarily
responsible for integrating, directing, and coordinating all reclamation projects for and on
behalf of the National Government." The same section also states that "[A]ll reclamation
projects shall be approved by the President upon recommendation of the PEA, and shall
be undertaken by the PEA or through a proper contract executed by it with any person or
entity; x x x." Thus, under EO No. 525, in relation to PD No. 3-A and PD No.1084, PEA
became the primary implementing agency of the National Government to reclaim
foreshore and submerged lands of the public domain. EO No. 525 recognized PEA as
the government entity "to undertake the reclamation of lands and ensure their maximum
utilization in promoting public welfare and interests."79 Since large portions of these
reclaimed lands would obviously be needed for public service, there must be a formal
declaration segregating reclaimed lands no longer needed for public service from those
still needed for public service.
1âwphi1.nêt
91
Section 3 of EO No. 525, by declaring that all lands reclaimed by PEA "shall belong to or
be owned by the PEA," could not automatically operate to classify inalienable lands into
alienable or disposable lands of the public domain. Otherwise, reclaimed foreshore and
submerged lands of the public domain would automatically become alienable once
reclaimed by PEA, whether or not classified as alienable or disposable.
The Revised Administrative Code of 1987, a later law than either PD No. 1084 or EO No.
525, vests in the Department of Environment and Natural Resources ("DENR" for
brevity) the following powers and functions:
"Sec. 4. Powers and Functions. The Department shall:
(1) x x x
xxx
(4) Exercise supervision and control over forest lands, alienable and
disposable public lands, mineral resources and, in the process of exercising
such control, impose appropriate taxes, fees, charges, rentals and any such form
of levy and collect such revenues for the exploration, development, utilization or
gathering of such resources;
xxx
(14) Promulgate rules, regulations and guidelines on the issuance of
licenses, permits, concessions, lease agreements and such other
privileges concerning the development, exploration and utilization of the
country's marine, freshwater, and brackish water and over all aquatic
resources of the country and shall continue to oversee, supervise and
police our natural resources; cancel or cause to cancel such privileges upon
failure, non-compliance or violations of any regulation, order, and for all other
causes which are in furtherance of the conservation of natural resources and
supportive of the national interest;
(15) Exercise exclusive jurisdiction on the management and disposition of
all lands of the public domain and serve as the sole agency responsible for
classification, sub-classification, surveying and titling of lands in consultation
with appropriate agencies."80 (Emphasis supplied)
As manager, conservator and overseer of the natural resources of the State, DENR
exercises "supervision and control over alienable and disposable public lands." DENR
also exercises "exclusive jurisdiction on the management and disposition of all lands of
the public domain." Thus, DENR decides whether areas under water, like foreshore or
submerged areas of Manila Bay, should be reclaimed or not. This means that PEA needs
authorization from DENR before PEA can undertake reclamation projects in Manila Bay,
or in any part of the country.
DENR also exercises exclusive jurisdiction over the disposition of all lands of the public
domain. Hence, DENR decides whether reclaimed lands of PEA should be classified as
alienable under Sections 681 and 782 of CA No. 141. Once DENR decides that the
reclaimed lands should be so classified, it then recommends to the President the
issuance of a proclamation classifying the lands as alienable or disposable lands of the
public domain open to disposition. We note that then DENR Secretary Fulgencio S.
Factoran, Jr. countersigned Special Patent No. 3517 in compliance with the Revised
Administrative Code and Sections 6 and 7 of CA No. 141.
In short, DENR is vested with the power to authorize the reclamation of areas under
water, while PEA is vested with the power to undertake the physical reclamation of areas
under water, whether directly or through private contractors. DENR is also empowered to
classify lands of the public domain into alienable or disposable lands subject to the
approval of the President. On the other hand, PEA is tasked to develop, sell or lease the
reclaimed alienable lands of the public domain.
Clearly, the mere physical act of reclamation by PEA of foreshore or submerged areas
does not make the reclaimed lands alienable or disposable lands of the public domain,
much less patrimonial lands of PEA. Likewise, the mere transfer by the National
Government of lands of the public domain to PEA does not make the lands alienable or
disposable lands of the public domain, much less patrimonial lands of PEA.
Absent two official acts – a classification that these lands are alienable or disposable and
open to disposition and a declaration that these lands are not needed for public service,
lands reclaimed by PEA remain inalienable lands of the public domain. Only such an
official classification and formal declaration can convert reclaimed lands into alienable or
disposable lands of the public domain, open to disposition under the Constitution, Title I
and Title III83of CA No. 141 and other applicable laws.84
PEA's Authority to Sell Reclaimed Lands
PEA, like the Legal Task Force, argues that as alienable or disposable lands of the
public domain, the reclaimed lands shall be disposed of in accordance with CA No. 141,
the Public Land Act. PEA, citing Section 60 of CA No. 141, admits that reclaimed lands
transferred to a branch or subdivision of the government "shall not be alienated,
92
encumbered, or otherwise disposed of in a manner affecting its title, except when
authorized by Congress: x x x."85 (Emphasis by PEA)
In Laurel vs. Garcia,86 the Court cited Section 48 of the Revised Administrative Code of
1987, which states that –
"Sec. 48. Official Authorized to Convey Real Property. Whenever real property of
the Government is authorized by law to be conveyed, the deed of conveyance
shall be executed in behalf of the government by the following: x x x."
Thus, the Court concluded that a law is needed to convey any real property belonging to
the Government. The Court declared that -
"It is not for the President to convey real property of the government on his or her
own sole will. Any such conveyance must be authorized and approved by a
law enacted by the Congress. It requires executive and legislative
concurrence." (Emphasis supplied)
PEA contends that PD No. 1085 and EO No. 525 constitute the legislative authority
allowing PEA to sell its reclaimed lands. PD No. 1085, issued on February 4, 1977,
provides that –
"The land reclaimed in the foreshore and offshore area of Manila
Bay pursuant to the contract for the reclamation and construction of the Manila-
Cavite Coastal Road Project between the Republic of the Philippines and the
Construction and Development Corporation of the Philippines dated November
20, 1973 and/or any other contract or reclamation covering the same area is
hereby transferred, conveyed and assigned to the ownership and
administration of the Public Estates Authority established pursuant to PD No.
1084; Provided, however, That the rights and interests of the Construction and
Development Corporation of the Philippines pursuant to the aforesaid contract
shall be recognized and respected.
Henceforth, the Public Estates Authority shall exercise the rights and assume the
obligations of the Republic of the Philippines (Department of Public Highways)
arising from, or incident to, the aforesaid contract between the Republic of the
Philippines and the Construction and Development Corporation of the
Philippines.
In consideration of the foregoing transfer and assignment, the Public Estates
Authority shall issue in favor of the Republic of the Philippines the corresponding
shares of stock in said entity with an issued value of said shares of stock (which)
shall be deemed fully paid and non-assessable.
The Secretary of Public Highways and the General Manager of the Public
Estates Authority shall execute such contracts or agreements, including
appropriate agreements with the Construction and Development Corporation of
the Philippines, as may be necessary to implement the above.
Special land patent/patents shall be issued by the Secretary of Natural
Resources in favor of the Public Estates Authority without prejudice to the
subsequent transfer to the contractor or his assignees of such portion or
portions of the land reclaimed or to be reclaimed as provided for in the
above-mentioned contract. On the basis of such patents, the Land
Registration Commission shall issue the corresponding certificate of title."
(Emphasis supplied)
On the other hand, Section 3 of EO No. 525, issued on February 14, 1979, provides that
-
"Sec. 3. All lands reclaimed by PEA shall belong to or be owned by the
PEA which shall be responsible for its administration, development, utilization or
disposition in accordance with the provisions of Presidential Decree No. 1084.
Any and all income that the PEA may derive from the sale, lease or use of
reclaimed lands shall be used in accordance with the provisions of Presidential
Decree No. 1084."
There is no express authority under either PD No. 1085 or EO No. 525 for PEA to sell its
reclaimed lands. PD No. 1085 merely transferred "ownership and administration" of
lands reclaimed from Manila Bay to PEA, while EO No. 525 declared that lands
reclaimed by PEA "shall belong to or be owned by PEA." EO No. 525 expressly states
that PEA should dispose of its reclaimed lands "in accordance with the provisions of
Presidential Decree No. 1084," the charter of PEA.
PEA's charter, however, expressly tasks PEA "to develop, improve, acquire, administer,
deal in, subdivide, dispose, lease and sell any and all kinds of lands x x x owned,
managed, controlled and/or operated by the government."87 (Emphasis supplied) There
is, therefore, legislative authority granted to PEA to sell its lands, whether
patrimonial or alienable lands of the public domain. PEA may sell to private parties
itspatrimonial properties in accordance with the PEA charter free from constitutional
limitations. The constitutional ban on private corporations from acquiring alienable lands
of the public domain does not apply to the sale of PEA's patrimonial lands.
93
PEA may also sell its alienable or disposable lands of the public domain to private
individuals since, with the legislative authority, there is no longer any statutory prohibition
against such sales and the constitutional ban does not apply to individuals. PEA,
however, cannot sell any of its alienable or disposable lands of the public domain to
private corporations since Section 3, Article XII of the 1987 Constitution expressly
prohibits such sales. The legislative authority benefits only individuals. Private
corporations remain barred from acquiring any kind of alienable land of the public
domain, including government reclaimed lands.
The provision in PD No. 1085 stating that portions of the reclaimed lands could be
transferred by PEA to the "contractor or his assignees" (Emphasis supplied) would not
apply to private corporations but only to individuals because of the constitutional ban.
Otherwise, the provisions of PD No. 1085 would violate both the 1973 and 1987
Constitutions.
The requirement of public auction in the sale of reclaimed lands
Assuming the reclaimed lands of PEA are classified as alienable or disposable lands
open to disposition, and further declared no longer needed for public service, PEA would
have to conduct a public bidding in selling or leasing these lands. PEA must observe the
provisions of Sections 63 and 67 of CA No. 141 requiring public auction, in the absence
of a law exempting PEA from holding a public auction.88 Special Patent No. 3517
expressly states that the patent is issued by authority of the Constitution and PD No.
1084, "supplemented by Commonwealth Act No. 141, as amended." This is an
acknowledgment that the provisions of CA No. 141 apply to the disposition of reclaimed
alienable lands of the public domain unless otherwise provided by law. Executive Order
No. 654,89 which authorizes PEA "to determine the kind and manner of payment for the
transfer" of its assets and properties, does not exempt PEA from the requirement of
public auction. EO No. 654 merely authorizes PEA to decide the mode of payment,
whether in kind and in installment, but does not authorize PEA to dispense with public
auction.
Moreover, under Section 79 of PD No. 1445, otherwise known as the Government
Auditing Code, the government is required to sell valuable government property through
public bidding. Section 79 of PD No. 1445 mandates that –
"Section 79. When government property has become unserviceable for any
cause, or is no longer needed, it shall, upon application of the officer accountable
therefor, be inspected by the head of the agency or his duly authorized
representative in the presence of the auditor concerned and, if found to be
valueless or unsaleable, it may be destroyed in their presence. If found to be
valuable, it may be sold at public auction to the highest bidder under the
supervision of the proper committee on award or similar body in the presence of
the auditor concerned or other authorized representative of the
Commission, after advertising by printed notice in the Official Gazette, or for
not less than three consecutive days in any newspaper of general
circulation, or where the value of the property does not warrant the expense of
publication, by notices posted for a like period in at least three public places in
the locality where the property is to be sold. In the event that the public
auction fails, the property may be sold at a private sale at such price as
may be fixed by the same committee or body concerned and approved by
the Commission."
It is only when the public auction fails that a negotiated sale is allowed, in which case the
Commission on Audit must approve the selling price.90 The Commission on Audit
implements Section 79 of the Government Auditing Code through Circular No. 89-
29691 dated January 27, 1989. This circular emphasizes that government assets must be
disposed of only through public auction, and a negotiated sale can be resorted to only in
case of "failure of public auction."
At the public auction sale, only Philippine citizens are qualified to bid for PEA's reclaimed
foreshore and submerged alienable lands of the public domain. Private corporations are
barred from bidding at the auction sale of any kind of alienable land of the public domain.
PEA originally scheduled a public bidding for the Freedom Islands on December 10,
1991. PEA imposed a condition that the winning bidder should reclaim another 250
hectares of submerged areas to regularize the shape of the Freedom Islands, under a
60-40 sharing of the additional reclaimed areas in favor of the winning bidder.92 No one,
however, submitted a bid. On December 23, 1994, the Government Corporate Counsel
advised PEA it could sell the Freedom Islands through negotiation, without need of
another public bidding, because of the failure of the public bidding on December 10,
1991.93
However, the original JVA dated April 25, 1995 covered not only the Freedom Islands
and the additional 250 hectares still to be reclaimed, it also granted an option to AMARI
to reclaim another 350 hectares. The original JVA, a negotiated contract, enlarged the
reclamation area to 750 hectares.94 The failure of public bidding on December 10, 1991,
involving only 407.84 hectares,95 is not a valid justification for a negotiated sale of 750
hectares, almost double the area publicly auctioned. Besides, the failure of public bidding
happened on December 10, 1991, more than three years before the signing of the
original JVA on April 25, 1995. The economic situation in the country had greatly
improved during the intervening period.
94
Reclamation under the BOT Law and the Local Government Code
The constitutional prohibition in Section 3, Article XII of the 1987 Constitution is absolute
and clear: "Private corporations or associations may not hold such alienable lands of the
public domain except by lease, x x x." Even Republic Act No. 6957 ("BOT Law," for
brevity), cited by PEA and AMARI as legislative authority to sell reclaimed lands to
private parties, recognizes the constitutional ban. Section 6 of RA No. 6957 states –
"Sec. 6. Repayment Scheme. - For the financing, construction, operation and
maintenance of any infrastructure projects undertaken through the build-operate-
and-transfer arrangement or any of its variations pursuant to the provisions of
this Act, the project proponent x x x may likewise be repaid in the form of a share
in the revenue of the project or other non-monetary payments, such as, but not
limited to, the grant of a portion or percentage of the reclaimed land, subject to
the constitutional requirements with respect to the ownership of the land: x
x x." (Emphasis supplied)
A private corporation, even one that undertakes the physical reclamation of a
government BOT project, cannot acquire reclaimed alienable lands of the public domain
in view of the constitutional ban.
Section 302 of the Local Government Code, also mentioned by PEA and AMARI,
authorizes local governments in land reclamation projects to pay the contractor or
developer in kind consisting of a percentage of the reclaimed land, to wit:
"Section 302. Financing, Construction, Maintenance, Operation, and
Management of Infrastructure Projects by the Private Sector. x x x
xxx
In case of land reclamation or construction of industrial estates, the repayment
plan may consist of the grant of a portion or percentage of the reclaimed land or
the industrial estate constructed."
Although Section 302 of the Local Government Code does not contain a proviso similar
to that of the BOT Law, the constitutional restrictions on land ownership automatically
apply even though not expressly mentioned in the Local Government Code.
Thus, under either the BOT Law or the Local Government Code, the contractor or
developer, if a corporate entity, can only be paid with leaseholds on portions of the
reclaimed land. If the contractor or developer is an individual, portions of the reclaimed
land, not exceeding 12 hectares96 of non-agricultural lands, may be conveyed to him in
ownership in view of the legislative authority allowing such conveyance. This is the only
way these provisions of the BOT Law and the Local Government Code can avoid a direct
collision with Section 3, Article XII of the 1987 Constitution.
Registration of lands of the public domain
Finally, PEA theorizes that the "act of conveying the ownership of the reclaimed lands to
public respondent PEA transformed such lands of the public domain to private lands."
This theory is echoed by AMARI which maintains that the "issuance of the special patent
leading to the eventual issuance of title takes the subject land away from the land of
public domain and converts the property into patrimonial or private property." In short,
PEA and AMARI contend that with the issuance of Special Patent No. 3517 and the
corresponding certificates of titles, the 157.84 hectares comprising the Freedom Islands
have become private lands of PEA. In support of their theory, PEA and AMARI cite the
following rulings of the Court:
1. Sumail v. Judge of CFI of Cotabato,97 where the Court held –
"Once the patent was granted and the corresponding certificate of title was
issued, the land ceased to be part of the public domain and became private
property over which the Director of Lands has neither control nor jurisdiction."
2. Lee Hong Hok v. David,98 where the Court declared -
"After the registration and issuance of the certificate and duplicate certificate of
title based on a public land patent, the land covered thereby automatically comes
under the operation of Republic Act 496 subject to all the safeguards provided
therein."3. Heirs of Gregorio Tengco v. Heirs of Jose Aliwalas,99 where the Court
ruled -
"While the Director of Lands has the power to review homestead patents, he may
do so only so long as the land remains part of the public domain and continues to
be under his exclusive control; but once the patent is registered and a certificate
of title is issued, the land ceases to be part of the public domain and becomes
private property over which the Director of Lands has neither control nor
jurisdiction."
4. Manalo v. Intermediate Appellate Court,100 where the Court held –
95
 "When the lots in dispute were certified as disposable on May 19, 1971, and free
patents were issued covering the same in favor of the private respondents, the
said lots ceased to be part of the public domain and, therefore, the Director of
Lands lost jurisdiction over the same."
5.Republic v. Court of Appeals,101 where the Court stated –
"Proclamation No. 350, dated October 9, 1956, of President Magsaysay legally
effected a land grant to the Mindanao Medical Center, Bureau of Medical
Services, Department of Health, of the whole lot, validly sufficient for initial
registration under the Land Registration Act. Such land grant is constitutive of a
'fee simple' title or absolute title in favor of petitioner Mindanao Medical Center.
Thus, Section 122 of the Act, which governs the registration of grants or patents
involving public lands, provides that 'Whenever public lands in the Philippine
Islands belonging to the Government of the United States or to the Government
of the Philippines are alienated, granted or conveyed to persons or to public or
private corporations, the same shall be brought forthwith under the operation of
this Act (Land Registration Act, Act 496) and shall become registered lands.'"
The first four cases cited involve petitions to cancel the land patents and the
corresponding certificates of titlesissued to private parties. These four cases uniformly
hold that the Director of Lands has no jurisdiction over private lands or that upon
issuance of the certificate of title the land automatically comes under the Torrens
System. The fifth case cited involves the registration under the Torrens System of a 12.8-
hectare public land granted by the National Government to Mindanao Medical Center, a
government unit under the Department of Health. The National Government transferred
the 12.8-hectare public land to serve as the site for the hospital buildings and other
facilities of Mindanao Medical Center, which performed a public service. The Court
affirmed the registration of the 12.8-hectare public land in the name of Mindanao Medical
Center under Section 122 of Act No. 496. This fifth case is an example of a public land
being registered under Act No. 496 without the land losing its character as a property of
public dominion.
In the instant case, the only patent and certificates of title issued are those in the name of
PEA, a wholly government owned corporation performing public as well as proprietary
functions. No patent or certificate of title has been issued to any private party. No one is
asking the Director of Lands to cancel PEA's patent or certificates of title. In fact, the
thrust of the instant petition is that PEA's certificates of title should remain with PEA, and
the land covered by these certificates, being alienable lands of the public domain, should
not be sold to a private corporation.
Registration of land under Act No. 496 or PD No. 1529 does not vest in the registrant
private or public ownership of the land. Registration is not a mode of acquiring ownership
but is merely evidence of ownership previously conferred by any of the recognized
modes of acquiring ownership. Registration does not give the registrant a better right
than what the registrant had prior to the registration.102 The registration of lands of the
public domain under the Torrens system, by itself, cannot convert public lands into
private lands.103
Jurisprudence holding that upon the grant of the patent or issuance of the certificate of
title the alienable land of the public domain automatically becomes private land cannot
apply to government units and entities like PEA. The transfer of the Freedom Islands to
PEA was made subject to the provisions of CA No. 141 as expressly stated in Special
Patent No. 3517 issued by then President Aquino, to wit:
"NOW, THEREFORE, KNOW YE, that by authority of the Constitution of the
Philippines and in conformity with the provisions of Presidential Decree No. 1084,
supplemented by Commonwealth Act No. 141, as amended, there are hereby
granted and conveyed unto the Public Estates Authority the aforesaid tracts of
land containing a total area of one million nine hundred fifteen thousand eight
hundred ninety four (1,915,894) square meters; the technical description of which
are hereto attached and made an integral part hereof." (Emphasis supplied)
Thus, the provisions of CA No. 141 apply to the Freedom Islands on matters not covered
by PD No. 1084. Section 60 of CA No. 141 prohibits, "except when authorized by
Congress," the sale of alienable lands of the public domain that are transferred to
government units or entities. Section 60 of CA No. 141 constitutes, under Section 44 of
PD No. 1529, a "statutory lien affecting title" of the registered land even if not annotated
on the certificate of title.104 Alienable lands of the public domain held by government
entities under Section 60 of CA No. 141 remain public lands because they cannot be
alienated or encumbered unless Congress passes a law authorizing their disposition.
Congress, however, cannot authorize the sale to private corporations of reclaimed
alienable lands of the public domain because of the constitutional ban. Only individuals
can benefit from such law.
The grant of legislative authority to sell public lands in accordance with Section 60 of CA
No. 141 does not automatically convert alienable lands of the public domain into private
or patrimonial lands. The alienable lands of the public domain must be transferred to
qualified private parties, or to government entities not tasked to dispose of public lands,
before these lands can become private or patrimonial lands. Otherwise, the constitutional
ban will become illusory if Congress can declare lands of the public domain as private or
patrimonial lands in the hands of a government agency tasked to dispose of public lands.
96
This will allow private corporations to acquire directly from government agencies limitless
areas of lands which, prior to such law, are concededly public lands.
Under EO No. 525, PEA became the central implementing agency of the National
Government to reclaim foreshore and submerged areas of the public domain. Thus, EO
No. 525 declares that –
"EXECUTIVE ORDER NO. 525
Designating the Public Estates Authority as the Agency Primarily Responsible for
all Reclamation Projects
Whereas, there are several reclamation projects which are ongoing or being
proposed to be undertaken in various parts of the country which need to be
evaluated for consistency with national programs;
Whereas, there is a need to give further institutional support to the Government's
declared policy to provide for a coordinated, economical and efficient reclamation
of lands;
Whereas, Presidential Decree No. 3-A requires that all reclamation of areas shall
be limited to the National Government or any person authorized by it under
proper contract;
Whereas, a central authority is needed to act on behalf of the National
Government which shall ensure a coordinated and integrated approach in
the reclamation of lands;
Whereas, Presidential Decree No. 1084 creates the Public Estates Authority
as a government corporation to undertake reclamation of lands and ensure
their maximum utilization in promoting public welfare and interests; and
Whereas, Presidential Decree No. 1416 provides the President with continuing
authority to reorganize the national government including the transfer, abolition,
or merger of functions and offices.
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines,
by virtue of the powers vested in me by the Constitution and pursuant to
Presidential Decree No. 1416, do hereby order and direct the following:
Section 1. The Public Estates Authority (PEA) shall be primarily responsible
for integrating, directing, and coordinating all reclamation projects for and
on behalf of the National Government. All reclamation projects shall be
approved by the President upon recommendation of the PEA, and shall be
undertaken by the PEA or through a proper contract executed by it with any
person or entity; Provided, that, reclamation projects of any national government
agency or entity authorized under its charter shall be undertaken in consultation
with the PEA upon approval of the President.
x x x ."
As the central implementing agency tasked to undertake reclamation projects
nationwide, with authority to sell reclaimed lands, PEA took the place of DENR as the
government agency charged with leasing or selling reclaimed lands of the public domain.
The reclaimed lands being leased or sold by PEA are not private lands, in the same
manner that DENR, when it disposes of other alienable lands, does not dispose of
private lands but alienable lands of the public domain. Only when qualified private parties
acquire these lands will the lands become private lands. In the hands of the
government agency tasked and authorized to dispose of alienable of disposable
lands of the public domain, these lands are still public, not private lands.
Furthermore, PEA's charter expressly states that PEA "shall hold lands of the public
domain" as well as "any and all kinds of lands." PEA can hold both lands of the public
domain and private lands. Thus, the mere fact that alienable lands of the public domain
like the Freedom Islands are transferred to PEA and issued land patents or certificates of
title in PEA's name does not automatically make such lands private.
To allow vast areas of reclaimed lands of the public domain to be transferred to PEA as
private lands will sanction a gross violation of the constitutional ban on private
corporations from acquiring any kind of alienable land of the public domain. PEA will
simply turn around, as PEA has now done under the Amended JVA, and transfer
several hundreds of hectares of these reclaimed and still to be reclaimed lands to a
single private corporation in only one transaction. This scheme will effectively nullify the
constitutional ban in Section 3, Article XII of the 1987 Constitution which was intended to
diffuse equitably the ownership of alienable lands of the public domain among Filipinos,
now numbering over 80 million strong.
This scheme, if allowed, can even be applied to alienable agricultural lands of the public
domain since PEA can "acquire x x x any and all kinds of lands." This will open the
floodgates to corporations and even individuals acquiring hundreds of hectares of
alienable lands of the public domain under the guise that in the hands of PEA these
97
lands are private lands. This will result in corporations amassing huge landholdings
never before seen in this country - creating the very evil that the constitutional ban was
designed to prevent. This will completely reverse the clear direction of constitutional
development in this country. The 1935 Constitution allowed private corporations to
acquire not more than 1,024 hectares of public lands.105 The 1973 Constitution prohibited
private corporations from acquiring any kind of public land, and the 1987 Constitution has
unequivocally reiterated this prohibition.
The contention of PEA and AMARI that public lands, once registered under Act No. 496
or PD No. 1529, automatically become private lands is contrary to existing laws. Several
laws authorize lands of the public domain to be registered under the Torrens System or
Act No. 496, now PD No. 1529, without losing their character as public lands. Section
122 of Act No. 496, and Section 103 of PD No. 1529, respectively, provide as follows:
Act No. 496
"Sec. 122. Whenever public lands in the Philippine Islands belonging to the x x x
Government of the Philippine Islands are alienated, granted, or conveyed to
persons or the public or private corporations, the same shall be brought
forthwith under the operation of this Act and shall become registered lands."
PD No. 1529
"Sec. 103. Certificate of Title to Patents. Whenever public land is by the
Government alienated, granted or conveyed to any person, the same shall be
brought forthwith under the operation of this Decree." (Emphasis supplied)
Based on its legislative history, the phrase "conveyed to any person" in Section 103 of
PD No. 1529 includes conveyances of public lands to public corporations.
Alienable lands of the public domain "granted, donated, or transferred to a province,
municipality, or branch or subdivision of the Government," as provided in Section 60 of
CA No. 141, may be registered under the Torrens System pursuant to Section 103 of PD
No. 1529. Such registration, however, is expressly subject to the condition in Section 60
of CA No. 141 that the land "shall not be alienated, encumbered or otherwise
disposed of in a manner affecting its title, except when authorized by Congress."
This provision refers to government reclaimed, foreshore and marshy lands of the public
domain that have been titled but still cannot be alienated or encumbered unless
expressly authorized by Congress. The need for legislative authority prevents the
registered land of the public domain from becoming private land that can be disposed of
to qualified private parties.
The Revised Administrative Code of 1987 also recognizes that lands of the public
domain may be registered under the Torrens System. Section 48, Chapter 12, Book I of
the Code states –
"Sec. 48. Official Authorized to Convey Real Property. Whenever real property of
the Government is authorized by law to be conveyed, the deed of conveyance
shall be executed in behalf of the government by the following:
(1) x x x
(2) For property belonging to the Republic of the Philippines, but titled in
the name of any political subdivision or of any corporate agency or
instrumentality, by the executive head of the agency or instrumentality."
(Emphasis supplied)
Thus, private property purchased by the National Government for expansion of a public
wharf may be titled in the name of a government corporation regulating port operations in
the country. Private property purchased by the National Government for expansion of an
airport may also be titled in the name of the government agency tasked to administer the
airport. Private property donated to a municipality for use as a town plaza or public
school site may likewise be titled in the name of the municipality.106 All these properties
become properties of the public domain, and if already registered under Act No. 496 or
PD No. 1529, remain registered land. There is no requirement or provision in any
existing law for the de-registration of land from the Torrens System.
Private lands taken by the Government for public use under its power of eminent domain
become unquestionably part of the public domain. Nevertheless, Section 85 of PD No.
1529 authorizes the Register of Deeds to issue in the name of the National Government
new certificates of title covering such expropriated lands. Section 85 of PD No. 1529
states –
"Sec. 85. Land taken by eminent domain. Whenever any registered land, or
interest therein, is expropriated or taken by eminent domain, the National
Government, province, city or municipality, or any other agency or instrumentality
exercising such right shall file for registration in the proper Registry a certified
copy of the judgment which shall state definitely by an adequate description, the
particular property or interest expropriated, the number of the certificate of title,
and the nature of the public use. A memorandum of the right or interest taken
shall be made on each certificate of title by the Register of Deeds, and where the
fee simple is taken, a new certificate shall be issued in favor of the National
Government, province, city, municipality, or any other agency or
98
 instrumentality exercising such right for the land so taken. The legal expenses
incident to the memorandum of registration or issuance of a new certificate of title
shall be for the account of the authority taking the land or interest therein."
(Emphasis supplied)
Consequently, lands registered under Act No. 496 or PD No. 1529 are not exclusively
private or patrimonial lands. Lands of the public domain may also be registered pursuant
to existing laws.
AMARI makes a parting shot that the Amended JVA is not a sale to AMARI of the
Freedom Islands or of the lands to be reclaimed from submerged areas of Manila Bay. In
the words of AMARI, the Amended JVA "is not a sale but a joint venture with a stipulation
for reimbursement of the original cost incurred by PEA for the earlier reclamation and
construction works performed by the CDCP under its 1973 contract with the Republic."
Whether the Amended JVA is a sale or a joint venture, the fact remains that the
Amended JVA requires PEA to "cause the issuance and delivery of the certificates of title
conveying AMARI's Land Share in the name of AMARI."107
This stipulation still contravenes Section 3, Article XII of the 1987 Constitution which
provides that private corporations "shall not hold such alienable lands of the public
domain except by lease." The transfer of title and ownership to AMARI clearly means
that AMARI will "hold" the reclaimed lands other than by lease. The transfer of title and
ownership is a "disposition" of the reclaimed lands, a transaction considered a sale or
alienation under CA No. 141,108 the Government Auditing Code,109 and Section 3, Article
XII of the 1987 Constitution.
The Regalian doctrine is deeply implanted in our legal system. Foreshore and
submerged areas form part of the public domain and are inalienable. Lands reclaimed
from foreshore and submerged areas also form part of the public domain and are also
inalienable, unless converted pursuant to law into alienable or disposable lands of the
public domain. Historically, lands reclaimed by the government are sui generis, not
available for sale to private parties unlike other alienable public lands. Reclaimed lands
retain their inherent potential as areas for public use or public service. Alienable lands of
the public domain, increasingly becoming scarce natural resources, are to be distributed
equitably among our ever-growing population. To insure such equitable distribution, the
1973 and 1987 Constitutions have barred private corporations from acquiring any kind of
alienable land of the public domain. Those who attempt to dispose of inalienable natural
resources of the State, or seek to circumvent the constitutional ban on alienation of lands
of the public domain to private corporations, do so at their own risk.
We can now summarize our conclusions as follows:
1. The 157.84 hectares of reclaimed lands comprising the Freedom Islands, now
covered by certificates of title in the name of PEA, are alienable lands of the
public domain. PEA may lease these lands to private corporations but may not
sell or transfer ownership of these lands to private corporations. PEA may only
sell these lands to Philippine citizens, subject to the ownership limitations in the
1987 Constitution and existing laws.
2. The 592.15 hectares of submerged areas of Manila Bay remain inalienable
natural resources of the public domain until classified as alienable or disposable
lands open to disposition and declared no longer needed for public service. The
government can make such classification and declaration only after PEA has
reclaimed these submerged areas. Only then can these lands qualify as
agricultural lands of the public domain, which are the only natural resources the
government can alienate. In their present state, the 592.15 hectares of
submerged areas are inalienable and outside the commerce of man.
3. Since the Amended JVA seeks to transfer to AMARI, a private corporation,
ownership of 77.34 hectares110 of the Freedom Islands, such transfer is void for
being contrary to Section 3, Article XII of the 1987 Constitution which prohibits
private corporations from acquiring any kind of alienable land of the public
domain.
4. Since the Amended JVA also seeks to transfer to AMARI ownership of
290.156 hectares111 of still submerged areas of Manila Bay, such transfer is void
for being contrary to Section 2, Article XII of the 1987 Constitution which prohibits
the alienation of natural resources other than agricultural lands of the public
domain. PEA may reclaim these submerged areas. Thereafter, the government
can classify the reclaimed lands as alienable or disposable, and further declare
them no longer needed for public service. Still, the transfer of such reclaimed
alienable lands of the public domain to AMARI will be void in view of Section 3,
Article XII of the 1987 Constitution which prohibits private corporations from
acquiring any kind of alienable land of the public domain.
Clearly, the Amended JVA violates glaringly Sections 2 and 3, Article XII of the 1987
Constitution. Under Article 1409112 of the Civil Code, contracts whose "object or purpose
is contrary to law," or whose "object is outside the commerce of men," are "inexistent and
void from the beginning." The Court must perform its duty to defend and uphold the
Constitution, and therefore declares the Amended JVA null and void ab initio.
Seventh issue: whether the Court is the proper forum to raise the issue of whether
the Amended JVA is grossly disadvantageous to the government.
99
Considering that the Amended JVA is null and void ab initio, there is no necessity to rule
on this last issue. Besides, the Court is not a trier of facts, and this last issue involves a
determination of factual matters.
WHEREFORE, the petition is GRANTED. The Public Estates Authority and Amari
Coastal Bay Development Corporation are PERMANENTLY ENJOINED from
implementing the Amended Joint Venture Agreement which is hereby
declared NULL and VOID ab initio.
SO ORDERED.
-x END OF PROPERTY IN RELATION TO THE PERSON TO WHOM IT BELONGS x-
JJJJJJJJJ
G.R. No. L-22006 July 28, 1975
PEREZ vs. MENDOZA
Civil Case 689 of the Court of First Instance of Batangas was an action to quiet title over
a piece of land filed on March 20, 1959, by spouses Basilio Perez and Petra Montalbo
with spouses Nicolas Mendoza and Margarita Macalalad as defendants. According to the
complaint, the land in controversy is located in barrio Dagatan, municipality of Taysan,
Batangas, with an area of approximately 4,765 sq. meters, declared for taxation
purposes in the name of the "Heirs of Estanislao Montalbo", and is "bounded on the
north by a school site, on the east by Calixto Flores, on the south by a creek, and on the
west by a creek and the land of Gregorio Mendoza." On the basis of evidence adduced
by the parties, the trial court then presided by Hon. Lorenzo Relova rendered judgment
on February 19, 1962, dismissing the complaint and declaring the spouses Mendoza "to
have a better right to the property in question." 1
Spouses Perez elevated the Relova decision to the Court of Appeals which, however,
affirmed in toto the findings of the court a quo, and declared that "upon the evidence it
has been shown by a great preponderance that the land in question belongs to the
defendants." 2
The case is now before Us on a petition for certiorari filed by spouses Perez.
The findings of fact both of the trial court and the Court of Appeals may be briefly
summarized as follows:
The litigated parcel of land was originally part of a bigger tract owned by Estanislao
Montalbo. When Estanislao died in 1918, his properties passed on to his children Petra,
Felisa, and Pedro all surnamed Montalbo, and because Pedro died single the two
women remained as the only heirs. By mutual agreement Petra and Felisa divided
between themselves the lands of their father and the parcel of which the litigated land
was a part was assigned to Felisa. Sometime in 1922 Felisa exchanged the above-
mentioned parcel with a land belonging to her aunt. Andrea Montalbo, a sister of her
father. The reason for the exchange was that Andrea wanted to donate a piece of land to
the municipality for use as a school site and the land of Felisa was what the municipality
preferred as it was adjacent to other properties of the municipality. (Exh. 5 for defendants
Mendoza) Upon her acquisition of Felisa's aforementioned land, Andrea donated to the
municipality the northern portion thereof which constituted almost one-half of the entire
parcel, and since then that portion was declared for taxation purposes by the municipality
together with its adjoining properties (Exhs. 6, 6-A, 6-B). In 1927 the remainder of the lot
1äw phï1.ñët
was given by Andrea Montalbo to her daughter Margarita Macalalad on the occasion of
her marriage to Nicolas Mendoza, and from the time of their marriage the couple
possessed the said property. That donation was confirmed subsequently in a public
instrument dated August 15, 1951 (Exh. 2 for the Mendozas). Nicolas Mendoza sought to
transfer the tax declaration of the property to his name and of his wife and for that
purpose he submitted a deed of exchange of property dated January 14, 1922, allegedly
executed by Felisa Montalbo and Andrea Montalbo in the presence of the municipal
secretary Rafael Manahan (Exh. 5). When Basilio Perez came to know about the
supposed deed of exchange, he had it investigated and upon discovering that the
signature of Rafael Manahan appearing on the document was forged, he filed a criminal
complaint before the Fiscal's office which led to an accusation for falsification of private
document against Andrea Montalbo and Nicolas Mendoza. Only Nicolas Mendoza was
arraigned and tried and was convicted by the Court of First Instance of Batangas, but on
appeal he was acquitted by the Court of Appeals for insufficiency of evidence to show
that he participated in affixing the signature of Rafael Manahan or that he was aware of
the falsity of the document in question when he presented it to the tax assessor's
office. 3 Notwithstanding the forged signature of Rafael Manahan on the document Exhibit 5,
there is sufficient evidence to prove that an exchange of property did in fact occur in 1922
between Andrea and Felisa Montalbo, and that Felisa's land passed on to Andrea who in turn
gave part of it to the municipality and part to her daughter, Margarita; hence, the decision in
favor of the spouses Mendoza.
On the other hand, petitioners contend that the disputed property was inherited by Petra
and Felisa Montalbo from their father Estanislao who died in 1918 and since that date
the two sisters were in possession of said land. In 1934 a deed of partition of the various
properties of Estanislao was executed between Petra and the heirs of Felisa, and the
land in question was divided equally, between them; among those who signed as
witnesses to that agreement was Andrea Montalbo(Exh. D for petitioners). In 1952
100
Felisa's husband, Jose Ortega, and children sold their one-half share to spouses Petra
Montalbo and Basilio Perez, now petitioners, but the deed of sale was lost a year after.
Sometime in 1946 petitioners leased the property to the Mendozas and when the lease
expired in 1951 they demanded for the return of the land but the Mendozas refused and
so petitioners had to file an ejectment suit before the justice of the peace court of Taysan
which was still pending at the time of the trial of the civil case in 1960. (tsn. witness
Basilio Perez, December 15, 1960, pp. 16-34)
For not giving credit to the foregoing evidence, petitioners now assail the adverse
decision of respondent court on four assigned errors.
1. Petitioners contend that respondent court erred in considering the criminal case for
falsification res adjudicataon the matter of ownership of the land in litigation when the
"question of ownership was not actually and directly in issue in the criminal case and the
latter was not the proper vehicle for the determination of the ownership of the land." (p. 9,
petitioners brief) Petitioners refer to portions in the decision of respondent court, viz:
The land in question, together with that portion that was acquired by the
municipality of Taysan, the identity of which is admitted by the parties,
belonged to Felisa Montalbo, as held in the decision of the Court of
Appeals, thus — "The said parcel of land previously belonged to Felisa
Montalbo (married to Jose Ortega), who inherited it from her deceased
father, the aforecited Estanislao Montalbo;", and the land in question was
donated propter nuptias by Andrea Montalbo to Margarita Macalalad and
Nicolas Mendoza, the defendants, (Margarita Macalalad is the daughter
of Andrea Montalbo) on the occasion of their marriage on February 27,
1927, as found and held in the decision of the Court of Appeals, thus —
"and this land was acquired by the donor (Andrea Montalbo) by means of
a barter with her own parcel of land planted with bamboos and mango
trees"
Upon the basis of the findings of fact and conclusion arrived at in the
decision of the Court of Appeals, it clearly appears that although the
document of exchange of the lands was found to be falsified,
nevertheless the Court found upon the facts as demonstrated by the
evidence that the land in question "previously belonged to Felisa
Montalbo (married to Jose Ortega), who inherited it from her deceased
father, the aforesaid Estanislao Montalbo ..."; that said land was
donated propter nuptias by Andrea Montalbo to the defendants on the
occasion of their marriage on February 27, 1927; and that "this land was
acquired by the donor by means of a barter with her own parcel of land
planted with bamboos and mango trees". From the context of the
decision the natural and logical inference is that factually the exchange of
the lands had been consummated.... (pp. 6-7, CA decision at pp. 20-
21, rollo; emphasis supplied to indicate disputed statements)
Undoubtedly, there is merit to the contention of petitioners that the pronouncements or
findings of fact made by the Court of Appeals in the criminal case concerning the
possession and ownership of the land now in litigation in the civil case, do not constitute
the law on the matter and cannot be taken or adopted as a basis for deciding the
question of ownership of said land in this civil case. Since there is no identity of parties in
the two cases — the petitioners here not being parties in the criminal case — and the
object or subject matter in the criminal prosecution is different, the latter being concerned
with the guilt or innocence of accused Nicolas Mendoza for falsification of private
document, it follows that the judgment in the criminal action cannot be used as evidence
in the civil case where the issue is ownership of a piece of land. It is the rule that the plea
of res judicata generally cannot be interposed except where the parties, facts, and
questions are the
same, 4 hence, the judgment in a criminal case cannot be pleaded as res judicata in a civil
action. 5
But whatever error was committed by respondent court in this regard, the same is not
sufficient to nullify the appealed decision.
Analyzing the decision of respondent court. We see that the latter made its own appraisal
and evaluation of the evidence existing in the record relative to the possession and
ownership of the land in question. Thus it said that the conclusions arrived at by the
Court of Appeals in the criminal case to wit(1) that there was an exchange of lands
consummated between Andrea and Felisa and (2) that the exchanged land was later
donated by Andrea to her daughter Margarita in 1927, "can hardly be doubted if we take
account of the undisputed fact that the defendants have been in possession of the land
since 1927, and the plaintiffs (meaning spouses Perez) have not attempted to
disturb defendants' possession of the land until 1952 when said plaintiffs filed an action
of unlawful detainer against the defendants." (p. 7 of appealed decision at p. 21, SC
rollo; emphasis supplied) Continuing, respondent court expounded:
Contrary to the allegation in the complaint — "That plaintiffs were in
possession of the land prior and up to January, 1946, when the same
was leased to the defendants ...", and the testimony of Basilio Perez to
the same tenor, the evidence has conclusively shown that the defendants
have been in continuous possession of the land since 1927 to the
present time, and they have built a house on the land in 1928 where they
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 have resided and lived to the present, as testified to by the defendant
Mendoza, ....
The plaintiffs have contended, however, with the support of the testimony
of Basilio Perez, that the possession of the defendants since 1946 was
that of a mere lessee of the land. On this matter, the trial court said, "the
records do not show any documentary evidence to support such
contention. Nor is any document, say receipts of payment of rentals
presented to bolster their theory. On the contrary their averment has
been strongly denied by the defendants and the records show that it was
only in 1952 that a civil action was instituted by the plaintiffs against the
defendants in the Justice of the Peace Court of Taysan, Batangas, for
detainer and damages", and said allegation of possession of the
defendants as lessees of the land "is not supported by positive and
convincing evidence". We find no reason to disagree with the foregoing
findings of fact and conclusion of the trial court because the same is
supported by the preponderance of evidence, and the plaintiffs have not
pointed to us any fact of significance or influence which have been
disregarded by the court, other than the testimony of Basilio Perez who
testified about the supposed contract of lease. (pp. 21-22, 23, ibid.;
emphasis supplied)
Digging further into the evidence of herein petitioners, respondent court found for itself
that the agreement of partition dated May 27, 1934, Exhibit D, is not incontrovertible
proof that in 1934 the litigated property belonged in common to Petra and the heirs of
Felisa Montalbo both of whom may have been guided by the fact that the property was
still declared for taxation purposes in the name of Estanislao Montalbo, and that the
document of partition "did not overcome the evidence on record that Andrea Montalbo
became the owner of the land, and that since 1927 the defendants have been in
continuous possession of the land, openly, adversely and in the concept of owners
thereby acquiring ownership of the land through acquisitive prescription." (p. 10 of CA
decision at p. 24, SC rollo)
Independently therefore of the pronouncements of the Court of Appeals in the criminal
case, respondent court examined the evidence in this civil case and made its own
findings of fact on the basis of which it affirmed the decision of the trial court.
We could have stopped here and resolved this petition under well-entrenched precepts in
Philippine jurisprudence that findings of fact of the Court of Appeals are as a rule
conclusive and binding upon this Court; 6 nonetheless, to set our mind at rest that the
conclusions of respondent court were not grounded on speculation, surmises or
conjectures, 7We went over the evidence before Us.
Certain salient facts strongly support the claim of respondents Mendoza over the
property in dispute:
First, the northern boundary of the land in controversy is undisputably a school site which
originally was part of a bigger tract belonging to Estanislao Montalbo. This is admitted by
petitioner Basilio Perez who to a question propounded by his counsel, Atty. Panganiban,
declared:
Mr. Panganiban: (Counsel of petitioners)
Q. According to these tax declarations which you said
covers the land in question, the boundaries on the north,
school site; on the east, land of Calixto Flores; on the
south, estero; and on the west, estero and Gregoria
Mendoza, why is it that there is a discrepancy?
A. Because from the whole parcel of land a portion was
taken for the school site, and that which remains now is
the land in question, sir. (tsn December 15, 1960, pp. 22-
23)
No explanation however was offered by Perez as to how that portion became a school
site. On the other hand, there is evidence of respondent Mendoza that because Andrea
Montalbo wanted to donate a piece of land to be used as a school site and the
municipality preferred the location of the land inherited by Felisa from her father, the two
women exchanged lands after which Andrea gave one-half of the property to the
municipality while the remaining portion which is the land now in litigation was donated
propter nuptias to her daughter Margarita way back in 1927. (tsn October 24, 1961, pp.
14-18) This donation of Andrea was not disproved by any evidence of petitioners. On the
part of respondents Mendoza, their documentary evidence, Exhibits 6, 6-A and 6-B,
show that the municipality of Taysan declared the donated property in its name as early
as July, 1925, which supports respondents' claim that the exchange of properties
between Andrea and Felisa Montalbo took place sometime in 1922.
Second, the provincial authorities authorities dealt with the Mendozas for the widening of
the provincial road which traverses the land in question. Nicolas Mendoza testified that
the land covered by the complaint actually consists of two lots which he described in his
sketch, Exhibit 1, with letters "A" and "B" respectively, separated by a provincial road
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leading to the municipality of Lobo; that lot "A" which is the bigger parcel is the one
donated to his wife, Margarita, by Andrea Montalbo on the occasion of their marriage in
1927 (Exh. 2); while lot "B" was bought from Donata Mendoza in 1951 as shown by the
deed of sale, Exhibit 7; that sometime in 1937-38, the province widened the provincial
road traversing the two lots, and he and his wife were approached by the provincial
authorities more particularly, Engineer Ramirez, for them to give without compensation
from lot "A" a stretch of land of one meter in width to widen said road, and they agreed.
At that time Donata Mendoza still owned lot "B" and she was also asked to give part of
her land for the road but she was paid for the value of the plants destroyed in the
process.(tsn October 24, 1961, pp. 32-34) For his part, petitioner Perez admitted during
the cross-examination conducted by the opposite counsel, Atty. Julio Enriquez, that the
provincial authorities did not deal with him at all during the widening of that particular
road. (tsn September 25, 1961, p. 34) This is of marked significance, because if it were
true as claimed by petitioners that they were in possession of the property since the
death of Estanislao Montalbo in 1918 or even after the deed of partition in 1934, they
would have been the persons approached by the authorities for the widening of the road.
The fact that the Mendozas were the ones who gave away part of the land for the
widening of the Lobo road shows that they were in possession of the property and were
living there at the time.
Third, respondents Mendoza have been in possession of the property since 1927 in
concept of owners thereof. We have the testimony of respondent Nicolas Mendoza that
after the land was donated to his wife in 1927 they built a house on it and lived there
continuously, witness referring particularly to what he described as lot "A" in his sketch
Exhibit 1. (tsn October 24, 1961, pp. 7, .30-31) Respondent's testimony was found both
by the trial and appellate courts credible because (1) petitioner Basilio Perez himself
admitted during cross-examination that even before the last world war the Mendozas had
constructed a house on the land in litigation (tsn September 25, 1971, pp. 37-39; see
Exh. E-3) which admission disproves the allegation in the complaint and Perez' testimony
that it was only in 1946 when the Mendozas occupied the property as lessees; (2) the
testimony of Nicolas Mendoza was corroborated by witness Adriano Gonzales, a retired
justice of the peace of Taysan, Batangas, who declared that he knew the Mendozas
since 1937 and he saw them living on the land in question and they have not changed
residence at all since he had known them (tsn December 6, 1961, pp. 5-6); and (3) the
respondents Mendoza were the ones who were living on the property and not the
petitioners at the time the provincial government in 1937 widened the Lobo road which
crosses said land.
The court a quo and the respondent appellate court did not err when they upheld the
claim of ownership of the Mendozas principally on the ground that the latter were in
actual possession of the property since 1927 and were sought to be dispossessed by
petitioners herein only in 1952 when an ejectment suit was filed against them.
Possession is an indicium of ownership of the thing possessed and to the possessor
goes the presumption that he holds the thing under a claim of ownership. 8 Article 433 of
the Civil Code provides that "(A)ctual 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." In Chan vs. Court of Appeals, et al., L-27488, June 30, 1970, 33
SCRA 737, this Court upheld the finding of the Court of Appeals that the litigated property
belonged to the private respondents therein based on their possession of the property, not
only because such findings of fact of the appellate court are conclusive and binding on this
Court but because the conclusion is in accordance with Articles 433 and 531 of the Civil
Code. 9
As we have here conflicting claims of possession by the parties over the land in
controversy and because the fact of possession cannot be recognized at the same time
in two different personalities except in cases of co-possession, the present possessor is
to be preferred pursuant to Article 538 of the Civil Code which We quote:
Possession as a fact cannot be recognized at the same time in two
different personalities except in the cases of co-possession. Should a
question arise regarding the fact of possession, the present possessor
shall be preferred; if there are two possessors, the one longer in
possession; if the dates of the possession are the same, the one who
presents a title; and if all these conditions are equal, the thing shall be
placed in judicial deposit pending determination of its possession or
ownership through proper proceedings." 10
The pretension of petitioners that the possession of the Mendozas is that of a mere
lessee was not believed by the trial judge and the appellate court not only because of the
absence of any written or oral evidence on the matter other than the bare testimony of
petitioner Basilio Perez, but also due to the circumstances present in the case which We
indicated and enumerated at pages 7 to 9 of this decision. In fine, it is a fact that the
Mendozas are presently in possession of the property and the presumption of ownership
in their favor has not been successfully rebutted by evidence that they are mere lessees
of the land in their possession as claimed by petitioners.
2. In their second assigned error, petitioners contend that respondent court should not
have given weight to the evidence of respondent Mendoza because the latter's Exhibit 5
was proven to be a falsified document.
To recall, Exhibit 5 is the alleged deed of exchange or barter of lands between Andrea
and Felisa Montalbo dated January 14, 1922. On this point, petitioners overlook the fact
that Exhibit 5 was made the basis of a criminal accusation of falsification of private
document solely on the allegation that the signature of Rafael Manahan, the person
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before whom the parties to the document allegedly appeared, was not his. There was no
finding in that criminal case as per decision rendered therein that the barter or exchange
of lands between Andrea and Felisa Montalbo did not in effect take place. On the
contrary, what appears in said decision offered by petitioners as their Exhibit J are the
following findings of the Court of Appeals, viz: that the land donated by Andrea Montalbo
to her daughter Margarita Macalalad "was acquired by the donor by means of a barter
with her own parcel of land planted with bamboos and mango trees"; that while it is true
that because of this presentation of the falsified document appellant (now respondent
Nicolas Mendoza) was able to secure the declaration of the property donated in his
name, no criminal liability should be imposed upon him in the absence of any evidence
that he presented said exhibit with the knowledge that it was forged "especially if we take
into consideration the fact that he and his wife were and are still in possession of the land
donated since 1927"; that in fact, the color and appearance of the document in question
show that it is not a new document but an old one thus confirming Mendoza's theory that
it was executed in or about the year 1922 as appearing in the document or five years
before his marriage. (pp. 1, 5, 6 of Exh. J, folder of exhibits) Thus, if the document
Exhibit 5 was held to be forged, it was simply because the municipal secretary, Rafael
Manahan, did not sign it and not for any other reason. What is material and relevant to
the civil case is that both the trial court and respondent appellate court found for a fact
that there was an exchange of lands between Andrea and Felisa Montalbo on the basis
of evidence other than the disputed Exhibit 5. As to what the evidence is, has been
discussed above.
Petitioners cite Gonzales vs. Mauricio, 53 Phil. 728 where this Court stated inter alia that
the introduction of a forged instrument by a witness renders the testimony of the latter
practically worthless. That statement however is not applicable to the situation before Us
because in Gonzalez the particular document or receipt referred to was found to be
entirely false as to its contents, handwriting, and signature, whereas here all that was
found to be false is the signature of a witnessing official.
3. The last argument of petitioners is the object of the third assigned error. It is
contended that the appellate court erred in not giving effect to the deed of partition,
Exhibit D, notwithstanding the fact that the name of Andrea Montalbo appears in the
document as one of the witnesses thereto.
Exhibit D appears to be a document dated May 27, 1934, wherein certain properties
allegedly belonging to Estanislao Montalbo were divided between Petra Montalbo and
Jose Ortega, husband of deceased Felisa Montalbo. Petitioner Basilio Perez declared
that one of the parcels of land mentioned in the document is the land now in litigation
which is particularly marked as Exhibit D-1. He also testified that Exhibit D was signed by
him and his wife, Petra Montalbo, by Jose Ortega, husband of deceased Felisa
Montalbo, and thumbmarked by the latter's children all in his presence. (tsn December
15,1960, pp. 19-24) Surprisingly, however, Basilio Perez did not at all mention during the
course of his testimony that the old woman, Andrea Montalbo, signed the deed of
partition as a witness. We have gone over the transcript of Basilio Perez' declaration on
direct and cross-examination (tsn December 15, 1960, pp. 15-34; September 25, 1961,
pp. 3-40) and at no instance did he ever state that Andrea Montalbo was present during
the preparation of the document, that she read or knew the contents thereof which by the
way consists of six handwritten pages, and that she signed her name on the document. It
was incumbent upon petitioners to identify the signature of Andrea Montalbo on the
document if her signature was truly there. As a matter of fact, examining the document
Exhibit D We entertain doubts whether the name referred to by petitioners is "Andrea
Montalbo", for, as written, it also can read "Maria Montalbo". At any rate, whatever is the
import of said deed of partition, the same binds only the parties thereto but does not
affect third persons such as Andrea Montalbo or the herein Mendozas in the absence of
proof that they participated in one way or another in the preparation and execution of
thedocument. As it is, Andrea Montalbo was a stranger to that deed of partition and any
recital therein concerning the property under litigation cannot be used as evidence to
prejudice her and her successors-in-interest or place her in estoppel as to her claims
over the property. Res inter alios acta alteri nocere non debet. A transaction between two
parties ought not to operate to the prejudice of a third person or stranger. 11
4. In the fourth assignment of error, petitioners claim that the appellate court should have
rendered a decision in their favor. That both the trial court and respondent appellate
court have correctly evaluated the evidence, has been clearly demonstrated by Us.
IN VIEW OF ALL THE ABOVE CONSIDERATIONS, We find no reversible error in the
decision under review and We AFFIRM the same with costs against petitioners.
So Ordered.
--- xxx END OF OWNERSHIP IN GENERAL xxx ---
G.R. No. L-2659 October 12, 1950
BACHRACH vs. SEIFERT
Is a stock dividend fruit or income, which belongs to the usufructuary, or is it capital or
part of the corpus of the estate, which pertains to the remainderman? That is the
question raised in the appeal.
The deceased E. M. Bachrach, who left no forced heir except his widow Mary McDonald
Bachrach, in his last will and testament made various legacies in cash and willed the
remainder of his estate as follows:
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 Sixth: It is my will and do herewith bequeath and devise to my beloved wife Mary
McDonald Bachrach for life all the fruits and usufruct of the remainder of all my
estate after payment of the legacies, bequests, and gifts provided for above; and
she may enjoy said usufruct and use or spend such fruits as she may in any
manner wish.
The will further provided that upon the death of Mary McDonald Bachrach, one-half of the
all his estate "shall be divided share and share alike by and between my legal heirs, to
the exclusion of my brothers."
The estate of E. M. Bachrach, as owner of 108,000 shares of stock of the Atok-Big
Wedge Mining Co., Inc., received from the latter 54,000 shares representing 50 per cent
stock dividend on the said 108,000 shares. On June 10, 1948, Mary McDonald
Bachrach, as usufructuary or life tenant of the estate, petitioned the lower court to
authorize the Peoples Bank and Trust Company as administrator of the estate of E. M.
Bachrach, to her the said 54,000 share of stock dividend by endorsing and delivering to
her the corresponding certificate of stock, claiming that said dividend, although paid out
in the form of stock, is fruit or income and therefore belonged to her as usufructuary or
life tenant. Sophie Siefert and Elisa Elianoff, legal heirs of the deceased, opposed said
petition on the ground that the stock dividend in question was not income but formed part
of the capital and therefore belonged not to the usufructuary but to the remainderman.
And they have appealed from the order granting the petition and overruling their
objection.
While appellants admits that a cash dividend is an income, they contend that a stock
dividend is not, but merely represents an addition to the invested capital. The so-called
Massachusetts rule, which prevails in certain jurisdictions in the United States, supports
appellants' contention . It regards cash dividends, however large, as income, and stock
dividends, however made, as capital. (Minot vs. Paine, 99 Mass., 101; 96 Am. Dec.,
705.) It holds that a stock dividend is not in any true sense any true sense any dividend
at all since it involves no division or severance from the corporate assets of the dividend;
that it does not distribute property but simply dilutes the shares as they existed before;
and that it takes nothing from the property of the corporation, and nothing to the interests
of the shareholders.
On the other hand, so called Pennsylvania rule, which prevails in various other
jurisdictions in the United States, supports appellee's contention. This rule declares that
all earnings of the corporation made prior to the death of the testator stockholder belong
to the corpus of the estate, and that all earnings, when declared as dividends in whatever
form, made during the lifetime of the usufructuary or life tenant. (Earp's Appeal, 28 Pa.,
368.)
. . . It is clear that testator intent the remaindermen should have only the corpus
of the estate he left in trust, and that all dividends should go the life tenants. It is
true that profits realized are not dividends until declared by the proper officials of
the corporation, but distribution of profits, however made, in dividends, and the
form of the distribution is immaterial. (In re Thompson's Estate, 262 Pa., 278; 105
Atl. 273, 274.)
In Hite vs. Hite (93 Ky., 257; 20 S. W., 778, 780), the Court of Appeals of Kentucky,
speaking thru its Chief Justice, said:
. . . Where a dividend, although declared in stock, is based upon the earnings of
the company, it is in reality, whether called by one name or another, the income
of the capital invested in it. It is but a mode of distributing the profit. If it be not
income, what is it? If it is, then it is rightfully and equitably the property of the life
tenant. If it be really profit, then he should have it, whether paid in stock or
money. A stock dividend proper is the issue of new shares paid for by the
transfer of a sum equal to their par value from the profits and loss account to that
representing capital stock; and really a corporation has no right to a dividend,
either in cash or stock, except from its earnings; and a singular state of case — it
seems to us, an unreasonable one — is presented if the company, although it
rests with it whether it will declare a dividend, can bind the courts as to the proper
ownership of it, and by the mode of payment substitute its will for that of that of
the testator, and favor the life tenants or the remainder-men, as it may desire. It
cannot, in reason, be considered that the testator contemplated such a result.
The law regards substance, and not form, and such a rule might result not only in
a violation of the testator's intention, but it would give the power to the
corporation to beggar the life tenants, who, in this case, are the wife and children
of the testator, for the benefit of the remainder-men, who may perhaps be
unknown to the testator, being unborn when the will was executed. We are
unwilling to adopt a rule which to us seems so arbitrary, and devoid of reason
and justice. If the dividend be in fact a profit, although declared in stock, it should
be held to be income. It has been so held in Pennsylvania and many other
states, and we think it the correct rule. Earp's Appeal, 28 Pa. St. 368; Cook,
Stocks & S. sec. 554. . . .
We think the Pennsylvania rule is more in accord with our statutory laws than the
Massachusetts rule. Under section 16 of our Corporation Law, no corporation may make
or declare any dividend except from the surplus profits arising from its business. Any
dividend, therefore, whether cash or stock, represents surplus profits. Article 471 of the
Civil Code provides that the usufructuary shall be entitled to receive all the natural,
industrial, and civil fruits of the property in usufruct. And articles 474 and 475 provide as
follows:
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 ART. 474. Civil fruits are deemed to accrue day by day, and belong to the
usufructuary in proportion to the time the usufruct may last.
ART. 475. When a usufruct is created on the right to receive an income or
periodical revenue, either in money or fruits, or the interest on bonds or securities
payable to bearer, each matured payment shall be considered as the proceeds
or fruits such right.
When it consists of the enjoyment of the benefits arising from an interest in an
industrial or commercial enterprise, the profits of which are not distributed at fixed
periods, such profits shall have the same consideration. lawphil.net
In either case they shall be distributed as civil fruits, and shall be applied in
accordance with the rules prescribed by the next preceding article.
The 108,000 shares of stock are part of the property in usufruct. The 54,000 shares of
stock dividend are civil fruits of the original investment. They represent profits, and the
delivery of the certificate of stock covering said dividend is equivalent to the payment of
said profits. Said shares may be sold independently of the original shares, just as the
offspring of a domestic animal may be sold independently of its mother.
The order appealed from, being in accordance with the above-quoted provisions of the
Civil Code, his hereby affirmed, with costs against the appellants.
G.R. No. 35223 September 17, 1931
BACHRACH vs. TALISAY SILAY
This proceeding originated in a complaint filed by the Bachrach Motor Co., Inc., against
the Talisay-Silay Milling Co., Inc., for the delivery of the amount P13,850 or promissory
notes or other instruments or credit for that sum payable on June 30, 1930, as bonus in
favor of Mariano Lacson Ledesma; the complaint further prays that the sugar central be
ordered to render an accounting of the amounts it owes Mariano Lacson Ledesma by
way of bonus, dividends, or otherwise, and to pay the plaintiff a sum sufficient to satisfy
the judgment mentioned in the complaint, and that the sale made by said Mariano
Lacson Ledesma be declared null and void.
The Philippine National Bank filed a third party claim alleging a preferential right to
receive any amount which Mariano Lacson Ledesma might be entitled to from the
Talisay-Silay Milling Co. as bonus, because that would be civil fruits of the land
mortgaged to said bank by said debtor for the benefit of the central referred to, and by
virtue of a deed of assignment, and praying that said central be ordered to delivered
directly to the intervening bank said sum on account of the latter's credit against the
aforesaid Mariano Lacson Ledesma.
The corporation Talisay-Silay Milling Co., Inc., answered the complaint stating that of
Mariano Lacson Ledesma's credit, P7,500 belonged to Cesar Ledesma because he had
purchased it, and praying that it be absolved from the complaint and that the proper party
be named so that the remainder might be delivered.
Cesar Ledesma, in turn, claiming to be the owner by purchase in good faith an for a
reconsideration of the P7,500 which is a part of the credit referred to above, answered
praying that he be absolved from the complaint.
The plaintiff Bachrach Motor Co., Inc., answered the third party claim alleging that its
credit against Mariano Lacson Ledesma was prior and preferential to that of the
intervening bank, and praying that the latter's complaint be dismissed.
At the trial all the parties agreed to recognize and respect the sale made in favor of
Cesar Ledesma of the P7,500 part of the credit in question, for which reason the trial
court dismissed the complaint and cross-complaint against Cesar Ledesma authorizing
the defendant central to deliver to him the aforementioned sum of P7,500. And upon
conclusion of the hearing, the court held that the Bachrach Motor Co., Inc., had a
preferred right to receive the amount of P11,076.02 which was Mariano Lacson
Ledesma's bonus, and it ordered the defendant central to deliver said sum to the plaintiff.
The Philippine National Bank appeals, assigning the following alleged errors as
committed by the trial court:
1. In holding that the bonus which the Talisay-Silay Milling Co., Inc., bound itself
to pay the planters who had mortgaged their land to the Philippine National Bank
to secure the payment of the debt of said central to said bank is not civil fruits of
said land.
2. In not holding that said bonus became subject to the mortgage executed by
the defendant Mariano Lacson Ledesma to the Philippine National Bank to
secure the payment of his personal debt to said bank when it fell due.
3. In holding that the assignment (Exhibit 9, P.N.B.) of said bonus made on
March 7, 1930, by Mariano Lacson Ledesma to the Philippine National Bank to
be applied to the payment of his debt to said Philippine National Bank is
fraudulent.
106
 4. In holding that the Bachrach Motor Co. Inc., in civil case No. 31597 of the
Court of First Instance of Manila levied a valid attachment upon the bonus in
question.
5. In admitting and considering the supplementary complaint filed by the
Bachrach Motor Co., Inc., alleging as a cause of action the attachment of the
bonus in question which said Bachrach Motor Co., Inc., in civil case No. 31821 of
the Court of First Instance of Manila levied after the filing of the original complaint
in this case, and after Mariano Lacson Ledesma in this case had been declared
in default.
6. In holding that the Bachrach Motor Co., Inc., has a preferential right to receive
from the Talisay-Silay Milling Co., Inc., the amount of P11,076.02 which is in the
possession of said corporation as the bonus to be paid to Mariano Lacson
Ledesma, and in ordering the Talisay-Silay Milling Co., Inc., to deliver said
amount to the Bachrach Motor Co., Inc.
7. In not holding that the Philippine National Bank has a preferential right to
receive from the Talisay-Silay Milling Co., Inc., the amount of P11,076.02 held by
said corporation as Mariano Lacson Ledesma's bonus, and in not ordering said
Talisay-Silay Milling Co., Inc., to deliver said amount to the Philippine National
Bank.
8. In not holding that the amended complaint and the supplementary complaint of
the Bachrach Motor Co., Inc., do not state facts sufficient to constitute a cause of
action in favor of the Bachrach Motor Co., Inc., and against the Talisay-Silay
Milling Co., Inc., or against the Philippine National Bank.
The appellant bank bases its preferential right upon the contention that the bonus in
question is civil fruits of the lands which the owners had mortgaged for the benefit of the
central giving the bonus, and that, as civil fruits of said land, said bonus was assigned by
Mariano Lacson Ledesma on March 7, 1930, by virtue of the document Exhibit 9 of said
intervening institution, which admitted in its brief that "if the bonus in question is not civil
fruits or rent which became subject to the mortgage in favor of the Philippine National
Bank when Mariano Lacson Ledesma's personal obligation fell due, the assignment of
March 7, 1930 (Exhibit 9, P.N.B.), is null and void, not because it is fraudulent, for there
was no intent of fraud in executing the deed, but that the cause or consideration of the
assignment was erroneous, for it was based upon the proposition that the bonus was
civil fruits of the land mortgaged to the Philippine National Bank." (P. 31.)
The fundamental question, then, submitted to our consideration is whether or not the
bonus in question is civil fruits.
This is how the bonus came to be granted: On December 22, 1923, the Talisay-Silay
Milling Co., Inc., was indebted to the Philippine National Bank. To secure the payment of
its debt, it succeeded in inducing its planters, among whom was Mariano Lacson
Ledesma, to mortgage their land to the creditor bank. And in order to compensate those
planters for the risk they were running with their property under the mortgage, the
aforesaid central, by a resolution passed on that same date, i.e., December 22, 1923,
undertook to credit the owners of the plantation thus mortgaged every year with a sum
equal to two per centum of the debt secured according to yearly balance, the payment of
the bonus being made at once, or in part from time to time, as soon as the central
became free of its obligations to the aforesaid bank, and of those contracted by virtue of
the contract of supervision, and had funds which might be so used, or as soon as it
obtained from said bank authority to make such payment. (Exhibits 5, 6; P.N.B.)
Article 355 of the Civil Code considers three things as civil fruits: First, the rents of
buildings; second, the proceeds from leases of lands; and, third, the income from
perpetual or life annuities, or other similar sources of revenue. It may be noted that
according to the context of the law, the phrase "u otras analogas" refers only to rent or
income, for the adjectives "otras" and "analogas" agree with the noun "rentas," as do
also the other adjectives"perpetuas" and "vitalicias." That is why we say that by "civil
fruits" the Civil Code understands one of three and only three things, to wit: the rent of a
building, the rent of land, and certain kinds of income.
As the bonus in question is not rent of a building or of land, the only meaning of "civil
fruits" left to be examined is that of "income."
Assuming that in broad juridical sense of the word "income" it might be said that the
bonus in question is "income" under article 355 of the Civil Code, it is obvious to inquire
whether it is derived from the land mortgaged by Mariano Lacson Ledesma to the
appellant bank for the benefit of the central; for it is not obtained from that land but from
something else, it is not civil fruits of that land, and the bank's contention is untenable.
It is to be noted that the said bonus bears no immediate, but only a remote accidental
relation to the land mentioned, having been granted as compensation for the risk of
having subjected one's land to a lien in favor of the bank, for the benefit of the entity
granting said bonus. If this bonus be income or civil fruits of anything, it is income arising
from said risk, or, if one chooses, from Mariano Lacson Ledesma's generosity in facing
the danger for the protection of the central, but certainly it is not civil fruits or income from
the mortgaged property, which, as far as this case is concerned, has nothing to do with it.
107
Hence, the amount of the bonus, according to the resolution of the central granting it, is
not based upon the value, importance or any other circumstance of the mortgaged
property, but upon the total value of the debt thereby secured, according to the annual
balance, which is something quite distinct from and independent of the property referred
to.
Finding no merit in this appeal, the judgment appealed from is affirmed, without express
finding as to costs. So ordered.
--- xxx END OF RIGHT OF ACCESSION (ACCESSION DISCRETA) xxx ---
G.R. No. L-44606 November 28, 1938
BERNARDO vs. BATACLAN
This is an appeal taken by both the plaintiff and the defendant from the order of
September 26, 1935, hereinabove referred to, of the Court of First Instance of Cavite in
Civil Case No. 2428.
There is no controversy as to the facts. By a contract of sale executed from Pastor
Samonte and others ownership of a parcel of land of about 90 hectares situated in sitio
Balayunan, Silang, Cavite. To secure possession of the land from the vendors the said
plaintiff, on July 20, 1929, instituted Civil Case No. 1935 in the Court of First Instance of
Cavite. The trial court found for the plaintiff in a decision which was affirmed by this
Supreme Court on appeal (G.R. No. 33017). 1 When plaintiff entered upon the premises,
however, he found the defendant herein, Catalino Bataclan, who appears to have been
authorized by former owners, as far back as 1922, to clear the land and make
improvements thereon. As Bataclan was not a party in Case No. 1935, plaintiff, on June
11, 1931, instituted against him, in the Court of First Instance of Cavite, Civil Case No.
2428. In this case, plaintiff was declared owner but the defendant was held to be a
possessor in good faith, entitled to reimbursement in the total sum of P1,642, for work
done and improvements made. The dispositive part of the decision reads:
Por las consideraciones expuestas, se declara al demandante Vicente Santo
Domingo Bernardo dueño con derecho a la posesion del terreno que se describe
en la demanda, y al demandado Catalino Bataclan con derecho a que del
demandante le pague la suma de P1,642 por gastos utiles hechos de buena fe
en el terreno, y por el cerco y ponos de coco y abaca existentes en el mismo, y
con derecho, ademas a retener la posesion del terreno hasta que se le pague
dicha cantidad. Al demandante puede optar, en el plazo de treinta dias, a partir
de la fecha en que fuere notificado de la presente, por pagar esa suma al
demandado, haciendo asi suyos el cerco y todas las plantaciones existentes en
el terreno, u obligar al demandado a pagarle el precio terreno, a razon de
trescientos pesos la hectarea. En el caso de que el demandante optara por que
el demandado le pagara el precio del terreno, el demandado efectuara el pago
en el plazo convenientes por las partes o que sera fijado por el Juzgado. Sin
costas.
Both parties appealed to this court (G. R. No. 37319). 2 The decision appealed from was
modified by allowing the defendant to recover compensation amounting to P2,212 and by
reducing the price at which the plaintiff could require the defendant to purchase the land
in question from P300 to P200 per hectare. Plaintiff was given by this court 30 days from
the date when the decision became final within which to exercise his option, either to sell
the land to the defendant or to buy the improvements from him. On January 9, 1934, the
plaintiff manifested to the lower court his desire "to require the defendant to pay him the
value of the land at the rate of P200 per hectare or a total price of P18,000 for the whole
tract of land." The defendant informed the lower court that he was unable to pay the land
and, on January 24, 1934, an order was issued giving the plaintiff 30 days within which to
pay the defendant the sum of P2,212 stating that, in the event of failure to make such
payment, the land would be ordered sold at public auction "Para hacer pago al
demandante de la suma de P2,212 y el remanente despues de deducidos los gastos
legales de la venta en publica subasta sera entregado al demandante." On February 21,
1934, plaintiff moved to reconsider the foregoing order so that he would have preference
over the defendant in the order of payment. The motion was denied on March 1, 1934
but on March 16 following the court below, motu proprio modified its order of January 24,
"en el sentido de que el demandante tiene derecho preferente al importe del terreno no
se vendiere en publica subasta, a razon de P200 por hectares y el remanente, si acaso
lo hubiere se entregara al demandado en pago de la cantidad de P2,212 por la limpieza
del terreno y las mejoras introducidas en el mismo por el citado demandado." On April
24, 1934, the court below, at the instance of the plaintiff and without objection on the part
of the defendant, ordered the sale of the land in question at public auction. The land was
sold on April 5, 1935 to Toribio Teodoro, the highest bidder, for P8,000. In the certificate
of sale issued to said purchaser on the very day of sale, it was stated that the period of
redemption of the land sold was to expire on April 5, 1936. Upon petition of Toribio
Teodoro the court below ordered the provincial sheriff to issue another certificate not
qualified by any equity of redemption. This was complied with by the sheriff on July 30,
1935. On September 18, 1935, Teodoro moved that he be placed in possession of the
land purchased by him. The motion was granted by order of September 26, 1935, the
dispositive part of which is as follows:
Por tanto, se ordena al Sheriff Provincial de Cavite ponga a Toribio Teodoro en
posesion del terreno comprado por el en subasta publica y por el cual se le
expidio certificado de venta definitiva, reservando al demandado su derecho de
ejercitar una accion ordinaria para reclamar del demandante la cantidad de
108
 P2,212 a que tiene derecho por la limpieza y mejoras del terreno y cuya suma,
en justicia y equidad, debe ser descontada y deducida de la suma de P8,000
que ya ha recibido el demandante.
The Civil Code confirms certain time-honored principles of the law of property. One of
these is the principle of accession whereby the owner of property acquires not only that
which it produces but that which is united to it either naturally or artificially. (Art. 353.)
Whatever is built, planted or sown on the land of another, and the improvements or
repairs made thereon, belong to the owner of the land (art. 358). Where, however, the
planter, builder, or sower has acted in good faith, a conflict of rights arises between the
owners and it becomes necessary to protect the owner of the improvements without
causing injustice to the owner of the land. In view of the impracticability of creating what
Manresa calls a state of "forced coownership" (vol. 3, 4th ed., p. 213), the law has
provided a just and equitable 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 (art. 361). It is the
owner of the land who is allowed 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, 4th ed., p. 213). In the case before us, the plaintiff, as owner of the
land, chose to require the defendant, as owner of the improvements, to pay for the land.
The defendant states that he is a possessor in good faith and that the amount of P2,212
to which he is entitled has not yet been paid to him. Therefore, he says, he has a right to
retain the land in accordance with the provisions of article 453 of the Civil Code. We do
not doubt the validity of the premises stated. "Considera la ley tan saarada y legitima la
deuda, que, hasta que sea pagada, no consiente que la cosa se restituya all vencedor."
(4 Manresa, 4th ed, p., 304.) We find, however, that the defendant has lost his right of
retention. In obedience to the decision of this court in G.R. No. 37319, the plaintiff
expressed his desire to require the defendant to pay for the value of the land. The said
defendant could have become owner of both land and improvements and continued in
possession thereof. But he said he could not pay and the land was sold at public auction
to Toribio Teodoro. The law, as we have already said, requires no more than that the
owner of the land should choose between indemnifying the owner of the improvements
or requiring the latter to pay for the land. When he failed to pay for the land, the
defendant herein lost his right of retention.
The sale at public auction having been asked by the plaintiff himself (p. 22, bill of
exceptions) and the purchase price of P8,000 received by him from Toribio Teodoro, we
find no reason to justify a rapture of the situation thus created between them, the
defendant-appellant not being entitled, after all, to recover from the plaintiff the sum of
P2,212. lawphi1.net
The judgment of the lower court is accordingly modified by eliminating therefrom the
reservation made in favor of the defendant-appellant to recover from the plaintiff the sum
of P2,212. In all the respects, the same is affirmed, without pronouncement regarding
costs. So ordered.
G.R. No. L-175 April 30, 1946
IGNACIO vs. HILARIO
This is a petition for certiorari arising from a case in the Court of First Instance of
Pangasinan between the herein respondents Elias Hilario and his wife Dionisia Dres as
plaintiffs, and the herein petitioners Damian, Francisco and Luis, surnamed Ignacio, as
defendants, concerning the ownership of a parcel of land, partly rice-land and partly
residential. After the trial of the case, the lower court, presided over by Hon. Alfonso
Felix, rendered judgment holding plaintiffs as the legal owners of the whole property but
conceding to defendants the ownership of the houses and granaries built by them on the
residential portion with the rights of a possessor in good faith, in accordance with article
361 of the Civil Code. The dispositive part of the decision, hub of this controversy,
follows:
Wherefore, judgment is hereby rendered declaring:
(1) That the plaintiffs are the owners of the whole property described in transfer
certificate of title No. 12872 (Exhibit A) issued in their name, and entitled to the
possession of the same;
(2) That the defendants are entitled to hold the position of the residential lot until
after they are paid the actual market value of their houses and granaries erected
thereon, unless the plaintiffs prefer to sell them said residential lot, in which case
defendants shall pay the plaintiffs the proportionate value of said residential lot
taking as a basis the price paid for the whole land according to Exhibit B; and
(3) That upon defendant's failure to purchase the residential lot in question, said
defendants shall remove their houses and granaries after this decision becomes
final and within the period of sixty (60) days from the date that the court is
informed in writing of the attitude of the parties in this respect.
No pronouncement is made as to damages and costs.
Once this decision becomes final, the plaintiffs and defendants may appear again
before this court for the purpose of determining their respective rights under
109
 article 361 of the Civil Code, if they cannot come to an extra-judicial settlement
with regard to said rights.
Subsequently, in a motion filed in the same Court of First Instance but now presided over
by the herein respondent Judge Hon. Felipe Natividad, the plaintiffs prayed for an order
of execution alleging that since they chose neither to pay defendants for the buildings nor
to sell to them the residential lot, said defendants should be ordered to remove the
structure at their own expense and to restore plaintiffs in the possession of said lot.
Defendants objected to this motion which, after hearing, was granted by Judge
Natividad. Hence, this petition by defendants praying for (a) a restraint and annulment of
the order of execution issued by Judge Natividad; (b) an order to compel plaintiffs to pay
them the sum of P2,000 for the buildings, or sell to them the residential lot for P45; or (c),
a rehearing of the case for a determination of the rights of the parties upon failure of
extra-judicial settlement.
The judgment rendered by Judge Felix is founded on articles 361 and 453 of the Civil
Code which are as follows:
ART. 361. The owner of land on which anything has been built, sown or planted
in good faith, shall have the right to appropriate as his own the work, sowing or
planting, after the payment of the indemnity stated in articles 453 and 454, or to
oblige the one who built or planted to pay the price of the land, and the one who
sowed, the proper rent.
ART. 453. Necessary expenses shall be refunded to every possessor; but only
the possessor in good faith may retain the thing until such expenses are made
good to him.
Useful expenses shall be refunded to the possessor in good faith with the same
right of retention, the person who has defeated him in the possession having the
option of refunding the amount of the expenses or paying the increase in value
which the thing may have acquired in consequence thereof.
The owner of the building erected in good faith on a land owned by another, is entitled to
retain the possession of the land until he is paid the value of his building, under article
453. The owner of the land, upon the other hand, has the option, under article 361, either
to pay for the building or to sell his land to the owner of the building. But he cannot, as
respondents here did, refuse both to pay for the building and to sell the land and compel
the owner of the building to remove it from the land where it is erected. He is entitled to
such remotion only when, after having chosen to sell his land, the other party fails to pay
for the same. But this is not the case before us.
We hold, therefore, that the order of Judge Natividad compelling defendants-petitioners
to remove their buildings from the land belonging to plaintiffs-respondents only because
the latter chose neither to pay for such buildings not to sell the land, is null and void, for it
amends substantially the judgment sought to be executed and is, furthermore, offensive
to articles 361 and 453 of the Civil Code.
There is, however, in the decision of Judge Felix a question of procedure which calls for
the clarification, to avoid uncertainty and delay in the disposition of cases. In that
decision, the rights of both parties are well defined under articles 361 and 453 of the Civil
Code, but it fails to determine the value of the buildings and of the lot where they are
erected as well as the periods of time within which the option may be exercised and
payment should be made, these particulars having been left for determination apparently
after the judgment has become final. This procedure is erroneous, for after the judgment
has become final, no additions can be made thereto and nothing can be done therewith
except its execution. And execution cannot be had, the sheriff being ignorant as to how,
for how much, and within what time may the option be exercised, and certainly no
authority is vested in him to settle these matters which involve exercise of judicial
discretion. Thus the judgment rendered by Judge Felix has never become final, it having
left matters to be settled for its completion in a subsequent proceeding, matters which
remained unsettled up to the time the petition is filed in the instant case.
For all the foregoing, the writ of execution issued by Judge Natividad is hereby set aside
and the lower court ordered to hold a hearing in the principal case wherein it must
determine the prices of the buildings and of the residential lot where they are erected, as
well as the period of time within which the plaintiffs-respondents may exercise their
option either to pay for the buildings or to sell their land, and, in the last instance, the
period of time within which the defendants-petitioners may pay for the land, all these
periods to be counted from the date the judgment becomes executory or unappealable.
After such hearing, the court shall render a final judgment according to the evidence
presented by the parties.
The costs shall be paid by plaintiffs-respondents.
G.R. No. L-57348 May 16, 1985
DEPRA vs. DUMLAO
This is an appeal from the Order of the former Court of First Instance of Iloilo to the then
Court of Appeals, which the latter certified to this instance as involving pure questions of
law
110
Plaintiff-appellee, Francisco Depra, is the owner of a parcel of land registered under
Transfer Certificate of Title No. T3087, known as Lot No. 685, situated in the municipality
of Dumangas, Iloilo, with an area of approximately 8,870 square meters. Agustin
Dumlao, defendant-appellant, owns an adjoining lot, designated as Lot No. 683, with an
approximate area of 231 sq. ms.
Sometime in 1972, when DUMLAO constructed his house on his lot, the kitchen thereof
had encroached on an area of thirty four (34) square meters of DEPRA's property, After
the encroachment was discovered in a relocation survey of DEPRA's lot made on
November 2,1972, his mother, Beatriz Depra after writing a demand letter asking
DUMLAO to move back from his encroachment, filed an action for Unlawful Detainer on
February 6,1973 against DUMLAO in the Municipal Court of of Dumangas, docketed as
Civil Case No 1, Said complaint was later amended to include DEPRA as a party plain.
plaintiff.
After trial, the Municipal Court found that DUMLAO was a builder in good faith, and
applying Article 448 of the Civil Code, rendered judgment on September 29, 1973, the
dispositive portion of which reads:
Ordering that a forced lease is created between the parties with the
plaintiffs, as lessors, and the defendants as lessees, over the disputed
portion with an area of thirty four (34) square meters, the rent to be paid
is five (P5.00) pesos a month, payable by the lessee to the lessors within
the first five (5) days of the month the rent is due; and the lease shall
commence on the day that this decision shall have become final.
From the foregoing judgment, neither party appeal so that, ff it were a valid judgment, it
would have ordinarily lapsed into finality, but even then, DEPRA did not accept payment
of rentals so that DUMLAO deposited such rentals with the Municipal Court.
On July 15,1974, DEPRA filed a Complaint for Quieting of Title against DUMLAO before
the then Court of First Instance of Iloilo, Branch IV (Trial Court), involving the very same
34 square meters, which was the bone of contention in the Municipal Court. DUMLAO, in
his Answer, admitted the encroachment but alleged, in the main, that the present suit is
barred by res judicata by virtue of the Decision of the Municipal Court, which had
become final and executory.
After the case had been set for pre-trial, the parties submitted a Joint Motion for
Judgment based on the Stipulation of Facts attached thereto. Premised thereon, the Trial
Court on October 31, 1974, issued the assailed Order, decreeing:
WHEREFORE, the Court finds and so holds that the thirty four (34)
square meters subject of this litigation is part and parcel of Lot 685 of the
Cadastral Survey of Dumangas of which the plaintiff is owner as
evidenced by Transfer Certificate of Title No. 3087 and such plaintiff is
entitled to possess the same.
Without pronouncement as to costs.
SO ORDERED.
Rebutting the argument of res judicata relied upon by DUMLAO, DEPRA claims that the
Decision of the Municipal Court was null and void ab initio because its jurisdiction is
limited to the sole issue of possession, whereas decisions affecting lease, which is an
encumbrance on real property, may only be rendered by Courts of First Instance.
Addressing out selves to the issue of validity of the Decision of the Municipal Court, we
hold the same to be null and void. The judgment in a detainer case is effective in respect
of possession only (Sec. 7, Rule 70, Rules of Court). 1 The Municipal Court over-stepped
its bounds when it imposed upon the parties a situation of "forced lease", which like "forced
co-ownership" is not favored in law. Furthermore, a lease is an interest in real property,
jurisdiction over which belongs to Courts of First Instance (now Regional Trial Courts) (Sec.
44(b), Judiciary Act of 1948; 2 Sec. 19 (2) Batas Pambansa Blg. 129). 3 Since the Municipal
Court, acted without jurisdiction, its Decision was null and void and cannot operate as res
judicata to the subject complaint for Queting of Title. Besides, even if the Decision were valid,
the rule on res judicata would not apply due to difference in cause of action. In the Municipal
Court, the cause of action was the deprivation of possession, while in the action to quiet title,
the cause of action was based on ownership. Furthermore, Sec. 7, Rule 70 of the Rules of
Court explicitly provides that judgment in a detainer case "shall not bar an action between the
same parties respecting title to the land. " 4
Conceded in the Stipulation of Facts between the parties is that DUMLAO was a builder
in good faith. Thus,
8. That the subject matter in the unlawful detainer case, Civil Case No. 1,
before the Municipal Court of Dumangas, Iloilo involves the same subject
matter in the present case, the Thirty-four (34) square meters portion of
land and built thereon in good faith is a portion of defendant's kitchen and
has been in the possession of the defendant since 1952 continuously up
to the present; ... (Emphasis ours)
111
Consistent with the principle that our Court system, like any other, must be a dispute
resolving mechanism, we accord legal effect to the agreement of the parties, within the
context of their mutual concession and stipulation. They have, thereby, chosen a legal
formula to resolve their dispute to appeal ply to DUMLAO the rights of a "builder in good
faith" and to DEPRA those of a "landowner in good faith" as prescribed in Article 448.
Hence, we shall refrain from further examining whether the factual situations of DUMLAO
and DEPRA conform to the juridical positions respectively defined by law, for a "builder in
good faith" under Article 448, a "possessor in good faith" under Article 526 and a
"landowner in good faith' under Article 448.
In regards to builders in good faith, Article 448 of the Civil Code provides:
ART. 448. The owner of the land on which anything has been built sown or planted in
good faith,
shall have the right
to appropriate as his own the works, sowing or planting, after payment of
the indemnity provided for in articles 546 and 548, 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 (Paragraphing
supplied)
Pursuant to the foregoing provision, DEPRA has the option either to pay for the
encroaching part of DUMLAO's kitchen, or to sell the encroached 34 square meters of
his lot to DUMLAO. He cannot refuse to pay for the encroaching part of the building, and
to sell the encroached part of his land, 5 as he had manifested before the Municipal Court.
But that manifestation is not binding because it was made in a void proceeding.
However, the good faith of DUMLAO is part of the Stipulation of Facts in the Court of
First Instance. It was thus error for the Trial Court to have ruled that DEPRA is "entitled
to possession," without more, of the disputed portion implying thereby that he is entitled
to have the kitchen removed. He is entitled to such removal only when, after having
chosen to sell his encroached land, DUMLAO fails to pay for the same. 6 In this case,
DUMLAO had expressed his willingness to pay for the land, but DEPRA refused to sell.
The owner of the building erected in good faith on a land owned by
another, is entitled to retain the possession of the land until he is paid the
value of his building, under article 453 (now Article 546). The owner of
the land, upon the other hand, has the option, under article 361 (now
Article 448), either to pay for the building or to sell his land to the owner
of the building. But he cannot as respondents here did refuse both to pay
for the building and to sell the land and compel the owner of the building
to remove it from the land where it erected. He is entitled to such
remotion only when, after having chosen to sell his land. the other party
fails to pay for the same (italics ours).
We hold, therefore, that the order of Judge Natividad compelling
defendants-petitioners to remove their buildings from the land belonging
to plaintiffs-respondents only because the latter chose neither to pay for
such buildings nor to sell the land, is null and void, for it amends
substantially the judgment sought to be executed and is. furthermore,
offensive to articles 361 (now Article 448) and 453 (now Article 546) of
the Civil Code. (Ignacio vs. Hilario, 76 Phil. 605, 608[1946]).
A word anent the philosophy behind Article 448 of the Civil rode.
The original provision was found in Article 361 of the Spanish Civil Code; which provided:
ART. 361. The owner of land on which anything has been built, sown or
planted in good faith, shall have the right to appropriate as his own the
work, sowing or planting, after the payment of the indemnity stated in
Articles 453 and 454, or to oblige the one who built or planted to pay the
price of the land, and the one who sowed, the proper rent.
As will be seen, the Article favors the owner of the land, by giving him one of the two
options mentioned in the Article. Some commentators have questioned the preference in
favor of the owner of the land, but Manresa's opinion is that the Article is just and fair.
. . . es justa la facultad que el codigo da al dueno del suelo en el articulo
361, en el caso de edificacion o plantacion? Algunos comentaristas la
conceptuan injusta, y como un extraordinario privilegio en favor de la
propiedad territorial. Entienden que impone el Codigo una pena al
poseedor de buena fe y como advierte uno de los comentaristas aludidos
112
 'no se ve claro el por que de tal pena . . . al obligar al que obro de buena
fe a quedarse con el edificio o plantacion, previo el pago del terreno que
ocupa, porque si bien es verdad que cuando edifico o planto demostro
con este hecho, que queria para si el edificio o plantio tambien lo es que
el que edifico o planto de buena fe lo hizo en la erronea inteligencia de
creerse dueno del terreno Posible es que, de saber lo contrario, y de
tener noticia de que habia que comprar y pagar el terreno, no se hubiera
decidido a plantar ni a edificar. La ley obligandole a hacerlo fuerza su
voluntad, y la fuerza por un hecho inocente de que no debe ser
responsable'. Asi podra suceder pero la realidad es que con ese hecho
voluntario, aunque sea inocente, se ha enriquecido torticeramente con
perjuicio de otro a quien es justo indemnizarle,
En nuestra opinion, el Codigo ha resuelto el conflicto de la manera mas
justa y equitativa y respetando en lo possible el principio que para la
accesion se establece en el art. 358. 7
Our own Code Commission must have taken account of the objections to Article 361 of
the Spanish Civil Code. Hence, the Commission provided a modification thereof, and
Article 448 of our Code has been made to provide:
ART. 448. The owner of the land on which anything has been built, sown
or planted in good faith, shall have the right to appropriate as his own the
works, sowing or planting, after payment of the indemnity provided for in
articles 546 and 548, or to oblige the one who built or planted to pay the
price of the land, and the one who sowed, the proper rent. However, the
builder or planter cannot be obliged to buy the land if its value is
considerably more than that of the building or trees. In such case, he
shall pay reasonable rent, if the owner of the land does not choose to
appropriate the building or trees after proper indemnity. The parties shall
agree upon the terms of the lease and in case of disagreement, the court
shall fix the terms thereof.
Additional benefits were extended to the builder but the landowner retained his options.
The fairness of the rules in Article 448 has also been explained as follows:
Where the builder, planter or sower has acted in good faith, a conflict of
rights arises between the owners, and it becomes necessary to protect
the owner of the improvements without causing injustice to the owner of
the land. In view of the impracticability of creating a state of forced co-
ownership, the law has provided a just solution by giving the owner of the
land the option to acquire the improvements after payment of the proper
indemnity, or to oblige the builder or planter to pay for the land and the
sower to pay for 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). 8
WHEREFORE, the judgment of the trial Court is hereby set aside, and this case is
hereby ordered remanded to the Regional Trial Court of Iloilo for further proceedings
consistent with Articles 448 and 546 of the Civil Code, as follows:
1. The trial Court shall determine
a) the present fair price of DEPRA's 34 square meter area of land;
b) the amount of the expenses spent by DUMLAO for the building of the
kitchen;
c) the increase in value ("plus value") which the said area of 34 square
meters may have acquired by reason thereof, and
d) whether the value of said area of land is considerably more than that of
the kitchen built thereon.
2. After said amounts shall have been determined by competent evidence, the Regional,
Trial Court shall render judgment, as follows:
a) The trial Court shall grant DEPRA a period of fifteen (15) days within
which to exercise his option under the law (Article 448, Civil Code),
whether to appropriate the kitchen as his own by paying to DUMLAO
either the amount of tile expenses spent by DUMLAO f or the building of
the kitchen, or the increase in value ("plus value") which the said area of
34 square meters may have acquired by reason thereof, or to oblige
DUMLAO to pay the price of said area. The amounts to be respectively
paid by DUMLAO and DEPRA, 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
113
by tendering the amount to the Court in favor of the party entitled to
receive it;
b) The trial Court shall further order that if DEPRA exercises the option to
oblige DUMLAO 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 kitchen, DUMLAO shall give written
notice of such rejection to DEPRA and to the Court within fifteen (15)
days from notice of DEPRA's 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
Court formal written notice of such 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 Ten Pesos
(P10.00) 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 1952 that DUMLAO has occupied the subject area.
The rental thus fixed shall be increased by ten percent (10%) for the
second year of the forced lease. DUMLAO shall not make any further
constructions or improvements on the kitchen. Upon expiration of the
two-year period, or upon default by DUMLAO in the payment of rentals
for two (2) consecutive months, DEPRA shall be entitled to terminate the
forced lease, to recover his land, and to have the kitchen removed by
DUMLAO or at the latter's expense. The rentals herein provided shall be
tendered by DUMLAO to the Court for payment to DEPRA, and such
tender shall constitute evidence of whether or not compliance was made
within the period fixed by the Court.
c) In any event, DUMLAO shall pay DEPRA an amount computed at Ten
Pesos (P10.00) per month as reasonable compensation for the
occupancy of DEPRA's land for the period counted from 1952, the year
DUMLAO occupied the subject area, 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 Precision shall be
inextendible, 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.
G.R. No. L-57288 April 30, 1984
SARMIENTO vs. AGANA
This Petition for certiorari questions a March 29, 1979 Decision rendered by the then
Court of First Instance of Pasay City. The Decision was one made on memoranda,
pursuant to the provisions of RA 6031, and it modified, on October 17, 1977, a judgment
of the then Municipal Court of Paranaque, Rizal, in an Ejectment suit instituted by herein
petitioner Leonila SARMIENTO against private respondents, the spouses ERNESTO
Valentino and Rebecca Lorenzo. For the facts, therefore, we have to look to the
evidence presented by the parties at the original level.
It appears that while ERNESTO was still courting his wife, the latter's mother had told
him the couple could build a RESIDENTIAL HOUSE on a lot of 145 sq. ms., being Lot D
of a subdivision in Paranaque (the LAND, for short). In 1967, ERNESTO did construct a
RESIDENTIAL HOUSE on the LAND at a cost of P8,000.00 to P10,000.00. It was
probably assumed that the wife's mother was the owner of the LAND and that,
eventually, it would somehow be transferred to the spouses.
It subsequently turned out that the LAND had been titled in the name of Mr. & Mrs. Jose
C. Santo, Jr. who, on September 7 , 1974, sold the same to petitioner SARMIENTO. The
following January 6, 1975, SARMIENTO asked ERNESTO and wife to vacate and, on
April 21, 1975, filed an Ejectment suit against them. In the evidentiary hearings before
the Municipal Court, SARMIENTO submitted the deed of sale of the LAND in her favor,
which showed the price to be P15,000.00. On the other hand, ERNESTO testified that
the then cost of the RESIDENTIAL HOUSE would be from P30,000.00 to P40,000.00.
The figures were not questioned by SARMIENTO.
The Municipal Court found that private respondents had built the RESIDENTIAL HOUSE
in good faith, and, disregarding the testimony of ERNESTO, that it had a value of
P20,000.00. It then ordered ERNESTO and wife to vacate the LAND after SARMIENTO
has paid them the mentioned sum of P20,000.00.
The Ejectment suit was elevated to the Court of First Instance of Pasay where, after the
submission of memoranda, said Court rendered a modifying Decision under Article 448
114
of the Civil Code. SARMIENTO was required, within 60 days, to exercise the option to
reimburse ERNESTO and wife the sum of 40,000.00 as the value of the RESIDENTIAL
HOUSE, or the option to allow them to purchase the LAND for P25,000.00. SARMIENTO
did not exercise any of the two options within the indicated period, and ERNESTO was
then allowed to deposit the sum of P25,000.00 with the Court as the purchase price for
the LAND. This is the hub of the controversy. SARMIENTO then instituted the instant
certiorari proceedings.
We agree that ERNESTO and wife were builders in good faith in view of the peculiar
circumstances under which they had constructed the RESIDENTIAL HOUSE. As far as
they knew, the LAND was owned by ERNESTO's mother-in-law who, having stated they
could build on the property, could reasonably be expected to later on give them the
LAND.
In regards to builders in good faith, Article 448 of the Code provides: têñ.£îhqwâ£
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. (Paragraphing
supplied)
The value of the LAND, purchased for P15,000.00 on September 7, 1974, could not have
been very much more than that amount during the following January when ERNESTO
and wife were asked to vacate. However, ERNESTO and wife have not questioned the
P25,000.00 valuation determined by the Court of First Instance.
In regards to the valuation of the RESIDENTIAL HOUSE, the only evidence presented
was the testimony of ERNESTO that its worth at the time of the trial should be from
P30,000.00 to P40,000.00. The Municipal Court chose to assess its value at P20,000.00,
or below the minimum testified by ERNESTO, while the Court of First Instance chose the
maximum of P40,000.00. In the latter case, it cannot be said that the Court of First
Instance had abused its discretion.
The challenged decision of respondent Court, based on valuations of P25,000.00 for the
LAND and P40,000.00 for the RESIDENTIAL HOUSE, cannot be viewed as not
supported by the evidence. The provision for the exercise by petitioner SARMIENTO of
either the option to indemnify private respondents in the amount of P40,000.00, or the
option to allow private respondents to purchase the LAND at P25,000.00, in our opinion,
was a correct decision. têñ.£îhqw â£
The owner of the building erected in good faith on a land owned by
another, is entitled to retain the possession of the land until he is paid the
value of his building, under article 453 (now Article 546). The owner, of
the land. upon, the other hand, has the option, under article 361 (now
Article 448), either to pay for the building or to sell his land to the owner
of the building. But he cannot, as respondents here did, refuse both to
pay for the building and to sell the land and compel the owner of the
building to remove it from the land where it is erected. He is entitled to
such remotion only when, after having chosen to sell his land, the other
party fails to pay for the same. (Emphasis ours)
We hold, therefore, that the order of Judge Natividad compelling
defendants-petitioners to remove their buildings from the land belonging
to plaintiffs-respondents only because the latter chose neither to pay for
such buildings nor to sell the land, is null and void, for it amends
substantially the judgment sought to be executed and is, furthermore,
offensive to articles 361 (now Article 448) and 453 (now Article 546) of
the Civil Code. (Ignacio vs. Hilario, 76 Phil. 605, 608 [1946]).
WHEREFORE, the Petition for Certiorari is hereby ordered dismissed, without
pronouncement as to costs.
SO ORDERED.
1äw phï1.ñët
G.R. No. L-12812 September 29, 1959
FILIPINA COLLEGES vs. TIMBANG
115
This is an appeal taken from an order of the Court of First Instance of Manila dated May
10, 1957 (a) declaring the Sheriff's certificate of sale covering a school building sold at
public auction null and void unless within 15 days from notice of said order the
successful bidders, defendants-appellants spouses Maria Garcia Timbang and Marcelino
Timbang, shall pay to, appellee Maria Gervacio Blas directly or through the Sheriff of
Manila the sum of P5,750.00 that the spouses Timbang had bid for the building at the
Sheriff's sale; (b) declaring the other appellee Filipinas Colleges, Inc. owner of
24,500/3,285,934 undivided interest in Lot No. 2-a covered by certificate of tile No
45970, on which the building sold in the auction sale is situated; and (c) ordering the sale
in public auction of the said undivided interest of the Filipinas Colleges, Inc., in lot No. 2-
a aforementioned to satisfy the unpaid portion of the judgment in favor of appellee Blas
and against Filipinas Colleges, Inc. in the amount of P8,200.00 minus the sum of
P5,750.00 mentioned in (a) above.
The order appealed from is the result of three motions filed in the court a quo in the
course of the execution of a final judgment of the Court of Appeals rendered in 2 cases
appealed to it in which the spouses Timbang, the Filipinas Colleges, Inc., and Maria
Gervacio Blas were the parties. IN that judgment of the Court of Appeals, the respective
rights of the litigants have been adjudicated as follows: 1âwphïl.nêt
(1) Filipinas Colleges, Inc. was declared to have acquired the rights of the
spouses Timbang in and to lot No. 2-a mentioned above and in consideration
thereof, Filipinas Colleges, Inc., was ordered to pay the spouses Timbang the
amount of P15,807.90 plus such other amounts which said spouses might have
paid or had to pay after February, 1953, to Hoskins and Co. Inc., agent of the
Urban Estates, Inc., original vendor of the lot. Filipinas Colleges, Inc. original
vendor of the total amount with the court within 90 days after the decision shall
have become final.
(2) Maria Gervacio Blas was declared to be a builder in good faith of the school
building constructed on the lot in question and entitled to be paid the amount of
P19,000.00 for the same. Filipinas Colleges, Inc., purchaser of the said building
was ordered to deliver to Blas stock certificate (Exh. C) for 108 shares of
Filipinas Colleges, Inc. with a par value of P10,800.00 and to pay Blas the sum of
P8,200.00 of the house.
(3) In case Filipinas Colleges, Inc. failed to deposit the value of the land, which
after liquidation was fixed at P32,859.34, within the 90-day period set by the
court, Filipinas Colleges would lose all its rights to the land and the spouses
Timbang would then become the owners thereof. In that eventuality, the
Timbangs would make known to the court their option under Art. 448 of the Civil
Code whether they would appropriate the building in question, in which even they
would have to pay Filipinas Colleges, Inc. the sum of P19,000.00, or would
compel the latter to acquire the land and pay the price thereof.
Filipinas Colleges, Inc. having failed to pay or deposit the sum of P32,859.34 within the
time prescribed, the spouses Timbang, in compliance with the judgment of the Court of
Appeals, on September 28, 1956, made known to the court their decision that they had
chosen not of appropriate the building but to compel Filipinas Colleges, Inc., for the
payment of the sum of P32,859,34. The motion having been granted, a writ of execution
was issued on January 8, 1957.
On January 16, 1957, appellee Blas in turn filed a motion for execution of her judgment
of P8,200.00 representing the unpaid portion of the price of the house sold to Filipinas
Colleges, Inc. Over the object of the Timbangs, the court grated the motion and the
corresponding writ of execution was issued on January 30, 1957, date of the granting of
the motion for execution, Blas through counsel, sent a letter to the Sheriff of Manila
advising him of her preferential claim or lien on the house to satisfy the unpaid balance of
the purchase price thereof under Article 2242 of the Civil Code, and to withhold from the
proceed of the auction sale the sum of P8,200.00. Levy having been made on the house
in virtue of the writs of execution, the Sheriff of Manila on March 5, 1957, sold the
building in public auction in favor of the spouses Timbang, as the highest bidders, in the
amount of P5,750.00. Personal properties of Filipinas Colleges, Inc. were also auctioned
for P245.00 in favor of the spouses Timbang.
As a result of these actuation, three motion were subsequently filed before the lower
court:
(1) By appellee Blas, praying that the Sheriff of Manila and/or the Timbang
spouses be ordered to pay and deliver to her the sum of P5,750.00 representing
the proceeds of the auction sale of the building of Filipinas Colleges, Inc. over
which she has a lien of P8,200.00 for the unpaid balance of the purchase price
thereof;.
(2) Also by the appellee Bals, praying that there being still two unsatisfied
executions, one for the sum of P32,859.34 in favor the land involved, Lot No. 2-a,
be sold at public auction; and (3) By Filipinas Colleges, Inc. praying that because
its properties, the house and some personal properties, have been auctioned for
P5,750.00 and P245.00 respectively in favor of the Timbang spouses who
applied the proceeds to the partial payment of the sum of P32,859.34 value of
the land, Lot No. 2-a, it (Filipinas Colleges, Inc.) be declared part owner of said
116
 lot to the extent of the total amount realized from the execution sale of its
properties.1âwphïl.nêt
The Timbang spouses presented their opposition to each and all of these motion. After
due hearing the lower court rendered its resolution in the manner indicated at the
beginning of this decision, from which the Timbangs alone have appealed.
In assailing the order of the court a quo directing the appellants to pay appellee Blas the
amount of their bid (P5,750.00) made at the public auction, appellants' counsel has
presented a novel, albeit ingenious, argument. It is contended that because the builder in
good faith has failed to pay the price of the land after the owners thereof exercised their
option under Article 448 of the Civil Code, the builder lost his right of retention provided
in Article 546 and by operation of Article 445, the appellants as owners of the land
automatically became the owners ipso facto, the execution sale of the house in their
favor was superfluous. Consequently, they are not bound to make good their bid of
P5,750.00 as that would be to make goods to pay for their own property. By the same
token, Blas claim for preference on account of the unpaid balance of the purchase price
of the house does not apply because preference applies only with respect to the property
of the debtor, and the Timbangs, owners of the house, are not the debtors of Blas.
This Court cannot accept this oversimplification of appellants' position. Article 448 and
546 of the Civil Code defining the right of the parties in case a person in good faith
builds, sows or plants on the land of another, respectively provides:
ART. 448. The owner of the land on which anything has been built, sown or
plated in good faith shall have the right to appropriate as his own the works,
sowing or planting, after payment of the indemnify provided for in article 546 and
548, or to obligate the one who built or planted to pay the price of the land, and
the one who sowed, the proper rent. However, the builder or planter cannot be
obliged to buy the land if its value is considerably more than that of the building
or trees. In such case, he shall pay reasonable rent, if the owner of the land does
not choose to appropriate the building or trees after proper indemnity. The parties
shall agree upon the terms of the lease and in case of disagreement, the court
shall fix the terms thereof.
ART. 546. Necessary expenses shall be refunded to every possessor; but only
the possessor in good faith may retain the thing until he has reimbursed therefor.
Useful expenses shall be refunded only to the possessor in good faith with the
same right of retention the person who has defeated him in the possession
having to option of refunding the amount of expenses or of paying the case in
value which thing may have acquired by reason thereof.
Under the terms of these article, it is true that the owner of the land has the right to
choose between appropriating the building by reimbursing the builder of the value thereof
or compelling the builder in good faith to pay for his land. Even this second right cannot
be exercised if the value of the land is considerably more than that of the building. In
addition to the right of the builder to be paid the value of his improvement, Article 546
gives him the corollary right of retention of the property until he is indemnified by the
owner of the land. There is nothing in the language of these two article, 448 and 546,
which would justify the conclusion of appellants that, upon the failure of the builder to pay
the value of the land, when such is demanded by the land-owner, the latter becomes
automatically the owner of the improvement under Article 445. The case of
Bernardo vs. Bataclan, 66 Phil., 590 cited by appellants is no authority for this
conclusion. Although it is true it was declared therein that in the event of the failure of the
builder to pay the land after the owner thereof has chosen this alternative, the builder's
right of retention provided in Article 546 is lost, nevertheless there was nothing said that
as a consequence thereof, the builder loses entirely all rights over his own building. The
question is; what is the recourse or remedy left to the parties in such eventuality where
the builder fails to pay the value of the land? While the Code is silent on this Court in the
cases of Miranda vs. Fadullon, et al., 97 Phil., 801; 51 Off. Gaz., [12] 6226; Ignacio vs.
Hilario, 76 Phil., 605 and the cited case of Bernardo vs. Bataclan, supra.
In the first case, this Court has said:
A builder in good faith not be required to pay rentals. he has right to retain the
land on which he has built in good faith until he is reimbursed the expenses
incurred by him. Possibly he might be made to pay rental only when the owner of
the land chooses not to appropriate the improvement and requires the builder in
good faith to pay for the land but that the builder is unwilling or unable to pay the
land, and then they decide to leave things as they are and assume the relation of
lessor and lessee, and should they disagree as to the amount of rental then they
can go to the court to fix that amount. (Emphasis supplied)
Should the parties not agree to leave things as they are and to assume the relation of
lessor and lessee, another remedy is suggested in the case of Ignacio vs. Hilario, supra,
wherein the court has ruled that the owner of the land in entitled to have the
improvement removed when after having chosen to sell his land to the other party, i.e.,
the builder in good faith fails to pay for the same.
117
A further remedy is indicated in the case of Bernardo vs. Bataclan, supra, where this
Court approved the sale of the land and the improvement in a public auction applying the
proceeds thereof first to the payment of the value of the land and the excess, if any, to be
delivered to the owner of the house in payment thereof.
The appellants herein, owners o the land, instead of electing any of the alternative above
indicated chose to seek recovery of the value of their land by asking for a writ of
execution; levying on the house of the builder; and selling the same in public auction.
Sand because they are the highest bidder in their own auction sale, they now claim they
acquired title to the building without necessity of paying in cash on account of their bid. In
other words, they in effect pretend to retain their land and acquire the house without
paying a cent therefor.
This contention is without merit. This Court has already held in Matias vs. The Provincial
Sheriff of Nueva Ecija(74 Phil., 326) that while it is the inveriable practice, dictated by
common sense, that where the successful bidder is the execution creditor himself, he
need not pay down the amount of the bid if it does not exceed the amount of his
judgement, nevertheless, when their is a claim by a third-party, to the proceeds of the
sale superior to his judgment credit, the execution creditor, as successful bidder, must
pay in cash the amount of his bid as a condition precedent to the issuance to him of the
certificate of sale. In the instant case, the Court of Appeals has already adjudged that
appellee Blas is entitled to the payment of the unpaid balance of the purchase price of
the school building. Blas is actually a lien on the school building are concerned. The
order of the lower court directing the Timbang spouses, as successful bidders, to pay in
cash the amount of their bid in the sum of P5,750.00 is therefore correct.
With respect to the order of the court declaring appellee Filipinas Colleges, Inc. part
owner of the land to the extent of the value of its personal properties sold at public
auction in favor of the Timbang, this Court Likewise finds the same as justified, for such
amount represents, in effect, a partial payment of the value of the land. If this resulted in
the continuation of the so-called involuntary partnership questioned by the difference
between P8,200.00 — the unpaid balance of the purchase price of the building and the
sum of P5,750.00 — amount to be paid by the Timbangs, the order of the court directing
the sale of such undivided interest of the Filipinas Colleges, Inc. is likewise justified to
satisfy the claim of the appellee Blas.
Considering that the appellant spouses Marcelino Timbang and Maria Garcia Timbang
may not voluntarily pay the sum of P5,750.00 as ordered, thereby further delaying the
final termination of this case, the first part of the dispositive portion of the order appealed
from is modified in the sense that upon failure of the Timbang spouses to pay to the
Sheriff or to Manila Gervacio Blas said sum of P5,750.00 within fifteen (15) days from
notice of the final judgment, an order of execution shall issue in favor of Maria Gervasio
Blas to be levied upon all properties of the Timbang spouses not exempt from execution
for the satisfaction of the said amount.
In all other respects, the appealed order of the court a quo is hereby affirmed, with costs
against the appellants.
It is so ordered.
G.R. No. L-32974 July 30, 1979
ORTIZ vs. KAYANAN
Petition for certiorari and Prohibition with Preliminary Injunction to nullify the Order of
respondent Judge directing the execution of the final judgment in Civil Case No. C-90,
entitled "Bartolome Ortiz vs. Secretary of Agriculture and Natural Resources, et al.," and
the Writ of Execution issued to implement said Order, allegedly for being inconsistent
with the judgment sought to be enforced.
Civil Case No. C-90 was filed by Bartolome Ortiz who sought the review and/or
annulment of the decision of the Secretary of Agriculture and Natural Resources, giving
preference to the sales applications of private respondents Quirino Comintan and
Eleuterio Zamora over Lot No. 5785, PLS-45, located at Barrio Cabuluan, Calauag,
Quezon.
I
The factual background of the case, as found by respondent Court, is as follows: têñ.£îhqw â£
... The lot in controversy was formerly the subject of Homestead
Application No. 122417 of Martin Dolorico II, plaintiff's ward who died on
August 20, 1931; that since then it was plaintiff who continued the
cultivation and possession of the property, without however filing any
application to acquire title thereon; that in the Homestead Application No.
122417, Martin Dolorico II named his uncle, Martin Dolorico I as his heir
and successor in interest, so that in 1951 Martin Dolorico I executed an
affidavit relinquishing his rights over the property in favor of defendants
Quirino Comintan and Eleuterio Zamora, his grandson and son-in-law,
respectively, and requested the Director of Lands to cancel the
homestead application; that on the strength of the affidavit, Homestead
Application No. 122417 was cancelled and thereafter, defendants
Comintan and Zamora filed their respective sales applications Nos. 8433
118
 and 9258; that plaintiff filed his protest on November 26, 1951 alleging
that he should be given preference to purchase the lot inasmuch as he is
the actual occupant and has been in continuous possession of the same
since 1931; and inspite of plaintiff's opposition, "Portion A" of the property
was sold at public auction wherein defendant Comintan was the only
bidder; that on June 8, 1957, investigation was conducted on plaintiff's
protest by Assistant Public Lands Inspector Serapion Bauzon who
submitted his report to the Regional Land Officer, and who in turn
rendered a decision on April 9, 1958, dismissing plaintiff's claim and
giving due course to defendants' sales applications on the ground that
the relinquishment of the homestead rights of Martin Dolorico I in favor of
Comintan and Zamora is proper, the former having been designated as
successor in interest of the original homestead applicant and that
because plaintiff failed to participate in the public auction, he is forever
barred to claim the property; that plaintiff filed a motion for
reconsideration of this decision which was denied by the Director of
Lands in his order dated June 10, 1959; that, finally, on appeal to the
Secretary of Agriculture and Natural Resources, the decision rendered by
the Regional Land Officer was affirmed in toto. 1
On March 22, 1966, respondent Court rendered judgment in the afore-mentioned civil
case, the dispositive portion of which reads as follows:
têñ.£îhqw â£
IN VIEW OF THE FOREGOING CONSIDERATIONS, judgment is hereby
rendered awarding Lot No. 5785-A of PLS-45, (Calauag Public Land
Subdivision) one-half portion of the property in litigation located at Bo.
Cabuluan, Calauag, Quezon, in favor of defendant QUIRINO
COMINTAN, being the successful bidder in the public auction conducted
by the bureau of Lands on April 18, 1955, and hereby giving due course
to the Sales Application No. 9258 of defendant Eleuterio Zamora over the
other half, Lot No. 5785-B of PLS-45, Calauag, without prejudice to the
right of plaintiff BARTOLOME ORTIZ to participate in the public bidding of
the same to be announced by the Bureau of Lands, Manila.
However, should plaintiff Bartolome Ortiz be not declared the successful
bidder thereof, defendants Quirino Comintan and Eleuterio Zamora are
ordered to reimburse jointly said plaintiff the improvements he has
introduced on the whole property in the amount of THIRTEEN
THOUSAND SIX HUNDRED THIRTY-TWO (P13,632.00) PESOS, the
latter having the right to retain the property until after he has been fully
paid therefor, without interest since he enjoys the fruits of the property in
question, with prejudice and with costs again the plaintiff. 2
Plaintiff appealed the decision to the Court of Appeals.
Two (2) years after the rendition of the judgment by the court a quo, while the case was
pending appeal and upon petition of private respondents Quirino Comintan and Eleuterio
Zamora, respondent Court appointed respondent Vicente Ferro, Clerk of Court, as
Receiver to collect tolls on a portion of the property used as a diversion road. On August
19, 1969, the Court of Appeals issued a Resolution annulling the Order appointing the
Receiver. Subsequently, on February 19, 1970, the Appellate Court affirmed the decision
of the trial court. A petition for review on certiorari of the decision of the Court of Appeals
was denied by this Court on April 6, 1970. At this point, private respondents filed a
petition for appointment of a new receiver with the court a quo. This petition was granted
and the receiver was reappointed. Petitioner sought the annulment of this Order with the
Court of Appeals, but said Court ruled that its decision had already become final and that
the records of the case were to be remanded to the trial court.
Not satisfied with such denial, petitioner filed a petitioner for certiorari, prohibition and
mandamus with preliminary injunction before this Court, 3 praying for the annulment of the
Order reappointing the Receiver. On July 13, 1970, the petition was dismissed by this Court
on the ground of insufficient showing of grave abuse of discretion.
II
The judgment having become final and executory private respondents filed a motion for
the execution of the same, praying as follows: têñ.£îhqwâ£
WHEREFORE, it is respectfully prayed of this Honorable Court to order
the issuance of a writ of execution in accordance with the judgment of
this Honorable Court, confirmed by the Court of Appeals and the
Supreme Court, commanding any lawful officer to deliver to defendants
Comintan and Zamora the land subject of the decision in this case but
allowing defendants to file a bond in such amount as this Honorable
Court may fix, in lieu of the P13,632.00 required to be paid to plaintiff,
conditioned that after the accounting of the tools collected by plaintiff,
there is still an amount due and payable to said plaintiff, then if such
amount is not paid on demand, including the legal interests, said bond
shall be held answerable.
Ordering further the plaintiff to render an accounting of the tolls he
collected from March of 1967 to December 31, 1968 and from September
1969 to March 31, 1970, and deliver said tolls collected to the receiver
119
 and if judgment is already executed, then to Quirino Comintan and
Eleuterio Zamora; and,
Finally, to condemn plaintiff to pay moral damages for withholding the
tools which belong to your movant in an amount this Court may deem just
in the premises. 4
Acting upon the foregoing motion, respondent Judge issued an Order, dated September
23, 1970, stating, among others, the following:têñ.£îhqw â£
The records further disclosed that from March 1967 to December 31,
1968, piaintiff Bartolome Ortiz collected tolls on a portion of the propertv
in question wherein he has not introduced anv improvement particularlv
on Lot No. 5785-A; PLS-45 awarded to defendant Quirino Comintan, thru
which vehicular traffic was detoured or diverted, and again from
September 1969 to March 31, 1970, the plaintiff resumed the collection of
tools on the same portion without rendering any accounting on said tolls
to the Receiver, who, was reappointed after submitting the required bond
and specifically authorized only to collect tolls leaving the harvesting of
the improvements to the plaintiff.
xxx xxx xxx
ln virtue of he findings of this Court as contained in the dispositive portion
of its decision, the defendants are jointly obligated to pay the plaintiff in
the amount of P13,632.00 as reasonable value of the improvements he
introduced on the whole property in question, and that he has the right of
retention until fully paid. It can be gleaned from the motion of the
defendants that if plaintiff submits an accounting of the tolls he collected
during the periods above alluded to, their damages of about P25,000.00
can more than offset their obligation of P13,362.00 in favor of the plaintiff,
thereafter the possession of the land be delivered to the defendants since
the decision of the Supreme Court has already become final and
executory, but in the interregnum pending such accounting and recovery
by the Receiver of the tolls collected by the plaintiff, the defendants pray
that they allowed to put up a bond in lieu of the said P13,632.00 to
answer for damages of the former, if any.
On the other hand, plaintiff contends in his opposition, admitting that the
decision of the Supreme Court has become final and executory; (1) the
offer of a bond in lieu of payment of P13,632.00 does not, and cannot,
satisfy the condition imposed in the decision of this Court which was
affirmed in toto;(2) the public sale of Portion "B" of the land has still to
take place as ordained before the decision could be executed; and, (3)
that whatever sums plaintiff may derive from the property cannot be set
off against what is due him for the improvements he made, for which he
has to be reimbursed as ordered.
xxx xxx xxx
Let it be known that plaintiff does not dispute his having collected tolls
during the periods from March 1967 to December 31, 1968 and from
September 1969 to March 31, 1970. The Supreme Court affirmed the
decision of this Court its findings that said tolls belong to the defendant,
considering that the same were collected on a portion of the land
question where the plaintiff did not introduce any improvement. The
reimbursement to the plaintiff pertains only to the value of the
improvements, like coconut trees and other plants which he introduced
on the whole property. The tolls collected by the plaintiff on an
unimproved portion naturally belong to the defendants, following the
doctrine on accretion. Further, the reappointment of a Receiver by this
Court was upheld by the Supreme Court when it denied the petition for
certiorari filed by the plaintiff, bolstering the legal claim of defendants over
said tolls. Thus, the decision of the Supreme Court rendered the decision
of this Court retroactive from March 22, 1966 although pending
accounting of the tolls collected by the plaintiff is justified and will not
prejudice anybody, but certainly would substantially satisfy the conditions
imposed in the decision. However, insofar as the one-half portion "B" of
the property, the decision may be executed only after public sale by the
Bureau of Lands shall be accomplished.
WHEREFORE, finding the Motion for Execution filed by the defendants to
be meritorious, the same is granted; provided, however, that they put up
a bond equal the adjudicated amount of P13,632.00 accruing in favor of
the plaintiff, from a reputable or recognized bonding or surety company,
conditioned that after an accounting of the tolls collected by the plaintiff
should there be found out any balance due and payable to him after
reckoning said obligation of P13,632.00 the bond shall be held
answerable therefor. 5
120
Accordingly, a Writ of Execution was issued after private respondent Quirino Comintan plaintiff Bartolome Ortiz, collected from the property by reason of the
had filed the required bond. The writ directed the Sheriff to enforce the decision of the diversion road where vehicular traffic was detoured. To defendant
Court, and stated, part in, the following: têñ.£îhqw ⣠Comintan belongs the tolls thus collected from a portion of the land
awarded to him used as a diversionary road by the doctrine of accretion
But should there be found any amount collectible after accounting and and his right over the same is ipso jure, there being no need of any action
deducting the amount of P3,632.00, you are hereby ordered that of the to possess said addition. It is so because as consistently maintained by
goods and chattels of Bartolome Ortiz of Bo. Kabuluan, Calauag, the Supreme Court, an applicant who has complied with all the terms and
Quezon, be caused to be made any excess in the above-metioned conditions which entitle him to a patent for a particular tract of publlic
amount together with your lawful fees and that you render same to land, acquires a vested right therein and is to be regarded as equitable
defendant Quirino Comintan. If sufficient personal property cannot be owner thereof so that even without a patent, a perfected homestead or
found thereof to satisfy this execution and lawful fees thereon, then you sales application is a property right in the fullest sense, unaffectcd by the
are commanded that of the lands and buildings of the said BARTOLOME fact that the paramount title is still in the Government and no subsequent
ORTIZ you make the said excess amount in the manner required by the law can deprive him of that vested right The question of the actual
Rules of Court, and make return of your proceedings within this Court damages suffered by defendant Comintan by reason of the unaccounted
within sixty (60) days from date of service. tolls received by plaintiff had already been fully discussed in the order of
September 23, 1970 and the Court is honestly convinced and believes it
You are also ordered to cause Bartolome Ortiz to vacate the property to be proper and regular under the circumstances.
within fifteen (15) days after service thereof the defendant Quirino
Comintan having filed the required bond in the amount of THIRTEEN Incidentally, the Court stands to correct itself when in the same order, it
THOUSAND SIX HUNDRED THIRTY-TWO (P13,632.00) PESOS. 6 directed the execution of he decision with respect to the one-half portion
"B" of the property only after the public sale by the Bureau of Lands, the
On October 12, 1970, petitioner filed a Motion for Reconsideration of the aforesaid Order same being an oversight, it appearing that the Sales Application of
and Writ of Execution, alleging:têñ.£îhqw â£
defendant Eleuterio Zamora had already been recognized and full
confirmed by the Supreme Court.
(a) That the respondent judge has no authority to place respondents in
possession of the property; In view thereof, finding the motion filed by plaintiff to be without merit, the
Court hereby denies the same and the order of September 23, 1970 shall
remain in full force subject to the amendment that the execution of the
(b) That the Supreme Court has never affirmed any decision of the trial
decision with respect to the one-half portion "B" shall not be conditioned
court that tolls collected from the diversionary road on the property, which
to the public sale by the Bureau of Lands.
is public land, belong to said respondents;
SO ORDERED. 7
(c) That to assess petitioner a P25,000.00 liability for damages is purely
punitive imposition without factual or legal justification.
III
The foregoing Motion for Reconsideration was denied by respondent Judge per Order
dated November 18, 1970. Saod Order states, in part: têñ.£îhqw â£
Petitioner thus filed the instant petition, contending that in having issued the Order and
Writ of Execution, respondent Court "acted without or in excess of jurisdiction, and/or
with grave abuse of discretion, because the said order and writ in effect vary the terms of
It goes without saying that defendant Comintan is entitled to be placed in
the judgment they purportedly seek to enforce." He argued that since said judgment
possession of lot No. 5785-A of PLS-45 (Calauag Public Land
declared the petitioner a possessor in good faith, he is entitled to the payment of the
Subdivision) and enjoyment of the tolls from March, 1967 to March, 1968
value of the improvements introduced by him on the whole property, with right to retain
and from September, 1969 to March 31, l970 which were received by
121
the land until he has been fully paid such value. He likewise averred that no payment for
improvements has been made and, instead, a bond therefor had been filed by
defendants (private respondents), which, according to petitioner, is not the payment
envisaged in the decision which would entitle private respondents to the possession of
the property. Furthermore, with respect to portion "B", petitioner alleges that, under the
decision, he has the right to retain the same until after he has participated and lost in the
public bidding of the land to be conducted by the Bureau of Lands. It is claimed that it is
only in the event that he loses in the bidding that he can be legally dispossessed thereof.
It is the position of petitioner that all the fruits of the property, including the tolls collected
by him from the passing vehicles, which according to the trial court amounts to
P25,000.00, belongs to petitioner and not to defendant/private respondent Quirino
Comintan, in accordance with the decision itself, which decreed that the fruits of the
property shall be in lieu of interest on the amount to be paid to petitioner as
reimbursement for improvements. Any contrary opinion, in his view, would be tantamount
to an amendment of a decision which has long become final and executory and,
therefore, cannot be lawfully done.
Petitioner, therefore, prayed that: (1) a Writ of Preliminary Injunction be issued enjoining
the enforcement of the Orders of September 23, 1970 and November 18, 1970, and the
Writ of Execution issued thereto, or restoring to petitioner the possession of the property
if the private respondents had been placed in possession thereof; (2) annulling said
Orders as well as the Writ of Execution, dissolving the receivership established over the
property; and (3) ordering private respondents to account to petitioner all the fruits they
may have gathered or collected from the property in question from the time of petitioiier's
illegal dispossession thereof.
On January 29, 1971, this Court issued the Writ of Preliminary Injunction. On January 30,
1971, private respondents filed a Motion for Reconsideration and/or Modification of the
Order dated January 29, 1971. This was followed by a Supplemental Motion for
Reconsideration and Manifestation on February 3, 1971. In the latter motion, private
respondents manifested that the amount of P14,040.96, representing the amount
decreed in the judgment as reimbursement to petitioner for the improvements, plus
interest for six months, has already been deposited by them in court, "with the
understanding that said amount shall be turned over to the plaintiff after the court a
quo shall have determined the improvement on Lot 5785-A, and subsequently the
remaining balance of the deposit shall be delivered to the petitioner (plaintiff therein) in
the event he loses the bid for Lot 5785-B in favor of private respondent Eleuterio
Zamora." 8 The deposit is evidenced by a certification made by the Clerk of the Court a
quo. 9 Contending that said deposit was a faithful compliance with the judgment of the trial
court, private respondent Quirino Comintan prayed for the dissolution of the Writ of Injunction.
It appears that as a consequence of the deposit made by private respondents, the
Deputy, Sheriff of Calauag, Quezon ousted petitioner's representative from the land in
question and put private respondents in possession thereof. 10
On March 10, 1971, petitioner filed a "Comment on Respondents' 'Motion for
Reconsideration' dated January 29, 1971' and 'Supplemental Motion for Reconsideration
and Manifestation,'" contending that the tender of deposit mentioned in the Suplemental
Motion was not really and officially made, "inasmuch as the same is not supported by
any official receipt from the lower court, or from its clerk or cashier, as required by law;"
that said deposit does not constitute sufficient compliance with the judgment sought to be
enforced, neither was it legally and validly made because the requisites for consignation
had not been complied with; that the tender of legal interest for six months cannot
substitute petitioner's enjoyment of the fruits of the property as long as the judgment in
Civil Case No. C-90 has not been implemented in the manner decreed therein; that
contrary to the allegations of private respondents, the value of the improvements on the
whole property had been determined by the lower court, and the segregation of the
improvements for each lot should have been raised by them at the opportune moment by
asking for the modification of the decision before it became final and executory; and that
the tolls on the property constituted "civil fruits" to which the petitioner is entitled under
the terms of the decision.
IV
The issue decisive of the controvery is—after the rendition by the trial court of its
judgment in Civil Case No. C-90 on March 22, 1966 confirming the award of one-half of
the property to Quirino Comintan—whether or not petitioner is still entitled to retain for his
own exclusive benefit all the fruits of the property, such as the tolls collected by him from
March 1967 to December 1968, and September 1969 to March 31, 1970, amounting to
about P25,000.00. In other words, petitioner contends that so long as the aforesaid
amount of P13,632,00 decreed in the judgment representing the expenses for clearing
the land and the value of the coconuts and fruit trees planted by him remains unpaid, he
can appropriate for his exclusive benefit all the fruits which he may derive from the
property, without any obligation to apply any portion thereof to the payment of the
interest and the principal of the debt.
We find this contention untenable.
There is no question that a possessor in good faith is entitled to the fruits received before
the possession is legally interrupted. 11 Possession in good faith ceases or is legally
interrupted from the moment defects in the title are made known to the possessor, by
extraneous evidence or by the filing of an action in court by the true owner for the recovery of
122
the property. 12 Hence, all the fruits that the possessor may receive from the time he is
summoned in court, or when he answers the complaint, must be delivered and paid by him to
the owner or lawful possessor. 13
However, even after his good faith ceases, the possessor in fact can still retain the
property, pursuant to Article 546 of the New Civil Code, until he has been fully
reimbursed for all the necessary and useful expenses made by him on the property. This
right of retention has been considered as one of the conglomerate of measures devised
by the law for the protection of the possessor in good faith. Its object is to guarantee the
reimbursement of the expenses, such as those for the preservation of the property, 14 or
for the enhancement of its utility or productivity. 15It permits the actual possessor to remain in
possession while he has not been reimbursed by the person who defeated him in the
possession for those necessary expenses and useful improvements made by him on the
thing possessed. The principal characteristic of the right of retention is its accessory
character. It is accessory to a principal obligation. Considering that the right of the possessor
to receive the fruits terminates when his good faith ceases, it is necessary, in order that this
right to retain may be useful, to concede to the creditor the right to secure reimbursement
from the fruits of the property by utilizing its proceeds for the payment of the interest as well
as the principal of the debt while he remains in possession. This right of retention of the
property by the creditor, according to Scaevola, in the light of the provisions of Article 502 of
the Spanish Civil Code, 16 is considered not a coercive measure to oblige the debtor to pay,
depriving him temporarily of the enjoyment of the fruits of his property, but as a means of
obtainitig compensation for the debt. The right of retention in this case is analogous to a
contract of antichresis and it cati be considered as a means of extinguishing the obligation,
inasmuch as the right to retain the thing lasts only for the period necessary to enable the
creditor to be reimbursed from the fruits for the necessary and useful expenses. 17
According to Manresa, the right of retention is, therefore, analogous to that of a pledge, if
the property retained is a movable, and to that of antichresis, if the property held is
immovable. 18 This construction appears to be in harmony with similar provisions of the civil
law which employs the right of retention as a means or device by which a creditor is able to
obtain the payment of a debt. Thus, under Article 1731 of the New Civil Code, any person
who has performed work upon a movable has a right to retain it by way of pledge until he is
paid. Similarly, under Article 1914 of the same Code, the agent may retain in pledge the
things which are the object of the agency until the principal effects reimbursement of the
funds advanced by the former for the execution of the agency, or he is indemnified for all
damages which he may have suffered as a consequence of the execution of the agency,
provided he is free from fault. To the same effect, the depositary, under Article 1994 of the
same Code, may retain the thing in pledge until the full payment of what may be due him by
reason of the deposit. The usufructuary, pursuant to Article 612 of the same Code, may retain
the property until he is reimbursed for the amount paid for taxes levied on the capital (Article
597) and tor extraordinary repairs (Article 594).
In all of these cases, the right of retention is used as a means of extinguishing the
obligation. As amply observed by Manresa: "El derecho de retencion, lo hemos dicho, es
el derecho de prenda o el de anticresis constituido por la ley con independencia de las
partes." 19 In a pledge, if the thing pledged earns or produces fruits, income, dividends or
interests, the creditor shall compensate what he receives with those which are owing
him. 20 In the same manner, in a contract of antichresis, the creditor acquires the right to
receive the fruits of an immovable of his debtor with the obligation to apply them to payment
of the interest, if owing, and thereafter to the principal of his credit. 21 The debtor can not
reacquire enjoyment of the immovable until he has actually paid what he owes the creditor. 22
Applying the afore-cited principles to the case at bar, petitioner cannot appropriate for his
own exclusive benefit the tolls which he collected from the property retained by him. It
was his duty under the law, after deducting the necessary expenses for his
administration, to apply such amount collected to the payment of the interest, and the
balance to the payment of the obligation.
We hold, therefore, that the disputed tolls, after deducting petitioner's expenses for
administration, belong to Quirino Comintan, owner of the land through which the toll road
passed, further considering that the same was on portions of the property on which
petitioner had not introduced any improvement. The trial court itself clarified this matter
when it placed the toll road under receivership. The omission of any mention of the tolls
in the decision itself may be attributed to the fact that the tolls appear to have been
collected after the rendition of the judgment of the trial court.
The records further reveal that earnest efforts have been made by private respondents to
have the judgment executed in the most practicable manner. They deposited in court the
amount of the judgment in the sum of P13,632.00 in cash, subject only to the accounting
of the tolls collected by the petitioner so that whatever is due from him may be set off
with the amount of reimbursement. This is just and proper under the circumstances and,
under the law, compensation or set off may take place, either totally or partially.
Considering that petitioner is the creditor with respect to the judgment obligation and the
debtor with respect to the tolls collected, Comintan being the owner thereof, the trial
court's order for an accounting and compensation is in accord with law. 23
With respect to the amount of reimbursement to be paid by Comintan, it appears that the
dispositive portion of the decision was lacking in specificity, as it merely provided that
Comintan and Zamora are jointly liable therefor. When two persons are liable under a
contract or under a judgment, and no words appear in the contract or judgment to make
each liable for the entire obligation, the presumption is that their obligation is joint
ormancomunada, and each debtor is liable only for a proportionate part of the
obligation. 24 The judgment debt of P13,632.00 should, therefore, be pro-rated in equal
shares to Comintan and Zamora.
123
Regarding Lot 5785-B, it appears that no public sale has yet been conducted by the
Bureau of Lands and, therefore, petitioner is entitled to remain in possession thereof.
This is not disputed by respondent Eleuterio Zamora. 25 After public sale is had and in the
event that Ortiz is not declared the successful bidder, then he should be reimbursed by
respondent Zamora in the corresponding amount for the improvements on Lot 5785-B.
WHEREFORE, in view hereof, the Order of respondent Court of November 18, 1970 is
hereby modified to conform to the foregoing judgment. The Writ of Preliminary Injunction,
dated January 29, 1971, is hereby dissolved. Without special pronouncement as to
costs.
G.R. No. L-25462 February 21, 1980
FLOREZA vs, EVANGELISTA
This is a Petition for Review on certiorari of the Decision of the Court of Appeals (CA-
G.R. No. 23516-R) promulgated on November 4, 1965, entitled "Maria de Evangelista
and Sergio Evangelists, (now the respondents) vs. Mariano Floreza (petitioner herein),"
reversing the judgment of the Court of First Instance of Rizal rendered on July 17, 1957,
and instead ordering petitioner to vacate respondents' residential lot, to remove his
house at his own expenses and to pay rental from May 5, 1956.
Plaintiffs Maria de Evangelista and Sergio Evangelista, who are mother and son, (the
EVANGELISTAS, for short) are the owners of a residential lot located at Sumilang St.,
Tanay, Rizal, with an area of 204.08 sq. ms., assessed at P410.00. In May 1945, the
EVANGELISTAS borrowed from FLOREZA the amount of P100.00. On or about
November 1945, with the consent of the EVANGELISTAS, FLOREZA occupied the
above residential lot and built thereon a house of light materials (barong- barong) without
any agreement as to payment for the use of said residential lot owing to the fact that the
EVANGELISTAS has then a standing loan of P100.00 in favor of FLOREZA.1
On the following dates, the EVANGELISTAS again borrowed the indicated amounts:
September 16, 1946 — P100.00; 2 August 17, 1947 — P200,00; 3 January 30, 1949 —
P200.00; 4 April 1, 1949 — P140.00, 5 or a total of P740.00 including the first loan. The last
three items are evidenced by private documents stating that the residential lot stands as
security therefor and that the amounts covered thereunder are payable within six years from
date, without mention of interest. The document executed on September 16, 1946 stated
specifically that the loan was without interest "walang anumang patubo."
On January 10, 1949, FLOREZA demolished this house of light materials and in its place
constructed one of strong materials assessed in his name at P1,410.00 under Tax
Declaration No. 4448. FLOREZA paid no rental as before. 6
On August 1, 1949, the EVANGELISTAS, for and in consideration of P1,000.00
representing the total outstanding loan of P740.00 plus P260.00 in cash, sold their
residential lot to FLOREZA, with a right to repurchase within a period of 6 years from
date, or up to August 1, 1955, as evidenced by a notarial document, Exh. B, registered
under Act 3344 on December 6, 1949, as Inscription No. 2147. 7
On January 2, 1955, or seven months before the expiry of the repurchase period, the
EVANGELISTAS paid in full the repurchase price of P1,000.00.
On April 25, 1956, the EVANGELISTAS, through their counsel, wrote FLOREZA a
letter 8 asking him to vacate the premises as they wanted to make use of their residential lot
besides the fact that FLOREZA had already been given by them more than one year within
which to move his house to another site. On May 4, 1956, the EVANGELISTAS made a
formal written demand to vacate, within five days from notice, explaining that they had
already fully paid the consideration for the repurchase of the lot. 9 FLOREZA refused to
vacate unless he was first reimbursed the value of his house. Hence, the filing of this
Complaint on May 18, 1956 by the EVANGELISTAS.
The EVANGELISTAS prayed that: 1) they be declared the owners of the house of strong
materials built by FLOREZA on their residential lot, without payment of indemnity; or, in
the alternative to order FLOREZA to remove said house; 2) that FLOREZA pay them the
sum of P10.00 per month as the reasonable value for the use and occupation of the
same from January 2, 1955 (the date the repurchase price was paid) until FLOREZA
removes the house and delivers the lot to them; and 3) to declare the transaction
between them and FLOREZA as one of mortgage and not of pacto de retro.
In his Answer, FLOREZA admitted the repurchase but controverted by stating that he
would execute a deed of repurchase and leave the premises upon payment to him of the
reasonable value of the house worth P7,000.00.
In a Decision dated July 17, 1957, the Court of First Instance of Rizal opined that the
question of whether the transaction between the parties is one of mortgage or pacto de
retro is no longer material as the indebtedness of P1,000.00 of the EVANGELISTAS to
FLOREZA had already been fully paid. And, applying Article 448 of the Civil Code, 10 it
rendered a decision dispositively decreeing:
FOR ALL THE FOREGOING CONSIDERATIONS, the Court hereby
renders judgment granting the plaintiffs the right to elect, as owners of the
land, to purchase the house built, on the said lot in question by the
defendant for P2,500 or to sell their said land to e defendant for P1,500.
In the event that the plaintiffs shall decide not to purchase the house in
124
 question the defendant should be allowed to remain in plaintiffs' premises
by, paying a monthly rental of P10.00 which is the reasonable value for
the use of the same per month as alleged by plaintiffs in their complaint.
The Court also orders the defendant to pay a monthly rental of P10.00 for
the use of the land in question from May 18, 1956, the date of the
commencement of this action. The counterclaim of the defendant is
hereby ordered dismissed. Without pronouncement as to costs.
SO ORDERED. 11
Both parties appealed to the Court of Appeals.
On November 4, 1965, the Court of Appeals concluded that Article 448 of the Civil
Code, supra, was inapplicable; that FLOREZA was not entitled to reimbursement for his
house but that he could remove the same at his expense; and accordingly rendered
judgment thus:
WHEREFORE, judgment is hereby rendered: (1) adjudging the
defendant-appellant Mariano Floreza to vacate plaintiffs' residential lot
described in the complaint and to pay rental of P10.00 a month from May
5, 1956, until he (defendant) shall have vacated the premises; (2)
ordering defendant to remove his house from the land in question within
30 days from the time this decision becomes final and executory; (3)
ordering the Register of Deeds of Rizal to cancel inscription No. 2147,
Page 210, Vol. 36, in the Registration Book under Act 3344 upon
payment of his lawful fees; and (4) taxing the costs in both instances
against defendant-appellant Mariano Floreza. 12
Hence, this Petition for Review on certiorari by FLOREZA, seeking a reversal of the
aforestated judgment and ascribing the following errors:
1) That the Court of Appeals erred in holding that petitioner Floreza was a
builder in bad faith without likewise holding that respondents as owners of
the land in dispute, were likewise in bad faith and therefore both parties
should in accordance with Art. 453 of the New Civil Code be considered
as having acted in good faith.
2) That the Court of Appeals erred in completely ignoring the issue raised
on appeal as to whether or not respondents as owners of the questioned
lot, were in bad faith in the sense that they had knowledge of and
acquiseced to the construction of the house of petitioner on their lot.
3) That the Court of Appeals erred in not applying Art. 448 of the New
Civil Code in the adjudication of the rights of petitioner and respondent.
4) That the Court of Appeals erred in declaring that petitioner is not
entitled to reimbursement for the value of his house and that he should
instead remove the same at his expense.
5) That the Court of Appeals erred in adjudging petitioner to vacate
respondents' lot in question and to pay rentals commencing from May 5,
1956, until he shall have vacated the premises, notwithstanding that
petitioner is entitled under Arts. 448 and 546 of the New Civil Code, to
retention without payment of rental while the corresponding indemnity of
his house had not been paid.
6) That the Court of Appeals erred in taxing costs against petitioner.
7) That the Court of Appeals erred in not awarding petitioner's
counterclaim.
During the pendency of this appeal, petitioner Maria D. de Evangelista died and was
ordered substituted by her son, petitioner Sergio, as her legal representative, in a
Resolution dated May 14, 1976.
On October 20, 1978. the EVANGELISTAS filed a Motion to Dismiss stating that
FLOREZA had since died and that his heirs had voluntarily vacated the residential lot in
question. The date FLOREZA passed away and the date his heirs had voluntarily
vacated the property has not been stated. Required to comment, "petitioner (represented
by his heirs)", through counsel, confirmed his death and the removal of the house and
manifested that thereby the question of reimbursement had moot and academic. He
objected to the dismissal of the case, however, on the ground that the issue of rentals
still pends. On January 21, 1980, complying with a Resolution of 'his Court, the
EVANGELISTAS clarified that the dismissal they were praying for was not of the entire
case but only of this Petition for Review on Certiorari.
We are not in agreement that the question of reimbursement of the value of the
improvement erected on the subject property has become moot. Petitioner's right of
retention of subject property until he is reimbursed for the value of his house, as he had
demanded, is inextricably linked with the question of rentals. For if petitioner has the right
to indemnity, he has the right of retention and no rentals need be paid. Conversely, if no
right of retention exists, damages in the form of rentals for the continued use and
occupation of the property should be allowed.
125
We uphold the Court of Appeals in its conclusion that Article 448 of the Civil Code is
inapplicable to the factual milieu herein. Said codal provision applies only when the
builder, planter, or sower believes he had the right so to build, plant or sow because he
thinks he owns the land or believes himself to have a claim of title. 13 In this case,
petitioner makes no pretensions of ownership whatsoever.
Petitioner concedes that he was a builder in bad faith but maintains that' the
EVANGELISTAS should also be held in bad faith, so that both of them being in bad faith,
Article 453 of the Civil Code 14 should apply. By the same token, however, that Article 448 of
the same Code is not applicable, neither is Article 453 under the ambiance of this case.
Would petitioner, as vendee a retro, then be entitled to the rights granted iii Article 1616
of the Civil Code (Art. 1518 of the old Code)? To quote:
Art. 1616. The vendor cannot avail himself of the right of repurchase
without returning to the vendee the price of the sale, and in addition:
(1) The expenses of the contract, and any other legitimate payments
made by reason of the sale;
(2) The necessary and useful expenses made on the thing sold.
The question again calls for a negative answer. It should be noted that petitioner did not
construct his house as a vendee a retro. The house had already been constructed as far
back as 1949 (1945 for the house of light materials) even before the pacto de retro sale
in 1949. Petitioner incurred no useful expense, therefore, after that sale. The house was
already there at the tolerance of the EVANGELISTAS in consideration of the several
loans extended to them. Since petitioner cannot be classified as a builder in good faith
within the purview of Article 448 of the Civil Code, nor as a vendee a retro, who made
useful improvements during the lifetime of the pacto de retro, petitioner has no right to
reimbursement of the value of the house which he had erected on the residential lot of
the EVANGELISTAS, much less to retention of the premises until he is reimbursed.The
rights of petitioner are more akin to those of a usufructuary who, under Article 579 of the
Civil (Art. 487 of the old Code), may make on the property useful improvements but with
no right to be indemnified therefor. He may, however, remove such improvements should
it be possible to do so without damage to the property: For if the improvements made by
the usufructuary were subject to indemnity, we would have a dangerous and unjust
situation in which the usufructuary could dispose of the owner's funds by compelling him
to pay for improvements which perhaps he would not have made. 15
We come now to the issue of rentals. It is clear that from the date that the redemption
price had been paid by the EVANGELISTAS on January 2, 1955, petitioner's right to the
use of the residential lot without charge had ceased. Having retained the property
although a redemption had been made, he should be held liable for damages in the form
of rentals for the continued use of the subject residential lot 16 at the rate of P10.00 monthly
from January 3, 1955, and not merely from the date of demand on May 4, 1956, as held by
the Court of Appeals, until the house was removed and the property vacated by petitioner or
his heirs.
WHEREFORE, the judgment appealed from is hereby affirmed, with the modification that
payment of rentals by the heir, of Mariano Floreza, who are hereby ordered substituted
for him, shall commence on January 3, 1955 until the date that the residential lot in
question was vacated.
Costs against petitioner.
SO ORDERED.
G.R. No. L-49219 April 15, 1988
SPOUSES CAMPO vs. ABESIA
In this appeal from the decision of the Court of First Instance (CFI) of Cebu, certified to
this Court by the Court of Appeals on account of the question of law involved, the sole
issue is the applicability of the provisions of Article 448 of the Civil Code relating to a
builder in good faith when the property involved is owned in common.
This case involves a parcel of land, Lot No. 1161 of the Cadastral Survey of Cebu, with
an area of only about 45 square meters, situated at the corner of F. Flores and Cavan
Streets, Cebu City covered by TCT No. 61850. An action for partition was filed by
plaintiffs in the CFI of Cebu. Plaintiffs and defendants are co-owners pro indiviso of this
lot in the proportion of and 1/3 share each, respectively. The trial court appointed a
commissioner in accordance with the agreement of the parties. ,the Id commissioner
conducted a survey, prepared a sketch plan and submitted a report to the trial court on
May 29, 1976, recommending that the property be divided into two lots: Lot 1161-A with
an area of 30 square meters for plaintiffs and Lot No. 1161-B with an area of 15 square
meters for the defendants. The houses of plaintiffs and defendants were surveyed and
shown on the sketch plan. The house of defendants occupied the portion with an area of
5 square meters of Lot 1161-A of plaintiffs. The parties manifested their conformity to the
report and asked the trial court to finally settle and adjudicate who among the parties
should take possession of the 5 square meters of the land in question.
126
In solving the issue the trial court held as follows:
The Court believed that the plaintiffs cannot be obliged to pay for the
value of the portion of the defendants' house which has encroached an
area of five (5) sq. meters of the land alloted to them. The defendants
cannot also be obliged to pay for the price of the said five (5) square
meters. The rights of a builder in good faith under Article 448 of the New
Civil Code does (sic) not apply to a case where one co-owner has built,
planted or sown on the land owned in common. "Manresa agreeing with
Sanchez Roman, says that as a general rule this article is not applicable
because the matter should be governed more by the provisions on co-
ownership than on accession. Planiol and Ripert are also of the opinion
that this article is not applicable to a co-owner who constructs, plants or
sows on the community property, even if the land where the construction,
planting or sowing is made is a third person under the circumstances,
and the situation is governed by the rules of co-ownership. Our Court of
Appeals has held that this article cannot be invoked by one co-owner
against another who builds, plants or sows upon their land, since the
latter does not do so on land not belonging to him. (C.A.), O.G. Supp.,
Aug. 30, 194, p. 126). In the light of the foregoing authorities and
considering that the defendants have expressed their conformity to the
partition that was made by the commissioner as shown in the sketch plan
attached to the commissioner's report, said defendants have no other
alternative except to remove and demolish part of their house that has
encroached an area of five (5) sq. meters of the land allotted to the
plaintiffs.
WHEREFORE, judgment is hereby rendered assigning Lot 1161-A with
an area of thirty (30) sq. meters to the plaintiffs spouses Concepcion
Fernandez Abesia, Lourdes Fernandez Rodil, Genaro Fernandez and
Dominga A. Fernandez, in the respective metes and bounds as shown in
the subdivision sketch plan attached to the Commissioner's Report dated
may 29, 1976 prepared by the Commissioner, Geodetic Engineer Espiritu
Bunagan. Further, the defendants are hereby ordered at their expense to
remove and demolish part of their house which has encroached an area
of five (5) square meters from Lot 1161-A of the plaintiffs; within sixty (60)
days from date hereof and to deliver the possession of the same to the
plaintiffs. For the Commissioner's fee of P400.00, the defendants are
ordered to pay, jointly and severally, the sum of P133.33 and the balance
thereof to be paid by the plaintiffs. The costs of suit shall be paid by the
plaintiffs and the defendants in the proportion of two-thirds (2/3) and one-
third (1/3) shares respectively. A certified copy of this judgment shall be
recorded in the office of the Register of Deeds of the City of Cebu and the
expense of such recording shall be taxed as a part of the costs of the
action.
Hence, this appeal interposed by the defendants with the following assignments of
errors:
I
THE TRIAL COURT ERRED IN NOT APPLYING THE RIGHTS OF A
BUILDER IN GOOD FAITH UNDER ART. 448 OF THE NEW CIVIL
CODE TO DEFENDANTS-APPELLANTS WITH RESPECT TO THAT
PART OF THEIR HOUSE OCCUPYING A PROTION OF THE LOT
ASSIGNED TO PLAINTIFFS-APPELLEES.
II
THE TRIAL COURT ERRED IN ORDERING DEFENDANTS-
APPELLANTS TO REMOVE AND DEMOLISH AT THEIR EXPENSE,
THAT PART OF THEIR HOUSE WHICH HAS ENCROACHED ON AN
AREA OF FIVE SQUARE METERS OF LOT 1161-A OF PLAINTIFFS-
APPELLEES.
Article 448 of the New Civil Code provides 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.
The court a quo correctly held that Article 448 of the Civil Code cannot apply where a co-
owner builds, plants or sows on the land owned in common for then he did not build,
plant or sow upon land that exclusively belongs to another but of which he is a co-owner.
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The co-owner is not a third person under the circumstances, and the situation is
governed by the rules of co-ownership. 1
However, when, as in this case, the co-ownership is terminated by the partition and it
appears that the house of defendants overlaps or occupies a portion of 5 square meters
of the land pertaining to plaintiffs which the defendants obviously built in good faith, then
the provisions of Article 448 of the new Civil Code should apply. Manresa and Navarro
Amandi agree that the said provision of the Civil Code may apply even when there was
co-ownership if good faith has been established. 2
Applying the aforesaid provision of the Civil Code, the plaintiffs have the right to
appropriate said portion of the house of defendants upon payment of indemnity to
defendants as provided for in Article 546 of the Civil Code. Otherwise, the plaintiffs may
oblige the defendants to pay the price of the land occupied by their house. However, if
the price asked for is considerably much more than the value of the portion of the house
of defendants built thereon, then the latter cannot be obliged to buy the land. The
defendants shall then pay the reasonable rent to the plaintiff upon such terms and
conditions that they may agree. In case of disagreement, the trial court shall fix the terms
thereof. Of course, defendants may demolish or remove the said portion of their house,
at their own expense, if they so decide.
WHEREFORE, the decision appealed from is hereby MODIFIED by ordering plaintiff to
indemnify defendants for the value of the Id portion of the house of defendants in
accordance with Article 546 of the Civil Code, if plaintiffs elect to appropriate the same.
Otherwise, the defendants shall pay the value of the 5 square meters of land occupied by
their house at such price as may be agreed upon with plaintiffs and if its value exceeds
the portion of the house that defendants built thereon, the defendants may choose not to
buy the land but defendants must pay a reasonable rental for the use of the portion of the
land of plaintiffs As may be agreed upon between the parties. In case of disagreement,
the rate of rental shall be determined by the trial court. Otherwise, defendants may
remove or demolish at their own expense the said portion of their house. No costs.
SO ORDERED.
G.R. No. 72876 January 18, 1991
IGNAO vs. IAC
In this petition for review by certiorari, petitioner seeks the reversal of the decision of the
Intermediate Appellate Court (now Court of Appeals) affirming in toto the decision of the
Court of First Instance of Cavite, ordering petitioner Florencio Ignao to sell to private
respondents Juan and Isidro Ignao, that part of his property where private respondents
had built a portion of their houses.
The antecedent facts are as follows:
Petitioner Florencio Ignao and his uncles private respondents Juan Ignao and Isidro
Ignao were co-owners of a parcel of land with an area of 534 square meters situated in
Barrio Tabon, Municipality of Kawit, Cavite. Pursuant to an action for partition filed by
petitioner docketed as Civil Case No. N-1681, the then Court of First Instance of Cavite
in a decision dated February 6, 1975 directed the partition of the aforesaid land, alloting
133.5 square meters or 2/8 thereof to private respondents Juan and Isidro, and giving
the remaining portion with a total area of 266.5 square meters to petitioner Florencio.
However, no actual partition was ever effected. 1
On July 17, 1978, petitioner instituted a complaint for recovery of possession of real
property against private respondents Juan and Isidro before the Court of First Instance of
Cavite, docketed as Civil Case No. 2662. In his complaint petitioner alleged that the area
occupied by the two (2) houses built by private respondents exceeded the 133.5 square
meters previously alloted to them by the trial court in Civil Case No. N-1681.
Consequently, the lower court conducted an ocular inspection. It was found that the
houses of Juan and Isidro actually encroached upon a portion of the land belonging to
Florencio. Upon agreement of the parties, the trial court ordered a licensed geodetic
engineer to conduct a survey to determine the exact area occupied by the houses of
private respondents. The survey subsequently disclosed that the house of Juan occupied
42 square meters while that of Isidro occupied 59 square meters of Florencio's land or a
total of 101 square meters.
In its decision, the trial court (thru Judge Luis L. Victor) ruled that although private
respondents occupied a portion of Florencio's property, they should be considered
builders in good faith. The trial court took into account the decision of the Court of First
Instance of Cavite in the action for partition 2 and quoted:
. . . . Hence, it is the well-considered opinion of the Court that although it turned
out that the defendants had, before partition, been in possession of more than
what rightfully belongs to them, their possession of what is in excess of their
rightful share can at worst be possession in good faith which exempts them from
being condemned to pay damages by reason thereof. 3
Furthermore, the trial court stated that pursuant to Article 448 of the Civil Code, the
owner of the land (Florencio) should have the choice to either appropriate that part of the
128
house standing on his land after payment of indemnity or oblige the builders in good faith
(Juan and Isidro) to pay the price of the land. However, the trial court observed that
based on the facts of the case, it would be useless and unsuitable for Florencio to
exercise the first option since this would render the entire houses of Juan and Isidro
worthless. The trial court then applied the ruling in the similar case of Grana vs. Court of
Appeals, 4 where the Supreme Court had advanced a more "workable solution". Thus, it
ordered Florencio to sell to Juan and Isidro those portions of his land respectively
occupied by the latter. The dispositive portion of said decision reads as follows:
WHEREFORE, judgment is hereby rendered in favor of the defendants and—
(a) Ordering the plaintiff Florencio Ignao to sell to the defendants Juan and Isidro
Ignao that portion of his property with an area of 101 square meters at P40.00
per square meter, on which part the defendants had built their houses; and
(b) Ordering the said plaintiff to execute the necessary deed of conveyance to
the defendants in accordance with paragraph (a) hereof.
Without pronouncement as to costs. 5
Petitioner Florencio Ignao appealed to the Intermediate Appellate Court. On August 27,
1985, the Appellate Court, Second Civil Cases Division, promulgated a
decision, 6 affirming the decision of the trial court.
Hence the instant petition for review which attributes to the Appellate Court the following
errors:
1. That the respondent Court has considered private respondents builders in
good faith on the land on question, thus applying Art. 448 of the Civil Code,
although the land in question is still owned by the parties in co-ownership, hence,
the applicable provision is Art. 486 of the Civil Code, which was not applied.
2. That, granting for the sake of argument that Art. 448 . . . is applicable, the
respondent Court has adjudged the working solution suggested in Grana and
Torralba vs. CA. (109 Phil. 260), which is just an opinion by way of passing, and
not the judgment rendered therein, which is in accordance with the said provision
of the Civil Code, wherein the owner of the land to buy (sic) the portion of the
building within 30 days from the judgment or sell the land occupied by the
building.
3. That, granting that private respondents could buy the portion of the land
occupied by their houses, the price fixed by the court is unrealistic and pre-war
price. 7
The records of the case reveal that the disputed land with an area of 534 square meters
was originally owned by Baltazar Ignao who married twice. In his first marriage, he had
four children, namely Justo (the father of petitioner Florencio), Leon and private
respondents Juan and Isidro. In his second marriage, Baltazar had also four children but
the latter waived their rights over the controverted land in favor of Justo. Thus, Justo
owned 4/8 of the land which was waived by his half-brothers and sisters plus his 1/8
share or a total of 5/8. Thereafter, Justo acquired the 1/8 share of Leon for P500.00
which he later sold to his son Florencio for the same amount. When Justo died, Florencio
inherited the 5/8 share of his father Justo plus his 1/8 share of the land which he bought
or a total of 6/8 (representing 400.5 square meters). Private respondents, Juan and
Isidro, on the other hand, had 1/8 share (66.75 square meters) each of the land or a total
of 133.5 square meters.
Before the decision in the partition case was promulgated, Florencio sold 134 square
meters of his share to a certain Victa for P5,000.00 on January 27, 1975. When the
decision was handed down on February 6,1975, the lower court alloted 2/8 of the land to
private respondents Juan and Isidro, or a total of 133.5 square meters.
It should be noted that prior to partition, all the co-owners hold the property in common
dominion but at the same time each is an owner of a share which is abstract and
undetermined until partition is effected. As cited in Eusebio vs. Intermediate Appellate
Court, 8 "an undivided estate is co-ownership by the heirs."
As co-owners, the parties may have unequal shares in the common property,
quantitatively speaking. But in a qualitative sense, each co-owner has the same right as
any one of the other co-owners. Every co-owner is therefore the owner of the whole, and
over the whole he exercises the right of dominion, but he is at the same time the owner
of a portion which is truly abstract, because until division is effected such portion is not
concretely determined. 9
Petitioner Florencio, in his first assignment of error, asseverates that the court a
quo erred in applying Article 448 of the Civil Code, since this article contemplates a
situation wherein the land belongs to one person and the thing built, sown or planted
belongs to another. In the instant case, the land in dispute used to be owned in common
by the contending parties.
Article 448 provides:
129
 Art. 448. The owner of the land on which anything has been built, sown or
planted in good faith, shall have the right to appropriate as his own the works,
sowing or planting, after payment of the indemnity provided for in articles 546
and 548, or to oblige the one who built or planted to pay the price of the land, and
the one who sowed, the proper rent. However, the builder or planter cannot be
obliged to buy the land if its value is considerably more than that of the building
or trees. In such case, he shall pay reasonable rent, if the owner of the land does
not choose to appropriate the building or trees after proper indemnity. The parties
shall agree upon the terms of the lease and in case of disagreement, the court
shall fix the terms thereof.
Whether or not the provisions of Article 448 should apply to a builder in good faith on a
property held in common has been resolved in the affirmative in the case of Spouses del
Campo vs. Abesia, 10 wherein the Court ruled that:
The court a quo correctly held that Article 448 of the Civil Code cannot apply
where a co-owner builds, plants or sows on the land owned in common for then
he did not build, plant or sow upon land that exclusively belongs to another but of
which he is a co-owner. The co-owner is not a third person under the
circumstances, and the situation is governed by the rules of co-ownership.
However, when, as in this case, the ownership is terminated by the partition and
it appears that the home of defendants overlaps or occupies a portion of 5
square meters of the land pertaining to plaintiffs which the defendants obviously
built in good faith, then the provisions of Article 448 of the new Civil Code should
apply. Manresa and Navarro Amandi agree that the said provision of the Civil
Code may apply even when there is a co-ownership if good faith has been
established. 11
In other words, when the co-ownership is terminated by a partition and it appears that the
house of an erstwhile co-owner has encroached upon a portion pertaining to another co-
owner which was however made in good faith, then the provisions of Article 448 should
apply to determine the respective rights of the parties.
Petitioner's second assigned error is however well taken. Both the trial court and the
Appellate Court erred when they peremptorily adopted the "workable solution" in the
case of Grana vs. Court of appeals, 12 and ordered the owner of the land, petitioner
Florencio, to sell to private respondents, Juan and Isidro, the part of the land they
intruded upon, thereby depriving petitioner of his right to choose. Such ruling
contravened the explicit provisions of Article 448 to the effect that "(t)he owner of the
land . . . shall have the right to appropriate . . .or to oblige the one who built . . . to pay
the price of the land . . . ." The law is clear and unambiguous when it confers the right of
choice upon the landowner and not upon the builder and the courts.
Thus, in Quemuel vs. Olaes, 13 the Court categorically ruled that the right to appropriate
the works or improvements or to oblige the builder to pay the price of the land belongs to
the landowner.
As to the third assignment of error, the question on the price to be paid on the land need
not be discussed as this would be premature inasmuch as petitioner Florencio has yet to
exercise his option as the owner of the land.
WHEREFORE, the decision appealed from is hereby MODIFIED as follows: Petitioner
Florencio Ignao is directed within thirty (30) days from entry of judgment to exercise his
option to either appropriate as his own the portions of the houses of Juan and Isidro
Ignao occupying his land upon payment of indemnity in accordance with Articles 546 and
548 of the Civil Code, or sell to private respondents the 101 square meters occupied by
them at such price as may be agreed upon. Should the value of the land exceed the
value of the portions of the houses that private respondents have erected thereon,
private respondents may choose not to buy the land but they must pay reasonable rent
for the use of the portion of petitioner's land as may be agreed upon by the parties. In
case of disagreement, the rate of rental and other terms of the lease shall be determined
by the trial court. Otherwise, private respondents may remove or demolish at their own
expense the said portions of their houses encroaching upon petitioner's land. 14 No costs.
SO ORDERED.
G.R. No. 115814 May 26, 1995
PECSON vs. CA
This petition for review on certiorari seeks to set aside the decision 1 of the Court of
Appeals in CA-G.R. SP No. 32679 affirming in part the order 2 of the Regional Trial Court
(RTC) of Quezon City, Branch 101, in Civil Case No. Q-41470.
The factual and procedural antecedents of this case as gathered from the record are as
follows:
Petitioner Pedro P. Pecson was the owner of a commercial lot located in Kamias Street,
Quezon City, on which he built a four-door two-storey apartment building. For his failure
to pay realty taxes amounting to twelve thousand pesos (P12,000.00), the lot was sold at
public auction by the city Treasurer of Quezon City to Mamerto Nepomuceno who in turn
130
sold it on 12 October 1983 to the private respondents, the spouses Juan Nuguid and
Erlinda Tan-Nuguid, for one hundred three thousand pesos (P103,000.00).
The petitioner challenged the validity of the auction sale in Civil Case No. Q-41470
before the RTC of Quezon City. In its decision of 8 February 1989, the RTC dismissed
the complaint, but as to the private respondents' claim that the sale included the
apartment building, it held that the issue concerning it was "not a subject of the . . .
litigation." In resolving the private respondents' motion to reconsider this issue, the trial
court held that there was no legal basis for the contention that the apartment building
was included in the sale. 3
Both parties then appealed the decision to the Court of Appeals. The case was docketed
as CA-G.R. CV No. 2931. In its decision of 30 April 1992, 4 the Court of Appeals affirmed in
toto the assailed decision. It also agreed with the trial court that the apartment building was
not included in the auction sale of the commercial lot. Thus:
Indeed, examining the record we are fully convinced that it was only the
land — without the apartment building — which was sold at the auction
sale, for plaintiff's failure to pay the taxes due thereon. Thus, in the
Certificate of Sale of Delinquent Property To Purchaser (Exh. K, p. 352,
Record) the property subject of the auction sale at which Mamerto
Nepomuceno was the purchaser is referred to as Lot No. 21-A, Block No.
K-34, at Kamias, Barangay Piñahan, with an area of 256.3 sq. m., with no
mention whatsoever, of the building thereon. The same description of the
subject property appears in the Final Notice To Exercise The Right of
Redemption (over subject property) dated September 14, 1981 (Exh. L,
p. 353, Record) and in the Final Bill of Sale over the same property dated
April 19, 1982 (Exh. P, p. 357, Record). Needless to say, as it was only
the land without any building which Nepomuceno had acquired at the
auction sale, it was also only that land without any building which he
could have legally sold to the Nuguids. Verily, in the Deed of Absolute
Sale of Registered Land executed by Mamerto Nepomuceno in favor of
the Nuguids on October 25, 1983 (Exh. U, p. 366, Record) it clearly
appears that the property subject of the sale for P103,000.00 was only
the parcel of land, Lot 21-A, Blk. K-34 containing an area of 256.3 sq.
meters, without any mention of any improvement, much less any building
thereon. (emphases supplied)
The petition to review the said decision was subsequently denied by this Court. 5 Entry of
judgment was made on 23 June 1993. 6
On November 1993, the private respondents filed with the trial court a motion for delivery
of possession of the lot and the apartment building, citing article 546 of the Civil
Code. 7 Acting thereon, the trial court issued on 15 November 1993 the challenged
order 8 which reads as follows:
Submitted for resolution before this Court is an uncontroverted [sic] for
the Delivery of Possession filed by defendants Erlinda Tan, Juan Nuguid,
et al. considering that despite personal service of the Order for plaintiff to
file within five (5) days his opposition to said motion, he did not file any.
In support of defendant's motion, movant cites the law in point as Article
546 of the Civil Code . . .
Movant agrees to comply with the provisions of the law considering that
plaintiff is a builder in good faith and he has in fact, opted to pay the cost
of the construction spent by plaintiff. From the complaint itself the plaintiff
stated that the construction cost of the apartment is much more than the
lot, which apartment he constructed at a cost of P53,000.00 in 1965 (par.
8 complaint). This amount of P53,000.00 is what the movant is supposed
to pay under the law before a writ of possession placing him in
possession of both the lot and apartment would be issued.
However, the complaint alleges in paragraph 9 that three doors of the
apartment are being leased. This is further confirmed by the affidavit of
the movant presented in support of the motion that said three doors are
being leased at a rental of P7,000.00 a month each. The movant further
alleges in his said affidavit that the present commercial value of the lot is
P10,000.00 per square meter or P2,500,000.00 and the reasonable
rental value of said lot is no less than P21,000.00 per month.
The decision having become final as per Entry of Judgment dated June
23, 1993 and from this date on, being the uncontested owner of the
property, the rents should be paid to him instead of the plaintiff collecting
them. From June 23, 1993, the rents collected by plaintiff amounting to
more than P53,000.00 from tenants should be offset from the rents due to
the lot which according to movant's affidavit is more than P21,000.00 a
month.
WHEREFORE, finding merit in the Motion, the Court hereby grants the
following prayer that:
131
 1. The movant shall reimburse plaintiff the construction
cost of P53,000.00.
2. The payment of P53,000.00 as reimbursement for the
construction cost, movant Juan Nuguid is hereby entitled
to immediate issuance of a writ of possession over the Lot
and improvements thereon.
3. The movant having been declared as the uncontested
owner of the Lot in question as per Entry of Judgment of
the Supreme Court dated June 23, 1993, the plaintiff
should pay rent to the movant of no less than P21,000.00
per month from said date as this is the very same amount
paid monthly by the tenants occupying the lot.
4. The amount of P53,000.00 due from the movant is
hereby offset against the amount of rents collected by the
plaintiff from June 23, 1993, to September 23, 1993.
SO ORDERED.
The petitioner moved for the reconsideration of the order but it was not acted upon by the
trial court. Instead, on 18 November 1993, it issued a writ of possession directing the
deputy sheriff "to place said movant Juan Nuguid in possession of subject property
located at No. 79 Kamias Road, Quezon City, with all the improvements thereon and to
eject therefrom all occupants therein, their agents, assignees, heirs and
representatives." 9
The petitioner then filed with the Court of Appeals a special civil action for certiorari and
prohibition assailing the order of 15 November 1993, which was docketed as CA-G.R.
SP No. 32679. 10 In its decision of 7 June 1994, the Court of Appeals affirmed in part the
order of the trial court citing Article 448 of the Civil Code. In disposing of the issues, it stated:
As earlier pointed out, private respondent opted to appropriate the
improvement introduced by petitioner on the subject lot, giving rise to the
right of petitioner to be reimbursed of the cost of constructing said
apartment building, in accordance with Article 546 of the . . . Civil Code,
and of the right to retain the improvements until he is reimbursed of the
cost of the improvements, because, basically, the right to retain the
improvement while the corresponding indemnity is not paid implies the
tenancy or possession in fact of the land on which they are built . . . [2
TOLENTINO, CIVIL CODE OF THE PHILIPPINES (1992) p. 112]. With
the facts extant and the settled principle as guides, we agree with
petitioner that respondent judge erred in ordering that "the movant having
been declared as the uncontested owner of the lot in question as per
Entry of Judgment of the Supreme Court dated June 23, 1993, the
plaintiff should pay rent to the movant of no less than P21,000 per month
from said date as this is the very same amount paid monthly by the
tenants occupying the lot.
We, however, agree with the finding of respondent judge that the amount
of P53,000.00 earlier admitted as the cost of constructing the apartment
building can be offset from the amount of rents collected by petitioner
from June 23, 1993 up to September 23, 1993 which was fixed at
P7,000.00 per month for each of the three doors. Our underlying reason
is that during the period of retention, petitioner as such possessor and
receiving the fruits from the property, is obliged to account for such fruits,
so that the amount thereof may be deducted from the amount of
indemnity to be paid to him by the owner of the land, in line with Mendoza
vs. De Guzman, 52 Phil. 164 . . . .
The Court of Appeals then ruled as follows:
WHEREFORE, while it appears that private respondents have not yet
indemnified petitioner with the cost of the improvements, since Annex I
shows that the Deputy Sheriff has enforced the Writ of Possession and
the premises have been turned over to the possession of private
respondents, the quest of petitioner that he be restored in possession of
the premises is rendered moot and academic, although it is but fair and
just that private respondents pay petitioner the construction cost of
P53,000.00; and that petitioner be ordered to account for any and all
fruits of the improvements received by him starting on June 23, 1993,
with the amount of P53,000.00 to be offset therefrom.
IT IS SO ORDERED. 11
Aggrieved by the Court of Appeals' decision, the petitioner filed the instant petition.
The parties agree that the petitioner was a builder in good faith of the apartment building
on the theory that he constructed it at the time when he was still the owner of the lot, and
that the key issue in this case is the application of Articles 448 and 456 of the Civil Code.
132
The trial court and the Court of Appeals, as well as the parties, concerned themselves
with the application of Articles 448 and 546 of the Civil Code. These 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. (361a)
xxx xxx xxx
Art. 546. Necessary expenses shall be refunded to every possessor; but
only the possessor in good faith may retain the thing until he has been
reimbursed therefor.
Useful expenses shall be refunded only to the possessor in good faith
with the same right of retention, the person who has defeated him in the
possession having the option of refunding the amount of the expenses or
of paying the increase in value which the thing may have acquired by
reason thereof. (453a)
By its clear language, Article 448 refers to a land whose ownership is claimed by two or
more parties, one of whom has built some works, or sown or planted something. The
building, sowing or planting may have been made in good faith or in bad faith. The rule
on good faith laid down in Article 526 of the Civil Code shall be applied in determining
whether a builder, sower or planter had acted in good faith. 12
Article 448 does not apply to a case where the owner of the land is the builder, sower, or
planter who then later loses ownership of the land by sale or donation. This Court said so
in Coleongco vs. Regalado: 13
Article 361 of the old Civil Code is not applicable in this case, for
Regalado constructed the house on his own land before he sold said land
to Coleongco. Article 361 applies only in cases where a person
constructs a building on the land of another in good or in bad faith, as the
case may be. It does not apply to a case where a person constructs a
building on his own land, for then there can be no question as to good or
bad faith on the part of the builder.
Elsewise stated, where the true owner himself is the builder of works on his own land,
the issue of good faith or bad faith is entirely irrelevant.
Thus in strict point of law, Article 448 is not apposite to the case at bar. Nevertheless, we
believe that the provision therein on indemnity may be applied by analogy considering
that the primary intent of Article 448 is to avoid a state of forced co-ownership and that
the parties, including the two courts below, in the main agree that Articles 448 and 546 of
the Civil Code are applicable and indemnity for the improvements may be paid although
they differ as to the basis of the indemnity.
Article 546 does not specifically state how the value of the useful improvements should
be determined. The respondent court and the private respondents espouse the belief
that the cost of construction of the apartment building in 1965, and not its current market
value, is sufficient reimbursement for necessary and useful improvements made by the
petitioner. This position is, however, not in consonance with previous rulings of this Court
in similar cases. In Javier vs. Concepcion, Jr., 14 this Court pegged the value of the useful
improvements consisting of various fruits, bamboos, a house and camarin made of strong
material based on the market value of the said improvements. In Sarmiento
vs. Agana, 15 despite the finding that the useful improvement, a residential house, was built in
1967 at a cost of between eight thousand pesos (P8,000.00) to ten thousand
pesos(P10,000.00), the landowner was ordered to reimburse the builder in the amount of
forty thousand pesos (P40,000.00), the value of the house at the time of the trial. In the same
way, the landowner was required to pay the "present value" of the house, a useful
improvement, in the case of De Guzman vs. De la Fuente, 16 cited by the petitioner.
The objective of Article 546 of the Civil Code is to administer justice between the parties
involved. In this regard, this Court had long ago stated in Rivera vs. Roman Catholic
Archbishop of Manila 17 that the said provision was formulated in trying to adjust the rights of
the owner and possessor in good faith of a piece of land, to administer complete justice to
both of them in such a way as neither one nor the other may enrich himself of that which
does not belong to him. Guided by this precept, it is therefore the current market value of the
improvements which should be made the basis of reimbursement. A contrary ruling would
unjustly enrich the private respondents who would otherwise be allowed to acquire a highly
valued income-yielding four-unit apartment building for a measly amount. Consequently, the
parties should therefore be allowed to adduce evidence on the present market value of the
apartment building upon which the trial court should base its finding as to the amount of
reimbursement to be paid by the landowner.
133
The trial court also erred in ordering the petitioner to pay monthly rentals equal to the
aggregate rentals paid by the lessees of the apartment building. Since the private
respondents have opted to appropriate the apartment building, the petitioner is thus
entitled to the possession and enjoyment of the apartment building, until he is paid the
proper indemnity, as well as of the portion of the lot where the building has been
constructed. This is so because the right to retain the improvements while the
corresponding indemnity is not paid implies the tenancy or possession in fact of the land
on which it is built, planted or sown. 18 The petitioner not having been so paid, he was
entitled to retain ownership of the building and, necessarily, the income therefrom.
It follows, too, that the Court of Appeals erred not only in upholding the trial court's
determination of the indemnity, but also in ordering the petitioner to account for the
rentals of the apartment building from 23 June 1993 to 23 September 1993.
WHEREFORE, the decision of the Court of Appeals in CA-G.R. SP No. 32679 and the
Order of 15 November 1993 of the Regional Trial Court, Branch 101, Quezon City in Civil
Case No. Q-41470 are hereby SET ASIDE.
The case is hereby remanded to the trial court for it to determine the current market
value of the apartment building on the lot. For this purpose, the parties shall be allowed
to adduce evidence on the current market value of the apartment building. The value so
determined shall be forthwith paid by the private respondents to the petitioner otherwise
the petitioner shall be restored to the possession of the apartment building until payment
of the required indemnity.
No costs.
SO ORDERED.
G.R. No. L-62943 July 14, 1986
MWSS vs. CA
This petition for review asks us to set aside the October 29, 1982 decision of the
respondent Court of Appeals, now Intermediate Appellate Court which reversed the
decision of the Court of First Instance of Manila, Branch XL, and dismissed the plaintiff's
complaint, the third party complaint, as well as the defendant's counterclaim.
The background facts which led to the filing of the instant petition are summarized in the
decision of the respondent Court of Appeals:
Metropolitan Waterworks and Sewerage System (hereinafter referred to
as MWSS) is a government owned and controlled corporation created
under Republic Act No. 6234 as the successor-in- interest of the defunct
NWSA. The Philippine National Bank (PNB for short), on the other hand,
is the depository bank of MWSS and its predecessor-in-interest NWSA.
Among the several accounts of NWSA with PNB is NWSA Account No. 6,
otherwise known as Account No. 381-777 and which is presently
allocated No. 010-500281. The authorized signature for said Account No.
6 were those of MWSS treasurer Jose Sanchez, its auditor Pedro Aguilar,
and its acting General Manager Victor L. Recio. Their respective
specimen signatures were submitted by the MWSS to and on file with the
PNB. By special arrangement with the PNB, the MWSS used
personalized checks in drawing from this account. These checks were
printed for MWSS by its printer, F. Mesina Enterprises, located at 1775
Rizal Extension, Caloocan City.
During the months of March, April and May 1969, twenty-three (23)
checks were prepared, processed, issued and released by NWSA, all of
which were paid and cleared by PNB and debited by PNB against NWSA
Account No. 6, to wit:
Check No. Date Payee Amount Date Paid
By PNB
1. 59546 8-21-69 Deogracias P 3,187.79 4-2-69
Estrella
2. 59548 3-31-69 Natividad 2,848.86 4-23 69
Rosario
3. 59547 3-31-69 Pangilinan 195.00 Unreleased
Enterprises
4. 59549 3-31-69 Natividad 3,239.88 4-23-69
Rosario
134
5. 59552 4-1-69 Villarama 987.59 5-6-69
& Sons
6. 59554 4-1-69 Gascom 6,057.60 4-16 69
Engineering
7. 59558 4-2-69 The Evening 112.00 Unreleased
News
8. 59544 3-27-69 Progressive 18,391.20 4-18 69
Const.
9. 59564 4-2-69 Ind. Insp. 594.06 4-18 69
Int. Inc.
10. 59568 4-7-69 Roberto 800.00 4-22-69
Marsan
11. 59570 4-7-69 Paz Andres 200.00 4-22-69
12. 59574 4-8-69 Florentino 100,000.00 4-11-69
Santos
13. 59578 4-8-69 Mla. Daily 95.00 Unreleased
Bulletin
14. 59580 4-8-69 Phil. Herald 100.00 5-9-69
15. 59582 4-8-69 Galauran 7,729.09 5-6-69
& Pilar
16. 59581 4-8-69 Manila 110.00 5-12 69
Chronicle
17. 59588 4-8-69 Treago 21,583.00 4-11 69
Tunnel
18. 59587 4-8-69 Delfin 120,000.00 4-11-69
Santiago
19. 59589 4-10-69 Deogracias 1,257.49 4-16 69
Estrella
20. 59594 4-14-69 Philam Ac- 33.03 4-29 69
cident Inc.
21. 59577 4-8-69 Esla 9,429.78 4-29 69
22. 59601 4-16-69 Justino 20,000.00 4-18-69
Torres
23. 59595 4-14-69 Neris Phil. 4,274.00 5-20-69
Inc. --------------------
P 320,636.26
During the same months of March, April and May 1969, twenty-three (23)
checks bearing the same numbers as the aforementioned NWSA checks
were likewise paid and cleared by PNB and debited against NWSA
Account No. 6, to wit:
Check Date Payee Amount Date Paid
135
No. Issued By PNB
1. 59546 3-6-69 Raul Dizon P 84,401.00 3-16-69
2. 59548 3-11-69 Raul Dizon 104,790.00 4-1-69
3. 59547 3-14-69 Arturo Sison 56,903.00 4-11-69
4. 59549 3-20-69 Arturo Sison 48,903.00 4-15-69
5. 59552 3-24-69 Arturo Sison 63,845.00 4-16-69
6. 59544 3-26-69 Arturo Sison 98,450.00 4-17-69
7. 59558 3-28-69 Arturo Sison 114,840.00 4-21-69
8. 59544 3-16-69 Antonio 38,490.00 4-22-69 Mendoza
9. 59564 3-31-69 Arturo Sison 180,900.00 4-23-69
10.59568 4-2-69 Arturo Sison 134,940.00 4- 5-69
11.59570 4-1-69 Arturo Sison 64,550.00 4-28-69
12.59574 4-2-69 Arturo Sison 148,610.00 4-29-69
13.59578 4-10-69 Antonio 93,950.00 4-29-69
Mendoza
14.59580 4-8-69 Arturo Sison 160,000.00 5-2-69
15.59582 4-10-69 Arturo Sison 155,400.00 5-5-69
16.59581 4-8-69 Antonio 176,580.00 5-6-69
Mendoza
17.59588 4-16-69 Arturo Sison 176,000.00 5-8-69
18.59587 4-16-69 Arturo Sison 300,000.00 5-12-69
19.59589 4-18-69 Arturo Sison 122,000.00 5-14-69
20.59594 4-18-69 Arturo Sison 280,000.00 5-15-69
21.59577 4-14-69 Antonio 260,000.00 5-16-69
Mendoza
22.59601 4-18-69 Arturo Sison 400,000.00 5-19-69
23.59595 4-28-69 Arturo Sison 190,800.00 5-21-69
---------------
P3,457,903.00
The foregoing checks were deposited by the payees Raul Dizon, Arturo
Sison and Antonio Mendoza in their respective current accounts with the
Philippine Commercial and Industrial Bank (PCIB) and Philippine Bank of
Commerce (PBC) in the months of March, April and May 1969. Thru the
Central Bank Clearing, these checks were presented for payment by PBC
and PCIB to the defendant PNB, and paid, also in the months of March,
April and May 1969. At the time of their presentation to PNB these
checks bear the standard indorsement which reads 'all prior indorsement
and/or lack of endorsement guaranteed.'
Subsequent investigation however, conducted by the NBI showed that
Raul Dizon, Arturo Sison and Antonio Mendoza were all fictitious
persons. The respective balances in their current account with the PBC
and/or PCIB stood as follows: Raul Dizon P3,455.00 as of April 30, 1969;
Antonio Mendoza P18,182.00 as of May 23, 1969; and Arturo Sison
Pl,398.92 as of June 30, 1969.
On June 11, 1969, NWSA addressed a letter to PNB requesting the
immediate restoration to its Account No. 6, of the total sum of
P3,457,903.00 corresponding to the total amount of these twenty-three
(23) checks claimed by NWSA to be forged and/or spurious checks. "In
view of the refusal of PNB to credit back to Account No. 6 the said total
136
 sum of P3,457,903.00 MWSS filed the instant complaint on November
10, 1972 before the Court of First Instance of Manila and docketed
thereat as Civil Case No. 88950.
In its answer, PNB contended among others, that the checks in question
were regular on its face in all respects, including the genuineness of the
signatures of authorized NWSA signing officers and there was nothing on
its face that could have aroused any suspicion as to its genuineness and
due execution and; that NWSA was guilty of negligence which was the
proximate cause of the loss.
PNB also filed a third party complaint against the negotiating banks PBC
and PCIB on the ground that they failed to ascertain the Identity of the
payees and their title to the checks which were deposited in the
respective new accounts of the payees with them.
xxx xxx xxx
On February 6, 1976, the Court of First Instance of Manila rendered judgment in favor of
the MWSS. The dispositive portion of the decision reads:
WHEREFORE, on the COMPLAINT by a clear preponderance of
evidence and in accordance with Section 23 of the Negotiable
Instruments Law, the Court hereby renders judgment in favor of the
plaintiff Metropolitan Waterworks and Sewerage System (MWSS) by
ordering the defendant Philippine National Bank (PNB) to restore the total
sum of THREE MILLION FOUR HUNDRED FIFTY SEVEN THOUSAND
NINE HUNDRED THREE PESOS (P3,457,903.00) to plaintiff's Account
No. 6, otherwise known as Account No. 010-50030-3, with legal interest
thereon computed from the date of the filing of the complaint and until as
restored in the said Account No. 6.
On the THIRD PARTY COMPLAINT, the Court, for lack of evidence,
hereby renders judgment in favor of the third party defendants Philippine
Bank of Commerce (PBC) and Philippine Commercial and Industrial Bank
(PCIB) by dismissing the Third Party Complaint.
The counterclaims of the third party defendants are likewise dismissed for
lack of evidence.
No pronouncement as to costs.
As earlier stated, the respondent court reversed the decision of the Court of First
Instance of Manila and rendered judgment in favor of the respondent Philippine National
Bank.
A motion for reconsideration filed by the petitioner MWSS was denied by the respondent
court in a resolution dated January 3, 1983.
The petitioner now raises the following assignments of errors for the grant of this petition:
I. IN NOT HOLDING THAT AS THE SIGNATURES ON THE CHECKS
WERE FORGED, THE DRAWEE BANK WAS LIABLE FOR THE LOSS
UNDER SECTION 23 OF THE NEGOTIABLE INSTRUMENTS LAW.
II. IN FAILING TO CONSIDER THE PROXIMATE NEGLIGENCE OF
PNB IN ACCEPTING THE SPURIOUS CHECKS DESPITE THE
OBVIOUS IRREGULARITY OF TWO SETS OF CHECKS BEARING
IdENTICAL NUMBER BEING ENCASHED WITHIN DAYS OF EACH
OTHER.
III. IN NOT HOLDING THAT THE SIGNATURES OF THE DRAWEE
MWSS BEING CLEARLY FORGED, AND THE CHECKS SPURIOUS,
SAME ARE INOPERATIVE AS AGAINST THE ALLEGED DRAWEE.
The appellate court applied Section 24 of the Negotiable Instruments Law which
provides:
Every negotiable instrument is deemed prima facie to have been issued
for valuable consideration and every person whose signature appears
thereon to have become a party thereto for value.
The petitioner submits that the above provision does not apply to the facts of the instant
case because the questioned checks were not those of the MWSS and neither were they
drawn by its authorized signatories. The petitioner states that granting that Section 24 of
the Negotiable Instruments Law is applicable, the same creates only a prima facie
presumption which was overcome by the following documents, to wit: (1) the NBI Report
of November 2, 1970; (2) the NBI Report of November 21, 1974; (3) the NBI Chemistry
Report No. C-74891; (4) the Memorandum of Mr. Juan Dino, 3rd Assistant Auditor of the
respondent drawee bank addressed to the Chief Auditor of the petitioner; (5) the
admission of the respondent bank's counsel in open court that the National Bureau of
Investigation found the signature on the twenty-three (23) checks in question to be
forgeries; and (6) the admission of the respondent bank's witness, Mr. Faustino Mesina,
137
Jr. that the checks in question were not printed by his printing press. The petitioner
contends that since the signatures of the checks were forgeries, the respondent drawee
bank must bear the loss under the rulings of this Court.
A bank is bound to know the signatures of its customers; and if it pays a
forged check it must be considered as making the payment out of its
obligation funds, and cannot ordinarily charge the amount so paid to the
account of the depositor whose name was forged.
xxx xxx xxx
The signatures to the checks being forged, under Section 23 of the
Negotiable Instruments Law they are not a charge against plaintiff nor are
the checks of any value to the defendant.
It must therefore be held that the proximate cause of loss was due to the
negligence of the Bank of the Philippine Islands in honoring and cashing
the two forged checks. (San Carlos Milling Co. v. Bank of the P. I., 59
Phil. 59)
It is admitted that the Philippine National Bank cashed the check upon a
forged signature, and placed the money to the credit of Maasim, who was
the forger. That the Philippine National Bank then endorsed the chock
and forwarded it to the Shanghai Bank by whom it was paid. The
Philippine National Bank had no license or authority to pay the money to
Maasim or anyone else upon a forged signature. It was its legal duty to
know that Malicor's endorsement was genuine before cashing the check.
Its remedy is against Maasim to whom it paid the money. (Great Eastern
Life Ins. Co. v. Hongkong & Shanghai Bank, 43 Phil. 678).
We have carefully reviewed the documents cited by the petitioner. There is no express
and categorical finding in these documents that the twenty-three (23) questioned checks
were indeed signed by persons other than the authorized MWSS signatories. On the
contrary, the findings of the National Bureau of Investigation in its Report dated
November 2, 1970 show that the MWSS fraud was an "inside job" and that the
petitioner's delay in the reconciliation of bank statements and the laxity and loose
records control in the printing of its personalized checks facilitated the fraud. Likewise,
the questioned Documents Report No. 159-1074 dated November 21, 1974 of the
National Bureau of Investigation does not declare or prove that the signatures appearing
on the questioned checks are forgeries. The report merely mentions the alleged
differences in the type face, checkwriting, and printing characteristics appearing in the
standard or submitted models and the questioned typewritings. The NBI Chemistry
Report No. C-74-891 merely describes the inks and pens used in writing the alleged
forged signatures.
It is clear that these three (3) NBI Reports relied upon by the petitioner are inadequate to
sustain its allegations of forgery. These reports did not touch on the inherent qualities of
the signatures which are indispensable in the determination of the existence of forgery.
There must be conclusive findings that there is a variance in the inherent characteristics
of the signatures and that they were written by two or more different persons.
Forgery cannot be presumed (Siasat, et al. v. Intermediate Appellate Court, et al, 139
SCRA 238). It must be established by clear, positive, and convincing evidence. This was
not done in the present case.
The cases of San Carlos Milling Co. Ltd. v. Bank of the Philippine Islands, et al. (59 Phil.
59) and Great Eastern Life Ins., Co. v. Hongkong and Shanghai Bank (43 Phil. 678)
relied upon by the petitioner are inapplicable in this case because the forgeries in those
cases were either clearly established or admitted while in the instant case, the
allegations of forgery were not clearly established during trial.
Considering the absence of sufficient security in the printing of the checks coupled with
the very close similarities between the genuine signatures and the alleged forgeries, the
twenty-three (23) checks in question could have been presented to the petitioner's
signatories without their knowing that they were bogus checks. Indeed, the cashier of the
petitioner whose signatures were allegedly forged was unable to ten the difference
between the allegedly forged signature and his own genuine signature. On the other
hand, the MWSS officials admitted that these checks could easily be passed on as
genuine.
The memorandum of Mr. A. T. Tolentino, no, Assistant Chief Accountant of the drawee
Philippine National Bank to Mr. E. Villatuya, Executive Vice-President of the petitioner
dated June 9, 1969 cites an instance where even the concerned NWSA officials could
not ten the differences between the genuine checks and the alleged forged checks.
At about 12:00 o'clock on June 6, 1969, VP Maramag requested me to
see him in his office at the Cashier's Dept. where Messrs. Jose M.
Sanchez, treasurer of NAWASA and Romeo Oliva of the same office
were present. Upon my arrival I observed the NAWASA officials
questioning the issue of the NAWASA checks appearing in their own list,
xerox copy attached.
138
 For verification purposes, therefore, the checks were taken from our file.
To everybody there present namely VIP Maramag, the two
abovementioned NAWASA officials, AVP, Buhain, Asst. Cashier Castelo,
Asst. Cashier Tejada and Messrs. A. Lopez and L. Lechuga, both C/A
bookkeepers, no one was able to point out any difference on the
signatures of the NAWASA officials appearing on the checks compared
to their official signatures on file. In fact 3 checks, one of those under
question, were presented to the NAWASA treasurer for verification but he
could not point out which was his genuine signature. After intent
comparison, he pointed on the questioned check as bearing his correct
signature.
xxx xxx xxx
Moreover, the petitioner is barred from setting up the defense of forgery under Section
23 of the Negotiable Instruments Law which provides that:
SEC. 23. FORGED SIGNATURE; EFFECT OF.- When the signature is
forged or made without authority of the person whose signature it
purports to be, it is wholly inoperative, and no right to retain the
instrument, or to give a discharge therefor, or to enforce payment thereof
against any party thereto can be acquired through or under such
signature unless the party against whom it is sought to enforce such right
is precluded from setting up the forgery or want of authority.
because it was guilty of negligence not only before the questioned checks were
negotiated but even after the same had already been negotiated. (See Republic v.
Equitable Banking Corporation, 10 SCRA 8) The records show that at the time the
twenty-three (23) checks were prepared, negotiated, and encashed, the petitioner was
using its own personalized checks, instead of the official PNB Commercial blank checks.
In the exercise of this special privilege, however, the petitioner failed to provide the
needed security measures. That there was gross negligence in the printing of its
personalized checks is shown by the following uncontroverted facts, to wit:
(1) The petitioner failed to give its printer, Mesina Enterprises, specific instructions
relative to the safekeeping and disposition of excess forms, check vouchers, and safety
papers;
(2) The petitioner failed to retrieve from its printer all spoiled check forms;
(3) The petitioner failed to provide any control regarding the paper used in the printing of
said checks;
(4) The petitioner failed to furnish the respondent drawee bank with samples of
typewriting, cheek writing, and print used by its printer in the printing of its checks and of
the inks and pens used in signing the same; and
(5) The petitioner failed to send a representative to the printing office during the printing
of said checks.
This gross negligence of the petitioner is very evident from the sworn statement dated
June 19, 1969 of Faustino Mesina, Jr., the owner of the printing press which printed the
petitioner's personalized checks:
xxx xxx xxx
7. Q: Do you have any business transaction with the
National Waterworks and Sewerage Authority
(NAWASA)?
A: Yes, sir. I have a contract with the NAWASA in printing
NAWASA Forms such as NAWASA Check
xxx xxx xxx
15. Q: Were you given any ingtruction by the NAWASA in
connection with the printing of these check vouchers?
A: There is none, sir. No instruction whatsoever was
given to me.
16. Q: Were you not advised as to what kind of paper
would be used in the check vouchers?
A: Only as per sample, sir.
xxx xxx xxx
20. Q: Where did you buy this Hammermill Safety check
paper?
139
A: From Tan Chiong, a paper dealer with store located at
Juan Luna, Binondo, Manila. (In front of the Metropolitan
Bank).
xxx xxx xxx
24. Q: Were all these check vouchers printed by you
submitted to NAWASA?
A: Not all, sir. Because we have to make reservations or
allowances for spoilage.
25. Q: Out of these vouchers printed by you, how many
were spoiled and how many were the excess printed
check vouchers?
A: Approximately four hundred (400) sheets, sir. I cannot
determine the proportion of the excess and spoiled
because the final act of perforating these check vouchers
has not yet been done and spoilage can only be
determined after this final act of printing.
26. Q: What did you do with these excess check
vouchers?
A: I keep it under lock and key in my firing cabinet.
xxx xxx xxx
28. Q: Were you not instructed by the NAWASA
authorities to bum these excess check vouchers?
A: No, sir. I was not instructed.
29. Q: What do you intend to do with these excess printed
check vouchers?
A: I intend to use them for future orders from the
xxx xxx xxx
32. Q: In the process of printing the check vouchers
ordered by the NAWASA, how many sheets were actually
spoiled?
A: I cannot approximate, sir. But there are spoilage in the
process of printing and perforating.
33. Q: What did you do with these spoilages?
A: Spoiled printed materials are usually thrown out, in the
garbage can.
34. Q: Was there any representative of the NAWASA to
supervise the printing or watch the printing of these check
vouchers?
A: None, sir.
xxx xxx xxx
39. Q: During the period of printing after the days work,
what measures do you undertake to safeguard the mold
and other paraphernalia used in the printing of these
particular orders of NAWASA?
A: Inasmuch as I have an employee who sleeps in the
printing shop and at the same time do the guarding, we
just leave the mold attached to the machine and the other
finished or unfinished work check vouchers are left in the
rack so that the work could be continued the following
day.
The National Bureau of Investigation Report dated November 2, 1970 is even more
explicit. Thus—
xxx xxx xxx
60. We observed also that there is some laxity and loose
control in the printing of NAWASA cheeks. We gathered
from MESINA ENTERPRISES, the printing firm that
140
 undertook the printing of the check vouchers of NAWASA
that NAWASA had no representative at the printing press
during the process of the printing and no particular
security measure instructions adopted to safeguard the
interest of the government in connection with printing of
this accountable form.
Another factor which facilitated the fraudulent encashment of the twenty-three (23)
checks in question was the failure of the petitioner to reconcile the bank statements with
its own records.
It is accepted banking procedure for the depository bank to furnish its depositors bank
statements and debt and credit memos through the mail. The records show that the
petitioner requested the respondent drawee bank to discontinue the practice of mailing
the bank statements, but instead to deliver the same to a certain Mr. Emiliano Zaporteza.
For reasons known only to Mr. Zaporteza however, he was unreasonably delayed in
taking prompt deliveries of the said bank statements and credit and debit memos. As a
consequence, Mr. Zaporteza failed to reconcile the bank statements with the petitioner's
records. If Mr. Zaporteza had not been remiss in his duty of taking the bank statements
and reconciling them with the petitioner's records, the fraudulent encashments of the first
checks should have been discovered, and further frauds prevented. This negligence
was, therefore, the proximate cause of the failure to discover the fraud. Thus,
When a person opens a checking account with a bank, he is given blank
checks which he may fill out and use whenever he wishes. Each time he
issues a check, he should also fill out the check stub to which the check
is usually attached. This stub, if properly kept, will contain the number of
the check, the date of its issue, the name of the payee and the amount
thereof. The drawer would therefore have a complete record of the
checks he issues. It is the custom of banks to send to its depositors a
monthly statement of the status of their accounts, together with all the
cancelled checks which have been cashed by their respective holders. If
the depositor has filled out his check stubs properly, a comparison
between them and the cancelled checks will reveal any forged check not
taken from his checkbook. It is the duty of a depositor to carefully
examine the bank's statement, his cancelled checks, his check stubs and
other pertinent records within a reasonable time, and to report any errors
without unreasonable delay. If his negligence should cause the bank to
honor a forged check or prevent it from recovering the amount it may
have already paid on such check, he cannot later complain should the
bank refuse to recredit his account with the amount of such check. (First
Nat. Bank of Richmond v. Richmond Electric Co., 106 Va. 347, 56 SE
152, 7 LRA, NS 744 [1907]. See also Leather Manufacturers' Bank v.
Morgan, 117 US 96, 6 S. Ct. 657 [1886]; Deer Island Fish and Oyster Co.
v. First Nat. Bank of Biloxi, 166 Miss. 162, 146 So. 116 [1933]). Campos
and Campos, Notes and Selected Cases on Negotiable Instruments Law,
1971, pp. 267-268).
This failure of the petitioner to reconcile the bank statements with its cancelled checks
was noted by the National Bureau of Investigation in its report dated November 2, 1970:
58. One factor which facilitate this fraud was the delay in the
reconciliation of bank (PNB) statements with the NAWASA bank
accounts. x x x. Had the NAWASA representative come to the PNB early
for the statements and had the bank been advised promptly of the
reported bogus check, the negotiation of practically all of the remaining
checks on May, 1969, totalling P2,224,736.00 could have been
prevented.
The records likewise show that the petitioner failed to provide appropriate security
measures over its own records thereby laying confidential records open to unauthorized
persons. The petitioner's own Fact Finding Committee, in its report submitted to their
General manager underscored this laxity of records control. It observed that the "office of
Mr. Ongtengco (Cashier No. VI of the Treasury Department at the NAWASA) is quite
open to any person known to him or his staff members and that the check writer is
merely on top of his table."
When confronted with this report at the Anti-Fraud Action Section of the National Bureau
of Investigation. Mr. Ongtengco could only state that:
A. Generally my order is not to allow anybody to enter my
office. Only authorized persons are allowed to enter my
office. There are some cases, however, where some
persons enter my office because they are following up
their checks. Maybe, these persons may have been
authorized by Mr. Pantig. Most of the people entering my
office are changing checks as allowed by the Resolution
of the Board of Directors of the NAWASA and the
Treasurer. The check writer was never placed on my
table. There is a place for the check write which is also
under lock and key.
141
 Q. Is Mr. Pantig authorized to allow unauthorized persons
to enter your office?
A. No, sir.
Q. Why are you tolerating Mr. Pantig admitting
unauthorized persons in your office?
A. I do not want to embarrass Mr. Pantig. Most of the
people following up checks are employees of the
NAWASA.
Q. Was the authority given by the Board of Directors and
the approval by the Treasurer for employees, and other
persons to encash their checks carry with it their authority
to enter your office?
A. No, sir.
xxx xxx xxx
Q. From the answers that you have given to us we
observed that actually there is laxity and poor control on
your part with regards to the preparations of check
payments inasmuch as you allow unauthorized persons to
follow up their vouchers inside your office which may
leakout confidential informations or your books of
account. After being apprised of all the shortcomings in
your office, as head of the Cashiers' Office of the
Treasury Department what remedial measures do you
intend to undertake?
A. Time and again the Treasurer has been calling our
attention not to allow interested persons to hand carry
their voucher checks and we are trying our best and if I
can do it to follow the instructions to the letter, I will do it
but unfortunately the persons who are allowed to enter
my office are my co-employees and persons who have
connections with our higher ups and I can not possibly
antagonize them. Rest assured that even though that
everybody will get hurt, I win do my best not to allow
unauthorized persons to enter my office.
xxx xxx xxx
Q. Is it not possible inasmuch as your office is in charge
of the posting of check payments in your books that
leakage of payments to the banks came from your office?
A. I am not aware of it but it only takes us a couple of
minutes to process the checks. And there are cases
wherein every information about the checks may be
obtained from the Accounting Department, Auditing
Department, or the Office of the General Manager.
Relying on the foregoing statement of Mr. Ongtengco, the National Bureau of
Investigation concluded in its Report dated November 2, 1970 that the fraudulent
encashment of the twenty-three (23)cheeks in question was an "inside job". Thus-
We have all the reasons to believe that this fraudulent act was an inside
job or one pulled with inside connivance at NAWASA. As pointed earlier
in this report, the serial numbers of these checks in question conform with
the numbers in current use of NAWASA, aside from the fact that these
fraudulent checks were found to be of the same kind and design as that
of NAWASA's own checks. While knowledge as to such facts may be
obtained through the possession of a NAWASA check of current issue,
an outsider without information from the inside can not possibly pinpoint
which of NAWASA's various accounts has sufficient balance to cover all
these fraudulent checks. None of these checks, it should be noted, was
dishonored for insufficiency of funds. . .
Even if the twenty-three (23) checks in question are considered forgeries, considering
the petitioner's gross negligence, it is barred from setting up the defense of forgery under
Section 23 of the Negotiable Instruments Law.
Nonetheless, the petitioner claims that it was the negligence of the respondent Philippine
National Bank that was the proximate cause of the loss. The petitioner relies on our
ruling in Philippine National Bank v. Court of Appeals(25 SCRA 693) that.
Thus, by not returning the cheek to the PCIB, by thereby indicating that
the PNB had found nothing wrong with the check and would honor the
142
 same, and by actually paying its amount to the PCIB, the PNB induced
the latter, not only to believe that the check was genuine and good in
every respect, but, also, to pay its amount to Augusto Lim. In other
words, the PNB was the primary or proximate cause of the loss, and,
hence, may not recover from the PCIB.
The argument has no merit. The records show that the respondent drawee bank, had
taken the necessary measures in the detection of forged checks and the prevention of
their fraudulent encashment. In fact, long before the encashment of the twenty-three (23)
checks in question, the respondent Bank had issued constant reminders to all Current
Account Bookkeepers informing them of the activities of forgery syndicates. The
Memorandum of the Assistant Vice-President and Chief Accountant of the Philippine
National Bank dated February 17, 1966 reads in part:
SUBJECT: ACTIVITIES OF FORGERY SYNDICATE
From reliable information we have gathered that personalized checks of
current account depositors are now the target of the forgery syndicate. To
protect the interest of the bank, you are hereby enjoined to be more
careful in examining said checks especially those coming from the
clearing, mails and window transactions. As a reminder please be guided
with the following:
1. Signatures of drawers should be properly scrutinized and compared
with those we have on file.
2. The serial numbers of the checks should be compared with the serial
numbers registered with the Cashier's Dept.
3. The texture of the paper used and the printing of the checks should be
compared with the sample we have on file with the Cashier's Dept.
4. Checks bearing several indorsements should be given a special
attention.
5. Alteration in amount both in figures and words should be carefully
examined even if signed by the drawer.
6. Checks issued in substantial amounts particularly by depositors who
do not usually issue checks in big amounts should be brought to the
attention of the drawer by telephone or any fastest means of
communication for purposes of confirmation.
and your attention is also invited to keep abreast of previous circulars and
memo instructions issued to bookkeepers.
We cannot fault the respondent drawee Bank for not having detected the fraudulent
encashment of the checks because the printing of the petitioner's personalized checks
was not done under the supervision and control of the Bank. There is no evidence on
record indicating that because of this private printing the petitioner furnished the
respondent Bank with samples of checks, pens, and inks or took other precautionary
measures with the PNB to safeguard its interests.
Under the circumstances, therefore, the petitioner was in a better position to detect and
prevent the fraudulent encashment of its checks.
WHEREFORE, the petition for review on certiorari is hereby DISMISSED for lack of
merit. The decision of the respondent Court of Appeals dated October 29, 1982 is
AFFIRMED. No pronouncement as to costs.
SO ORDERED.
G.R. No. 73418 September 20, 1988
SABIDO vs. IAC
This petition for review on certiorari seeks to set aside the decision of the then
Intermediate Appellate Court which nullified the orders of the trial court for the issuance
of the writs of execution and demolition in favor of the petitioners and which ordered the
trial court to assess the value of the demolished properties of the private respondent for
the purposes of set-off against respondent's liability to the petitioners.
This case originated from an action for quieting of title which was filed by the spouses
Victor Dasal and Maria Pecunio against herein petitioners, Maximo Rances and Pelicula
Sabido on the question of ownership over two parcels of land otherwise known as Lots
"B" and "D".
On October 7, 1969, the trial court presided by Judge Delfin Sunga declared the
petitioners as owners of Lots "B" and "D". The decision became final. However, when the
decision was being carried out to put the petitioners in possession of Lot "B", the
Provincial Sheriff found three (3) persons occupying portions of Lot "B". One of them was
private respondent Dominador Sta. Ana.
143
The petitioners filed a motion to require the private respondent to show cause why he
should not be ejected from the portion of Lot "B". In his answer, Sta. Ana claimed
ownership by purchase from one Prudencio Lagarto, of a bigger area of which Lot "B" is
a part. He stated that the two other persons occupying the disputed portion are his
tenants.
Subsequently, an order of demolition was issued by the trial court against the private
respondent. This order was challenged by the private respondent and upon his filing of
certiorari proceedings, this Court on November 26, 1973, set aside the order of the trial
court and remanded the case to the latter for further reception of evidence to determine:
1) Whether or not the private respondent is privy to the spouses Victor Dasal and Maria
Pecunio as the losing parties in the action below; and 2) Whether or not the petitioners
and the private respondent are litigating over the same parcel of land or whether there is
overlapping of boundaries of their respective lands.
On December 12, 1974, after conducting an ocular inspection and hearing, Judge Sunga
issued an order for the private respondent to vacate Lot "B" upon finding that there is no
proof that what the respondent allegedly purchased from Lagarto covers a portion of Lot
"B" but on the contrary, the deed of sale and tax declaration show that what was sold to
the respondent was bounded on the south by Tigman river and therefore, the
respondent's ownership could not have extended to Lot "B" which was separated by the
Tigman river and mangrove swamps from the portion he purchased.
Before the order of December 12, 1974, could be executed, however, Judge Sunga
inhibited himself from the case so the same was transferred to the then Court of First
Instance (now Branch M, Regional Trial Court) of Naga City presided by Judge Mericia
B. Palma.
The execution of the order met with some further delay when the records were
reconstituted. Judge Palma, feeling the need for a clearer understanding of the facts and
issues involved in the case, proceeded to hear and received evidence.
On May 16, 1983, Judge Palma issued a resolution finding that there was privity between
the private respondent and the spouses Victor Dasal and Maria Pecunio as to the
ownership of Lot "C" and as to the possession over the western portion of the private
road and the disputed Lot "B"; and that Lot "B" and the private road are not included in
the land purchased by the respondent from Lagarto.
According to the trial court, the private respondent was in the company of Dasal (from
whom he was renting Lot "C' and who was also the brother-in-law of Lagarto) and was
present when Commissioner Tubianosa inspected the land in question in 1953
supporting the claim that the respondent knew that the land was already in dispute
between Dasal and the petitioners; and if the respondent really believed that he owns the
entire Lot "B" and the private road, he should have raised his claim of ownership when
Tubianosa inspected the land. The respondent also failed to include the land in dispute in
the survey of his purchased lot with the flimsy excuse that the surveyor failed to return to
finish the survey and include the disputed land.
Before arriving at the above findings, however, the trial court clarified the issues involved
in the case. It said:
WE NOW come to the RESOLUTION OF THE TWO ISSUES: (1) Was
there privity between Petitioner Sta. Ana and Plaintiffs Dasal? and (2) Is
the disputed area Identified in paragraph 1 of the foregoing enumeration,
part of the land purchased by Petitioner from Prudencio Lagarto?
If there is a privity between the Petitioner and Dasal, then the Petitioner is
bound by the final decision in this CC No. R-396 (2040) against Dasal
and therefore Petitioner is subject to the order of execution and is bound
to vacate the land in question or subject a portion of his house and the
surrounding walls to demolition. If there is no privity then he is not bound
by said final decision. (Rollo, pp. 48-49).
In the dispositive portion, however, the trial court held:
WHEREFORE, premises considered, the Court finds:
1.) That there is privity between the petitioner and the plaintiffs spouses
Victor Dasal and Maria Pecunio as to ownership of Lot C and as to the
possession over the western portion of the private road and the disputed
Lot B as so Identified in Exhibit 5;
2.) That the private road Identified as within points 1, 2, 3, 4, 5, 6 and 1 in
Exh. 5 is owned by the respondents as already decided in CC No. 1103,
and the same private road and the Lot B in Exhibit 5 are both owned by
the respondents as already decided in this CC No. R-396 (2040);
3.) That the balcony of the present house of the petitioner is located in
the disputed Lot B and its southern (or southeastern) part of the western
portion of the 'private road';
xxx xxx xxx
144
 6.) That therefore, this Court recommends to the Honorable Supreme
Court, that the petitioner be ordered to remove the entire balcony and the
northern portion of the main house to the extent of about one meter found
to be standing on the private road, as well as the northern extension of
the hollow block walls on the eastern boundary of Lot C that stand on the
private road and to the northern end of Lot B which wall measures to a
total length of about 15 meters from the northern boundary of Lot B to the
southern edge of the private road; or in the alternative to require the
petitioner to pay the respondents the value of the western portion of the
disputed area which is now enclosed in the wall constructed by the
petitioner;
7.) And to hold the petitioner liable to the respondents for reasonable
attorney's fees and damages. (Rollo, p. 52)
On June 7, 1983, the private respondent filed with this Court a pleading captioned
"Notice of Appeal for Review." Said petition was denied in this Court's resolution on
October 26,1983, to wit:
L-32642 (Dominador Sta. Ana v. Hon. Delfin Vir, Sunga, etc., et al.).
Considering the petition of petitioner for review of trial court resolution
dated May 16, 1983, the Court Resolved to DENY the petition, said
resolution of May 16, 1983, being in accord with the decision of
November 26, 1973 (Rec., p. 438) and the resolution of May 16, 1975
(idem, p. 595) as well as the order of December 12,1974 (idem, p. 500)
which ordered the petitioner to vacate the premises (which is presumably
final). As stated in the aforesaid resolution of May 16, 1975, any review
has to be sought by timely appeal to the appellate court and cannot be
sought in this case. (Rollo, p. 65).
A series of resolutions were subsequently issued by this Court denying the private
respondent's motion to reconsider the above-quoted resolution. Finally, on February 27,
1984, this Court issued a resolution ordering "the Chief of the Judgment Division of this
Court to RETURN the records thereof to the respondent court for execution of judgment."
On August 9, 1984, the petitioners filed motion for execution of judgment, accompanied
by a bill of costs, as follows: 1) Attorney's fees — P 25,000.00; 2) Cost of litigation —
P7,000.00; 3) Expenses for transcript of record — P600.00; 4) Expenses for xeroxing of
important papers and documents-P 500.00; 5) Accrued rentals for the lot in question
P11,800.00 and 6) Legal interest of accrued rentals at 12% a year — P1,436.00 for a
total of P46,336.00.
On October 5, 1984, the trial court issued an order granting the petitioners' motion for
execution and application for a writ of attachment and approving the bill of costs. In said
order, the trial court ordered the demolition of any part of the private respondent's
building and all other construction within Lot "B" and the private road. The demolition was
effected.
The private respondent appealed to the then Intermediate Appellate Court, contending
that the order of the trial court departed from the intention of the Supreme Court's
resolution ordering execution of the judgment, for it thereby deprived him of the
alternative choice of paying the value of the disputed area which was allowed in the trial
court's resolution of May 16, 1983, which the Supreme Court found to be in accord with,
among others, its decision in G.R. No. L-32642 (Sta. Ana v. Sunga, 54 SCRA 36).
On September 20, 1985, the appellate court rendered the assailed decision, the
dispositive portion of which provided;
WHEREFORE, the writs of certiorari and prohibition applied for are
granted. The Order of October 5, 1984 approving the bill of courts and
granting execution of 'previous orders', as well as the order/writ of
demolition are hereby set aside, Respondent Court is ordered to forthwith
determine the value of the demolished portion of petition of petitioner's
residential building and other structures affected by the demolition and
also, to assess the value of the disputed area for purposes of set off and
whatever is the excess in value should be paid to the party entitled
thereto. (Rollo, pp. 40-41)
In its decision, the appellate court explained the rationale behind the dispositive portion.
It said:
xxx xxx xxx
The unqualified affirmance of said resolution of May 16, 1983, to Our
Mind, carried with it the approval of the above recommendation. The fact
that the Supreme Court was silent on the recommended alternative
choice of demolition and payment of the disputed area and merely
returned the records for execution of judgment, did not indicate that the
recommended demolition was preferred. The sufficiency and efficacy of
the resolution of May 16, 1983, as the judgment to be enforced or
executed, cannot be doubted considering its substance rather than its
form. The aforequoted recommendation, itself the dispositive portion, can
be ascertained as to its meaning and operation. Thereby, the petitioner is
145
 given the option to pay the value of the western portion of the disputed
area which is enclosed in the wall constructed by said petitioner. It is
petitioner who is given the alternative choice since if he does not pay,
then he can be ordered to remove whatever structure he had introduced
in the questioned premises. Notably, petitioner indicated his willingness
to pay the price of the disputed area or otherwise exercised that option.
Respondent Court therefore acted with grave abuse of discretion
tantamount to lack or excess of jurisdiction in abandoning the alternative
choice of payment of the value of the area in dispute, which it authorized
in its final resolution of May 16, 1983, when it ordered execution of its
'previous orders' for the petitioner to vacate the land in question and for
demolition, which was set aside when the case was remanded for
hearing pursuant to the Supreme Court decision of November 26, 1973.
The previous orders referred to have not been specified by the
respondent Court in its Order of October 6, 1984. If it is the Order of
December 12, 1974 which is being referred to by respondent Court, it
should have so specified; however, it did not presumably because it was
reconsidered as can be deduced from the fact that thereafter, respondent
Court further heard the parties and received their respective evidence in
compliance with the decision of November 26, 1973, or which
proceedings, the respondent Court issued its resolution of May 16, 1983.
(Rollo, p. 38)
In the petition before us, the petitioners maintain that the appellate court committed
grave abuse of discretion when it granted the private respondent the option of exercising
the alternative choice of staying in the disputed land when it has been established that
the private respondent was in privy with the spouses Victor Dasal and Maria Pecunio
and, therefore, he could not be considered a builder in good faith as to entitle him to the
alternative choice of retention; and that the demolition of the private respondent's
construction on Lot "B" and on the private road is a logical consequence of the finding
that he was privy to the losing parties who were also the adversaries of the petitioners in
the original case.
We agree.
When this Court ordered the remand of the case between the petitioners and the private
respondent in our decision of November 26, 1973 (see Sta. Ana v. Sunga, supra), it was
precisely to determine whether herein respondent was privy to the spouses Dasals as to
make the decision against the latter and in favor of the petitioners over Lot "B" binding
upon him. And this fact was clearly pointed out by Judge Palma in her resolution of May
16, 1983 stating that if there is privity between the private respondent and the spouses
Dasals, then the former is bound by the final decision in CC No. R-396 (2040) which is
the case between the Dasals and the petitioners. However, an apparent confusion was
brought about by the dispositive portion of the aforementioned resolution when it
recommended to this Court either to order the respondent to remove all his constructions
over Lot "B" or to require said respondent to pay the petitioners the value of the disputed
area which was already enclosed by a wall constructed by the respondent. This,
nevertheless, was rectified when we issued the series of resolutions denying the
respondent's petition and motions for reconsideration before this Court wherein we
stated that the resolution of May 16, 1983 was in accord, among others, with the order of
December 12, 1974 "which ordered the petitioner (private respondent) to vacate the
premises (which is presumably final)."
Hence, it is clear that the private respondent has to remove all his constructions over Lot
"B" and vacate the premises. This is his only option. Being adjudged in privy with the
spouses Dasals, he cannot avail himself of the rights granted to a builder in good faith.
He, therefore, must remove all his useful improvements over Lot "B" at his own expense
and if the same have already been removed, he cannot be entitled to the right of
retention or to any reimbursement. Thus, in the case of Metropolitan Waterworks and
Sewarage System v. Court of Appeals, (143 SCRA 623, 629), we ruled:
Article 449 of the Civil Code of the Philippines provides that "he who
builds, plants or sows in bad faith on the land of another, loses what is
built, planted or sown without right to indemnity." As a builder in bad faith,
NAWASA lost whatever useful improvements it had made without right to
indemnity (Santos v. Mojica, Jan. 31, 1969, 26 SCRA 703)
Moreover, under Article 546 of said code, only a possessor in good faith
shall be refunded for useful expenses with the right of retention until
reimbursed; and under Article 547 thereof, only a possessor in good faith
may remove useful improvements if this can be done without damage to
the principal thing and if the person who recovers the possession does
not exercise the option of reimbursing the useful expenses. The right
given a possessor in bad faith to remove improvements applies only to
improvements for pure luxury or mere pleasure, provided the thing suffers
no injury thereby and the lawful possessor does not prefer to retain them
by paying the value they have at the time he enters into possession
(Article 549, Id.).
We, therefore, find that the appellate court committed reversible error in holding that the
private respondent is entitled to exercise the option to pay the value of the disputed area
146
of Lot "B" and to reimbursement for the value of the demolished portion of his building.
We, however, affirm its ruling that the petitioner's bill of costs must be set aside and that
while the resolution of May 16, 1983 included attorney's fees and damages, the
necessity of proof cannot be dispensed with. Since no proof was presented before the
trial regarding any of these claims, they cannot be awarded.
WHEREFORE, the petition is GRANTED and the decision of the court of Appeals dated
September 20, 1985 is ANNULED and SET ASIDE. The writ of attachment issued by the
trial court for the purpose of satisfying the award for damages and the bill of costs is,
however, permanently SET ASIDE.
SO ORDERED.
G.R. No. 176791 November 14, 2012
COMMUNITIES CAGAYAN vs. NANOL
LAWS fill the gap in a contract.
This Petition for Review on Certiorari1 under Rule 45 of the Rules of Court assails the
December 29. 2006 Decision2 and the February 12, 2007 Order3 of the Regional Trial
Court (RTC), Cagayan De Oro City, Branch 18, in Civil Case No. 2005-158.
Factual Antecedents
Sometimes in 1994, respondent-spouses Arsenio and Angeles Nanol entered into a
Contract to Sell4 with petitioner Communities Cagayan, Inc.,5 whereby the latter agreed
to sell to respondent-spouses a house and Lots 17 and 196 located at Block 16, Camella
Homes Subdivision, Cagayan de Oro City, 7 for the price of P368,000.00.8 Respondent-
spouses, however, did not avail of petitioner’s inhouse financing due to its high interest
rates.9 Instead, they obtained a loan from Capitol Development Bank, a sister company
of petitioner, using the property as collateral.10 To facilitate the loan, a simulated sale
over the property was executed by petitioner in favor of respondent-
spouses.11 Accordingly, titles were transferred in the names of respondent-spouses
under Transfer Certificates of Title (TCT) Nos. 105202 and 105203, and submitted to
Capitol Development Bank for loan processing.12 Unfortunately, the bank collapsed and
closed before it could release the loan.13
Thus, on November 30, 1997, respondent-spouses entered into another Contract to
Sell14 with petitioner over the same property for the same price of P368,000.00.15 This
time, respondent-spouses availed of petitioner’s in-house financing16thus, undertaking to
pay the loan over four years, from 1997 to 2001.17
Sometime in 2000, respondent Arsenio demolished the original house and constructed a
three-story house allegedly valued at P3.5 million, more or less.18
In July 2001, respondent Arsenio died, leaving his wife, herein respondent Angeles, to
pay for the monthly amortizations.19
On September 10, 2003, petitioner sent respondent-spouses a notarizedNotice of
Delinquency and Cancellation of Contract to Sell20 due to the latter’s failure to pay the
monthly amortizations.
In December 2003, petitioner filed before Branch 3 of the Municipal Trial Court in Cities
of Cagayan de Oro City, an action for unlawful detainer, docketed as C3-Dec-2160,
against respondent-spouses.21 When the case was referred for mediation, respondent
Angeles offered to pay P220,000.00 to settle the case but petitioner refused to accept
the payment.22 The case was later withdrawn and consequently dismissed because the
judge found out that the titles were already registered under the names of respondent-
spouses.23
Unfazed by the unfortunate turn of events, petitioner, on July 27, 2005, filed before
Branch 18 of the RTC, Cagayan de Oro City, a Complaint for Cancellation of Title,
Recovery of Possession, Reconveyance and Damages,24 docketed as Civil Case No.
2005-158, against respondent-spouses and all persons claiming rights under them.
Petitioner alleged that the transfer of the titles in the names of respondent-spouses was
made only in compliance with the requirements of Capitol Development Bank and that
respondent-spouses failed to pay their monthly amortizations beginning January
2000.25 Thus, petitioner prayed that TCT Nos. T-105202 and T-105203 be cancelled, and
that respondent Angeles be ordered to vacate the subject property and to pay petitioner
reasonable monthly rentals from January 2000 plus damages.26
In her Answer,27 respondent Angeles averred that the Deed of Absolute Sale is valid, and
that petitioner is not the proper party to file the complaint because petitioner is different
from Masterplan Properties, Inc.28 She also prayed for damages by way of compulsory
counterclaim.29
In its Reply,30 petitioner attached a copy of its Certificate of Filing of Amended Articles of
Incorporation31 showing that Masterplan Properties, Inc. and petitioner are one and the
same. As to the compulsory counterclaim for damages, petitioner denied the same on
the ground of "lack of knowledge sufficient to form a belief as to the truth or falsity of
such allegation."32
147
Respondent Angeles then moved for summary judgment and prayed that petitioner be
ordered to return the owner’s duplicate copies of the TCTs.33
Pursuant to Administrative Order No. 59-2005, the case was referred for mediation.34 But
since the parties failed to arrive at an amicable settlement, the case was set for
preliminary conference on February 23, 2006.35
On July 7, 2006, the parties agreed to submit the case for decision based on the
pleadings and exhibits presented during the preliminary conference.36
Ruling of the Regional Trial Court
On December 29, 2006, the RTC rendered judgment declaring the Deed of Absolute
Sale invalid for lack of consideration.37 Thus, it disposed of the case in this wise:
WHEREFORE, the Court hereby declares the Deed of Absolute Sale VOID. Accordingly,
Transfer Certificates of Title Nos. 105202 and 105203 in the names of the [respondents],
Arsenio (deceased) and Angeles Nanol, are ordered CANCELLED. The [respondents]
and any person claiming rights under them are directed to turn-over the possession of
the house and lot to [petitioner], Communities Cagayan, Inc., subject to the latter’s
payment of their total monthly installments and the value of the new house minus the
cost of the original house.
SO ORDERED.38
Not satisfied, petitioner moved for reconsideration of the Decision but the Motion was
39
denied in an Order40 dated February 12, 2007.
Issue
Instead of appealing the Decision to the Court of Appeals (CA), petitioner opted to file the
instant petition directly with this Court on a pure question of law, to wit:
WHETHER X X X THE ACTION OF THE RTC BRANCH 18 X X X IN ORDERING THE
RECOVERY OF POSSESSION BY PETITIONER ‘subject to the latter’s payment of their
total monthly installments and the value of the new house minus the cost of the original
house’ IS CONTRARY TO LAW AND JURISPRUDENCE X X X.41
Petitioner’s Arguments
Petitioner seeks to delete from the dispositive portion the order requiring petitioner to
reimburse respondent-spouses the total monthly installments they had paid and the
value of the new house minus the cost of the original house.42 Petitioner claims that there
is no legal basis for the RTC to require petitioner to reimburse the cost of the new house
because respondent-spouses were in bad faith when they renovated and improved the
house, which was not yet their own.43 Petitioner further contends that instead of ordering
mutual restitution by the parties, the RTC should have applied Republic Act No. 6552,
otherwise known as the Maceda Law,44 and that instead of awarding respondent-
spouses a refund of
all their monthly amortization payments, the RTC should have ordered them to pay
petitioner monthly rentals.45
Respondent Angeles’ Arguments
Instead of answering the legal issue raised by petitioner, respondent Angeles asks for a
review of the Decision of the RTC by interposing additional issues.46 She maintains that
the Deed of Absolute Sale is valid.47 Thus, the RTC erred in cancelling TCT Nos. 105202
and 105203.
Our Ruling
The petition is partly meritorious.
At the outset, we must make it clear that the issues raised by respondent Angeles may
not be entertained. For failing to file an appeal, she is bound by the Decision of the RTC.
Well entrenched is the rule that "a party who does not appeal from a judgment can no
longer seek modification or reversal of the same. He may oppose the appeal of the other
party only on grounds consistent with the judgment."48 For this reason, respondent
Angeles may no longer question the propriety and correctness of the annulment of the
Deed of Absolute Sale, the cancellation of TCT Nos. 105202 and 105203, and the order
to vacate the property.
Hence, the only issue that must be resolved in this case is whether the RTC erred in
ordering petitioner to reimburse respondent-spouses the "total monthly installments and
the value of the new house minus the cost of the original house."49 Otherwise stated, the
issues for our resolution are:
1) Whether petitioner is obliged to refund to respondent-spouses all the monthly
installments paid; and
148
 2) Whether petitioner is obliged to reimburse respondent-spouses the value of
the new house minus the cost of the original house.
Respondent-spouses are entitled to the
cash surrender value of the payments
on the property equivalent to 50% of the
total payments made.
Considering that this case stemmed from a Contract to Sell executed by the petitioner
and the respondent-spouses, we agree with petitioner that the Maceda Law, which
governs sales of real estate on installment, should be applied.
Sections 3, 4, and 5 of the Maceda Law provide for the rights of a defaulting buyer, to
wit:
Section 3. In all transactions or contracts involving the sale or financing of real estate on
installment payments, including residential condominium apartments but excluding
industrial lots, commercial buildings and sales to tenants under Republic Act Numbered
Thirty-eight hundred forty-four, as amended by Republic Act Numbered Sixty-three
hundred eighty-nine, where the buyer has paid at least two years of installments, the
buyer is entitled to the following rights in case he defaults in the payment of succeeding
installments:
(a) To pay, without additional interest, the unpaid installments due within the total
grace period earned by him which is hereby fixed at the rate of one month grace
period for every one year of installment payments made: Provided, That this right
shall be exercised by the buyer only once in every five years of the life of the
contract and its extensions, if any.
(b) If the contract is canceled, the seller shall refund to the buyer the cash
surrender value of the payments on the property equivalent to fifty percent
of the total payments made, and, after five years of installments, an additional
five per cent every year but not to exceed ninety per cent of the total payments
made: Provided, That the actual cancellation of the contract shall take place after
thirty days from receipt by the buyer of the notice of cancellation or the demand
for rescission of the contract by a notarial act and upon full payment of the cash
surrender value to the buyer.
Down payments, deposits or options on the contract shall be included in the computation
of the total number of installment payments made. (Emphasis supplied.)
Section 4. In case where less than two years of installments were paid, the seller shall
give the buyer a grace period of not less than sixty days from the date the installment
became due.
If the buyer fails to pay the installments due at the expiration of the grace period, the
seller may cancel the contract after thirty days from receipt by the buyer of the notice of
cancellation or the demand for rescission of the contract by a notarial act.
Section 5. Under Sections 3 and 4, the buyer shall have the right to sell his rights or
assign the same to another person or to reinstate the contract by updating the account
during the grace period and before actual cancellation of the contract. The deed of sale
or assignment shall be done by notarial act.
In this connection, we deem it necessary to point out that, under the Maceda Law, the
actual cancellation of a contract to sell takes place after 30 days from receipt by the
buyer of the notarized notice of cancellation,50 and upon full payment of the cash
surrender value to the buyer.51 In other words, before a contract to sell can be validly and
effectively cancelled, the seller has (1) to send a notarized notice of cancellation to the
buyer and (2) to refund the cash surrender value.52 Until and unless the seller complies
with these twin mandatory requirements, the contract to sell between the parties remains
valid and subsisting.53 Thus, the buyer has the right to continue occupying the property
subject of the contract to sell,54 and may "still reinstate the contract by updating the
account during the grace period and before the actual cancellation"55 of the contract.
In this case, petitioner complied only with the first condition by sending a notarized notice
of cancellation to the respondent-spouses. It failed, however, to refund the cash
surrender value to the respondent-spouses. Thus, the Contract to Sell remains valid and
subsisting and supposedly, respondent-spouses have the right to continue occupying the
subject property. Unfortunately, we cannot reverse the Decision of the RTC directing
respondent-spouses to vacate and turnover possession of the subject property to
petitioner because respondent-spouses never appealed the order. The RTC Decision as
to respondent-spouses is therefore considered final.
In addition, in view of respondent-spouses’ failure to appeal, they can no longer reinstate
the contract by updating the account. Allowing them to do so would be unfair to the other
party and is offensive to the rules of fair play, justice, and due process. Thus, based on
the factual milieu of the instant case, the most that we can do is to order the return of the
cash surrender value. Since respondent-spouses paid at least two years of
installment,56 they are entitled to receive the cash surrender value of the payments they
had made which, under Section 3(b) of the Maceda Law, is equivalent to 50% of the total
payments made.
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Respondent-spouses are entitled to
reimbursement of the improvements
made on the property.
Petitioner posits that Article 448 of the Civil Code does not apply and that respondent-
spouses are not entitled to reimbursement of the value of the improvements made on the
property because they were builders in bad faith. At the outset, we emphasize that the
issue of whether respondent-spouses are builders in good faith or bad faith is a factual
question, which is beyond the scope of a petition filed under Rule 45 of the Rules of
Court.57 In fact, petitioner is deemed to have waived all factual issues since it appealed
the case directly to this Court,58 instead of elevating the matter to the CA. It has likewise
not escaped our attention that after their failed preliminary conference, the parties agreed
to submit the case for resolution based on the pleadings and exhibits presented. No trial
was conducted. Thus, it is too late for petitioner to raise at this stage of the proceedings
the factual issue of whether respondent-spouses are ilders in bad faith. Hence, in view of
the special circumstances obtaining in this case, we are constrained to rely on the
presumption of good faith on the part of the respondent-spouses which the petitioner
failed to rebut. Thus, respondent-spouses being presumed builders in good faith, we now
rule on the applicability of Article 448 of the Civil Code.
As a general rule, Article 448 on builders in good faith does not apply where there is a
contractual relation between the parties,59 such as in the instant case. We went over the
records of this case and we note that the parties failed to attach a copy of the Contract to
Sell. As such, we are constrained to apply Article 448 of the Civil Code, which
provides viz:
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.
Article 448 of the Civil Code applies when the builder believes that he is the owner of the
land or that by some title he has the right to build thereon,60 or that, at least, he has a
claim of title thereto.61 Concededly, this is not present in the instant case. The subject
property is covered by a Contract to Sell hence ownership still remains with petitioner
being the seller. Nevertheless, there were already instances where this Court applied
Article 448 even if the builders do not have a claim of title over the property. Thus:
This Court has ruled that this provision covers only cases in which the builders, sowers
or planters believe themselves to be owners of the land or, at least, to have a claim of
title thereto. It does not apply when the interest is merely that of a holder, such as a mere
tenant, agent or usufructuary. From these pronouncements, good faith is identified by the
belief that the land is owned; or that – by some title – one has the right to build, plant, or
sow thereon.
However, in some special cases, this Court has used Article 448 by recognizing good
faith beyond this limited definition. Thus, in Del Campo v. Abesia, this provision was
applied to one whose house – despite having been built at the time he was still co-owner
– overlapped with the land of another. This article was also applied to cases wherein a
builder had constructed improvements with the consent of the owner. The Court ruled
that the law deemed the builder to be in good faith. In Sarmiento v. Agana, the builders
were found to be in good faith despite their reliance on the consent of another, whom
they had mistakenly believed to be the owner of the land.62
The Court likewise applied Article 448 in Spouses Macasaet v. Spouses
Macasaet63 notwithstanding the fact that the builders therein knew they were not the
owners of the land. In said case, the parents who owned the land allowed their son and
his wife to build their residence and business thereon. As found by this Court, their
occupation was not by mere tolerance but "upon the invitation of and with the complete
approval of (their parents), who desired that their children would occupy the premises. It
arose from familial love and a desire for family solidarity x x x."64 Soon after, conflict
between the parties arose. The parents demanded their son and his wife to vacate the
premises. The Court thus ruled that as owners of the property, the parents have the right
to possession over it. However, they must reimburse their son and his wife for the
improvements they had introduced on the property because they were considered
builders in good faith even if they knew for a fact that they did not own the property, thus:
Based on the aforecited special cases, Article 448 applies to the present factual milieu.
The established facts of this case show that respondents fully consented to the
improvements introduced by petitioners. In fact, because the children occupied the lots
upon their invitation, the parents certainly knew and approved of the construction of the
improvements introduced thereon. Thus, petitioners may be deemed to have been in
good faith when they built the structures on those lots.
The instant case is factually similar to Javier v. Javier. In that case, this Court deemed
the son to be in good faith for building the improvement (the house) with the knowledge
150
and consent of his father, to whom belonged the land upon which it was built. Thus,
Article 448 was applied.65
In fine, the Court applied Article 448 by construing good faith beyond its limited definition.
We find no reason not to apply the Court’s ruling in Spouses Macasaet v. Spouses
Macasaet in this case. We thus hold that Article 448 is also applicable to the instant
case. First, good faith is presumed on the part of the respondent-spouses. Second,
petitioner failed to rebut this presumption. Third, no evidence was presented to show that
petitioner opposed or objected to the improvements introduced by the respondent-
spouses. Consequently, we can validly presume that petitioner consented to the
improvements being constructed. This presumption is bolstered by the fact that as the
subdivision developer, petitioner must have given the respondent-spouses permits to
commence and undertake the construction. Under Article 453 of the Civil Code, "it is
understood that there is bad faith on the part of the landowner whenever the act was
done with his knowledge and without opposition on his part."
In view of the foregoing, we find no error on the part of the RTC in requiring petitioner to
pay respondent-spouses the value of the new house minus the cost of the old house
based on Article 448 of the Civil Code, subject to succeeding discussions.
Petitioner has two options under Article
448 and pursuant to the ruling in
Tuatis v. Escol.66
In Tuatis, we ruled that the seller (the owner of the land) has two options under Article
448: (1) he may appropriate the improvements for himself after reimbursing the buyer
(the builder in good faith) the necessary and useful expenses under Articles 54667 and
54868 of the Civil Code; or (2) he may sell the land to the buyer, unless its value is
considerably more than that of the improvements, in which case, the buyer shall pay
reasonable rent.69Quoted below are the pertinent portions of our ruling in that case:
Taking into consideration the provisions of the Deed of Sale by Installment and Article
448 of the Civil Code, Visminda has the following options:
Under the first option, Visminda may appropriate for herself the building on the
subject property after indemnifying Tuatis for the necessary and useful expenses
the latter incurred for said building, as provided in Article 546 of the Civil Code.
It is worthy to mention that in Pecson v. Court of Appeals, the Court pronounced that the
amount to be refunded to the builder under Article 546 of the Civil Code should be
the current market value of the improvement, thus:
xxxx
Until Visminda appropriately indemnifies Tuatis for the building constructed by the latter,
Tuatis may retain possession of the building and the subject property.
Under the second option, Visminda may choose not to appropriate the building and,
instead, oblige Tuatis to pay the present or current fair value of the land. The
P10,000.00 price of the subject property, as stated in the Deed of Sale on Installment
executed in November 1989, shall no longer apply, since Visminda will be obliging Tuatis
to pay for the price of the land in the exercise of Visminda’s rights under Article 448 of
the Civil Code, and not under the said Deed. Tuatis’ obligation will then be statutory, and
not contractual, arising only when Visminda has chosen her option under Article 448 of
the Civil Code.
Still under the second option, if the present or current value of the land, the subject
property herein, turns out to be considerably more than that of the building built
thereon, Tuatis cannot be obliged to pay for the subject property, but she must
pay Visminda reasonable rent for the same. Visminda and Tuatis must agree on
the terms of the lease; otherwise, the court will fix the terms.
Necessarily, the RTC should conduct additional proceedings before ordering the
execution of the judgment in Civil Case No. S-618. Initially, the RTC should determine
which of the aforementioned options Visminda will choose. Subsequently, the RTC
should ascertain: (a) under the first option, the amount of indemnification Visminda must
pay Tuatis; or (b) under the second option, the value of the subject property vis-à-vis that
of the building, and depending thereon, the price of, or the reasonable rent for, the
subject property, which Tuatis must pay Visminda.
The Court highlights that the options under Article 448 are available to Visminda, as the
owner of the subject property. There is no basis for Tuatis’ demand that, since the value
of the building she constructed is considerably higher than the subject property, she may
choose between buying the subject property from Visminda and selling the building to
Visminda for P502,073.00. Again, the choice of options is for Visminda, not Tuatis, to
make. And, depending on Visminda’s choice, Tuatis’ rights as a builder under Article 448
are limited to the following: (a) under the first option, a right to retain the building and
subject property until Visminda pays proper indemnity; and (b) under the second option,
a right not to be obliged to pay for the price of the subject property, if it is considerably
higher than the value of the building, in which case, she can only be obliged to pay
reasonable rent for the same.
151
The rule that the choice under Article 448 of the Civil Code belongs to the owner of the
land is in accord with the principle of accession, i.e., that the accessory follows the
principal and not the other way around. Even as the option lies with the landowner, the
grant to him, nevertheless, is preclusive. The landowner cannot refuse to exercise either
option and compel instead the owner of the building to remove it from the land.
The raison d’etre for this provision has been enunciated thus: Where the builder, planter
or sower has acted in good faith, a conflict of rights arises between the owners, and it
becomes necessary to protect the owner of the improvements without causing injustice
to the owner of the land. In view of the impracticability of creating a state of forced co-
ownership, the law has provided a just solution by giving the owner of the land the option
to acquire the improvements after payment of the proper indemnity, or to oblige the
builder or planter to pay for the land and the sower the proper rent. He cannot refuse to
exercise either option. It is the owner of the land who is authorized to exercise the option,
because his right is older, and because, by the principle of accession, he is entitled to the
ownership of the accessory thing.
Visminda’s Motion for Issuance of Writ of Execution cannot be deemed as an expression
of her choice to recover possession of the subject property under the first option, since
the options under Article 448 of the Civil Code and their respective consequences were
also not clearly presented to her by the 19 April 1999 Decision of the RTC. She must
then be given the opportunity to make a choice between the options available to her after
being duly informed herein of her rights and obligations under both.70 (Emphasis
supplied.)
In conformity with the foregoing pronouncement, we hold that petitioner, as landowner,
has two options. It may appropriate the new house by reimbursing respondent Angeles
the current market value thereof minus the cost of the old house. Under this option,
respondent Angeles would have "a right of retention which negates the obligation to pay
rent."71 In the alternative, petitioner may sell the lots to respondent Angeles at a price
equivalent to the current fair value thereof. However, if the value of the lots is
considerably more than the value of the improvement, respondent Angeles cannot be
compelled to purchase the lots. She can only be obliged to pay petitioner reasonable
rent.
In view of the foregoing disquisition and in accordance with Depra v. Dumlao72 and
Technogas Philippines Manufacturing Corporation v. Court of Appeals,73 we find it
necessary to remand this case to the court of origin for the purpose of determining
matters necessary for the proper application of Article 448, in relation to Articles 546 and
548 of the Civil Code.
WHEREFORE, the petition is hereby PARTIALLY GRANTED. The assailed Decision
dated December 29, 2006 and the Order dated February 12, 2007 of the Regional Trial
Court, Cagayan de Oro City, Branch 18, in Civil Case No. 2005-158 are
hereby AFFIRMED with MODIFICATION that petitioner Communities Cagayan, Inc. is
hereby ordered to RETURN the cash surrender value of the payments made by
respondent-spouses on the properties, which is equivalent to 50% of the total payments
made, in ccordance with Section 3(b) of Republic Act No. 6552, otherwise known as the
Maceda Law.
The case is hereby REMANDED to the Regional Trial Court, Cagayan de Oro City,
Branch 18, for further proceedings consistent with the proper application of Articles 448,
546 and 548 of the Civil Code, as follows:
1. The trial court shall determine:
a) the present or current fair value of the lots;
b) the current market value of the new house;
c) the cost of the old house; and
d) whether the value of the lots is considerably more than the current market
value of the new house minus the cost of the old house.
2. After said amounts shall have been determined by competent evidence, the trial court
shall render judgment as follows:
a) Petitioner shall be granted a period of 15 days within which to exercise its
option under the law (Article 448, Civil Code), whether to appropriate the new
house by paying to respondent Angeles the current market value of the new
house minus the cost of the old house, or to oblige respondent Angeles to pay
the price of the lots. The amounts to be respectively paid by the parties, in
accordance with the option thus exercised by written notice to the other party and
to the court, shall be paid by the obligor within 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 petitioner exercises the option to oblige respondent Angeles to pay the price
of the lots but the latter rejects such purchase because, as found by the trial
court, the value of the lots is considerably more than the value of the new house
minus the cost of the old house, respondent Angeles shall give written notice of
152
 such rejection to petitioner and to the trial court within 15 days from notice of
petitioner’s option to sell the land. In that event, the parties shall be given a
period of 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
15 days from and after the termination of the said period fixed for negotiation,
shall then fix the period and terms of the lease, including the monthly rental,
which shall be payable within the first five days of each calendar month.
Respondent Angeles shall not make any further constructions or improvements
on the building. Upon expiration of the period, or upon default by respondent
Angeles in the payment of rentals for two consecutive months, petitioner shall be
entitled to terminate the forced lease, to recover its land, and to have the new
house removed by respondent Angeles or at the latter’s expense.
c) In any event, respondent Angeles shall pay petitioner reasonable
compensation for the occupancy of the property for the period counted from the
time the Decision dated December 29, 2006 became final as to respondent
Angeles or 15 days after she received a copy of the said Decision up to the date
petitioner serves notice of its option to appropriate the encroaching structures,
otherwise up to the actual transfer of ownership to respondent Angeles 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.
1âwphi 1
d) The periods to be fixed by the trial court in its decision shall be nonextendible,
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.
SO ORDERED.
--- xxx END OF ACCESSION INDUSTRIAL xxx ---
G.R. No. L-43346 March 20, 1991
RONQUILLO vs. CA
This petition seeks the review of the decision 1 rendered by respondent Court of Appeals
on September 25, 1975 in CA-G.R. No. 32479-R, entitled "Rosendo del Rosario, et al.,
Plaintiffs-Appellees, versus Mario Ronquillo, Defendant-Appellant," affirming in toto the
judgment of the trial court, and its amendatory resolution 2 dated January 28, 1976 the
dispositive portion of which reads:
IN VIEW OF THE FOREGOING, the decision of this Court dated September 25,
1975 is hereby amended in the sense that the first part of the appealed decision
is set aside, except the last portion "declaring the plaintiffs to be the rightful
owners of the dried-up portion of Estero Calubcub which is abutting plaintiffs'
property," which we affirm, without pronouncement as to costs.
SO ORDERED.
The following facts are culled from the decision of the Court of Appeals:
It appears that plaintiff Rosendo del Rosario was a registered owner of a parcel
of land known as Lot 34, Block 9, Sulucan Subdivision, situated at Sampaloc,
Manila and covered by Transfer Certificate of Title No. 34797 of the Registry of
Deeds of Manila (Exhibit "A"). The other plaintiffs Florencia and Amparo del
Rosario were daughters of said Rosendo del Rosario. Adjoining said lot is a
dried-up portion of the old Estero Calubcub occupied by the defendant since
1945 which is the subject matter of the present action.
Plaintiffs claim that long before the year 1930, when T.C.T. No. 34797 over Lot
No. 34 was issued in the name of Rosendo del Rosario, the latter had been in
possession of said lot including the adjoining dried-up portion of the old Estero
Calubcub having bought the same from Arsenio Arzaga. Sometime in 1935, said
titled lot was occupied by Isabel Roldan with the tolerance and consent of the
plaintiff on condition that the former will make improvements on the adjoining
dried-up portion of the Estero Calubcub. In the early part of 1945 defendant
occupied the eastern portion of said titled lot as well as the dried-up portion of the
old Estero Calubcub which abuts plaintiffs' titled lot. After a relocation survey of
the land in question sometime in 1960, plaintiffs learned that defendant was
occupying a portion of their land and thus demanded defendant to vacate said
land when the latter refused to pay the reasonable rent for its occupancy.
However, despite said demand defendant refused to vacate.
Defendant on the other hand claims that sometime before 1945 he was living
with his sister who was then residing or renting plaintiffs' titled lot. In 1945 he built
his house on the disputed dried-up portion of the Estero Calubcub with a small
portion thereof on the titled lot of plaintiffs. Later in 1961, said house was
destroyed by a fire which prompted him to rebuild the same. However, this time it
was built only on the called up portion of the old Estero Calubcub without
touching any part of plaintiffs titled land. He further claims that said dried-up
portion is a land of public domain.3
153
Private respondents Rosendo, Amparo and Florencia, all surnamed del Rosario (Del
Rosarios), lodged a complaint with the Court of First Instance of Manila praying, among
others, that they be declared the rightful owners of the dried-up portion of Estero
Calubcub. Petitioner Mario Ronquillo (Ronquillo) filed a motion to dismiss the complaint
on the ground that the trial court had no jurisdiction over the case since the dried-up
portion of Estero Calubcub is public land and, thus, subject to the disposition of the
Director of Lands. The Del Rosarios opposed the motion arguing that since they are
claiming title to the dried-up portion of Estero Calubcub as riparian owners, the trial court
has jurisdiction. The resolution of the motion to dismiss was deferred until after trial on
the merits.
Before trial, the parties submitted the following stipulation of facts:
1. That the plaintiffs are the registered owners of Lot 34, Block 9, Sulucan
Subdivision covered by Transfer Certificate of Title No. 34797;
2. That said property of the plaintiffs abuts and is adjacent to the dried-up river
bed of Estero Calubcub Sampaloc, Manila;
3. That defendant Mario Ronquillo has no property around the premises in
question and is only claiming the dried-up portion of the old Estero Calubcub,
whereon before October 23, 1961, the larger portion of his house was
constructed;
4. That before October 23, 1961, a portion of defendant's house stands (sic) on
the above-mentioned lot belonging to the plaintiffs;
5. That the plaintiffs and defendant have both filed with the Bureau of Lands
miscellaneous sales application for the purchase of the abandoned river bed
known as Estero Calubcub and their sales applications, dated August 5, 1958
and October 13, 1959, respectively, are still pending action before the Bureau of
Lands;
6. That the parties hereby reserve their right to prove such facts as are
necessary to support their case but not covered by this stipulation of facts. 4
On December 26, 1962, the trial court rendered judgment the decretal portion of which
provides:
WHEREFORE, judgment is hereby rendered ordering the defendant to deliver to
the plaintiffs the portion of the land covered by Transfer Certificate of title No.
34797 which is occupied by him and to pay for the use and occupation of said
portion of land at the rate of P 5.00 a month from the date of the filing of the
complaint until such time as he surrenders the same to the plaintiffs and
declaring plaintiffs to be the owners of the dried-up portion of estero Calubcub
which is abutting plaintiffs' property.
With costs to the defendant.
SO ORDERED. 5
On appeal, respondent court, in affirming the aforequoted decision of the trial court,
declared that since Estero Calubcub had already dried-up way back in 1930 due to the
natural change in the course of the waters, under Article 370 of the old Civil Code which
it considers applicable to the present case, the abandoned river bed belongs to the Del
Rosarios as riparian owners. Consequently, respondent court opines, the dried-up river
bed is private land and does not form part of the land of the public domain. It stated
further that "(e)ven assuming for the sake of argument that said estero did not change its
course but merely dried up or disappeared, said dried-up estero would still belong to the
riparian owner," citing its ruling in the case of Pinzon vs. Rama. 6
Upon motion of Ronquillo, respondent court modified its decision by setting aside the first
portion of the trial court's decision ordering Ronquillo to surrender to the Del Rosarios
that portion of land covered by Transfer Certificate of Title No. 34797 occupied by the
former, based on the former's representation that he had already vacated the same prior
to the commencement of this case. However, respondent court upheld its declaration
that the Del Rosarios are the rightful owners of the dried-up river bed. Hence, this
petition.
On May 17, 1976, this Court issued a resolution 7 requiring the Solicitor General to
comment on the petition in behalf of the Director of Lands as an indispensable party in
representation of the Republic of the Philippines, and who, not having been impleaded,
was subsequently considered impleaded as such in our resolution of September 10,
1976. 8 In his Motion to Admit Comment, 9 the Solicitor General manifested that pursuant
to a request made by this office with the Bureau of Lands to conduct an investigation, the
Chief of the Legal Division of the Bureau sent a communication informing him that the
records of his office "do not show that Mario Ronquillo, Rosendo del Rosario, Amparo del
Rosario or Florencia del Rosario has filed any public land application covering parcels of
land situated at Estero Calubcub Manila as verified by our Records Division.
154
The position taken by the Director of Lands in his Comment 10 filed on September 3,
1978, which was reiterated in the Reply dated May 4, 1989 and again in the Comment
dated August 17, 1989, explicates:
5. We do not see our way clear to subscribe to the ruling of the Honorable Court
of Appeals on this point for Article 370 of the Old Civil Code, insofar as
ownership of abandoned river beds by the owners of riparian lands are
concerned, speaks only of a situation where such river beds were
abandoned because of a natural change in the course of the waters. Conversely,
we submit that if the abandonment was for some cause other than the natural
change in the course of the waters, Article 370 is not applicable and the
abandoned bed does not lose its character as a property of public dominion not
susceptible to private ownership in accordance with Article 502 (No. 1) of the
New Civil Code. In the present case, the drying up of the bed, as contended by
the petitioner, is clearly caused by human activity and undeniably not because of
the natural change of the course of the waters (Emphasis in the original text).
In his Comment 11 dated August 17, 1989, the Director of Lands further adds:
8. Petitioner herein and the private respondents, the del Rosarios, claim to have
pending sales application(s) over the portion of the dried up Estero Calubcub, as
stated in pages 4-5, of the Amended Petition.
9. However, as stated in the Reply dated May 4, 1989 of the Director of Lands,
all sales application(s) have been rejected by that office because of the objection
interposed by the Manila City Engineer's Office that they need the dried portion of
the estero for drainage purposes.
10. Furthermore, petitioner and private respondents, the del Rosarios having filed
said sales application(s) are now estopped from claiming title to the Estero
Calubcub (by possession for petitioner and by accretion for respondents del
Rosarios) because for (sic) they have acknowledged that they do not own the
land and that the same is a public land under the administration of the Bureau of
Lands (Director of Lands vs. Santiago, 160 SCRA 186, 194).
In a letter dated June 29, 1979 12 Florencia del Rosario manifested to this Court that
Rosendo, Amparo and Casiano del Rosario have all died, and that she is the only one
still alive among the private respondents in this case.
In a resolution dated January 20, 1988, 13 the Court required petitioner Ronquillo to
implead one Benjamin Diaz pursuant to the former's manifestation 14 that the land
adjacent to the dried up river bed has already been sold to the latter, and the Solicitor
General was also required to inquire into the status of the investigation being conducted
by the Bureau of Lands. In compliance therewith, the Solicitor General presented a letter
from the Director of Lands to the effect that neither of the parties involved in the present
case has filed any public land application. 15
On April 3, 1989, petitioner filed an Amended Petition for Certiorari, 16 this time
impleading the Development Bank of the Philippines (DBP) which subsequently bought
the property adjacent to the dried-up river bed from Benjamin Diaz. In its resolution dated
January 10, 1990, 17 the Court ordered that DBP be impleaded as a party respondent.
In a Comment 18 filed on May 9, 1990, DBP averred that "[c]onsidering the fact that the
petitioner in this case claims/asserts no right over the property sold to Diaz/DBP by the
del Rosarios; and considering, on the contrary, that Diaz and DBP claims/asserts (sic) no
right (direct or indirect) over the property being claimed by Ronquillo (the dried-up portion
of Estero Calubcub), it follows, therefore, that the petitioner Ronquillo has no cause of
action against Diaz or DBP. A fortiori from the viewpoint of the classical definition of a
cause of action, there is no legal justification to implead DBP as one of the respondents
in this petition." DBP thereafter prayed that it be dropped in the case as party
respondent.
On September 13, 1990, respondent DBP filed a Manifestation/Compliance 19 stating that
DBP's interest over Transfer Certificate of Title No. 139215 issued in its name (formerly
Transfer Certificate of Title No. 34797 of the Del Rosarios and Transfer Certificate of
Title No. 135170 of Benjamin Diaz) has been transferred to Spouses Victoriano and
Pacita A. Tolentino pursuant to a Deed of Sale dated September 11, 1990.
Petitioner Ronquillo avers that respondent Court of Appeals committed an error of law
and gross abuse of discretion, acted arbitrarily and denied petitioner due process of law
(a) when it declared private respondents Del Rosarios the rightful owners of the dried-up
portion of Estero Calubcub by unduly relying upon decisional law in the case of Pinzon
vs. Rama, ante, which case was decided entirely on a set of facts different from that
obtaining in this case; and (b) when it ignored the undisputed facts in the present case
and declared the dried-up portion of Estero Calubcub as a private property.
The main issue posed for resolution in this petition is whether the dried-up portion of
Estero Calubcub being claimed by herein petitioner was caused by a natural change in
the course of the waters; and, corollary thereto, is the issue of the applicability of Article
370 of the old Civil Code.
155
Respondent court, in affirming the findings of the trial court that there was a natural
change in the course of Estero Calubcub declared that:
The defendant claims that Article 370 of the old Civil Code is not applicable to the
instant case because said Estero Calubcub did not actually change its course but
simply dried up, hence, the land in dispute is a land of public domain and subject
to the disposition of the Director of Land(s). The contention of defendant is
without merit. As mentioned earlier, said estero as shown by the relocation plan
(Exhibit "D") did not disappear but merely changed its course by a more
southeasternly (sic) direction. As such, "the abandoned river bed belongs to the
plaintiffs-appellees and said land is private and not public in nature. Hence,
further, it is not subject to a Homestead Application by the appellant." (Fabian vs.
Paculan CA-G.R. Nos. 21062-63-64-R, Jan. 25 1962). Even assuming for the
sake of argument that said estero did not change its course but merely dried up
or disappeared, said dried-up estero would still belong to the riparian owner as
held by this Court in the case of Pinzon vs. Rama (CA-G.R. No. 8389, Jan. 8,
1943; 2 O.G. 307). 20
Elementary is the rule that the jurisdiction of the Supreme Court in cases brought to it
from the Court of Appeals in a petition for certiorari under Rule 45 of the Rules of Court is
limited to the review of errors of law, and that said appellate court's finding of fact is
conclusive upon this Court. However, there are certain exceptions, such as (1) when the
conclusion is a finding grounded entirely on speculation, surmises or conjectures; (2)
when the inference made is manifestly absurd, mistaken or impossible; (3) when there is
grave abuse of discretion in the appreciation of facts; (4) when the judgment is premised
on a misapprehension of facts; (5) when the findings of fact are conflicting; and (6) when
the Court of Appeals in making its findings went beyond the issues of the case and the
same is contrary to the admissions of both appellant and
appellee. 21
A careful perusal of the evidence presented by both parties in the case at bar will reveal
that the change in the course of Estero Calubcub was caused, not by natural forces, but
due to the dumping of garbage therein by the people of the surrounding neighborhood.
Under the circumstances, a review of the findings of fact of respondent court thus
becomes imperative.
Private respondent Florencia del Rosario, in her testimony, made a categorical statement
which in effect admitted that Estero Calubcub changed its course because of the
garbage dumped therein, by the inhabitants of the locality, thus:
Q When more or less what (sic) the estero fully dried up?
A By 1960 it is (sic) already dried up except for a little rain that accumulates on
the lot when it rains.
Q How or why did the Estero Calubcub dried (sic) up?
A It has been the dumping place of the whole neighborhood. There is no street,
they dumped all the garbage there. It is the dumping place of the whole
community, sir. 22
In addition, the relocation plan (Exhibit "D") which also formed the basis of respondent
court's ruling, merely reflects the change in the course of Estero Calubcub but it is not
clear therefrom as to what actually brought about such change. There is nothing in the
testimony of lone witness Florencia del Rosario nor in said relocation plan which would
indicate that the change in the course of the estero was due to the ebb and flow of the
waters. On the contrary, the aforequoted testimony of the witness belies such fact, while
the relocation plan is absolutely silent on the matter. The inescapable conclusion is that
the dried-up portion of Estero Calubcub was occasioned, not by a natural change in the
course of the waters, but through the active intervention of man.
The foregoing facts and circumstances remove the instant case from the applicability of
Article 370 of the old Civil Code which provides:
Art. 370. The beds of rivers, which are abandoned because of a natural change
in the course of the waters, belong to the owners of the riparian lands throughout
the respective length of each. If the abandoned bed divided tenements belonging
to different owners the new dividing line shall be equidistant from one and the
other.
The law is clear and unambiguous. It leaves no room for interpretation. Article 370
1âw phi 1
applies only if there is a natural change in the course of the waters. The rules on alluvion
do not apply to man-made or artificial accretions 23 nor to accretions to lands that adjoin
canals or esteros or artificial drainage systems. 24 Considering our earlier finding that the
dried-up portion of Estero Calubcub was actually caused by the active intervention of
man, it follows that Article 370 does not apply to the case at bar and, hence, the Del
Rosarios cannot be entitled thereto supposedly as riparian owners.
The dried-up portion of Estero Calubcub should thus be considered as forming part of
the land of the public domain which cannot be subject to acquisition by private
ownership. That such is the case is made more evident in the letter, dated April 28, 1989,
of the Chief, Legal Division of the Bureau of Lands 25 as reported in the Reply of
respondent Director of Lands stating that "the alleged application filed by Ronquillo no
156
longer exists in its records as it must have already been disposed of as a rejected
application for the reason that other applications "covering Estero Calubcub Sampaloc,
Manila for areas other than that contested in the instant case, were all rejected by our
office because of the objection interposed by the City Engineer's office that they need the
same land for drainage purposes". Consequently, since the land is to be used for
drainage purposes the same cannot be the subject of a miscellaneous sales application.
Lastly, the fact that petitioner and herein private respondents filed their sales applications
with the Bureau of Lands covering the subject dried-up portion of Estero Calubcub
cannot but be deemed as outright admissions by them that the same is public land. They
are now estopped from claiming otherwise.
WHEREFORE, the decision appealed from, the remaining effective portion of which
declares private respondents Del Rosarios as riparian owners of the dried-up portion of
Estero Calubcub is hereby REVERSED and SET ASIDE.
SO ORDERED.
G.R. No. 77294 December 12, 1988
VIAJAR vs. CA
This is a petition for review on certiorari of the decision of the Court of Appeals dated
December 29, 1986, in CA-G.R. CV No. 69942 entitled, "ANGELICA VIAJAR, et. al.,
Plaintiffs-Appellants, versus LEONOR LADRIDO, et. al., Defendants-
Appellees," affirming the decision of the Court of First Instance (now Regional Trial
Court) of Iloilo dated December 10, 1981.
The antecedent facts in the instant case are as follows: The spouses Ricardo Y. Ladrido
and Leonor P. Ladrido were the owners of Lot No. 7511 of the Cadastral Survey of
Pototan situated in barangay Cawayan, Pototan, Iloilo. This lot contained an area of
154,267 square meters and was registered in the names of the spouses under Transfer
Certificate of Title No. T-21940 of the Register of Deeds of Iloilo.
Spouses Rosendo H. Te and Ana Te were also the registered owners of a parcel of land
described in their title as Lot No. 7340 of the Cadastral Survey of Pototan.
On September 6, 1973, Rosendo H. Te, with the conformity of Ana Te, sold this lot to
Angelica F. Viajar and Celso F. Viajar for P5,000. A Torrens title was later issued in the
names of Angelica F. Viajar and Celso F. Viajar.
Later, Angelica F. Viajar had Lot No. 7340 relocated and found out that the property was
in the possession of Ricardo Y. Ladrido. Consequently, she demanded its return but
Ladrido refused.
On February 15, 1974, Angelica F. Viajar and Celso F. Viajar instituted a civil action for
recovery of possession and damages against Ricardo Y. Ladrido. This case was
docketed as Civil Case No. 9660 of the Court of First Instance of Iloilo. Summoned to
plead, defendant Ladrido filed his answer with a counterclaim. Plaintiffs filed their reply to
the answer.
Subsequently, the complaint was amended to implead Rosendo H. Te as another
defendant. Plaintiffs sought the annulment of the deed of sale and the restitution of the
purchase price with interest in the event the possession of defendant Ladrido is
sustained. Defendant Te filed his answer to the amended complaint and he counter
claimed for damages. Plaintiffs answered the counterclaim.
During the pendency of the case, plaintiff Celso F. Viajar sold his rights over Lot No.
7340 to his mother and co-plaintiff, Angelica F. Viajar. For this reason, plaintiff Angelica
F. Viajar now appears to be the sole registered owner of this lot.
On May 25, 1978, defendant Ladrido died. He was substituted in the civil action by his
wife, Leonor P. Ladrido, and children, namely: Lourdes Ladrido-Ignacio, Eugenio P.
Ladrido and Manuel P. Ladrido, as parties defendants.
The facts admitted by the parties during the pre-trial show that the piece of real property
which used to be Lot No. 7340 of the Cadastral Survey of Pototan was located in
barangay Guibuanogan Pototan, Iloilo; that it consisted of 20,089 square meters; that at
the time of the cadastral survey in 1926, Lot No. 7511 and Lot No. 7340 were separated
by the Suague River; that the area of 11,819 square meters of what was Lot No. 7340
has been in the possession of the defendants; that the area of 14,036 square meters,
which was formerly the river bed of the Suague River per cadastral survey of 1926, has
also been in the possession of the defendants; and that the plaintiffs have never been in
actual physical possession of Lot No. 7340.
After trial on the merits, a second amended complaint which included damages was
admitted.
The plaintiffs raised the following issues to be resolved:
157
 1. Whether the change in the course of the Suague River
was sudden as claimed by the plaintiffs or gradual as
contended by the defendants;
2. Assuming arguendo it was gradual, whether or not the
plaintiffs are still entitled to Lot "B' appearing in Exhibit "4"
and to one-half (½) of Lot "A," also indicated in Exhibit "4;"
and
3. Damages (pp. 12-13, Rollo).
On December 10, 1981, the trial court rendered its decision, the dispositive portion of
which reads:
WHEREFORE, judgment is hereby rendered in favor of the defendants
and against the plaintiffs:
1. Dismissing the complaint of plaintiffs Angelica F. Viajar
and Celso F. Viajar with costs against them;
2. Declaring defendants Leonor P. Ladrido, Lourdes
Ladrido-Ignacio, Eugenio P. Ladrido and Manuel P.
Ladrido as owner of the parcel of land indicated as Lots A
and B in the sketch plan (Exhs. 'C' as well as '4,' '4-B' and
'4-C') situated in barangays Cawayan and Guibuanogan
Pototan, Iloilo, and containing an area of 25,855 square
meters, more or less; and
3. Pronouncing that as owners of the land described in
the preceding paragraph, the defendants are entitled to
the possession thereof.
Defendants' claim for moral damages and attorney's fees are dismissed.
SO ORDERED (p. 36, Rollo).
Not satisfied with the decision, the plaintiffs appealed to the Court of Appeals and
assigned the following errors:
I.
THE LOWER COURT ERRED IN NOT HOLDING THAT PLAINTIFFS
ARE ENTITLED TO LOT B APPEARING IN EXHIBIT "4" AND TO ONE-
HALF (½) OF LOT A IN THE SAID EXHIBIT "4."
II
THE LOWER COURT ERRED IN NOT AWARDING DAMAGES TO
PLAINTIFFS (p. 42, Rollo).
As earlier stated, the Court of Appeals affirmed the decision of the court a quo. Plaintiffs
(the petitioners herein) now come to Us claiming that the Court of Appeals palpably erred
in affirming the decision of the trial court on the ground that the change in the course of
the Suague River was gradual and not sudden.
In the decision appealed from, the Court of Appeals held:
This appeal is not impressed with merit.
Article 457 of the New Civil Code provides that:
Art. 457. To the owners of lands adjoining the banks of
rivers belong the accretion which they gradually receive
from the effects of the current of the waters.
The presumption is that the change in the course of the river was gradual
and caused by accretion and erosion (Martinez Canas vs. Tuason, 5 Phil.
668; Payatas Estate Improvement Co. vs. Tuason, 53 Phil. 55; C.H.
Hodges vs. Garcia, 109 Phil. 133). In the case at bar, the lower court
correctly found that the evidence introduced by the plaintiff to show that
the change in the course of the Suague River was sudden or that it
occurred through avulsion is not clear and convincing.
Contrariwise, the lower court found that:
... the defendants have sufficiently established that for many years after
1926 a gradual accretion on the eastern side of Lot No. 7511 took place
by action of the current of the Suague River so that in 1979 an alluvial
deposit of 29,912 square meters (2.9912 hectares), more or less, had
been added to Lot No. 7511. (Exhs. '1' as well as Exhs. 'C' and '4').
Apropos it should be observed that the accretion consisted of Lot A with
158
 an area of 14,036 square meters; Lot B, 11,819 square meters; and Lot
C, 4,057 square meters. (Exhs. '4-B,' '4-C' and '4-D'). Only Lot C is not
involved in this litigation. (See Pre-trial Order, supra)
The established facts indicate that the eastern boundary of Lot No. 7511
was the Suague River based on the cadastral plan. For a period of more
than 40 years (before 1940 to 1980) the Suague River overflowed its
banks yearly and the property of the defendant gradually received
deposits of soil from the effects of the current of the river. The
consequent increase in the area of Lot No. 7511 due to alluvion or
accretion was possessed by the defendants whose tenants plowed and
planted the same with coin and tobacco.
The quondam river bed had been filled by accretion through the years.
The land is already plain and there is no indication on the ground of any
abandoned river bed. The river bed is definitely no longer discernible
now.
What used to be the old river bed (Lot A) is in level with Lot No. 7511. So
are the two other areas to the East. (Lots B and C) Lots A, B and C are
still being cultivated.
Under the law, accretion which the banks or rivers may gradually receive
from the effects of the current of the waters becomes the property of the
owners of the lands adjoining the banks. (Art. 366, Old Civil Code; Art.
457, New Civil Code which took effect on August 30, 1950 [Lara v. Del
Rosario, 94 Phil. 778]. Therefore, the accretion to Lot No. 7511 which
consists of Lots A and B (see Exhs. 'C' and '4') belongs to the defendants
(pp. 34-35, Record on Appeal).
We find no cogent reason to disturb the foregoing finding and conclusion
of the lower court.
The second assignment of error is a mere offshoot of the first assignment
of error and does not warrant further discussion (pp. 4244, Rollo).
The petition is without merit.
The petitioners contend that the first issue raised during the trial of the case on the merits
in the Court of First Instance, that is, "whether the change in the course of the Suague
River was sudden as claimed by the plaintiffs or gradual as contended by the
defendants," was abandoned and never raised by them in their appeal to the Court of
Appeals. Hence, the Court of Appeals, in holding that the appeal is without merit,
because of the change of the Suague River was gradual and not sudden, disposed of the
appeal on an issue that was never raised and, accordingly, its decision is void. In support
of its contention, petitioners cite the following authorities:
It is a well-known principle in procedure that courts of justice have no
jurisdiction or power to decide a question not in issue (Lim Toco vs. Go
Fay, 80 Phil. 166).
A judgment going outside the issues and purporting to adjudicate
something upon which the parties were not heard, is not merely irregular,
but extra-judicial and invalid ( Salvante vs. Cruz, 88 Phil. 236-244; Lazo
vs. Republic Surety & Insurance Co., Inc., 31 SCRA 329, 334).
The pivotal issue in the petitioners' appeal was whether the change in the course of the
Suague River was gradual or sudden because the trial court below resolved the same in
its decision thus subjecting the same to review by respondent appellate court. By simply
abandoning this issue, the petitioners cannot hope that the affirmance of the decision
wherein this issue was resolved makes the decision of the Court of Appeals void. In
effect, the petitioners are expounding a new procedural theory that to render a
questioned decision void, all that has to be done is to simply abandon on appeal the
pivotal issue as resolved by the lower court and when its decision is affirmed on appeal,
attack the decision of the appellate court as void on the principle that a court of justice
has no jurisdiction or power to decide the question not in issue. This is not correct. Even
the authorities cited by the petitioners, more specifically the Salvante and Lazo cases,
supra, do not support their contention. They were heard in the trial court and they cannot
complain that the proceeding below was irregular and hence, invalid.
The trial court found that the change in the course of the Suague River was gradual and
this finding was affirmed by the respondent Court of Appeals. We do not find any valid
reason to disturb this finding of fact.
Article 457 of the New Civil Code (reproduced from Article 366 of the Old), the law
applied by the courts a quoprovides:
Art. 457. To the owners of the lands adjoining the banks of rivers belong
the accretion which they gradually receive from the effects of the current
of the waters.
159
Petitioners contend that this article must be read together with Sections 45 an 46 of Act
No. 496 which provides:
SEC. 45. 1The obtaining of a decree of registration and the entry of a
certificate of title shall be regarded as an agreement running with the land,
and binding upon the applicant and all successors in title that the land shall
be and always remain registered land, and subject to the provisions of this
Act and all Acts amendatory thereof.
SEC. 46. 2No title to registered land in derogation to that of the registered
owner shall be acquired by prescription or adverse possession.
As a result, petitioners contend, Article 457 of the New Civil Code must be construed to
limit the accretion mentioned therein as accretion of unregistered land to the riparian
owner, and should not extend to registered land. Thus, the lot in question having
remained the registered land of the petitioners, then the private respondents cannot
acquire title there in derogation to that of the petitioners, by accretion, for that will defeat
the indefeasibility of a Torrens Title.
The rule that registration under the Torrens System does not protect the riparian owner
against the diminution of the area of his registered land through gradual changes in the
course of an adjoining stream is well settled. InPayatas Estate Improvement Co. vs.
Tuason, 53 Phil. 55, We ruled:
The controversy in the present cases seems to be due to the erroneous
conception that Art. 366 of the Civil Code does not apply to Torrens
registered land. That article provides that "any accretions which the
banks of rivers may gradually receive from the effects of the current
belong to the owners of the estates bordering thereon." Accretions of that
character are natural incidents to land bordering on running streams and
are not affected by the registration laws. It follows that registration does
not protect the riparian owner against diminution of the area of his land
through gradual changes in the course of the adjoining stream.
In C.N. Hodges vs. Garcia, 109 Phil. 133, We also ruled:
It clearly appearing that the land in question has become part of
defendant's estate as a result of accretion, it follows that said land now
belongs to him. The fact that the accretion to his land used to pertain to
plaintiffs estate, which is covered by a Torrens Certificate of Title, cannot
preclude him (defendant) from being the owner thereof. Registration does
not protect the riparian owner against the diminution of the area of his
land through gradual changes in the course of the adjoining stream.
Accretions which the banks of rivers may gradually receive from the
effect of the current become the property of the owners of the banks (Art.
366 of the Old Civil Code; Art. 457 of the New). Such accretions are
natural incidents to land bordering on running streams and the provisions
of the Civil Code in that respect are not affected by the Registration Act.
We find no valid reason to review and abandon the aforecited rulings.
As the private respondents are the owners of the premises in question, no damages are
recoverable from them.
ACCORDINGLY, the petition is DISMISSED for lack of merit without pronouncement as
to costs.
SO ORDERED.
G.R. No. L-61647 October 12, 1984
REPUBLIC vs. CA
This is a petition for certiorari to set aside the decision of the respondent Court of
Appeals (now Intermediate Appellate Court) affirming the decision of the Court of First
Instance of Bulacan, Fifth Judicial District, Branch VIII, which found that Lots 1 and 2 of
Plan Psu-131892 are accretion to the land covered by Transfer Certificate of Title No.
89709 and ordered their registration in the names of the private respondents.
Respondents Benjamin Tancinco, Azucena Tancinco Reyes, Marina (should be "Maria")
Tancinco Imperial and Mario C. Tancinco are registered owners of a parcel of land
covered by Transfer Certificate of Title No. T-89709 situated at Barrio Ubihan,
Meycauayan, Bulacan bordering on the Meycauayan and Bocaue rivers.
On June 24, 1973, the private respondents filed an application for the registration of
three lots adjacent to their fishpond property and particularly described as follows: têñ.£îhqwâ£
Lot 1-Psu-131892
(Maria C. Tancinco)
A parcel of land (lot 1 as shown on plan Psu-131892), situated in the
Barrio of Ubihan, Municipality of Meycauayan, Province of Bulacan.
160
 Bounded on the NE., along line 1-2, by Lot 3 of plan Psu-131892; on the
SE., along lines 2-3-4, by Meycauayan River; on the S.W., along fines 4-
5-6-7-8-9, by Bocaue River; on the NE., along line 9-10, by property of
Joaquina Santiago; on the E., NE., and NW., along lines 10-11-12-1, by
property of Mariano Tancinco (Lot 2, Psu-111877). ... containing an area
of THIRTY THREE THOUSAND NINE HUNDRED THIRTY SEVEN
(33,937) SQUARE METERS. ...
Lot 2-Psu-131892
(Maria C. Tancinco)
A parcel of land (Lot 2 as shown on plan Psu-131892), situated in the
Barrio of Ubihan, Municipality of Meycauayan, Province of Bulacan.
Bounded on the E., along line 1-2, by property of Rafael Singson; on the
S., along line 2-3, by Meycauayan River; on the SW., along line 3-4, by
Lot 3 of plan Psu-131892; and on the N., along line 4-1, by property of
Mariano Tancinco (Lot 1, Psu-111877). ... containing an area of FIVE
THOUSAND FOUR HUNDRED FIFTY THREE (5,453) SQUARE
METERS. ...
Lot 3-Psu-131892
(Maria C. Tancinco)
A parcel of land (Lot 3 as shown on plan Psu-131892), situated in the
Barrio of Ubihan, Municipality of Meycauayan, Province of Bulacan.
Bounded on the NE., along line 1-2, by property of Mariano Tancinco (Lot
1, Psu-111877); and along line 2-3, by Lot 2 of plan Psu-131892; on the
S., along line 3-4, by Meycauayan River, on the SW., along line 4-5, by
Lot 1 of plan Psu-131892; and along line 5-6 by property of Mariano
Tancinco (Lot 2, Psu-111877), and on the NW., along line 6-1, by
property of Joaquina Santiago. ... containing an area of ONE
THOUSAND NINE HUNDRED EIGHTY FIVE (1,985) SQUARE
METERS. ...
On April 5, 1974, Assistant Provincial Fiscal Amando C. Vicente, in representation of the
Bureau of Lands filed a written opposition to the application for registration.
On March 6, 1975, the private respondents filed a partial withdrawal of the application for
registration with respect to Lot 3 of Plan Psu-131892 in line with the recommendation of
the Commissioner appointed by the Court.
On March 7, 1975, Lot 3 was ordered withdrawn from the application and trial proceeded
only with respect to Lots 1 and 2 covered by Plan Psu-131892.
On June 26, 1976, the lower court rendered a decision granting the application on the
finding that the lands in question are accretions to the private respondents' fishponds
covered by Transfer Certificate of Title No. 89709. The dispositive portion of the decision
reads: têñ.£îhqwâ£
WHEREFORE, it appearing that Lots 1 & 2 of plan Psu-131892 (Exh. H)
are accretions to the land covered by Transfer Certificate of Title No.
89709 of the Register of Deeds of Bulacan, they belong to the owner of
said property. The Court, therefore, orders the registration of lots 1 & 2
situated in the barrio of Ubihan, municipality of Meycauayan, province of
Bulacan, and more particularly described in plan Psu-131892 (Exh. H)
and their accompanying technical descriptions (Exhs. E, E-1) in favor of
Benjamin Tancinco, married to Alma Fernandez and residing at 3662
Heatherdown, Toledo, Ohio 43614 U.S.A.; Azucena Tancinco Reyes,
married to Alex Reyes, Jr., residing at 4th St., New Manila, Quezon City;
Marina Tancinco Imperial, married to Juan Imperial, residing at Pasay
Road, Dasmariñas Village, Makati, Rizal; and Mario C. Tancinco, married
to Leticia Regidor, residing at 1616 Cypress St., Dasmariñas Village,
Makati, Rizal, all of legal age, all Filipino citizens.
On July 30, 1976, the petitioner Republic appealed to the respondent Court of Appeals.
On August, 19, 1982, the respondent Court rendered a decision affirming in toto the
decision of the lower court. The dispositive portion of the decision reads: têñ.£îhqw â£
DAHIL DITO, ang hatol na iniakyat ay sinasangayunan at pinagtitibay sa
kanyang kabuuan nang walang bayad.
The rule that the findings of fact of the trial court and the Court of Appeals are binding
upon this Court admits of certain exceptions. Thus in Carolina Industries Inc. v. CMS
Stock Brokerage, Inc. (97 SCRA 734) we held that this Court retains the power to review
and rectify the findings of fact of said courts when (1) the conclusion is a finding
grounded entirely on speculations, surmises and conjectures; (2) when the inference
made is manifestly mistaken, absurd, and impossible; (3) where there is grave abuse of
discretion, (4) when the judgment is based on a misapprehension of facts; and (5) when
the court, in making its findings, went beyond the issues of the case and the same are
contrary to the admissions of both appellant and appellee.
161
There are facts and circumstances in the record which render untenable the findings of
the trial court and the Court of Appeals that the lands in question are accretions to the
private respondents' fishponds.
The petitioner submits that there is no accretion to speak of under Article 457 of the New
Civil Code because what actually happened is that the private respondents simply
transferred their dikes further down the river bed of the Meycauayan River, and thus, if
there is any accretion to speak of, it is man-made and artificial and not the result of the
gradual and imperceptible sedimentation by the waters of the river.
On the other hand, the private respondents rely on the testimony of Mrs. Virginia Acuña
to the effect that:
têñ.£îhqw â£
xxx xxx xxx
... when witness first saw the land, namely, Lots 1 & 2, they were already
dry almost at the level of the Pilapil of the property of Dr. Tancinco, and
that from the boundaries of the lots, for about two (2) arms length the
land was still dry up to the edge of the river; that sometime in 1951, a
new Pilapil was established on the boundaries of Lots 1 & 2 and soil from
the old Pilapil was transferred to the new Pilapil and this was done
sometime in 1951; that the new lots were then converted into fishpond,
and water in this fishpond was two (2) meters deep on the side of the
Pilapil facing the fishpond ... .
The private respondents submit that the foregoing evidence establishes the fact of
accretion without human intervention because the transfer of the dike occurred after the
accretion was complete.
We agree with the petitioner.
Article 457 of the New Civil Code provides: têñ.£îhqw â£
To the owners of lands adjoining the banks of rivers belong the accretion
which they gradually receive from the effects of the current of the waters.
The above-quoted article requires the concurrence of three requisites before an
accretion covered by this particular provision is said to have taken place. They are (1)
that the deposit be gradual and imperceptible; (2) that it be made through the effects of
the current of the water; and (3) that the land where accretion takes place is adjacent to
the banks of rivers.
The requirement that the deposit should be due to the effect of the current of the river is
indispensable. This excludes from Art. 457 of the New Civil Code all deposits caused by
human intervention. Alluvion must be the exclusive work of nature. In the instant case,
there is no evidence whatsoever to prove that the addition to the said property was made
gradually through the effects of the current of the Meycauayan and Bocaue rivers. We
agree with the observation of the Solicitor General that it is preposterous to believe that
almost four (4) hectares of land came into being because of the effects of the
Meycauayan and Bocaue rivers. The lone witness of the private respondents who
happens to be their overseer and whose husband was first cousin of their father noticed
the four hectare accretion to the twelve hectare fishpond only in 1939. The respondents
claim that at this point in time, accretion had already taken place. If so, their witness was
incompetent to testify to a gradual and imperceptible increase to their land in the years
before 1939. However, the witness testified that in that year, she observed an increase in
the area of the original fishpond which is now the land in question. If she was telling the
truth, the accretion was sudden. However, there is evidence that the alleged alluvial
deposits were artificial and man-made and not the exclusive result of the current of the
Meycauayan and Bocaue rivers. The alleged alluvial deposits came into being not
because of the sole effect of the current of the rivers but as a result of the transfer of the
dike towards the river and encroaching upon it. The land sought to be registered is not
even dry land cast imperceptibly and gradually by the river's current on the fishpond
adjoining it. It is under two meters of water. The private respondents' own evidence
shows that the water in the fishpond is two meters deep on the side of the pilapil facing
the fishpond and only one meter deep on the side of the pilapil facing the river
The reason behind the law giving the riparian owner the right to any land or alluvion
deposited by a river is to compensate him for the danger of loss that he suffers because
of the location of his land. If estates bordering on rivers are exposed to floods and other
evils produced by the destructive force of the waters and if by virtue of lawful provisions,
said estates are subject to incumbrances and various kinds of easements, it is proper
that the risk or danger which may prejudice the owners thereof should be compensated
by the right of accretion. (Cortes v. City of Manila, 10 Phil. 567). Hence, the riparian
owner does not acquire the additions to his land caused by special works expressly
intended or designed to bring about accretion. When the private respondents transferred
their dikes towards the river bed, the dikes were meant for reclamation purposes and not
to protect their property from the destructive force of the waters of the river.
We agree with the submission of the Solicitor General that the testimony of the private
respondents' lone witness to the effect that as early as 1939 there already existed such
alleged alluvial deposits, deserves no merit. It should be noted that the lots in question
were not included in the survey of their adjacent property conducted on May 10, 1940
and in the Cadastral Survey of the entire Municipality of Meycauayan conducted between
the years 1958 to 1960. The alleged accretion was declared for taxation purposes only in
162
1972 or 33 years after it had supposedly permanently formed. The only valid conclusion
therefore is that the said areas could not have been there in 1939. They existed only
after the private respondents transferred their dikes towards the bed of the Meycauayan
river in 1951. What private respondents claim as accretion is really an encroachment of a
portion of the Meycauayan river by reclamation.
The lower court cannot validly order the registration of Lots 1 & 2 in the names of the
private respondents. These lots were portions of the bed of the Meycauayan river and
are therefore classified as property of the public domain under Article 420 paragraph 1
and Article 502, paragraph 1 of the Civil Code of the Philippines. They are not open to
registration under the Land Registration Act. The adjudication of the lands in question as
private property in the names of the private respondents is null and void.
WHEREFORE, the instant petition is GRANTED. The decision appealed from is hereby
REVERSED and SET ASIDE. The private respondents are ordered to move back the
dikes of their fishponds to their original location and return the disputed property to the
river to which it belongs.
SO ORDERED. 1äw phï1.ñët
G.R. No. 92161 March 18, 1991
BINALAY vs. MANALO
The late Judge Taccad originally owned a parcel of land situated in Tumauini, Isabela
having an estimated area of twenty (20) hectares. The western portion of this land
bordering on the Cagayan River has an elevation lower than that of the eastern portion
which borders on the national road. Through the years, the western portion would
periodically go under the waters of the Cagayan River as those waters swelled with the
coming of the rains. The submerged portion, however, would re-appear during the dry
season from January to August. It would remain under water for the rest of the year, that
is, from September to December during the rainy season.
The ownership of the landholding eventually moved from one person to another. On 9
May 1959, respondent Guillermo Manalo acquired 8.65 hectares thereof from Faustina
Taccad, daughter of Judge Juan Taccad. The land sold was described in the Deed of
Absolute Sale 1 as follows:
. . . a parcel of agricultural land in Balug, Tumauini, Isabela, containing an area of
8.6500 hectares, more or less; bounded on the North by Francisco Forto on the
East by National Road; on South by Julian Tumolva and on the West by
Cagayan River; declared for taxation under Tax Declaration No. 12681 in the
name of Faustina Taccad, and assessed at P 750.00. . . .
Later in 1964, respondent Manalo purchased another 1.80 hectares from Gregorio
Taguba who had earlier acquired the same from Judge Juan Taccad. The second
purchase brought the total acquisition of respondent Manalo to 10.45 hectares. The
second piece of property was more particularly described as follows:
. . . a piece of agricultural land consisting of tobacco land, and containing an area
of 18,000 square meters, more or less, bounded on the North by Balug Creek; on
the South, by Faustina Taccad (now Guillermo R. Manalo); on the East, by a
Provincial Road; and on the West, by Cagayan River assessed at P 440.00, as
tax Declaration No. 3152. . . . 2
During the cadastral survey conducted at Balug, Tumauini, Isabela on 21 October 1969,
the two (2) parcels of land belonging to respondent Manalo were surveyed and
consolidated into one lot, designated as Lot No. 307, Pls-964. Lot 307 which contains
4.6489 hectares includes: (a) the whole of the 1.80 hectares acquired from Gregorio
Taguba; and (b) 2.8489 hectares out of the 8.65 hectares purchased from Faustina
Taccad. As the survey was conducted on a rainy month, a portion of the land bought
from Faustina Taccad then under water was left unsurveyed and was not included in Lot
307.
The Sketch Plan 3 submitted during the trial of this case and which was identified by
respondent Manalo shows that the Cagayan River running from south to north, forks at a
certain point to form two (2) branches—the western and the eastern branches—and then
unites at the other end, further north, to form a narrow strip of land. The eastern branch
of the river cuts through the land of respondent Manalo and is inundated with water only
during the rainy season. The bed of the eastern branch is the submerged or the
unsurveyed portion of the land belonging to respondent Manalo. For about eight (8)
months of the year when the level of water at the point where the Cagayan River forks is
at its ordinary depth, river water does not flow into the eastern branch. While this
condition persists, the eastern bed is dry and is susceptible to cultivation.
Considering that water flowed through the eastern branch of the Cagayan River when
the cadastral survey was conducted, the elongated strip of land formed by the western
and the eastern branches of the Cagayan River looked very much like an island. This
strip of land was surveyed on 12 December 1969. 4
It was found to have a total area of 22.7209 hectares and was designated as Lot 821 and
Lot 822. The area of Lot 822 is 10.8122 hectares while Lot 821 has an area of 11.9087
163
hectares. Lot 821 is located directly opposite Lot 307 and is separated from the latter
only by the eastern branch of the Cagayan River during the rainy season and, during the
dry season, by the exposed, dry river bed, being a portion of the land bought from
Faustina Taccad. Respondent Manalo claims that Lot 821 also belongs to him by way of
accretion to the submerged portion of the property to which it is adjacent.
Petitioners who are in possession of Lot 821, upon the other hand, insist that they own
Lot 821. They occupy the outer edges of Lot 821 along the river banks, i.e., the fertile
portions on which they plant tobacco and other agricultural products. They also cultivate
the western strip of the unsurveyed portion during summer. 5 This situation compelled
respondent Manalo to file a case for forcible entry against petitioners on 20 May 1969.
The case was dismissed by the Municipal Court of Tumauini, Isabela for failure of both
parties to appear. On 15 December 1972, respondent Manalo again filed a case for
forcible entry against petitioners. The latter case was similarly dismissed for lack of
jurisdiction by the Municipal Court of Tumauini, Isabela.
On 24 July 1974, respondent Manalo filed a complaints 6 before the then Court of First
Instance of Isabela, Branch 3 for quieting of title, possession and damages against
petitioners. He alleged ownership of the two (2) parcels of land he bought separately
from Faustina Taccad and Gregorio Taguba for which reason he prayed that judgment
be entered ordering petitioners to vacate the western strip of the unsurveyed portion.
Respondent Manalo likewise prayed that judgment be entered declaring him as owner of
Lot 821 on which he had laid his claim during the survey.
Petitioners filed their answer denying the material allegations of the complaint. The case
was then set for trial for failure of the parties to reach an amicable agreement or to enter
into a stipulation of facts. 7 On 10 November 1982, the trial court rendered a decision with
the following dispositive portion:
WHEREFORE, in the light of the foregoing premises, the Court renders judgment
against the defendants and in favor of the plaintiff and orders:
1. That plaintiff, Guillermo Manalo, is declared the lawful owner of the land in
question, Lot No. 821, Pls-964 of Tumauini Cadastre, and which is more
particularly described in paragraph 2-b of the Complaint;
2. That the defendants are hereby ordered to vacate the premises of the land in
question, Lot No. 821, Pls-964 of Tumauini Cadastre, and which is more
particularly described in paragraph 2-b of the Complaint;
3. That the defendants are being restrained from entering the premises of the
land in question, Lot No. 821, Pls-964 of Tumauini Cadastre, and which is more
particularly described in paragraph 2-b of the Complaint; and
4. That there is no pronouncement as to attorney's fees and costs.
SO ORDERED. 8
Petitioners appealed to the Court of Appeals which, however, affirmed the decision of the
trial court. They filed a motion for reconsideration, without success.
While petitioners insist that Lot 821 is part of an island surrounded by the two (2)
branches of the Cagayan River, the Court of Appeals found otherwise. The Court of
Appeals concurred with the finding of the trial court that Lot 821 cannot be considered
separate and distinct from Lot 307 since the eastern branch of the Cagayan River
substantially dries up for the most part of the year such that when this happens, Lot 821
becomes physically (i.e., by land) connected with the dried up bed owned by respondent
Manalo. Both courts below in effect rejected the assertion of petitioners that the
depression on the earth's surface which separates Lot 307 and Lot 821 is, during part of
the year, the bed of the eastern branch of the Cagayan River.
It is a familiar rule that the findings of facts of the trial court are entitled to great respect,
and that they carry even more weight when affirmed by the Court of Appeals. 9 This is in
recognition of the peculiar advantage on the part of the trial court of being able to
observe first-hand the deportment of the witnesses while testifying. Jurisprudence is
likewise settled that the Court of Appeals is the final arbiter of questions of fact. 10 But
whether a conclusion drawn from such findings of facts is correct, is a question of law
cognizable by this Court. 11
In the instant case, the conclusion reached by both courts below apparently collides with
their findings that periodically at the onset of and during the rainy season, river water
flows through the eastern bed of the Cagayan River. The trial court held:
The Court believes that the land in controversy is of the nature and character of
alluvion (Accretion), for it appears that during the dry season, the body of water
separating the same land in controversy (Lot No. 821, Pls-964) and the two (2)
parcels of land which the plaintiff purchased from Gregorio Taguba and Justina
Taccad Cayaba becomes a marshy land and is only six (6) inches deep and
twelve (12) meters in width at its widest in the northern tip (Exhs. "W", "W-l", "W-
2", "W-3" and "W-4"), It has been held by our Supreme Court that "the owner of
the riparian land which receives the gradual deposits of alluvion, does not have
164
 to make an express act of possession. The law does not require it, and the
deposit created by the current of the water becomes manifest" (Roxas vs.
Tuazon, 6 Phil. 408). 12
The Court of Appeals adhered substantially to the conclusion reached by the trial court,
thus:
As found by the trial court, the disputed property is not an island in the strict
sense of the word since the eastern portion of the said property claimed by
appellants to be part of the Cagayan River dries up during summer. Admittedly, it
is the action of the heavy rains which comes during rainy season especially from
September to November which increases the water level of the Cagayan river.
As the river becomes swollen due to heavy rains, the lower portion of the said
strip of land located at its southernmost point would be inundated with water.
This is where the water of the Cagayan river gains its entry. Consequently, if the
water level is high the whole strip of land would be under water.
In Government of the Philippine Islands vs. Colegio de San Jose, it was held that —
According to the foregoing definition of the words "ordinary" and "extra-ordinary,"
the highest depth of the waters of Laguna de Bay during the dry season is the
ordinary one, and the highest depth they attain during the extra-ordinary one
(sic); inasmuch as the former is the one which is regular, common, natural, which
occurs always or most of the time during the year, while the latter is uncommon,
transcends the general rule, order and measure, and goes beyond that which is
the ordinary depth. If according to the definition given by Article 74 of the Law of
Waters quoted above, the natural bed or basin of the lakes is the ground covered
by their waters when at their highest ordinary depth, the natural bed or basin of
Laguna de Bay is the ground covered by its waters when at their highest depth
during the dry season, that is up to the northeastern boundary of the two parcels
of land in question.
We find the foregoing ruling to be analogous to the case at bar. The highest ordinary
level of the waters of the Cagayan River is that attained during the dry season which is
confined only on the west side of Lot [821] and Lot [822]. This is the natural Cagayan
river itself. The small residual of water between Lot [821] and 307 is part of the small
stream already in existence when the whole of the late Judge Juan Taccad's property
was still susceptible to cultivation and uneroded. 13
The Court is unable to agree with the Court of Appeals that Government of the Philippine
Islands vs. Colegio de San Jose 14 is applicable to the present case. That case involved
Laguna de Bay; since Laguna de Bay is a lake, the Court applied the legal provisions
governing the ownership and use of lakes and their beds and shores, in order to
determine the character and ownership of the disputed property. Specifically, the Court
applied the definition of the natural bed or basin of lakes found in Article 74 of the Law of
Waters of 3 August 1866. Upon the other hand, what is involved in the instant case is the
eastern bed of the Cagayan River.
We believe and so hold that Article 70 of the Law of Waters of 3 August 1866 is the law
applicable to the case at bar:
Art. 70. The natural bed or channel of a creek or river is the ground covered by
its waters during the highest floods. (Emphasis supplied)
We note that Article 70 defines the natural bed or channel of a creek or river as the
ground covered by its waters during the highest floods. The highest floods in the eastern
branch of the Cagayan River occur with the annual coming of the rains as the river
waters in their onward course cover the entire depressed portion. Though the eastern
bed substantially dries up for the most part of the year (i.e., from January to August), we
cannot ignore the periodical swelling of the waters ( i.e., from September to December)
causing the eastern bed to be covered with flowing river waters.
The conclusion of this Court that the depressed portion is a river bed rests upon
evidence of record. Firstly, respondent Manalo admitted in open court that the entire
1âwphi1
area he bought from Gregorio Taguba was included in Lot 307. 15 If the 1.80 hectares
purchased from Gregorio Taguba was included in Lot 307, then the Cagayan River
referred to as the western boundary in the Deed of Sale transferring the land from
Gregorio Taguba to respondent Manalo as well as the Deed of Sale signed by Faustina
Taccad, must refer to the dried up bed (during the dry months) or the eastern branch of
the river (during the rainy months). In the Sketch Plan attached to the records of the
case, Lot 307 is separated from the western branch of the Cagayan River by a large tract
of land which includes not only Lot 821 but also what this Court characterizes as the
eastern branch of the Cagayan River.
Secondly, the pictures identified by respondent Manalo during his direct examination
depict the depressed portion as a river bed. The pictures, marked as Exhibits "W" to "W-
4", were taken in July 1973 or at a time when the eastern bed becomes visible. 16 Thus,
Exhibit "W-2" which according to respondent Manalo was taken facing the east and
Exhibit "W-3" which was taken facing the west both show that the visible, dried up portion
has a markedly lower elevation than Lot 307 and Lot 821. It has dike-like slopes on both
sides connecting it to Lot 307 and Lot 821 that are vertical upward and very prominent.
This topographic feature is compatible with the fact that a huge volume of water passes
165
through the eastern bed regularly during the rainy season. In addition, petitioner
Ponciano Gannaban testified that one had to go down what he called a "cliff" from the
surveyed portion of the land of respondent Manalo to the depressed portion. The cliff, as
related by petitioner Gannaban, has a height of eight (8) meters. 17
The records do not show when the Cagayan River began to carve its eastern channel on
the surface of the earth. However, Exhibit "E" 18 for the prosecution which was the
Declaration of Real Property standing in the name of Faustina Taccad indicates that the
eastern bed already existed even before the sale to respondent Manalo. The words "old
bed" enclosed in parentheses—perhaps written to make legitimate the claim of private
ownership over the submerged portion—is an implied admission of the existence of the
river bed. In the Declaration of Real Property made by respondent Manalo, the
depressed portion assumed the name Rio Muerte de Cagayan. Indeed, the steep dike-
like slopes on either side of the eastern bed could have been formed only after a
prolonged period of time.
Now, then, pursuant to Article 420 of the Civil Code, respondent Manalo did not acquire
private ownership of the bed of the eastern branch of the river even if it was included in
the deeds of absolute sale executed by Gregorio Taguba and Faustina Taccad in his
favor. These vendors could not have validly sold land that constituted property of public
dominion. Article 420 of the Civil Code states:
The following things are property of public dominion:
(1) Those intended for public use, such as roads, canals, rivers, torrents, ports
and bridges constructed by the State, banks, shores, roadsteads, and others of
similar character;
(2) Those which belong to the State, without being for public use, and are
intended for some public service or for the development of the national wealth.
(Emphasis supplied)
Although Article 420 speaks only of rivers and banks, "rivers" is a composite term which
includes: (1) the running waters, (2) the bed, and (3) the banks. 19 Manresa, in
commenting upon Article 339 of the Spanish Civil Code of 1889 from which Article 420 of
the Philippine Civil Code was taken, stressed the public ownership of river beds:
La naturaleza especial de los rios, en punto a su disfrute general, hace que sea
necesario considerar en su relacion de dominio algo mas que sus aguas
corrientes. En efecto en todo rio es preciso distinguir 1. esta agua corriente; 2. el
alveo o cauce, y 3. las riberas. Ahora bien: son estas dos ultimas cosas siempre
de dominio publico, como las aguas?
Realmente no puede imaginarse un rio sin alveo y sin ribera; de suerte que al
decir el Codigo civil que los rios son de dominio publico, parece que debe ir
implicito el dominio publico de aquellos tres elementos que integran el rio. Por
otra parte, en cuanto a los alveos o cauces tenemos la declaracion del art. 407,
num 1, donde dice: son de dominion publico . . . los rios y sus cauces naturales;
declaracion que concuerda con lo que dispone el art. 34 de la ley de [Aguas],
segun el cual, son de dominion publico: 1. los alveos o cauces de los
arroyos que no se hallen comprendidos en el art. 33, y 2. los alveos o cauces
naturales de los riosen la extension que cubran sus aguas en las mayores
crecidas ordinarias. 20 (Emphasis supplied)
The claim of ownership of respondent Manalo over the submerged portion is bereft of
basis even if it were alleged and proved that the Cagayan River first began to encroach
on his property after the purchase from Gregorio Taguba and Faustina Taccad. Article
462 of the Civil Code would then apply divesting, by operation of law, respondent Manalo
of private ownership over the new river bed. The intrusion of the eastern branch of the
Cagayan River into his landholding obviously prejudiced respondent Manalo but this is a
common occurrence since estates bordering on rivers are exposed to floods and other
evils produced by the destructive force of the waters. That loss is compensated by, inter
alia, the right of accretion acknowledged by Article 457 of the Civil Code. 21 It so
happened that instead of increasing the size of Lot 307, the eastern branch of the
Cagayan River had carved a channel on it.
We turn next to the issue of accretion. After examining the records of the case, the Court
considers that there was no evidence to prove that Lot 821 is an increment to Lot 307
and the bed of the eastern branch of the river. Accretion as a mode of acquiring property
under Article 457 of the Civil Code requires the concurrence of three (3) requisites: (a)
that the deposition of soil or sediment be gradual and imperceptible; (b) that it be the
result of the action of the waters of the river (or sea); and (c) that the land where
accretion takes place is adjacent to the banks of rivers (or the sea coast). 22 The Court
notes that the parcels of land bought by respondent Manalo border on the eastern
branch of the Cagayan River. Any accretion formed by this eastern branch which
respondent Manalo may claim must be deposited on or attached to Lot 307. As it is, the
claimed accretion (Lot 821) lies on the bank of the river not adjacent to Lot 307 but
directly opposite Lot 307 across the river.
Assuming (arguendo only) that the Cagayan River referred to in the Deeds of Sale
transferring ownership of the land to respondent Manalo is the western branch, the
166
decision of the Court of Appeals and of the trial court are bare of factual findings to the
effect that the land purchased by respondent Manalo received alluvium from the action of
the aver in a slow and gradual manner. On the contrary, the decision of the lower court
made mention of several floods that caused the land to reappear making it susceptible to
cultivation. A sudden and forceful action like that of flooding is hardly the alluvial process
contemplated under Article 457 of the Civil Code. It is the slow and hardly perceptible
accumulation of soil deposits that the law grants to the riparian owner.
Besides, it is important to note that Lot 821 has an area of 11.91 hectares. Lot 821 is the
northern portion of the strip of land having a total area of 22.72 hectares. We find it
difficult to suppose that such a sizable area as Lot 821 resulted from slow accretion to
another lot of almost equal size. The total landholding purchased by respondent Manalo
is 10.45 hectares (8.65 hectares from Faustina Taccad and 1.80 hectares from Gregorio
Taguba in 1959 and 1964, respectively), in fact even smaller than Lot 821 which he
claims by way of accretion. The cadastral survey showing that Lot 821 has an area of
11.91 hectares was conducted in 1969. If respondent Manalo's contention were
accepted, it would mean that in a span of only ten (10) years, he had more than doubled
his landholding by what the Court of Appeals and the trial court considered as accretion.
As already noted, there are steep vertical dike-like slopes separating the depressed
portion or river bed and Lot 821 and Lot 307. This topography of the land, among other
things, precludes a reasonable conclusion that Lot 821 is an increment to the depressed
portion by reason of the slow and constant action of the waters of either the western or
the eastern branches of the Cagayan River.
We turn finally to the issue of ownership of Lot 821. Respondent Manalo's claim over Lot
821 rests on accretion coupled with alleged prior possession. He alleged that the parcels
of land he bought separately from Gregorio Taguba and Faustina Taccad were formerly
owned by Judge Juan Taccad who was in possession thereof through his (Judge
Taccad's) tenants. When ownership was transferred to him, respondent Manalo took
over the cultivation of the property and had it declared for taxation purposes in his name.
When petitioners forcibly entered into his property, he twice instituted the appropriate
action before the Municipal Trial Court of Tumauini, Isabela. Against respondent
Manalo's allegation of prior possession, petitioners presented tax declarations standing
in their respective names. They claimed lawful, peaceful and adverse possession of Lot
821 since 1955.
If respondent Manalo had proved prior possession, it was limited physically to Lot 307
and the depressed portion or the eastern river bed. The testimony of Dominga Malana
who was a tenant for Justina Taccad did not indicate that she was also cultivating Lot
821. In fact, the complaints for forcible entry lodged before the Municipal Trial Court of
Tumauini, Isabela pertained only to Lot 307 and the depressed portion or river bed and
not to Lot 821. In the same manner, the tax declarations presented by petitioners conflict
with those of respondent Manalo. Under Article 477 of the Civil Code, the plaintiff in an
action for quieting of title must at least have equitable title to or interest in the real
property which is the subject matter of the action. The evidence of record on this point is
less than satisfactory and the Court feels compelled to refrain from determining the
ownership and possession of Lot 821, adjudging neither petitioners nor respondent
Manalo as owner(s) thereof.
WHEREFORE, the Decision and Resolution of the Court of Appeals in CA-GR CV No.
04892 are hereby SET ASIDE. Respondent Manalo is hereby declared the owner of Lot
307. The regularly submerged portion or the eastern bed of the Cagayan River is hereby
DECLARED to be property of public dominion. The ownership of Lot 821 shall be
determined in an appropriate action that may be instituted by the interested parties inter
se. No pronouncement as to costs.
SO ORDERED.
G.R. No. 95907 April 8, 1992
REYNANTE vs. CA
This is a petition for review on certiorari which seeks the reversal of: a) decision 1 of the
Court of Appeals dated February 28, 1990 in CA-G.R. No. 1917 entitled "JOSE REYNANTE
versus HON. VALENTIN CRUZ, Judge, RTC of Malolos, Bulacan, and HEIRS OF LEONCIO
AND DOLORES CARLOS, et al.", affirming the decision 2 of the Regional Trial Court
of Malolos, Bulacan, Branch 8, Third Judicial Region which reversed the decision 3 of the
Municipal Trial Court of Meycauayan, Bulacan, Branch 1, Third Judicial Region in Civil Case
No. 1526 entitled "HEIRS OF LEONCIO CARLOS & DOLORES A. CARLOS and HEIRS OF
GORGONIO A. CARLOS & CONCEPCION CARLOS versus JOSE REYNANTE: and b) the
resolution denying the motion for reconsideration.
The facts as culled from the records of the case are as follows:
More than 50 years ago, petitioner Jose Reynante was taken as tenant by the late Don
Cosme Carlos, owner and father-in-law of herein private respondents, over a fishpond
located at Barrio Liputan, Meycauayan, Bulacan with an area of 188.711 square meters,
more or less and covered by Transfer Certificate of Title No. 25618, Land Registry of
Bulacan.
During the tenancy, petitioner Jose Reynante constructed a nipa hut where he and his
family lived and took care of the nipa palms (sasahan) he had planted on lots 1 and 2
covering an area of 5,096 square meters and 6,011 square meters respectively. These
lots are located between the fishpond covered by TCT No. 25618 and the Liputan
167
(formerly Meycauayan) River. Petitioner harvested and sold said nipa palms without
interference and prohibition from anybody. Neither did the late Don Cosme Carlos
question his right to plant the nipa palms near the fishpond or to harvest and appropriate
them as his own.
After the death of Don Cosme Carlos, his heirs (private respondents' predecessors-in-
interest) entered into a written agreement denominated as "SINUMPAANG SALAYSAY
NG PAGSASAULI NG KARAPATAN" dated November 29, 1984 with petitioner Jose
Reynante whereby the latter for and in consideration of the sum of P200,000.00 turned
over the fishpond he was tenanting to the heirs of Don Cosme Carlos and surrendered
all his rights therein as caretaker or "bantay-kasama at tagapamahala" (Rollo, p. 77).
Pursuant to the said written agreement, petitioner surrendered the fishpond and the two
huts located therein to private respondents. Private respondents thereafter leased the
said fishpond to one Carlos de la Cruz. Petitioner continued to live in the nipa hut
constructed by him on lots 1 and 2 and to take care of the nipa palms he had planted
therein.
On February 17, 1988, private respondents formally demanded that the petitioner vacate
said portion since according to them petitioner had already been indemnified for the
surrender of his rights as a tenant. Despite receipt thereof, petitioner refused and failed
to relinquish possession of lots 1 and 2.
Hence, on April 22, 1988, private respondents filed a complaint for forcible entry with
preliminary mandatory injunction against petitioner alleging that the latter by means of
strategy and stealth, took over the physical, actual and material possession of lots 1 and
2 by residing in one of the kubos or huts bordering the Liputan River and cutting off
and/or disposing of the sasa or nipa palms adjacent thereto.
On January 10, 1989, the trial court rendered its decision dismissing the complaint and
finding that petitioner had been in prior possession of lots 1
and 2.
Private respondents appealed to the Regional Trial Court and on August 8, 1989 it
rendered its decision, the dispositive portion of which reads as follows:
WHEREFORE, this Court renders judgment in favor of the plaintiffs and
against defendant and hereby reverses the decision of the Court a quo.
Accordingly, the defendant is ordered to restore possession of that piece
of land particularly described and defined as Lots 1 & 2 of the land survey
conducted by Geodetic Engineer Restituto Buan on March 2, 1983,
together with the sasa or nipa palms planted thereon. No pronouncement
as to attorney's fees. Each party shall bear their respective costs of the
suit.
SO ORDERED. (Rollo, p. 55; Decision, p. 4).
From said decision, petitioner filed with the Court of Appeals a petition for review (Rollo,
p. 30; Annex "A"). On February 28, 1990, the Court of Appeals rendered its decision, the
dispositive portion of which reads as follows:
WHEREFORE, the decision of the court a quo, being consistent with law
and jurisprudence, is hereby AFFIRMED in toto. The instant petition
seeking to issue a restraining order is hereby denied.
SO ORDERED. (Rollo, p. 30; Decision, p. 3).
On November 5, 1990, the Court of Appeals denied the motion for reconsideration filed
by petitioner (Rollo, p. 35; Annex "B").
Hence, this petition.
In its resolution dated May 6, 1991, the Second Division of this court gave due course to
the petition and required both parties to file their respective memoranda (Rollo, p. 93).
The main issues to be resolved in this case are: a) who between the petitioner and
private respondents has prior physical possession of lots 1 and 2; and b) whether or not
the disputed lots belong to private respondents as a result of accretion.
An action for forcible entry is merely a quieting process and actual title to the property is
never determined. A party who can prove prior possession can recover such possession
even against the owner himself. Whatever may be the character of his prior possession,
if he has in his favor priority in time, he has the security that entitles him to remain on the
property until he is lawfully ejected by a person having a better right by accion
publiciana oraccion reivindicatoria (German Management & Services, Inc. v. Court of
Appeals, G.R. No. 76216, September 14, 1989, 177 SCRA 495, 498, 499). On the other
hand, if a plaintiff cannot prove prior physical possession, he has no right of action for
forcible entry and detainer even if he should be the owner of the property (Lizo v.
Carandang, 73 Phil. 469 [1942]).
168
Hence, the Court of Appeals could not legally restore private respondents' possession
over lots 1 and 2 simply because petitioner has clearly proven that he
had prior possession over lots 1 and 2.
The evidence on record shows that petitioner was in possession of the questioned lots
for more than 50 years. It is undisputed that he was the caretaker of the fishpond owned
by the late Don Cosme Carlos for more than 50 years and that he constructed a nipa hut
adjacent to the fishpond and planted nipa palms therein. This fact is bolstered by the
"SINUMPAANG SALAYSAY" executed by Epifanio Lucero (Records, p. 66), Apolonio D.
Morte (Records, p. 101) and Carling Dumalay (Records, p. 103), all of whom are
disinterested parties with no motive to falsify that can be attributed to them, except their
desire to tell the truth.
Moreover, an ocular inspection was conducted by the trial court dated December 2, 1988
which was attended by the parties and their respective counsels and the court observed
the following:
The Court viewed the location and the distance of the constructed nipa
hut and the subject "sasahan" which appears exists (sic) long ago,
planted and stands (sic) adjacent to the fishpond and the dikes which
serves (sic) as passage way of water river of lot 1 and lot 2. During the
course of the hearing, both counsel observed muniment of title
embedded on the ground which is located at the inner side of the "pilapil"
separating the fishpond from the subject "sasa" plant with a height of 20
to 25 feet from water level and during the ocular inspection it was
judicially observed that the controversial premises is beyond the titled
property of the plaintiffs but situated along the Liputan, Meycauayan
River it being a part of the public domain. (Rollo, p. 51; Decision, p. 12).
On the other hand, private respondents based their claim of possession over lots 1 and 2
simply on the written agreement signed by petitioner whereby the latter surrendered his
rights over the fishpond.
Evidently, the trial court did not err when it ruled that:
An examination of the document signed by the defendant (Exhibit "B"),
shows that what was surrendered to the plaintiffs was the fishpond and
not the "sasahan" or the land on which he constructed his hut where he
now lives. That is a completely different agreement in which a tenant
would return a farm or a fishpond to his landlord in return for the amount
that the landlord would pay to him as a disturbance compensation. There
is nothing that indicates that the tenant was giving other matters not
mentioned in a document like Exhibit "B". Moreover, when the plaintiffs
leased the fishpond to Mr. Carlos de La Cruz there was no mention that
the lease included the hut constructed by the defendant and the nipa
palms planted by him (Exhibit "1"), a circumstance that gives the
impression that the nipa hut and the nipa palms were not included in the
lease to Mr. de la Cruz, which may not belong to the plaintiffs. (Rollo, p.
49; Decision, p. 9).
With regard to the second issue, it must be noted that the disputed lots involved in this
case are not included in Transfer Certificate of Title No. 25618 as per verification made
by the Forest Management Bureau, Department of Environment and Natural Resources.
That tract of land situated at Barrio Liputan, Meycauayan, Bulacan containing an area of
1.1107 hectares as described in the plan prepared and surveyed by Geodetic Engineer
Restituto Buan for Jose Reynante falls within Alienable and Disposable Land (for
fishpond development) under Project No. 15 per B.F.L.C. Map No. 3122 dated May 8,
1987 (Rollo, p. 31; Decision, p. 2).
The respondent Court of Appeals ruled that lots 1 and 2 were created by alluvial
formation and hence the property of private respondents pursuant to Article 457 of the
New Civil Code, to wit:
Art. 457. To the owners of lands adjoining the banks of rivers belong the
accretion which they gradually receive from the effects of the current of
the waters.
Accretion benefits a riparian owner when the following requisites are present: (1) that the
deposit be gradual and imperceptible; (2) that it resulted from the effects of the current of
the water; and (c) that the land where accretion takes place is adjacent to the bank of a
river (Republic v. Court of Appeals, G.R. No. L-61647, October 12, 1984, 132 SCRA 514,
cited in Agustin v. Intermediate Appellate Court, G.R. Nos. 66075-76, July 5, 1990, 187
SCRA 218).
Granting without conceding that lots 1 and 2 were created by alluvial formation and while
it is true that accretions which the banks of rivers may gradually receive from the effect of
the current become the property of the owner of the banks, such accretion to registered
land does not preclude acquisition of the additional area by another person through
prescription.
This Court ruled in the case of Ignacio Grande, et al. v. Hon. Court of Appeals, et al.,
G.R. No. L-17652, June 30, 1962, 115 Phil. 521 that:
169
 An accretion does not automatically become registered land just because
the lot which receives such accretion is covered by a Torrens Title.
Ownership of a piece of land is one thing; registration under the Torrens
system of that ownership is another. Ownership over the accretion
received by the land adjoining a river is governed by the Civil Code.
Imprescriptibility of registered land is provided in the registration law.
Registration under the Land Registration and Cadastral Act does not vest
or give title to the land, but merely confirms and, thereafter, protects the
title already possessed by the owner, making it imprescriptible by
occupation of third parties. But to obtain this protection, the land must be
placed under the operation of the registration laws, wherein certain
judicial procedures have beenprovided.
Assuming private respondents had acquired the alluvial deposit (the lot in question), by
accretion, still their failure to register said accretion for a period of fifty (50) years
subjected said accretion to acquisition through prescription by third persons.
It is undisputed that petitioner has been in possession of the subject lots for more than
fifty (50) years and unless private respondents can show a better title over the subject
lots, petitioner's possession over the property must be respected.
PREMISES CONSIDERED, the decision of the respondent Court of Appeals dated
February 28, 1990 is REVERSED and SET ASIDE and the decision of the Municipal
Trial Court of Meycauayan, Bulacan, Branch I, is hereby REINSTATED.
SO ORDERED.
G.R. No. 160453 November 12, 2012
REPUBLIC vs. SANTOS
By law, accretion - the gradual and imperceptible deposit made through the effects of the
current of the water- belongs to the owner of the land adjacent to the banks of rivers
where it forms. The drying up of the river is not accretion. Hence, the dried-up river bed
belongs to the State as property of public dominion, not to the riparian owner, unless a
law vests the ownership in some other person.
Antecedents
Alleging continuous and adverse possession of more than ten years, respondent Arcadio
Ivan A. Santos III (Arcadio Ivan) applied on March 7, 1997 for the registration of Lot
4998-B (the property) in the Regional Trial Court (RTC) in Parafiaque City. The property,
which had an area of 1,045 square meters, more or less, was located in Barangay San
Dionisio, Parañaque City, and was bounded in the Northeast by Lot 4079 belonging to
respondent Arcadio C. Santos, Jr. (Arcadio, Jr.), in the Southeast by the Parañaque
River, in the Southwest by an abandoned road, and in the Northwest by Lot 4998-A also
owned by Arcadio Ivan.1
On May 21, 1998, Arcadio Ivan amended his application for land registration to include
Arcadio, Jr. as his co-applicant because of the latter’s co-ownership of the property. He
alleged that the property had been formed through accretion and had been in their joint
open, notorious, public, continuous and adverse possession for more than 30 years.2
The City of Parañaque (the City) opposed the application for land registration, stating
that it needed the property for its flood control program; that the property was within the
legal easement of 20 meters from the river bank; and that assuming that the property
was not covered by the legal easement, title to the property could not be registered in
favor of the applicants for the reason that the property was an orchard that had dried up
and had not resulted from accretion.3
Ruling of the RTC
On May 10, 2000,4 the RTC granted the application for land registration, disposing:
WHEREFORE, the Court hereby declares the applicants, ARCADIO IVAN A. SANTOS,
III and ARCADIO C. SANTOS, JR., both Filipinos and of legal age, as the TRUE and
ABSOLUTE OWNERS of the land being applied for which is situated in the Barangay of
San Dionisio, City of Parañaque with an area of one thousand forty five (1045) square
meters more or less and covered by Subdivision Plan Csd-00-000343, being a portion of
Lot 4998, Cad. 299, Case 4, Parañaque Cadastre, LRC Rec. No. and orders the
registration of Lot 4998-B in their names with the following technical description, to wit:
xxxx
Once this Decision became (sic) final and executory, let the corresponding Order for the
Issuance of the Decree be issued.
SO ORDERED.
The Republic, through the Office of the Solicitor General (OSG), appealed.
Ruling of the CA
170
In its appeal, the Republic ascribed the following errors to the RTC,5 to wit:
I ASSUMING THAT THE LAND SOUGHT TO BE REGISTERED WAS "PREVIOUSLY A
THE TRIAL COURT ERRED IN RULING THAT THE PROPERTY SOUGHT TO BE
REGISTERED IS AN ACCRETION TO THE ADJOINING PROPERTY OWNED BY
APPELLEES DESPITE THE ADMISSION OF APPELLEE ARCADIO C. SANTOS JR.
THAT THE SAID PROPERTY WAS NOT FORMED AS A RESULT OF THE GRADUAL
FILLING UP OF SOIL THROUGH THE CURRENT OF THE RIVER.
II
THE TRIAL COURT ERRED IN GRANTING THE APPLICATION FOR LAND
REGISTRATION DESPITE APPELLEE’S FAILURE TO FORMALLY OFFER IN
EVIDENCE AN OFFICIAL CERTIFICATION THAT THE SUBJECT PARCEL OF LAND
IS ALIENABLE AND DISPOSABLE.
III
THE TRIAL COURT ERRED IN RULING THAT APPELLEES HAD SUFFICIENTLY
ESTABLISHED THEIR CONTINUOUS, OPEN, PUBLIC AND ADVERSE OCCUPATION
OF THE SUBJECT PROPERTY FOR A PERIOD OF MORE THAN THIRTY (30)
YEARS.
On May 27, 2003, the CA affirmed the RTC.6
The Republic filed a motion for reconsideration, but the CA denied the motion on October
20, 2003.7
Issues
Hence, this appeal, in which the Republic urges that:8
I The CA grossly erred in applying Article 457 of the Civil Code to respondents’ benefit
RESPONDENTS’ CLAIM THAT THE SUBJECT PROPERTY IS AN ACCRETION TO
THEIR ADJOINING LAND THAT WOULD ENTITLE THEM TO REGISTER IT UNDER
ARTICLE 457 OF THE NEW CIVIL CODE IS CONTRADICTED BY THEIR OWN
EVIDENCE.
II
PART OF THE PARAÑAQUE RIVER WHICH BECAME AN ORCHARD AFTER IT
DRIED UP," THE REGISTRATION OF SAID PROPERTY IN FAVOR OF
RESPONDENTS CANNOT BE ALTERNATIVELY JUSTIFIED UNDER ARTICLE 461 OF
THE CIVIL CODE.
III
THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN NOT RULING
THAT THE FAILURE OF RESPONDENTS TO FORMALLY OFFER IN EVIDENCE AN
OFFICIAL CERTIFICATION THAT THE SUBJECT PROPERTY IS ALIENABLE AND
DISPOSABLE IS FATAL TO THEIR APPLICATION FOR LAND REGISTRATION.
IV
THE FINDING OF THE COURT OF APPEALS THAT RESPONDENTS HAVE
CONTINUOUSLY, OPENLY, PUBLICLY AND ADVERSELY OCCUPIED THE SUBJECT
PROPERTY FOR MORE THAN THIRTY (30) YEARS IS NOT SUPPORTED BY WELL-
NIGH INCONTROVERTIBLE EVIDENCE.
To be resolved are whether or not Article 457 of the Civil Code was applicable herein;
and whether or not respondents could claim the property by virtue of acquisitive
prescription pursuant to Section 14(1) of Presidential Decree No. 1529 (Property
Registration Decree).
Ruling
The appeal is meritorious.
I.
Article 457 of the Civil Code provides that "(t)o the owners of lands adjoining the banks of
rivers belong the accretion which they gradually receive from the effects of the currents
of the waters."
In ruling for respondents, the RTC pronounced as follows:
171
On the basis of the evidence presented by the applicants, the Court finds that Arcadio
Ivan A. Santos III and Arcadio C. Santos, Jr., are the owners of the land subject of this
application which was previously a part of the Parañaque River which became an
orchard after it dried up and further considering that Lot 4 which adjoins the same
property is owned by applicant, Arcadio C. Santos, Jr., after it was obtained by him
through inheritance from his mother, Concepcion Cruz, now deceased. Conformably with
Art. 457 of the New Civil Code, it is provided that:
"Article 457. To the owners of the lands adjoining the bank of rivers belong the accretion
which they gradually receive from the effects of the current of the waters."9
The CA upheld the RTC’s pronouncement, holding:
It could not be denied that "to the owners of the lands adjoining the banks of rivers
belong the accretion which they gradually receive from the effects of the current of the
waters" (Article 457 New Civil Code) as in this case, Arcadio Ivan Santos III and Arcadio
Santos, Jr., are the owners of the land which was previously part of the Parañaque River
which became an orchard after it dried up and considering that Lot 4 which adjoins the
same property is owned by the applicant which was obtained by the latter from his
mother (Decision, p. 3; p. 38 Rollo).10
The Republic submits, however, that the application by both lower courts of Article 457 of
the Civil Code was erroneous in the face of the fact that respondents’ evidence did not
establish accretion, but instead the drying up of the Parañaque River.
The Republic’s submission is correct.
Respondents as the applicants for land registration carried the burden of proof to
establish the merits of their application by a preponderance of evidence, by which is
meant such evidence that is of greater weight, or more convincing than that offered in
opposition to it.11 They would be held entitled to claim the property as their own and
apply for its registration under the Torrens system only if they established that, indeed,
the property was an accretion to their land.
Accretion is the process whereby the soil is deposited along the banks of rivers.12 The
deposit of soil, to be considered accretion, must be: (a) gradual and imperceptible; (b)
made through the effects of the current of the water; and (c) taking place on land
adjacent to the banks of rivers.13
Accordingly, respondents should establish the concurrence of the elements of accretion
to warrant the grant of their application for land registration.
However, respondents did not discharge their burden of proof. They did not show that
the gradual and imperceptible deposition of soil through the effects of the current of the
river had formed Lot 4998-B. Instead, their evidence revealed that the property was the
dried-up river bed of the Parañaque River, leading both the RTC and the CA to
themselves hold that Lot 4998-B was "the land which was previously part of the
Parañaque River xxx (and) became an orchard after it dried up."
Still, respondents argue that considering that Lot 4998-B did not yet exist when the
original title of Lot 4 was issued in their mother’s name in 1920, and that Lot 4998-B
came about only thereafter as the land formed between Lot 4 and the Parañaque River,
the unavoidable conclusion should then be that soil and sediments had meanwhile been
deposited near Lot 4 by the current of the Parañaque River, resulting in the formation of
Lot 4998-B.
The argument is legally and factually groundless. For one, respondents thereby ignore
that the effects of the current of the river are not the only cause of the formation of land
along a river bank. There are several other causes, including the drying up of the river
bed. The drying up of the river bed was, in fact, the uniform conclusion of both lower
courts herein. In other words, respondents did not establish at all that the increment of
land had formed from the gradual and imperceptible deposit of soil by the effects of the
current. Also, it seems to be highly improbable that the large volume of soil that
ultimately comprised the dry land with an area of 1,045 square meters had been
deposited in a gradual and imperceptible manner by the current of the river in the span of
about 20 to 30 years – the span of time intervening between 1920, when Lot 4 was
registered in the name of their deceased parent (at which time Lot 4998-B was not yet in
existence) and the early 1950s (which respondents’ witness Rufino Allanigue alleged to
be the time when he knew them to have occupied Lot 4988-B). The only plausible
explanation for the substantial increment was that Lot 4988-B was the dried-up bed of
the Parañaque River. Confirming this explanation was Arcadio, Jr.’s own testimony to the
effect that the property was previously a part of the Parañaque River that had dried up
and become an orchard.
We observe in this connection that even Arcadio, Jr.’s own Transfer Certificate of Title
No. 44687 confirmed the uniform conclusion of the RTC and the CA that Lot 4998-B had
been formed by the drying up of the Parañaque River. Transfer Certificate of Title No.
44687 recited that Lot 4 of the consolidated subdivision plan Pcs-13-002563, the lot
therein described, was bounded "on the SW along line 5-1 by Dried River Bed."14
That boundary line of "SW along line 5-1" corresponded with the location of Lot 4998-B,
which was described as "bounded by Lot 4079 Cad. 299, (Lot 1, Psu-10676), in the
name of respondent Arcadio Santos, Jr. (Now Lot 4, Psd-13-002563) in the Northeast."15
172
The RTC and the CA grossly erred in treating the dried-up river bed as an accretion that
became respondents’ property pursuant to Article 457 of the Civil Code. That land was
definitely not an accretion. The process of drying up of a river to form dry land involved
the recession of the water level from the river banks, and the dried-up land did not
equate to accretion, which was the gradual and imperceptible deposition of soil on the
river banks through the effects of the current. In accretion, the water level did not recede
and was more or less maintained. Hence, respondents as the riparian owners had no
legal right to claim ownership of Lot 4998-B. Considering that the clear and categorical
language of Article 457 of the Civil Code has confined the provision only to accretion, we
should apply the provision as its clear and categorical language tells us to. Axiomatic it
is, indeed, that where the language of the law is clear and categorical, there is no room
for interpretation; there is only room for application.16 The first and fundamental duty of
courts is then to apply the law.17
The State exclusively owned Lot 4998-B and may not be divested of its right of
ownership. Article 502 of the Civil Code expressly declares that rivers and their natural
beds are public dominion of the State.18 It follows that the river beds that dry up, like Lot
4998-B, continue to belong to the
State as its property of public dominion, unless there is an express law that provides that
the dried-up river beds should belong to some other person.19
II
Acquisitive prescription was
not applicable in favor of respondents
The RTC favored respondents’ application for land registration covering Lot 4998-B also
because they had taken possession of the property continuously, openly, publicly and
adversely for more than 30 years based on their predecessor-in-interest being the
adjoining owner of the parcel of land along the river bank. It rendered the following
ratiocination, viz:20
In this regard, the Court found that from the time the applicants became the owners
thereof, they took possession of the same property continuously, openly, publicly and
adversely for more than thirty (30) years because their predecessors-in-interest are the
adjoining owners of the subject parcel of land along the river bank. Furthermore, the fact
that applicants paid its realty taxes, had it surveyed per subdivision plan Csd-00-000343
(Exh. "L") which was duly approved by the Land Management Services and the fact that
Engr. Chito B. Cainglet, OIC–Chief, Surveys Division Land Registration Authority, made
a Report that the subject property is not a portion of the Parañaque River and that it does
not fall nor overlap with Lot 5000, thus, the Court opts to grant the application.
Finally, in the light of the evidence adduced by the applicants in this case and in view of
the foregoing reports of the Department of Agrarian Reforms, Land Registration Authority
and the Department of Environment and Natural Resources, the Court finds and so holds
that the applicants have satisfied all the requirements of law which are essential to a
government grant and is, therefore, entitled to the issuance of a certificate of title in their
favor. So also, oppositor failed to prove that the applicants are not entitled thereto, not
having presented any witness.
In fine, the application is GRANTED.
As already mentioned, the CA affirmed the RTC.
Both lower courts erred.
The relevant legal provision is Section 14(1) of Presidential Decree No. 1529 (Property
Registration Decree), which pertinently states:
Section 14. Who may apply. — The following persons may file in the proper [Regional
Trial Court] an application for registration of title to land, whether personally or through
their duly authorized representatives:
(1) Those who by themselves or through their predecessors-in-interest have been in
open, continuous, exclusive and notorious possession and occupation of alienable and
disposable lands of the public domain under a bona fide claim of ownership since June
12, 1945, or earlier.
xxxx
Under Section 14(1), then, applicants for confirmation of imperfect title must prove the
following, namely: (a) that the land forms part of the disposable and alienable agricultural
lands of the public domain; and (b) that they have been in open, continuous, exclusive,
and notorious possession and occupation of the land under a bona fide claim of
ownership either since time immemorial or since June 12, 1945.21
The Republic assails the findings by the lower courts that respondents "took possession
of the same property continuously, openly, publicly and adversely for more than thirty
(30) years."22
173
Although it is well settled that the findings of fact of the trial court, especially when
affirmed by the CA, are accorded the highest degree of respect, and generally will not be
disturbed on appeal, with such findings being binding and conclusive on the Court,23 the
Court has consistently recognized exceptions to this rule, including the following, to wit:
(a) when the findings are grounded entirely on speculation, surmises, or conjectures; (b)
when the inference made is manifestly mistaken, absurd, or impossible; (c) when there is
grave abuse of discretion; (d) when the judgment is based on a misapprehension of
facts; (e) when the findings of fact are conflicting; (f) when in making its findings the CA
went beyond the issues of the case, or its findings are contrary to the admissions of both
the appellant and the appellee; (g) when the findings are contrary to those of the trial
court; (h) when the findings are conclusions without citation of specific evidence on which
they are based; (i) when the facts set forth in the petition as well as in the petitioner’s
main and reply briefs are not disputed by respondent; and (j) when the findings of fact
are premised on the supposed absence of evidence and contradicted by the evidence on
record.24
Here, the findings of the RTC were obviously grounded on speculation, surmises, or
conjectures; and that the inference made by the RTC and the CA was manifestly
mistaken, absurd, or impossible. Hence, the Court should now review the findings.
In finding that respondents had been in continuous, open, public and adverse possession
of the land for more than 30 years, the RTC declared:
In this regard, the Court found that from the time the applicant became the owners
thereof, they took possession of the same property continuously, openly, publicly and
adversely for more than thirty years because their predecessor in interest are the
adjoining owners of the subject parcel of land along the river banks. Furthermore, the
fact that the applicant paid its realty taxes, had it surveyed per subdivision plan Csd-00-
000343 (Exh. "L") which was duly approved by the Land Management Services and the
fact that Engr. Chito B. Cainglet, OIC – Chief, Surveys Division Land Registration
Authority, made a Report that the subject property is not a portion of the Parañaque
River and that it does not fall nor overlap with Lot 5000, thus, the Court opts to grant the
application.
The RTC apparently reckoned respondents’ period of supposed possession to be "more
than thirty years" from the fact that "their predecessors in interest are the adjoining
owners of the subject parcel of land." Yet, its decision nowhere indicated what acts
respondents had performed showing their possession of the property "continuously,
openly, publicly and adversely" in that length of time. The decision mentioned only that
they had paid realty taxes and had caused the survey of the property to be made. That,
to us, was not enough to justify the foregoing findings, because, firstly, the payment of
realty taxes did not conclusively prove the payor’s ownership of the land the taxes were
paid for,25 the tax declarations and payments being mere indicia of a claim of
ownership;26 and, secondly, the causing of surveys of the property involved was not itself
an of continuous, open, public and adverse possession.
The principle that the riparian owner whose land receives the gradual deposits of soil
does not need to make an express act of possession, and that no acts of possession are
necessary in that instance because it is the law itself that pronounces the alluvium to
belong to the riparian owner from the time that the deposit created by the current of the
water becomes manifest27 has no applicability herein. This is simply because Lot 4998-B
was not formed through accretion. Hence, the ownership of the land adjacent to the river
bank by respondents’ predecessor-in-interest did not translate to possession of Lot 4998-
B that would ripen to acquisitive prescription in relation to Lot 4998-B.
On the other hand, the claim of thirty years of continuous, open, public and adverse
possession of Lot 4998-B was not even validated or preponderantly established. The
admission of respondents themselves that they declared the property for taxation
purposes only in 1997 and paid realty taxes only from 199928 signified that their alleged
possession would at most be for only nine years as of the filing of their application for
land registration on March 7, 1997.
Yet, even conceding, for the sake of argument, that respondents possessed Lot 4998-B
for more than thirty years in the character they claimed, they did not thereby acquire the
land by prescription or by other means without any competent proof that the land was
already declared as alienable and disposable by the Government. Absent that
declaration, the land still belonged to the State as part of its public dominion.
Article 419 of the Civil Code distinguishes property as being either of public dominion or
of private ownership. Article 420 of the Civil Code lists the properties considered as part
of public dominion, namely: (a) those intended for public use, such as roads, canals,
rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads,
and others of similar character; and (b) those which belong to the State, without being for
public use, and are intended for some public service or for the development of the
national wealth. As earlier mentioned, Article 502 of the Civil Code declares that rivers
and their natural beds are of public dominion.
Whether the dried-up river bed may be susceptible to acquisitive prescription or not was
a question that the Court resolved in favor of the State in Celestial v. Cachopero,29 a
case involving the registration of land found to be part of a dried-up portion of the natural
bed of a creek. There the Court held:
174
As for petitioner’s claim of ownership over the subject land, admittedly a dried-up bed of
the Salunayan Creek, based on (1) her alleged long term adverse possession and that of
her predecessor-in-interest, Marcelina Basadre, even prior to October 22, 1966, when
she purchased the adjoining property from the latter, and (2) the right of accession under
Art. 370 of the Spanish Civil Code of 1889 and/or Article 461 of the Civil Code, the same
must fail.
Since property of public dominion is outside the commerce of man and not susceptible to
private appropriation and acquisitive prescription, the adverse possession which may be
the basis of a grant of title in the confirmation of an imperfect title refers only to alienable
or disposable portions of the public domain. It is only after the Government has declared
the land to be alienable and disposable agricultural land that the year of entry, cultivation
and exclusive and adverse possession can be counted for purposes of an imperfect title.
A creek, like the Salunayan Creek, is a recess or arm extending from a river and
participating in the ebb and flow of the sea. As such, under Articles 420(1) and 502(1) of
the Civil Code, the Salunayan Creek, including its natural bed, is property of the public
domain which is not susceptible to private appropriation and acquisitive prescription.
And, absent any declaration by the government, that a portion of the creek has dried-up
does not, by itself, alter its inalienable character.
xxxx
Had the disputed portion of the Salunayan Creek dried up after the present Civil Code
took effect, the subject land would clearly not belong to petitioner or her predecessor-in-
interest since under the aforementioned provision of Article 461, "river beds which are
abandoned through the natural change in the course of the waters ipso facto belong to
the owners of the land occupied by the new course," and the owners of the adjoining lots
have the right to acquire them only after paying their value.
And both Article 370 of the Old Code and Article 461 of the present Civil Code are
applicable only when "river beds are abandoned through the natural change in the
course of the waters." It is uncontroverted, however, that, as found by both the Bureau of
Lands and the DENR Regional Executive Director, the subject land became dry as a
result of the construction an irrigation canal by the National Irrigation Administration.
Thus, in Ronquillo v. Court of Appeals, this Court held:
The law is clear and unambiguous. It leaves no room for interpretation. Article 370
applies only if there is a natural change in the course of the waters. The rules on alluvion
do not apply to man-made or artificial accretions nor to accretions to lands that adjoin
canals or esteros or artificial drainage systems. Considering our earlier finding that the
dried-up portion of Estero Calubcub was actually caused by the active intervention of
man, it follows that Article 370 does not apply to the case at bar and, hence, the Del
Rosarios cannot be entitled thereto supposedly as riparian owners.
The dried-up portion of Estero Calubcub should thus be considered as forming part of
the land of the public domain which cannot be subject to acquisition by private
ownership. xxx (Emphasis supplied)
Furthermore, both provisions pertain to situations where there has been a change in the
course of a river, not where the river simply dries up. In the instant Petition, it is not even
alleged that the Salunayan Creek changed its course. In such a situation, commentators
are of the opinion that the dry river bed remains property of public dominion. (Bold
emphases supplied)
Indeed, under the Regalian doctrine, all lands not otherwise appearing to be clearly
within private ownership are presumed to belong to the State.30 No public land can be
acquired by private persons without any grant, express or implied, from the Government.
It is indispensable, therefore, that there is a showing of a title from the State.31Occupation
of public land in the concept of owner, no matter how long, cannot ripen into ownership
and be registered as a title.32
Subject to the exceptions defined in Article 461 of the Civil Code (which declares river
beds that are abandoned through the natural change in the course of the waters as ipso
facto belonging to the owners of the land occupied by the new course, and which gives
to the owners of the adjoining lots the right to acquire only the abandoned river beds not
ipso facto belonging to the owners of the land affected by the natural change of course of
the waters only after paying their value), all river beds remain property of public dominion
and cannot be acquired by acquisitive prescription unless previously declared by the
Government to be alienable and disposable. Considering that Lot 4998-B was not shown
to be already declared to be alienable and disposable, respondents could not be deemed
to have acquired the property through prescription.
Nonetheless, respondents insist that the property was already classified as alienable and
disposable by the Government. They cite as proof of the classification as alienable and
disposable the following notation found on the survey plan, to wit:33
NOTE
ALL CORNERS NOT OTHERWISE DESCRIBED ARE OLD BL CYL. CONC. MONS 15
X 60CM
175
All corners marked PS are cyl. conc. mons 15 x 60 cm
Surveyed in accordance with Survey Authority NO. 007604-48 of the Regional Executive
Director issued by the CENR-OFFICER dated Dec. 2, 1996.
This survey is inside L.C. Map No. 2623, Proj. No. 25 classified as alienable/disposable
by the Bureau of Forest Dev’t. on Jan. 3, 1968.
Lot 4998-A = Lot 5883} Cad 299
Lot 4998-B = Lot 5884} Paranaque Cadastre.
Was the notation on the survey plan to the effect that Lot 4998-B was "inside" the map
"classified as alienable/disposable by the Bureau of Forest Development on 03 Jan.
1968" sufficient proof of the property’s nature as alienable and disposable public land?
To prove that the land subject of an application for registration is alienable, an applicant
must conclusively establish the existence of a positive act of the Government, such as a
presidential proclamation, executive order, administrative action, investigation reports of
the Bureau of Lands investigator, or a legislative act or statute. Until then, the rules on
confirmation of imperfect title do not apply.
As to the proofs that are admissible to establish the alienability and disposability of public
land, we said in Secretary of the Department of Environment and Natural Resources v.
Yap34 that:
The burden of proof in overcoming the presumption of State ownership of the lands of
the public domain is on the person applying for registration (or claiming ownership), who
must prove that the land subject of the application is alienable or disposable. To
overcome this presumption, incontrovertible evidence must be established that the land
subject of the application (or claim) is alienable or disposable.There must still be a
positive act declaring land of the public domain as alienable and disposable. To prove
that the land subject of an application for registration is alienable, the applicant must
establish the existence of a positive act of the government such as a presidential
proclamation or an executive order; an administrative action; investigation reports of
Bureau of Lands investigators; and a legislative act or a statute. The applicant may also
secure a certification from the government that the land claimed to have been possessed
for the required number of years is alienable and disposable.
In the case at bar, no such proclamation, executive order, administrative action, report,
statute, or certification was presented to the Court. The records are bereft of evidence
showing that, prior to 2006, the portions of Boracay occupied by private claimants were
subject of a government proclamation that the land is alienable and disposable. Absent
such well-nigh incontrovertible evidence, the Court cannot accept the submission that
lands occupied by private claimants were already open to disposition before 2006.
Matters of land classification or reclassification cannot be assumed. They call for proof."
(Emphasis supplied)
In Menguito v. Republic,35 which we reiterated in Republic v. Sarmiento,36 we specifically
resolved the issue of whether the notation on the survey plan was sufficient evidence to
establish the alienability and disposability of public land, to wit:
To prove that the land in question formed part of the alienable and disposable lands of
the public domain, petitioners relied on the printed words which read: "This survey plan is
inside Alienable and Disposable Land Area, Project No. 27-B as per L.C. Map No. 2623,
certified by the Bureau of Forestry on January 3, 1968," appearing on Exhibit "E" (Survey
Plan No. Swo-13-000227).
This proof is not sufficient. Section 2, Article XII of the 1987 Constitution, provides: "All
lands of the public domain, waters, minerals, coal, petroleum, and other mineral oils, all
forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other
natural resources are owned by the State. x x x."
For the original registration of title, the applicant (petitioners in this case) must overcome
the presumption that the land sought to be registered forms part of the public domain.
Unless public land is shown to have been reclassified or alienated to a private person by
the State, it remains part of the inalienable public domain. Indeed, "occupation thereof in
the concept of owner, no matter how long, cannot ripen into ownership and be registered
as a title." To overcome such presumption, incontrovertible evidence must be shown by
the applicant. Absent such evidence, the land sought to be registered remains
inalienable.
In the present case, petitioners cite a surveyor-geodetic engineer’s notation in Exhibit "E"
indicating that the survey was inside alienable and disposable land. Such notation does
not constitute a positive government act validly changing the classification of the land in
question. Verily, a mere surveyor has no authority to reclassify lands of the public
domain. By relying solely on the said surveyor’s assertion, petitioners have not
sufficiently proven that the land in question has been declared alienable. (Emphasis
supplied)
In Republic v. T.A.N. Properties, Inc.,37 we dealt with the sufficiency of the certification by
the Provincial Environmental Officer (PENRO) or Community Environmental Officer
176
(CENRO) to the effect that a piece of public land was alienable and disposable in the area of 1,045 square meters, more or less, situated in Barangay San Dionisio,
following manner, viz: Parañaque City, Metro Manila; and DECLARES Lot 4998-B as exclusively belonging to
the State for being part of the dried--up bed of the Parat1aque River.
x x x it is not enough for the PENRO or CENRO to certify that a land is alienable and
disposable. The applicant for land registration must prove that the DENR Secretary had Respondents shall pay the costs of suit.
approved the land classification and released the land of the public domain as alienable
and disposable, and that the land subject of the application for registration falls within the SO ORDERED.
approved area per verification through survey by the PENRO or CENRO. In addition, the
applicant for land registration must present a copy of the original classification approved --- xxx END OF ACCESSION NATURAL xxx ---
by the DENR Secretary and certified as a true copy by the legal custodian of the official
records. These facts must be established to prove that the land is alienable and
G.R. No. L-31163 November 6, 1929
disposable. Respondent failed to do so because the certifications presented by
SANTOS vs. BERNABE
respondent do not, by themselves, prove that the land is alienable and disposable.
This appeal was taken by the defendants Pablo Tiongson and the Provincial Sheriff of
Only Torres, respondent’s Operations Manager, identified the certifications submitted by
Bulacan from the judgment of the Court of First of said province, wherein said defendant
respondent. The government officials who issued the certifications were not presented
Pablo Tiongson was ordered to pay the plaintiff Urbano Santos the value of 778 cavans
1âwphi1

before the trial court to testify on their contents. The trial court should not have accepted
and 38 kilos of palay, at the rate of P3 per cavan, without special pronouncement as to
the contents of the certifications as proof of the facts stated therein. Even if the
costs.
certifications are presumed duly issued and admissible in evidence, they have no
probative value in establishing that the land is alienable and disposable.
In support of their appeal, the appellants assign the following alleged errors committed
by the lower court in its judgment, to wit:
xxxx
1. The court erred in holding that it has been proved that in the cavans of palay
The CENRO and Regional Technical Director, FMS-DENR, certifications do not prove
attached by the herein defendant Pablo Tiongson from the defendant Jose C.
that Lot 10705-B falls within the alienable and disposable land as proclaimed by the
Bernabe were included those claimed by the plaintiff in this cause.
DENR Secretary. Such government certifications do not, by their mere issuance, prove
the facts stated therein. Such government certifications may fall under the class of
documents contemplated in the second sentence of Section 23 of Rule 132. As such, the 2. The court erred in ordering the defendant Pablo Tiongson to pay the plaintiff
certifications are prima facie evidence of their due execution and date of issuance but the value of 778 cavans and 38 kilos of palay, the refund of which is claimed by
they do not constitute prima facie evidence of the facts stated therein. (Emphasis said plaintiff.
supplied)
3. The court erred in denying the defendants' motion for a new trial. 1awphil.net

These rulings of the Court indicate that the notation on the survey plan of Lot 4998-B,
Cad-00-000343 to the effect that the "survey is inside a map classified as
alienable/disposable by the Bureau of Forest Dev’t" did not prove that Lot 4998-B was
already classified as alienable and disposable. Accordingly, respondents could not
validly assert acquisitive prescription of Lot 4988-B.
WHEREFORE, the Court REVERSES and SETS ASIDE the decision of the Court of
Appeals promulgated on May 27, 2003; DISMISSES the application for registration of
Arcadio C. Santos, Jr. and Arcadio Ivan S. Santos III respecting Lot 4998-B with a total
The following facts were conclusively proved at the trial:
On March 20, 1928, there were deposited in Jose C. Bernabe's warehouse by the
plaintiff Urbano Santos 778 cavans and 38 kilos of palay and by Pablo Tiongson 1,026
cavans and 9 kilos of the same grain.
On said date, March 20, 1928, Pablo Tiongson filed with the Court of First Instance of
Bulacan a complaint against Jose C. Bernabe, to recover from the latter the 1,026
177
cavans and 9 kilos of palay deposited in the defendant's warehouse. At the same time,
the application of Pablo Tiongson for a writ of attachment was granted, and the
attachable property of Jose C. Bernabe, including 924 cavans and 31 1/2 kilos of palay
found by the sheriff in his warehouse, were attached, sold at public auction, and the
proceeds thereof delivered to said defendant Pablo Tiongson, who obtained judgment in
said case.
The herein plaintiff, Urbano Santos, intervened in the attachment of the palay, but upon
Pablo Tiongson's filing the proper bond, the sheriff proceeded with the attachment, giving
rise to the present complaint.
It does not appear that the sacks of palay of Urbano Santos and those of Pablo
Tiongson, deposited in Jose C. Bernabe's warehouse, bore any marks or signs, nor were
they separated one from the other.
The plaintiff-appellee Urbano Santos contends that Pablo Tiongson cannot claim the 924
cavans and 31 ½ kilos of palay attached by the defendant sheriff as part of those
deposited by him in Jose C. Bernabe's warehouse, because, in asking for the attachment
thereof, he impliedly acknowledged that the same belonged to Jose C. Bernabe and not
to him.
In the complaint filed by Pablo Tiongson against Jose C. Bernabe, civil case No. 3665 of
the Court of First Instance of Bulacan, it is alleged that said plaintiff deposited in the
defendant's warehouse 1,026 cavans and 9 kilos of palay, the return of which, or the
value thereof, at the rate of P3 per cavan was claimed therein. Upon filing said
complaint, the plaintiff applied for a preliminary writ of attachment of the defendant's
property, which was accordingly issued, and the defendant's property, including the 924
cavans and 31 ½ kilos of palay found by the sheriff in his warehouse, were attached.
It will be seen that the action brought by Pablo Tiongson against Jose C. Bernabe is that
provided in section 262 of the Code of Civil Procedure for the delivery of personal
property. Although it is true that the plaintiff and his attorney did not follow strictly the
procedure provided in said section for claiming the delivery of said personal property
nevertheless, the procedure followed by him may be construed as equivalent thereto,
considering the provisions of section 2 of the Code of Civil Procedure of the effect that
"the provisions of this Code, and the proceedings under it, shall be liberally construed, in
order to promote its object and assist the parties in obtaining speedy justice."
Liberally construing, therefore, the above cited provisions of section 262 of the Code of
Civil Procedure, the writ of attachment applied for by Pablo Tiongson against the
property of Jose C. Bernabe may be construed as a claim for the delivery of the sacks of
palay deposited by the former with the latter.
The 778 cavans and 38 kilos of palay belonging to the plaintiff Urbano Santos, having
been mixed with the 1,026 cavans and 9 kilos of palay belonging to the defendant Pablo
Tiongson in Jose C. Bernabe's warehouse; the sheriff having found only 924 cavans and
31 1/2 kilos of palay in said warehouse at the time of the attachment thereof; and there
being no means of separating form said 924 cavans and 31 1/2 of palay belonging to
Urbano Santos and those belonging to Pablo Tiongson, the following rule prescribed in
article 381 of the Civil Code for cases of this nature, is applicable:
Art. 381. If, by the will of their owners, two things of identical or dissimilar nature
are mixed, or if the mixture occurs accidentally, if in the latter case the things
cannot be separated without injury, each owner shall acquire a right in the
mixture proportionate to the part belonging to him, according to the value of the
things mixed or commingled.
The number of kilos in a cavan not having been determined, we will take the proportion
only of the 924 cavans of palay which were attached and sold, thereby giving Urbano
Santos, who deposited 778 cavans, 398.49 thereof, and Pablo Tiongson, who deposited
1,026 cavans, 525.51, or the value thereof at the rate of P3 per cavan.
Wherefore, the judgment appealed from is hereby modified, and Pablo Tiongson is
hereby ordered to pay the plaintiff Urbano Santos the value of 398.49 cavans of palay at
the rate of P3 a cavan, without special pronouncement as to costs. So ordered.
--- xx END OF OVER MOVABLES xx ---
G.R. No. L-45425 April 29, 1939
GATCHALIAN vs. CIR
The plaintiff brought this action to recover from the defendant Collector of Internal
Revenue the sum of P1,863.44, with legal interest thereon, which they paid under protest
by way of income tax. They appealed from the decision rendered in the case on October
23, 1936 by the Court of First Instance of the City of Manila, which dismissed the action
with the costs against them.
The case was submitted for decision upon the following stipulation of facts:
178
 Come now the parties to the above-mentioned case, through their respective
undersigned attorneys, and hereby agree to respectfully submit to this Honorable
Court the case upon the following statement of facts:
1. That plaintiff are all residents of the municipality of Pulilan, Bulacan, and that
defendant is the Collector of Internal Revenue of the Philippines;
2. That prior to December 15, 1934 plaintiffs, in order to enable them to purchase
one sweepstakes ticket valued at two pesos (P2), subscribed and paid therefor
the amounts as follows:
1. Jose Gatchalian
P0.18
....................................................................................................
2. Gregoria Cristobal ...............................................................................................
3. Saturnina Silva ....................................................................................................
4. Guillermo Tapia ...................................................................................................
5. Jesus Legaspi
......................................................................................................
6. Jose Silva
.............................................................................................................
7. Tomasa Mercado ................................................................................................
8. Julio Gatchalian
...................................................................................................
9. Emiliana Santiago
................................................................................................
10. Maria C. Legaspi ...............................................................................................
11. Francisco Cabral ...............................................................................................
12. Gonzalo Javier
....................................................................................................
13. Maria Santiago
...................................................................................................
14. Buenaventura Guzman
.13
......................................................................................
15. Mariano Santos ................................................................................................. .14
Total ........................................................................................................ 2.00
3. That immediately thereafter but prior to December 15, 1934, plaintiffs
purchased, in the ordinary course of business, from one of the duly authorized
agents of the National Charity Sweepstakes Office one ticket bearing No. 178637
for the sum of two pesos (P2) and that the said ticket was registered in the name
of Jose Gatchalian and Company;
.18 4. That as a result of the drawing of the sweepstakes on December 15, 1934, the
above-mentioned ticket bearing No. 178637 won one of the third prizes in the
.08 amount of P50,000 and that the corresponding check covering the above-
mentioned prize of P50,000 was drawn by the National Charity Sweepstakes
.13
Office in favor of Jose Gatchalian & Company against the Philippine National
Bank, which check was cashed during the latter part of December, 1934 by Jose
.15 Gatchalian & Company;
5. That on December 29, 1934, Jose Gatchalian was required by income tax
.07
examiner Alfredo David to file the corresponding income tax return covering the
prize won by Jose Gatchalian & Company and that on December 29, 1934, the
.08 said return was signed by Jose Gatchalian, a copy of which return is enclosed as
Exhibit A and made a part hereof;
.13
6. That on January 8, 1935, the defendant made an assessment against Jose
Gatchalian & Company requesting the payment of the sum of P1,499.94 to the
.13
deputy provincial treasurer of Pulilan, Bulacan, giving to said Jose Gatchalian &
Company until January 20, 1935 within which to pay the said amount of
.16 P1,499.94, a copy of which letter marked Exhibit B is enclosed and made a part
.13 hereof;
7. That on January 20, 1935, the plaintiffs, through their attorney, sent to
.14
defendant a reply, a copy of which marked Exhibit C is attached and made a part
hereof, requesting exemption from payment of the income tax to which reply
there were enclosed fifteen (15) separate individual income tax returns filed
.17
separately by each one of the plaintiffs, copies of which returns are attached and
marked Exhibit D-1 to D-15, respectively, in order of their names listed in the
179
caption of this case and made parts hereof; a statement of sale signed by Jose
Gatchalian showing the amount put up by each of the plaintiffs to cover up the
attached and marked as Exhibit E and made a part hereof; and a copy of the
affidavit signed by Jose Gatchalian dated December 29, 1934 is attached and
marked Exhibit F and made part thereof;
8. That the defendant in his letter dated January 28, 1935, a copy of which
marked Exhibit G is enclosed, denied plaintiffs' request of January 20, 1935, for
exemption from the payment of tax and reiterated his demand for the payment of
the sum of P1,499.94 as income tax and gave plaintiffs until February 10, 1935
within which to pay the said tax;
9. That in view of the failure of the plaintiffs to pay the amount of tax demanded
by the defendant, notwithstanding subsequent demand made by defendant upon
the plaintiffs through their attorney on March 23, 1935, a copy of which marked
Exhibit H is enclosed, defendant on May 13, 1935 issued a warrant of distraint
and levy against the property of the plaintiffs, a copy of which warrant marked
Exhibit I is enclosed and made a part hereof;
10. That to avoid embarrassment arising from the embargo of the property of the
plaintiffs, the said plaintiffs on June 15, 1935, through Gregoria Cristobal, Maria
C. Legaspi and Jesus Legaspi, paid under protest the sum of P601.51 as part of
the tax and penalties to the municipal treasurer of Pulilan, Bulacan, as evidenced
by official receipt No. 7454879 which is attached and marked Exhibit J and made
a part hereof, and requested defendant that plaintiffs be allowed to pay under
protest the balance of the tax and penalties by monthly installments;
11. That plaintiff's request to pay the balance of the tax and penalties was
granted by defendant subject to the condition that plaintiffs file the usual bond
secured by two solvent persons to guarantee prompt payment of each
installments as it becomes due;
12. That on July 16, 1935, plaintiff filed a bond, a copy of which marked Exhibit K
is enclosed and made a part hereof, to guarantee the payment of the balance of
the alleged tax liability by monthly installments at the rate of P118.70 a month,
the first payment under protest to be effected on or before July 31, 1935;
13. That on July 16, 1935 the said plaintiffs formally protested against the
payment of the sum of P602.51, a copy of which protest is attached and marked
Exhibit L, but that defendant in his letter dated August 1, 1935 overruled the
protest and denied the request for refund of the plaintiffs;
14. That, in view of the failure of the plaintiffs to pay the monthly installments in
accordance with the terms and conditions of bond filed by them, the defendant in
his letter dated July 23, 1935, copy of which is attached and marked Exhibit M,
ordered the municipal treasurer of Pulilan, Bulacan to execute within five days
the warrant of distraint and levy issued against the plaintiffs on May 13, 1935;
15. That in order to avoid annoyance and embarrassment arising from the levy of
their property, the plaintiffs on August 28, 1936, through Jose Gatchalian,
Guillermo Tapia, Maria Santiago and Emiliano Santiago, paid under protest to
the municipal treasurer of Pulilan, Bulacan the sum of P1,260.93 representing
the unpaid balance of the income tax and penalties demanded by defendant as
evidenced by income tax receipt No. 35811 which is attached and marked Exhibit
N and made a part hereof; and that on September 3, 1936, the plaintiffs formally
protested to the defendant against the payment of said amount and requested
the refund thereof, copy of which is attached and marked Exhibit O and made
part hereof; but that on September 4, 1936, the defendant overruled the protest
and denied the refund thereof; copy of which is attached and marked Exhibit P
and made a part hereof; and
16. That plaintiffs demanded upon defendant the refund of the total sum of one
thousand eight hundred and sixty three pesos and forty-four centavos
(P1,863.44) paid under protest by them but that defendant refused and still
refuses to refund the said amount notwithstanding the plaintiffs' demands.
17. The parties hereto reserve the right to present other and additional evidence
if necessary.
Exhibit E referred to in the stipulation is of the following tenor:
To whom it may concern:
I, Jose Gatchalian, a resident of Pulilan, Bulacan, married, of age, hereby certify,
that on the 11th day of August, 1934, I sold parts of my shares on ticket No.
178637 to the persons and for the amount indicated below and the part of may
share remaining is also shown to wit:
Purchaser Amount Address
1. Mariano Santos ........................................... P0.14 Pulilan, Bulacan.
2. Buenaventura Guzman ............................... .13 - Do -
180
 3. Maria Santiago ............................................ .17 - Do - No. Price Won prize
4. Gonzalo Javier .............................................. .14 - Do - 1. Jose Gatchalian
D-1 P0.18 P4,425 P 480 3,945
..........................................
5. Francisco Cabral .......................................... .13 - Do -
2. Gregoria Cristobal
6. Maria C. Legaspi .......................................... .16 - Do - D-2 .18 4,575 2,000 2,575
......................................
7. Emiliana Santiago ......................................... .13 - Do - 3. Saturnina Silva
D-3 .08 1,875 360 1,515
.............................................
8. Julio Gatchalian ............................................ .13 - Do -
9. Jose Silva ...................................................... .07 - Do - 4. Guillermo Tapia
D-4 .13 3,325 360 2,965
..........................................
10. Tomasa Mercado ....................................... .08 - Do -
5. Jesus Legaspi by Maria
D-5 .15 3,825 720 3,105
11. Jesus Legaspi ............................................. .15 - Do - Cristobal .........

12. Guillermo Tapia ........................................... .13 - Do - 6. Jose Silva

D-6 .08 1,875 360 1,515
....................................................
13. Saturnina Silva ............................................ .08 - Do -
7. Tomasa Mercado
14. Gregoria Cristobal ....................................... .18 - Do - D-7 .07 1,875 360 1,515
.......................................
15. Jose Gatchalian ............................................ .18 - Do - 8. Julio Gatchalian by Beatriz
D-8 .13 3,150 240 2,910
Guzman .......
2.00 Total cost of said 9. Emiliana Santiago
D-9 .13 3,325 360 2,965
......................................
ticket; and that, therefore, the persons named above are entitled to the parts of 10. Maria C. Legaspi
whatever prize that might be won by said ticket. D-10 .16 4,100 960 3,140
......................................

Pulilan, Bulacan, P.I. 11. Francisco Cabral

D-11 .13 3,325 360 2,965
......................................
(Sgd.) JOSE GATCHALIAN 12. Gonzalo Javier
D-12 .14 3,325 360 2,965
..........................................
And a summary of Exhibits D-1 to D-15 is inserted in the bill of exceptions as follows:
13. Maria Santiago
D-13 .17 4,350 360 3,990
RECAPITULATIONS OF 15 INDIVIDUAL INCOME TAX RETURNS FOR 1934 ..........................................
ALL DATED JANUARY 19, 1935 SUBMITTED TO THE COLLECTOR OF
INTERNAL REVENUE. 14. Buenaventura Guzman
D-14 .13 3,325 360 2,965
...........................

Name Exhibit Purchase Price Expenses Net 15. Mariano Santos D-15 .14 3,325 360 2,965

181
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The legal questions raised in plaintiffs-appellants' five assigned errors may properly be
reduced to the two following: (1) Whether the plaintiffs formed a partnership, or merely a
community of property without a personality of its own; in the first case it is admitted that
the partnership thus formed is liable for the payment of income tax, whereas if there was
merely a community of property, they are exempt from such payment; and (2) whether
they should pay the tax collectively or whether the latter should be prorated among them
and paid individually.
The Collector of Internal Revenue collected the tax under section 10 of Act No. 2833, as
last amended by section 2 of Act No. 3761, reading as follows:
SEC. 10. (a) There shall be levied, assessed, collected, and paid annually upon
the total net income received in the preceding calendar year from all sources by
every corporation, joint-stock company, partnership, joint account (cuenta en
participacion), association or insurance company, organized in the Philippine
Islands, no matter how created or organized, but not including duly registered
general copartnership (compañias colectivas), a tax of three per centum upon
such income; and a like tax shall be levied, assessed, collected, and paid
annually upon the total net income received in the preceding calendar year from
all sources within the Philippine Islands by every corporation, joint-stock
company, partnership, joint account (cuenta en participacion), association, or
insurance company organized, authorized, or existing under the laws of any
foreign country, including interest on bonds, notes, or other interest-bearing
obligations of residents, corporate or otherwise: Provided, however, That nothing
in this section shall be construed as permitting the taxation of the income derived
from dividends or net profits on which the normal tax has been paid.
The gain derived or loss sustained from the sale or other disposition by a
corporation, joint-stock company, partnership, joint account (cuenta en
participacion), association, or insurance company, or property, real, personal, or
mixed, shall be ascertained in accordance with subsections (c) and (d) of section
two of Act Numbered Two thousand eight hundred and thirty-three, as amended
by Act Numbered Twenty-nine hundred and twenty-six.
The foregoing tax rate shall apply to the net income received by every taxable
corporation, joint-stock company, partnership, joint account (cuenta en
participacion), association, or insurance company in the calendar year nineteen
hundred and twenty and in each year thereafter.
There is no doubt that if the plaintiffs merely formed a community of property the latter is
exempt from the payment of income tax under the law. But according to the stipulation
facts the plaintiffs organized a partnership of a civil nature because each of them put up
money to buy a sweepstakes ticket for the sole purpose of dividing equally the prize
which they may win, as they did in fact in the amount of P50,000 (article 1665, Civil
Code). The partnership was not only formed, but upon the organization thereof and the
winning of the prize, Jose Gatchalian personally appeared in the office of the Philippines
Charity Sweepstakes, in his capacity as co-partner, as such collection the prize, the
office issued the check for P50,000 in favor of Jose Gatchalian and company, and the
said partner, in the same capacity, collected the said check. All these circumstances
repel the idea that the plaintiffs organized and formed a community of property only.
Having organized and constituted a partnership of a civil nature, the said entity is the one
bound to pay the income tax which the defendant collected under the aforesaid section
10 (a) of Act No. 2833, as amended by section 2 of Act No. 3761. There is no merit in
plaintiff's contention that the tax should be prorated among them and paid individually,
resulting in their exemption from the tax.
In view of the foregoing, the appealed decision is affirmed, with the costs of this instance
to the plaintiffs appellants. So ordered.
G.R. No. L-27933 December 24, 1968
DIVERSIFIED CREDIT vs. ROSADO
This appeal from a decision of the Court of First Instance of Bacolod City, Negros
Occidental (Civ. Case No. 7516 of that Court) was certified to us by the Court of Appeals
(Second Division) because the same involves no questions of fact.
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The case had its origin in the Municipal Court of Bacolod City, when the Diversified
Credit Corporation filed an action to compel the spouses Felipe Rosado and Luz Jayme
Rosado to vacate and restore possession of a parcel of land in the City of Bacolod (Lot
62-B of Subdivision plan LRC-Psd-33823) that forms part of Lot No. 62 of the Bacolod
Cadastre, and is covered by Transfer Certificate of Title No. 27083 in the name of
plaintiff. After answer, claiming that the lot was defendants' conjugal property, the
Municipal Court ordered defendants to surrender and vacate the land in litigation; to pay
P100.00 a month from the filing of the complaint up to the actual vacating of the
premises; to pay P500.00 attorneys' fees and costs. Upon appeal to the Court of First
Instance, the case was submitted on the following stipulation of facts (Rec. on App., pp.
59-60):
1. That Lot No. 62-B of Bacolod Cadastre belong to the thirteen co-owners,
including the wife of the defendant herein, who owns 1/13th part pro-indiviso;
2. That on May 11, 1964, Luz Jayme Rosado, wife of the defendant Felipe
Rosado, signed a Deed of Sale together with the co-owners of the property to the
plaintiff as shown by Exh. "A" for the plaintiff;
3. That on the lot in question the defendant Felipe Rosado had built a house
sometime in 1957 without the whole property having been previously partitioned
among the thirteen (13) co-owners;
4. That the title of the property has already been transferred to the plaintiff upon
registration of the Deed of Sale in June, 1964, with the Office of the Register of
Deeds;
5. That demand was made by the plaintiff upon the defendant Felipe Rosado and
his wife Luz Jayme Rosado on October 19, 1964, but until now the defendant
Felipe Rosado has refused to vacate the premises or to remove his house
thereon as shown by Exh. "B" for the plaintiff, on the grounds as he alleged in his
answer that he had built on the lot in question a conjugal house worth P8,000.00
which necessarily makes the lot on which it stands subject to Article 158 of the
Civil Code and on the point of view of equity that the wife of the defendant Felipe
Rosado received an aliquot share of P2,400.00 only from the share and if the
house were demolished the defendant would suffer damage in the amount of
P8,000.00;
6. That the portion of the lot on which the house stands, would earn a monthly
rental of P50.00;
7. That Felipe Rosado, husband of Luz Jayme, did not give his conformity to the
Deed of Sale, Exh. "A".
8. That on October 31, 1964, the defendant Felipe Rosado requested the plaintiff
in the letter, Exh. "C" for the plaintiff, for a period of six (6) months within which to
vacate the premises.
9. That the letter was not answered by the plaintiff and they did not accept the
offer, and on November 25, 1964, they filed a complaint before the Municipal
Court which proves that plaintiff neglected the offer;
The Court of First Instance in its decision rejected the claim of ownership advanced by
Rosado, based upon the construction of a house on the disputed lot by the conjugal
partnership of the Rosado spouses, which allegedly converted the land into conjugal
property under Article 158, paragraph 2 of the present Civil Code of the Philippines;
further held that defendants were in estoppel to claim title in view of the letter Exhibit C
requesting for six (6) months within which to vacate the premises, and affirmed the
decision of the Inferior Court. Defendant Felipe Rosado resorted to the Court of Appeals,
and his appeal (CA-G.R. No. 37398-R) is the one now before us. He assigns four alleged
errors:
(a) The lower court erred in not holding that Exhibit "A" is null and void, since
upon the construction of the conjugal dwelling thereon, the conjugal partnership
of the defendant-appellant Felipe Rosado and Luz Jayme became the owner of
the share of Luz Jayme in Lot No. 62-B, Bacolod Cadastre;
(b) The trial court erred in ordering the defendant-appellant to vacate Lot No. 62-
B and in not holding that Exhibit "A" is null and void because as the legal
usufructuary of the share of Luz Jayme Rosado in Lot 62-B, Bacolod Cadastre,
the conjugal partnership, managed and administered by the defendant-appellant
Felipe Rosado can not be deprived of its usufructuary rights by any contract
between Luz Jayme and the plaintiff-appellee;
(c) The trial court erred in not holding that the defendant-appellant should be
reimbursed the value of the conjugal house constructed on Lot 62-B; and
(d) The lower court erred in ordering the defendant-appellant to pay attorneys'
fees in the amount of five hundred (P500.00) pesos.
183
It can be seen that the key question is whether by the construction of a house on the lot
owned in common by the Jaymes, and sold by them to the appellant corporation, the
land in question or a 1/13th part of it became conjugal property.
Appellant, husband of vendor Luz Jayme, claims the affirmative invoking the second
paragraph of Article 158 of the Civil Code of the Philippines, prescribing that:
ART. 158. Improvements, whether for utility or adornment, made on the separate
property of the spouses through advancements from the partnership or through
the industry of either the husband or the wife, belong to the conjugal partnership.
Buildings constructed, at the expense of the partnership, during the marriage on
land belonging to one of the spouses, also pertain to the partnership, but the
value of the land shall be reimbursed to the spouse who owns the same.
Rosado further contends that as the building of the house at the expense of the conjugal
partnership converted the 1/13 undivided share on his wife in Lot 62-B into property of
the community, the deed of sale of May 11, 1964 in favor of the appellee corporation was
void in so far as said 1/13 share is concerned, because his wife, Luz Jayme, had ceased
to own such share from and after the building of the house; and Rosado, as manager of
the conjugal partnership, had not participated in the sale, nor subsequently ratified the
same.
We find appellant's thesis legally untenable. For it is a basic principle in the law of co-
ownership, both under the present Civil Code as in the Code of 1889, that no individual
co-owner can claim title to any definite portion of the land or thing owned in common until
the partition thereof. Prior to that time, all that the co-owner has is an ideal, or abstract,
quota or proportionate share in the entire thing owned in common by all the co-owners.
The principle is emphasized by the rulings of this Court. In Lopez vs. Ilustre, 5 Phil. 567,
it was held that while a co-owner has the right to freely sell and dispose of his undivided
interest, he has no right to sell a divided part of the real estate owned in common. "If he
is the owner of an undivided half of a tract of land, he has the right to sell and convey an
undivided half, but he has no right to divide the lot into two parts, and convey the whole
of one part by metes and bounds." The doctrine was reiterated in Mercado vs. Liwanag,
L-14429, June 20, 1962, holding that a co-owner may not convey a physical portion of
the land owned in common. And in Santos vs. Buenconsejo, L-20136, June 23, 1965, it
was ruled that a co-owner may not even adjudicate to himself any determinate portion of
land owned in common.
Since the share of the wife, Luz Jayme, was at no time physically determined, it cannot
be validly claimed that the house constructed by her husband was built on land
belonging to her, and Article 158 of the Civil Code can not apply. Certainly, on her 1/13
ideal or abstract undivided share, no house could be erected. Necessarily, the claim of
conversion of the wife's share from paraphernal to conjugal in character as a result of the
construction must be rejected for lack of factual or legal basis.
It is the logical consequence of the foregoing ruling that the lower court did not err in
holding that the appellant was bound to vacate the land without reimbursement, since he
knew that the land occupied by the house did not belong exclusively to his wife, but to
the other owners as well, and there is no proof on record that the house occupied only
1/13 of the total area. The construction was not done in good faith.
WHEREFORE, the judgment of the Court of First Instance is affirmed. Costs against
appellant Felipe Rosado.
G.R. No. L-44426 February 25, 1982
CARVAJAL vs. CA
The Court reverses the appellate court's decision affirming in toto the judgment of the
Court of First Instance of Pangasinan, declaring plaintiffs-respondents the lawful owners
of the land in question and ordering defendant (herein petitioner) to pay P30.00 monthly
rentals until possession of the property is surrendered to respondents, for unless there is
partition of the estate of the deceased, either extra judicially or by court order, a co-heir
cannot validly claim title to a specific portion of the estate and send the same. Title to any
specific part of the estate does not automatically pass to the heirs by the mere death of
the decedent and the effect of any disposition by a co-heir before partition shall be
limited to the portion which may be allotted to him upon the dissolution of the communal
estate. What a co-heir can validly dispose of is only his hereditary rights.
Private respondents, who are husband and wife, had instituted a complaint before the
Court of First Instance for ejectment and recovery of possession against herein
petitioner, docketed as Civil Case No. T-1163, alleging that they are the owners in fee
simple of a parcel of commercial land, pro-indiviso, consisting of 150.8 sq. meters, more
or less, situated in Poblacion, Tayug, Pangasinan, having bought the same from Evaristo
G. Espique by virtue of a Deed of Absolute Sale executed on April 15, 1964. They also
demand that petitioner pay a monthly rental for the use of the property all P40.00 until
the property is surrendered to them.
The property in question is a 1/5 portion of a 754 sq. qmeter land originally owned by
Hermogenes Espique and his wife, both dead. After their death their five children,
namely: Maria, Evaristo, Faustina, Estefanio and Tropinia succeeded them in the
ownership of the whole lot.
184
Petitioner presently occupies two-fifths of the whole lot inherited pro-indiviso by the
Espique children. Petitioner alleges that he purchased the northern one-half portion of
the lot he is occupying (which is also claimed by respondents) from Estefanio Espique
and that the southern one-half portion of the lot he is occupying (which is also claimed by
respondents) from Estefanio Espique and that the southern one-half portion is leased to
him by Tropinia Espique. The land subject of the controversy is the most southern
portion of the whole lot inherited by the Espique children which petitioner claims he had
bought from Estefanio on April 26, 1967 and which respondents claim they had bough
from Evaristo on April 15, 1964.
Both sales were made while the petition for partition filed by Evaristo Espique was still
pending before the Court of First Instance of Pangasinan, docketed therein as Civil Case
No. T-966.
The Court finds merit in the petition for setting aside respondent appellate court's
decision finding for respondents-plaintiffs, for the following considerations:
The action for ejectment and recovery of possession instituted by herein respondents in
the lower court is premature, for what must be settled frist is the action for partition.
Unless a project of partition is effected, each heir cannot claim ownership over a definite
portion of the inheritance. Without partition, either by agreement between the parties of
by judicial proceeding, a co-heir cannot dispose of a specific portion of the estate. For
where there are two or more heirs, the whole estate such heirs. 1 Upon the death of a
person, each of his heirs becomes the undivided owner of the whole estate left wtih respect
to the part of portion which might be adjudicated to him, a community of ownership being thus
formed among the co-owners of the estate or co-heirs while it remains undivided. 2
While under Article 493 of the New Civil Code, each co-owner shall have the full
ownership of his part and of the fruits and benefits pertaining thereto and he may
alienate, assign or mortgage it, and even substitute another person in its enjoyment, the
effect of the alienation or the mortgage with respect to the co-owners, shall be limited, by
mandate of the same article, to the portion which may be allotted to him in the division
upon the termination of the co-ownership. He has no right to sell or alienate a concrete,
specific, or determinate part of the thing in common to the exclusion of the other co-
owners because his right over the thing is represented by an abstract or Ideal portion
without any physical adjudication. 3 An individual co- owner cannot adjudicate to himself or
claim title to any definite portion of the land or thing owned in common until its actual partition
by agreement or judicial decree. Prior to that time all that the co-owner has is an Ideal or
abstract quota or proportionate share in the entire thing owned in common by all the co-
owners. 4 What a co owner may dispose of is only his undivided aliquot share, which shall be
limited to the portion that may be allotted to him upon partition. 5 Before partition, a co-heir
can only sell his successional rights. 6
In the case at bar, the fact that the sale executed by Evaristo G. qqqEspique in favor of
respondents and the sale executed by Estefanio Espique in favor of petitioner were
made before the partition of the property among the co-heirs does not annul or invalidate
the deeds of sale and both sales are valid. However, the interests thereby acquired by
petitioner and respondents are limited only to the parts that may be ultimately assigned
to Estefanio and Evaristo, respectively, upon the partition of the estate 7 subject to
provisions on subrogation of the other co-heirs to the rights of the stranger-purchaser
provided in Article 1088 of the Civil Code. 8 Respondent court's ruling that the sale by
Estefanio in favor of petitioner is not valid because of lack of notice to his co-heirs is
erroneous. Such notice in writing is not a requisite for the validity of the sale. Its purpose is
merely to apprise the co-heirs of the sale of a portion of the estate, for them to exercise their
preferential right of subrogation under Article 1088 of the New Civil Code, that is, the right to
redeem the property sold within one month from the time they were notified in writing of the
sale by a co-heir. (There is nothing in the record to indicate that such right of subrogation was
in effect sought to be exercised upon the co-heirs' having learned of the sale, which is not in
issue here.)
Thus, respondents have no right to eject petitioners nor demand payment of rentals for
the use of the property in dispute. Until the partition of the estate is ordered by the Court
of First Instance of Pangasinan in the pending partition proceedings and the share of
each co-heir is determined by metes and bounds, neither petitioner nor respondents can
rightfully claim that what they bought is the part in dispute.
Accordingly, respondent court's judgment is set aside and judgment is hereby rendered
dismissing the complaint of respondents-plaintiffs in the court below. No pronouncement
as to costs.
--- xx END OF CHARACTERISTICS OF CO-OWNERSHIP xx ---
G.R. No. L-4656 November 18, 1912
PARDELL vs. BARTOLOME
This is an appeal by bill of exceptions, from the judgment of October 5, 1907, whereby
the Honorable Dionisio Chanco, judge, absolved the defendants from the complaint, and
the plaintiff from a counterclaim, without special finding as to costs.
Counsel for the spouses Ricardo y Cruz and Vicente Ortiz y Felin de Pardell, the first of
whom, absent in Spain by reason of his employment, conferred upon the second
sufficient and ample powers to appear before the courts of justice, on June 8, 1905, in
his written complaint, alleged that the plaintiff, Vicente Ortiz, and the defendant, Matilde
Ortiz, are the duly recognized natural daughters of the spouses Miguel Ortiz and Calixta
Felin y Paula who died in Vigan, Ilocos Sur, in 1875 and 1882, respectively; that Calixta
185
Felin, prior to her death, executed on August 17, 1876, a nuncupative will in Vigan
whereby she made her four children, named Manuel, Francisca, Vicenta, and Matilde,
surnamed Ortiz y Felin, her sole and universal heirs of all her property; that, of the
persons enumerated, Manuel died before his mother and Francisca a few years after her
death, leaving no heirs by force of law, and therefore the only existing heirs of the said
testatrix are the plaintiff Vicenta Ortiz and the defendant Matilde Ortiz; that, aside from
some personal property and jewelry already divided among the heirs, the testatrix
possessed, at the time of the execution of her will, and left at her death the real
properties which, with their respective cash values, are as follows:
1. A house of strong material, with the lot on which it is built, situated
P6,000.00
on Escolta Street, Vigan, and valued at
2. A house of mixed material, with the lot on which it stands, at No.
1,500.00
88 Washington Street, Vigan; valued at
3. A lot on Magallanes Street, Vigan; valued at 100.00
4. A parcel of rice land, situated in the barrio of San Julian, Vigan;
60.00
valued at
5. A parcel of rice land in the pueblo of Santa Lucia; valued at 86.00
6. Three parcels of land in the pueblo of Candon; valued at 150.00
Total 7,896.00
That, on or about the first months of the year 1888, the defendants, without judicial
authorization, nor friendly or extrajudicial agreement, took upon themselves the
administration and enjoyment of the said properties and collected the rents, fruits, and
products thereof, to the serious detriment of the plaintiffs' interest; that, notwithstanding
the different and repeated demands extrajudicially made upon Matilde Ortiz to divide the
aforementioned properties with the plaintiff Vicente and to deliver to the latter the one-
half thereof, together with one-half of the fruits and rents collected therefrom, the said
defendant and her husband, the self-styled administrator of the properties mentioned,
had been delaying the partition and delivery of the said properties by means of unkept
promises and other excuses; and that the plaintiffs, on account of the extraordinary delay
in the delivery of one-half of said properties, or their value in cash, as the case might be,
had suffered losses and damages in the sum of P8,000. Said counsel for the plaintiffs
therefore asked that judgment be rendered by sentencing the defendants, Gaspar de
Bartolome, and Matilde Ortiz Felin de Bartolome, to restore and deliver to the plaintiffs
one-half of the total value in cash, according to appraisal, of the undivided property
specified, which one-half amounted approximately to P3,948, or if deemed proper, to
recognize the plaintiff Vicenta Ortiz to be vested with the full and absolute right of
ownership to the said undivided one-half of the properties in question, as universal
testamentary heir thereof together with the defendant Matilde Ortiz, to indemnify the
plaintiffs in the sum of P8,000, for losses and damages, and to pay the costs.
Counsel for the defendants, in his answer denied the facts alleged in paragraphs 1, 4, 6,
7, and 8 thereof, inasmuch as, upon the death of the litigating sister's brother Manuel,
their mother, who was still living, was his heir by force of law, and the defendants had
never refused to give to the plaintiff Vicente Ortiz her share of the said properties; and
stated that he admitted the facts alleged in paragraph 2, provided it be understood,
however, that the surname of the defendant's mother was Felin, and not Feliu, and that
Miguel Ortiz died in Spain, and not in Vigan; that he also admitted paragraph 3 of the
complaint, with the difference that the said surname should be Felin, and likewise
paragraph 5, except the part thereof relating to the personal property and the jewelry,
since the latter had not yet been divided; that the said jewelry was in the possession of
the plaintiffs and consisted of: one Lozada gold chronometer watch with a chain in the
form of a bridle curb and a watch charm consisting of the engraving of a postage stamp
on a stone mounted in gold and bearing the initials M. O., a pair of cuff buttons made of
gold coins, four small gold buttons, two finger rings, another with the initials M. O., and a
gold bracelet; and that the defendants were willing to deliver to the plaintiffs, in
conformity with their petitions, one-half of the total value in cash, according to
appraisement, of the undivided real properties specified in paragraph 5, which half
amounted to P3,948.
In a special defense said counsel alleged that the defendants had never refused to divide
the said property and had in fact several years before solicited the partition of the same;
that, from 1886 to 1901, inclusive, there was collected from the property on Calle Escolta
the sum of 288 pesos, besides a few other small amounts derived from other sources,
which were delivered to the plaintiffs with other larger amounts, in 1891, and from the
property on Calle Washington, called La Quinta, 990.95 pesos, which proceeds, added
together, made a total of 1,278.95 pesos, saving error or omission; that, between the
years abovementioned, Escolta, and that on Calle Washington, La Quinta, 376.33, which
made a total of 1,141.71, saving error or omission; that, in 1897, the work of
reconstruction was begun of the house on Calle Escolta, which been destroyed by an
earthquake, which work was not finished until 1903 and required an expenditure on the
part of the defendant Matilde Ortiz, of 5,091.52 pesos; that all the collections made up to
August 1, 1905, including the rent from the stores, amounted to only P3,654.15, and the
expenses, to P6,252.32, there being, consequently, a balance of P2,598.17, which
divided between the sisters, the plaintiff and the defendant, would make the latter's share
P1,299.08; that, as shown by the papers kept by the plaintiffs, in the year 1891 the
defendant Bartolome presented to the plaintiffs a statement in settlements of accounts,
186
and delivered to the person duly authorized by the latter for the purpose, the sum of
P2,606.29, which the said settlement showed was owing his principals, from various
sources; that, the defendant Bartolome having been the administrator of the undivided
property claimed by the plaintiffs, the latter were owing the former legal remuneration of
the percentage allowed by law for administration; and that the defendants were willing to
pay the sum of P3,948, one-half of the total value of the said properties, deducting
therefrom the amount found to be owing them by the plaintiffs, and asked that judgment
be rendered in their favor to enable them to recover from the latter that amount, together
with the costs and expenses of the suit.
The defendants, in their counter claim, repeated each and all of the allegations contained
in each of the paragraphs of section 10 of their answer; that the plaintiffs were obliged to
pay to the administrator of the said property the remuneration allowed him by law; that,
as the revenues collected by the defendants amounted to no more than P3,654.15 and
the expenditures incurred by them, to P6,252.32, it followed that the plaintiffs owed the
defendants P1,299.08, that is one-half of the difference between the amount collected
from and that extended on the properties, and asked that judgment be therefore
rendered in their behalf to enable them to collect this sum from the plaintiffs, Ricardo
Pardell and Vicenta Ortiz, with legal interest thereon from December 7, 1904, the date
when the accounts were rendered, together with the sums to which the defendant
Bartolome was entitled for the administration of the undivided properties in question.
By a written motion of August 21, 1905, counsel for the plaintiffs requested permission to
amend the complaint by inserting immediately after the words "or respective appraisal,"
fifth line of paragraph 5, the phrase "in cash in accordance with the assessed value," and
likewise further to amend the same, in paragraph 6 thereof, by substituting the following
word in lieu of the petition for the remedy sought: "By reason of all the foregoing, I beg
the court to be pleased to render the judgment by sentencing the defendants, Gaspar de
Bartolome and Matilde Ortiz Felin de Bartolome, to restore and deliver to the plaintiffs an
exact one-half of the total vale of the undivided properties described in the complaint,
such value to be ascertained by the expert appraisal of two competent persons, one of
whom shall be appointed by the plaintiffs and the other by the defendants, and, in case
of disagreement between these two appointees such value shall be determined by a third
expert appraiser appointed by the court, or, in a proper case, by the price offered at
public auction; or, in lieu thereof, it is requested that the court recognize the plaintiff,
Vicenta Ortiz, to be vested with a full and absolute right to an undivided one-half of the
said properties; furthermore, it is prayed that the plaintiffs be awarded an indemnity of
P8,000 for losses and damages, and the costs." Notwithstanding the opposition of the
defendants, the said amendment was admitted by the court and counsel for the
defendants were allowed to a period of three days within which to present a new answer.
An exception was taken to this ruling.
The proper proceedings were had with reference to the valuation of the properties
concerned in the division sought and incidental issues were raised relative to the partition
of some of them and their award to one or the other of the parties. Due consideration
was taken of the averments and statements of both parties who agreed between
themselves, before the court, that any of them might at any time acquire, at the valuation
fixed by the expert judicial appraiser, any of the properties in question, there being none
in existence excluded by the litigants. The court, therefore, by order of December 28,
1905, ruled that the plaintiffs were entitled to acquire, at the valuation determined by the
said expert appraiser, the building known as La Quinta, the lot on which it stands and the
warehouses and other improvements comprised within the inclosed land, and the seeds
lands situated in the pueblos of Vigan and Santa Lucia; and that the defendants were
likewise entitled to acquire the house on Calle Escolta, the lot on Calle Magallanes, and
the three parcels of land situated in the pueblo of Candon.
After this partition had been made counsel for the defendants, by a writing of March 8,
1906, set forth: That, having petitioned for the appraisement of the properties in question
for the purpose of their partition, it was not to be understood that he desired from the
exception duly entered to the ruling made in the matter of the amendment to the
complaint; that the properties retained by the defendants were valued at P9,310, and
those retained by the plaintiffs, at P2,885, one-half of which amounts each party had to
deliver to the other, as they were pro indivisoproperties; that, therefore, the defendants
had to pay the plaintiffs the sum of P3,212.50, after deducting the amount which the
plaintiffs were obliged to deliver to the defendants, as one-half of the price of the
properties retained by the former; that, notwithstanding that the amount of the
counterclaim for the expenses incurred in the reconstruction of the pro indiviso property
should be deducted from the sum which the defendants had to pay the plaintiffs, the
former, for the purpose of bringing the matter of the partition to a close, would deliver to
the latter, immediately upon the signing of the instrument of purchase and sale, the sum
of P3,212.50, which was one-half of the value of the properties alloted to the defendants;
such delivery, however, was not to be understood as a renouncement of the said
counterclaim, but only as a means for the final termination of the pro indiviso status of
the property.
The case having been heard, the court on October 5, 1907, rendered judgment holding
that the revenues and the expenses were compensated by the residence enjoyed by the
defendant party, that no losses or damages were either caused or suffered, nor likewise
any other expense besides those aforementioned, and absolved the defendants from the
complaint and the plaintiffs from the counterclaim, with no special finding as to costs. An
exception was taken to this judgment by counsel for the defendants who moved for a
new trial on the grounds that the evidence presented did not warrant the judgment
rendered and that the latter was contrary to law. This motion was denied, exception
187
whereto was taken by said counsel, who filed the proper bill of exceptions, and the same
was approved and forwarded to the clerk of this court, with a transcript of the evidence.
Both of the litigating sisters assented to a partition by halves of the property left in her will
by their mother at her death; in fact, during the course of this suit, proceedings were had,
in accordance with the agreement made, for the division between them of the said
hereditary property of common ownership, which division was recognized and approved
in the findings of the trial court, as shown by the judgment appealed from.
The issues raised by the parties, aside from said division made during the trial, and
which have been submitted to this court for decision, concern: (1) The indemnity claimed
for losses and damages, which the plaintiffs allege amount to P8,000, in addition to the
rents which should have been derived from the house on Calle Escolta, Vigan; (2) the
payment by the plaintiffs to the defendants of the sum of P1,299.08, demanded by way
of counterclaim, together with legal interest thereon from December 7, 1904; (3) the
payment to the husband of the defendant Matilde Ortiz, of a percentage claimed to be
due him as the administrator of the property of common ownership; (4) the division of
certain jewelry in the possession of the plaintiff Vicenta Ortiz; and (5) the petition that the
amendment be held to have been improperly admitted, which was made by the plaintiffs
in their written motion of August 21, 1905, against the opposition of the defendants,
through which admission the latter were obliged to pay the former P910.50. lawphil.net
Before entering upon an explanation of the propriety or impropriety of the claims made
by both parties, it is indispensable to state that the trial judge, in absolving the
defendants from the complaint, held that they had not caused losses and damages to the
plaintiffs, and that the revenues and the expenses were compensated, in view of the fact
that the defendants had been living for several years in the Calle Escolta house, which
was pro indivisoproperty of joint ownership.
By this finding absolving the defendants from the complaint, and which was acquiesced
in by the plaintiffs who made no appeal therefrom, the first issue has been decided which
was raised by the plaintiffs, concerning the indemnity for losses and damages, wherein
are comprised the rents which should have been obtained from the upper story of the
said house during the time it was occupied by the defendants, Matilde Ortiz and her
husband, Gaspar de Bartolome.
Notwithstanding the acquiescence on the part of the plaintiffs, assenting to the said
finding whereby the defendants were absolved from the complaint, yet, as such
absolution is based on the compensation established in the judgment of the trial court,
between the amounts which each party is entitled to claim from the other, it is imperative
to determine whether the defendant Matilde Ortiz, as coowner of the house on Calle
Escolta, was entitled, with her husband, to reside therein, without paying to her coowner,
Vicenta Ortiz, who, during the greater part of the time, lived with her husband abroad,
one-half of the rents which the upper story would have produced, had it been rented to a
stranger.
Article 394 of the Civil Code prescribes:
Each coowner may use the things owned in common, provided he uses them in
accordance with their object and in such manner as not to injure the interests of
the community nor prevent the coowners from utilizing them according to their
rights.
Matilde Ortiz and her husband occupied the upper story, designed for use as a dwelling,
in the house of joint ownership; but the record shows no proof that, by so doing, the said
Matilde occasioned any detriment to the interest of the community property, nor that she
prevented her sister Vicenta from utilizing the said upper story according to her rights. It
is to be noted that the stores of the lower floor were rented and accounting of the rents
was duly made to the plaintiffs.
Each coowner of realty held pro indiviso exercises his rights over the whole property and
may use and enjoy the same with no other limitation than that he shall not injure the
interests of his coowners, for the reason that, until a division be made, the respective
part of each holder can not be determined and every one of the coowners exercises,
together with his other coparticipants, joint ownership over the pro indiviso property, in
addition to his use and enjoyment of the same.
As the hereditary properties of the joint ownership of the two sisters, Vicenta Ortiz,
plaintiff, and Matilde Ortiz, defendant, were situated in the Province of Ilocos Sur, and
were in the care of the last named, assisted by her husband, while the plaintiff Vicenta
with her husband was residing outside of the said province the greater part of the time
between 1885 and 1905, when she left these Islands for Spain, it is not at all strange that
delays and difficulties should have attended the efforts made to collect the rents and
proceeds from the property held in common and to obtain a partition of the latter,
especially during several years when, owing to the insurrection, the country was in a
turmoil; and for this reason, aside from that founded on the right of coownership of the
defendants, who took upon themselves the administration and care of the properties of
joint tenancy for purposes of their preservation and improvement, these latter are not
obliged to pay to the plaintiff Vicenta one-half of the rents which might have been derived
from the upper of the story of the said house on Calle Escolta, and, much less, because
one of the living rooms and the storeroom thereof were used for the storage of some
belongings and effects of common ownership between the litigants. The defendant
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Matilde, therefore, in occupying with her husband the upper floor of the said house, did
not injure the interests of her coowner, her sister Vicenta, nor did she prevent the latter
from living therein, but merely exercised a legitimate right pertaining to her as coowner of
the property.
Notwithstanding the above statements relative to the joint-ownership rights which entitled
the defendants to live in the upper story of the said house, yet in view of the fact that the
record shows it to have been proved that the defendant Matilde's husband, Gaspar de
Bartolome, occupied for four years a room or a part of the lower floor of the same house
on Calle Escolta, using it as an office for the justice of the peace, a position which he
held in the capital of that province, strict justice, requires that he pay his sister-in-law, the
plaintiff, one half of the monthly rent which the said quarters could have produced, had
they been leased to another person. The amount of such monthly rental is fixed at P16 in
accordance with the evidence shown in the record. This conclusion as to Bartolome's
liability results from the fact that, even as the husband of the defendant coowner of the
property, he had no right to occupy and use gratuitously the said part of the lower floor of
the house in question, where he lived with his wife, to the detriment of the plaintiff
Vicenta who did not receive one-half of the rent which those quarters could and should
have produced, had they been occupied by a stranger, in the same manner that rent was
obtained from the rooms on the lower floor that were used as stores. Therefore, the
defendant Bartolome must pay to the plaintiff Vicenta P384, that is, one-half of P768, the
total amount of the rents which should have been obtained during four years from the
quarters occupied as an office by the justice of the peace of Vigan.
With respect to the second question submitted for decision to this court, relative to the
payment of the sum demanded as a counterclaim, it was admitted and proved in the
present case that, as a result of a serious earthquake on August 15, 1897, the said
house on Calle Escolta was left in ruins and uninhabitable, and that, for its reconstruction
or repair, the defendants had to expend the sum of P6,252.32. This expenditure,
notwithstanding that it was impugned, during the trial, by the plaintiffs, was duly proved
by the evidence presented by the defendants. Evidence, unsuccessfully rebutted, was
also introduced which proved that the rents produced by all the rural and urban
properties of common ownership amounted, up to August 1, 1905, to the sum of
P3,654.15 which, being applied toward the cost of the repair work on the said house,
leaves a balance of P2,598.17, the amount actually advanced by the defendants, for the
rents collected by them were not sufficient for the termination of all the work undertaken
on the said building, necessary for its complete repair and to replace it in a habitable
condition. It is therefore lawful and just that the plaintiff Vicenta Ortiz, who was willing to
sell to her sister Matilde for P1,500, her share in the house in question, when it was in a
ruinous state, should pay the defendants one-half of the amount expanded in the said
repair work, since the building after reconstruction was worth P9,000, according to expert
appraisal. Consequently, the counterclaim made by the defendants for the payment to
them of the sum of P1,299.08, is a proper demand, though from this sum a reduction
must be made of P384, the amount of one-half of the rents which should have been
collected for the use of the quarters occupied by the justice of the peace, the payment of
which is incumbent upon the husband of the defendant Matilde, as aforesaid, and the
balance remaining, P915.08, is the amount which the plaintiff Vicenta must pay to the
defendants.
The defendants claim to be entitled to the collection of legal interest on the amount of the
counterclaim, from December 7, 1904. This contention can not be sustained, inasmuch
as, until this suit is finally decided, it could not be known whether the plaintiffs would or
would not be obliged to pay the sum whatever in reimbursement of expenses incurred by
the plaintiffs in the repair work on the said house on Calle Escolta, whether or not the
defendants, in turn, were entitled to collect any such amount, and, finally, what the net
sum would be which the plaintiff's might have to pay as reimbursement for one-half of the
expenditure made by the defendants. Until final disposal of the case, no such net sum
can be determined, nor until then can the debtor be deemed to be in arrears. In order
that there be an obligation to pay legal interest in connection with a matter at issue
between the parties, it must be declared in a judicial decision from what date the interest
will be due on the principal concerned in the suit. This rule has been established by the
decisions of the supreme court of Spain, in reference to articles 1108, 1109, and 1110 of
the Civil Code, reference on April 24, 1867, November 19, 1869, and February 22, 1901.
With regard to the percentage, as remuneration claimed by the husband of the defendant
Matilde for his administration of the property of common ownership, inasmuch as no
stipulation whatever was made in the matter by and between him and his sister-in-law,
the said defendant, the claimant is not entitled to the payment of any remuneration
whatsoever. Of his own accord and as an officious manager, he administered the
said pro indiviso property, one-half of which belonged to his wife who held it in joint
tenancy, with his sister-in-law, and the law does not allow him any compensation as such
voluntary administrator. He is merely entitled to a reimbursement for such actual and
necessary expenditures as he may have made on the undivided properties and an
indemnity for the damages he may have suffered while acting in that capacity, since at all
events it was his duty to care for and preserve the said property, half of which belonged
to his wife; and in exchange for the trouble occasioned him by the administration of his
sister-in-law's half of the said property, he with his wife resided in the upper story of the
house aforementioned, without payment of one-half of the rents said quarters might have
produced had they been leased to another person.
With respect to the division of certain jewelry, petitioned for by the defendants and
appellants only in their brief in this appeal, the record of the proceedings in the lower
court does not show that the allegation made by the plaintiff Vicenta is not true, to the
effect that the deceased mother of the litigant sisters disposed of this jewelry during her
189
lifetime, because, had she not done so, the will made by the said deceased would have
been exhibited in which the said jewelry would have been mentioned, at least it would
have been proved that the articles in question came into the possession of the plaintiff
Vicenta without the expressed desire and the consent of the deceased mother of the said
sisters, for the gift of this jewelry was previously assailed in the courts, without success;
therefore, and in view of its inconsiderable value, there is no reason for holding that the
said gift was not made.
As regards the collection of the sum of P910.50, which is the difference between the
assessed value of the undivided real properties and the price of the same as determined
by the judicial expert appraiser, it is shown by the record that the ruling of the trial judge
admitting the amendment to the original complaint, is in accord with the law and
principles of justice, for the reason that any of the coowners of a pro indiviso property,
subject to division or sale, is entitled to petition for its valuation by competent expert
appraisers. Such valuation is not prejudicial to any of the joint owners, but is beneficial to
their interests, considering that, as a general rule, the assessed value of a building or a
parcel of realty is less than the actual real value of the property, and this being appraiser
to determine, in conjunction with the one selected by the plaintiffs, the value of the
properties of joint ownership. These two experts took part in the latter proceedings of the
suit until finally, and during the course of the latter, the litigating parties agreed to an
amicable division of the pro indiviso hereditary property, in accordance with the price
fixed by the judicial expert appraiser appointed as a third party, in view of the
disagreement between and nonconformity of the appraisers chosen by the litigants.
Therefore it is improper now to claim a right to the collection of the said sum, the
difference between the assessed value and that fixed by the judicial expert appraiser, for
the reason that the increase in price, as determined by this latter appraisal, redounded to
the benefit of both parties.
In consideration of the foregoing, whereby the errors assigned to the lower court have
been duly refuted, it is our opinion that, with a partial reversal of the judgment appealed
from, in so far as it absolves the plaintiffs from the counterclaim presented by the
defendants, we should and hereby do sentence the plaintiffs to the payment of the sum
of P915.08, the balance of the sum claimed by the defendants as a balance of the one-
half of the amount which the defendants advanced for the reconstruction or repair of the
Calle Escolta house, after deducting from the total of such sum claimed by the latter the
amount of P384 which Gaspar de Bartolome, the husband of the defendant Matilde,
should have paid as one-half of the rents due for his occupation of the quarters on the
lower floor of the said house as an office for the justice of the peace court of Vigan; and
we further find: (1) That the defendants are not obliged to pay one-half of the rents which
could have been obtained from the upper story of the said house; (2) that the plaintiffs
can not be compelled to pay the legal interest from December 7, 1904, on the sum
expanded in the reconstruction of the aforementioned house, but only the interest fixed
by law, at the rate of 6 per cent per annum, from the date of the judgment to be rendered
in accordance with this decision; (3) that the husband of the defendant Matilde Ortiz is
not entitled to any remuneration for the administration of thepro indiviso property
belonging to both parties; (4) that, neither is he entitled to collect from the plaintiffs the
sum of P910.50, the difference between the assessed valuation and the price set by the
expert appraisal solicited by the plaintiffs in their amendment to the complaint; and, (5)
that no participation shall be made of jewelry aforementioned now in the possession of
the plaintiff Vicenta Ortiz. The said judgment, as relates to the points appealed, is
affirmed, in so far as its findings agree with those of this decision, and is reversed, in so
far as they do not. No special finding is made regarding the costs of both instances. So
ordered.
--- xx END OF RIGHTS OF EACH CO-OWNERS xx ---
G.R. No. L-32047 November 1, 1930
MELENCIO vs. DY TIAO LAY
On August 1,1927, the plaintiffs, Manuel, Mariano, Pura and Caridad Melencio, brought
the present action against the defendant-appellee, Dy Tiao Lay for the recovery of the
possession of a parcel of land situated in the town of Cabanatuan, Nueva Ecija, and
containing an area of 4,628.25 square meters. The plaintiffs further demand a monthly
rental of P300 for the use and occupation of the parcel from May, 1926, until the date of
the surrender to them of the possession thereof; and that if it is found that the said
appellee was occupying the said parcel of land by virtue of a contract of lease, such
contract should be declared null and void for lack of consent, concurrence, and
ratification by the owners thereof.
In his answer, the defendant pleaded the general issue, and as special defenses, he
alleged in substance that he was occupying the said tract of land by virtue of a contract
of lease executed on July 24,1905, in favor of his predecessor in interest, by Ruperta
Garcia, Pedro Melencio, Juliana Melencio, and Ruperta Melencio under the terms
specified therein, and which contract is still in force; that Liberata Macapagal, the mother
of the plaintiffs, in her capacity as judicial administratrix of the estate of Ramon Melencio,
one of the original coowners of the parcel of land in question, actually recognized and
ratified the existence and validity of the contract aforesaid by virtue of the execution of a
public document by her on or about November 27,1920, and by collecting from the
assignees of the original lessee the monthly rent for the premises until April 30, 1926;
and that said defendant deposits with the clerk of court the sum of P20.20 every month
as rent thereof and that as a counterclaim, he seeks the recovery of P272 for goods and
money delivered by him to the plaintiffs.
190
The plaintiffs filed a reply to the answer alleging, among other things, that Ruperta
Garcia was not one of the coowners of the land in question; that the person who signed
the alleged contract of lease never represented themselves as being the sole and
exclusive owners of the land subject to the lease as alleged by the defendant in his
answer; that the said contract of lease of July 24,1905, is null and void for being
executed without the intervention and consent of two coowners, Ramon Melencio and
Jose P. Melencio, and without the marital consent of the husbands of Juliana and
Ruperta Melencio; that the lessee has repeatedly violated the terms and conditions of the
said contract; and that Liberata Macapagal, in her capacity as administratrix of the
property of her deceased husband, could not lawfully and legally execute a contract of
lease with the conditions and terms similar to that of the one under consideration, and
that from this it follows that she could not ratify the said lease as claimed by the
defendant.
On January 21,1928, Liberata Macapagal Viuda de Melencio, duly appointed and
qualified as administratrix of the estate of her deceased husband, Ramon Melencio, filed
a petition praying to be allowed to join the plaintiffs as party to the present case, which
petition was granted in open court on January 31,1928. Her amended complaint of
intervention of February 14,1928, contains allegations similar to those alleged in the
complaint of the original plaintiffs, and she further alleges that the defendant-appellee
has occupied the land in question ever since November, 1920, under and by virtue of a
verbal contract of lease for a term from month to month. To this complaint of intervention,
the defendant-appellee filed an answer reproducing the allegations contained in his
answer reproducing the allegations contained in his answer to the complaint of the
original plaintiffs and setting up prescription as a further special defense.
It appears from the evidence that the land in question was originally owned by one Julian
Melencio. He died prior to the year 1905 leaving his widow, Ruperta Garcia, and his five
children, Juliana, Ramon, Ruperta, Pedro R., and Emilio Melencio. Emilio Melencio also
died before 1905, his son Jose P. Melencio, then a minor, succeeding to his interest in
the said parcel of land by representation. A question has been raised as to whether the
land was community property of the marriage of Julian Melencio and Ruperta Garcia, but
the evidence is practically undisputed that Ruperta Garcia in reality held nothing but a
widow's usufruct in the land.
On July 24,1905, Ruperta Garcia, Pedro R. Melencio, Juliana Melencio, and Ruperta
Melencio executed a contract of lease of the land in favor of one Yap Kui Chin, but
neither Jose P. Melencio nor Ramon Melencio were mentioned in the lease. The term of
the lease was for twenty years, extendible for a like period at the option of the lessee.
The purpose of the lessee was to establish a rice mill on the land, with the necessary
buildings for warehouses and for quarters for the employees, and it was further stipulated
that at the termination of the original period of the lease, or the extension therof, the
lessors might purchase all the buildings and improvements on the land at a price to be
fixed by experts appointed by the parties, but that if the lessors should fail to take
advantage of that privilege, the lease would continue for another and further period of
twenty years. The document was duly acknowledged but was never recorded with the
register of deeds. The original rent agreed upon was P25 per month, but by reason of the
construction of a street through the land, the monthly rent was reduced of P20.20.
Shortly after the execution of the lease, the lessee took possession of the parcel in
question and erected the mill as well as the necessary buildings, and it appears that in
matters pertaining to the lease, he dealt with Pedro R. Melencio, who from 1905 until his
death in 1920, acted as manager of the property held in common by the heirs of Julian
Melencio and Ruperta Garcia. The original lessee, Yap Kui Chin, died in 1912, and the
lease, as well as the other property, was transferred to Uy Eng Jui who again transferred
it to Uy Eng Jui & Co., an unregistered partnership. Finally the lease came into the hands
of Dy Tiao Lay, the herein defendant-appellee.
Ramon Melencio died in 1914, and his widow, Liberata Macapagal, was appointed
administratrix of his estate. In 1913 the land which includes the parcel in question was
registered under the Torrens system. The lease was not mentioned in the certificate of
title, but it was stated that one house and three warehouses on the land were the
property of Yap Kui Chin.
In 1920 the heirs of Julian Melencio made an extrajudicial partition of parts of the
inheritance, and among other things, the land here in question fell to the share of the
children of Ramon Melencio, who are the original plaintiffs in the present case. Their
mother, Liberata Macapagal, as administratrix of the estate of her deceased husband,
Ramon, collected the rent for the lease at the rate of P20.20 per month until the month of
May,1926, when she demanded of the lessee that the rent should be increased to P300
per month, and she was then informed by the defendant that a written lease existed and
that according to the terms thereof, the defendant was entitled to an extension of the
lease at the original rental. The plaintiffs insisted that they never had any knowledge of
the existence of such a contract of lease and maintained that in such case the lease was
executed without their consent and was void. It may be noted that upon careful search, a
copy of the contract of lease was found among the papers of the deceased Pedro R,
Melencio. Thereafter the present action was brought to set aside the lease and to
recover possession of the land. Upon trial, the court below rendered judgment in favor of
the defendant declaring the lease valid and ordering the plaintiffs to pay the P272
demanded by the defendant in his counterclaim. From this judgment the plaintiffs
appealed.
191
The contention of the appellants is that the aforesaid contract of lease (Exhibit C) is null
and void for the following reasons:
1. That Exhibit C calls for an alteration of the property in question and therefore
ought to have been signed by all the coowners as by law required in the
premises.
2. That the validity and fulfillment of the said agreement of lease were made to
depend upon the will of the lessee exclusively.
3. That the said contract of lease being for a term of over six years, the same is
null and void pursuant to the provision of article 1548 of the Civil Code.
4. That the duration of the same is unreasonably long, thus being against public
policy.
5. That the defendant-appellee and his predecessors in interest repeatedly
violated the provisions of the agreement.
The first proposition is based on article 397 of the Civil Code which provides that "none
of the owners shall, without the consent of the others, make any alterations in the
common property even though such alterations might be advantageous to all." We do not
think that the alterations are of sufficient importance to nullify the lease, especially so
since none of the coowners objected to such alterations until over twenty years after the
execution of the contract of lease. The decision of this court in the case of Enriquez vs.
A. S. Watson and Co. (22 Phil., 623), contains a full discussion of the effect of alterations
of leased community property, and no further discussion upon the point need here be
considered.
The second proposition is likewise of little merit. Under the circumstances, the provision
in the contract that the lessee, at any time before he erected any building on the land,
might rescind the lease, can hardly be regarded as a violation of article 1256 of the Civil
Code.
The third and fourth proposition are, in our opinion, determinative of the controversy. The
court below based its decision principally on the case of Enriquez vs. A.S. Watson & Co.
(22 Phil., 623), and on the resolution of theDireccion General de los Registros dated April
26,1907. (Jurisprudencia Civil, vol.107, p. 222.) An examination of the Enriquez case will
show that it differs materially from the present. In that case all of the coowners of a lot
and building executed a contract of lease of the property for the term of eighteen years in
favor of A. S. Watson & Co.; one of the owners was minor, but he was represented by
his legally appointed guardian, and the action of the latter in signing the lease on behalf
of the minor was formally approved by the Court of First Instance. In the present case
only a small majority of the coowners executed the lease here in question, and according
to the terms of the contract the lease might be given a duration of sixty years; that is
widely different from a lease granted by all of the coowners for a term of only eighteen
years.
The resolution of April 26,1907, is more in point. It relates to the inscription or registration
of a contract of lease of some pasture grounds. The majority of the coowners of the
property executed the lease for the term of twelve years but when the lessees presented
the lease for inscription in the registry of property, the registrar denied the inscription on
the ground that the term of the lease exceeded six years and that therefore the majority
of the coowners lacked authority to grant the lease. The Direccion General de
los Registros held that the contract of lease for a period exceeding six years, constitutes
a real right subject to registry and that the lease in question was valid.
The conclusions reached by the Direccion General led to considerable criticism and have
been overruled by a decision of the Supreme Court of Spain dated June 1,1909. In that
decision the court made the following statement of the case (translation):
The joint owners of 511 out of 1,000 parts of the realty denominated El
Mortero, leased out the whole property for twelve years to Doña Josefa de la
Rosa; whereupon the Count and Countess Trespalacios together with other
coowners brought this suit to annul the lease and, in view of the fact that the land
was indivisible, prayed for its sale by public auction and the distribution of the
price so obtained; they alleged that they neither took part nor consented to the
lease; that the decision of the majority of part owners referred to in article 398 of
the Code, implies a common deliberation on the step to be taken , for to do
without it, would, even more than to do without the minority, be nothing less than
plunder; and that, even if this deliberation were not absolutely necessary, the
power of the majority would still be confined to decisions touching the
management and enjoyment of the common property, and would not include acts
of ownership, such as a lease for twelve years, which according to the Mortgage
Law gives rise to a real right, which must be recorded, and which can be
performed only by the owners of the property leased.
The part owners who had executed the contract prayed in reconvention that it
held valid for all the owners in common, and if this could not be, then for all those
who had signed it, and for the rest, for the period of six years; and the Audiencia
of Caceres having rendered judgment holding the contract null and void, and
ordering the sale of the realty and the distribution of the price, the defendants
192
 appealed alleging under the third and fourth assignments of error, that the
judgment was a violation of article 398 of the Civil Code, which is absolute and
sets no limit of time for the efficacy of the decisions arrived at by the majority of
the part owners for the enjoyment of the common property, citing the decisions of
June 30th, 1897, of July 8th,1902, and of October 30th, 1907; under the fifth
assignments of error the appellants contended that in including joint owners
among those referred to in said article, which sets certain limits to the power of
leasing, in the course of the management of another's property, the court applied
article 1548 unduly; and by the seventh assignments of error, they maintained
the judgment appealed from also violated article 1727, providing that the principal
is not bound where his agent has acted beyond his authority; whence it may be
inferred that if in order to hold the contract null and void, the majority of the part
owners are looked upon as managers or agents exercising limited powers, it
must at least be conceded that in so far as the act in question lies within the
scope of their powers, it is valid; the contract cannot be annulled in toto.
The Supreme Court held that the appeal from the decision of the Audiencia of
Caceres was not well taken and expressed the following consideranda:
Considering that, although as a rule the contract of lease constitutes an act of
management, as this court has several times held, cases may yet arise, either
owing to the nature of the subject matter, or to the period of duration, which may
render it imperative to record the contract in the registry of property, in pursuance
of the Mortgage Law, where the contract of lease may give rise to a real right in
favor of the lessee, and it would then constitute such a sundering of the
ownership as transcends mere management; in such cases it must of necessity
be recognized that the part owners representing the greater portion of the
property held in common have no power to lease said property for a longer
period than six years without the consent of all the coowners, whose propriety
rights, expressly recognized by the law, would by contracts of long duration be
restricted or annulled; and as under article 1548 of the Civil Code such contracts
cannot be entered into by the husband with respect to his wife's property, by the
parent or guardian with respect to that of the child or ward, and by the manager
in default of special power, since the contract of lease only produces personal
obligations, and cannot without the consent of all persons interested or express
authority from the owner, be extended to include stipulations which may alter its
character, changing it into a contract of partial alienation of the property leased;
Considering that, applying this doctrine to the case before us, one of the grounds
upon which the judgment appealed from, denying the validity of the lease made
by the majority of the part owners of the pasture landEl Mortero is based, must
be upheld; to wit, that the period of duration is twelve years and the consent of all
the coowners has not been obtained; hence, the third, fourth. and fifth
assignments of error are without merit; firstly, because article 398 of the Civil
Code, alleged to have been violated, refers to acts decided upon by the majority
of the part owners, touching the management and enjoyment of the common
property, and does not contradict what we have stated in the foregoing
paragraph; secondly because although the cases cited were such as arose upon
leases for more than six years, yet this point was not raised on appeal, and could
not therefore be passed upon; and thirdly, because it cannot be denied that there
is an analogy between a manager without special authority, who is forbidden by
article 1548 of the Code to give a lease for a period of over six years, and the
joint owners constituting a legal majority, who may decide to lease out the
indivisible property, with respect to the shares of the other coowners; and having
come to the conclusion that the contract is null and void, there is no need to
discuss the first two assignments of error which refer to another of the bases
adopted, however erroneously, by the trial court;
Considering that the sixth assignment of error is without merit, inasmuch as the
joint ownership of property is not a sort of agency and cannot be governed by the
provisions relating to the latter contract; whence, article 1727 of the Code alleged
to have been violated, can no more be applied, than, the question of the validity
or nullity of the lease being raise, upon the contract as celebrated, it would be
allowable to modify aposteriori some one or other of the main conditions
stipulated, like that regarding the duration of the lease, for this would amount to a
novation; still less allowable would it be to authorize diverse periods for the
different persons unequally interested in the fulfillment.
Taking into consideration articles 398,1548, and 1713 of the Civil Code and following the
aforesaid decision of June 1,1909, we hold that the contract of lease here in question is
null and void.
It has been suggested that by reason of prescription and by acceptance of benefits under
the lease, the plaintiffs are estopped to question the authority for making the lease.To
this we may answer that the burden of proof of prescription devolved upon the defendant
and that as far as we can find, there is no proof that Ramon Melencio and his successors
ever had knowledge of the existence of the lease in question prior to 1926. We cannot by
mere suspicion conclude that they were informed of the existence of the document and
its terms; it must be remembered that under a strict interpretation of the terms of the
lease, the lessees could remain indefinitely in their tenancy unless the lessors could
purchase the mill and the buildings on the land. In such circumstances, better evidence
than that presented by the defendant in regard to the plaintiff's knowledge of the lease
must be required.
193
The fact that Ramon during his lifetime received his share of the products of land owned
in common with his coheirs is not sufficient proof of knowledge of the existence of the
contract of lease when it is considered that the land in question was only a small portion
of a large tract which Pedro R. Melencio was administering in connection with other
community property.
The appealed judgment as to the validity of the lease is therefore reversed, and it is
ordered that the possession of the land in controversy be delivered to the intervenor
Liberata Macapagal in her capacity as administratrix of the estate of the deceased
Ramon Melencio. It is further ordered that the defendant pay to said administratrix a
monthly rent of P50 for the occupation of the land from May 1st, 1926, until the land is
delivered to the administratrix. The sum of P272 demanded by the defendant in his
counterclaim may be deducted from the total amount of the rent due and unpaid. The
building erected on the land by the defendant and his predecessors in interest may be
removed by him, or otherwise disposed of, within six months from the promulgation of
this decision. Without costs. So ordered.
G.R. No. L-3404 April 2, 1951
TUASON vs. TUASON
In 1941 the sisters Angela I. Tuason and Nieves Tuason de Barreto and their brother
Antonio Tuason Jr., held a parcel of land with an area of 64,928.6 sq. m. covered by
Certificate of Title No. 60911 in Sampaloc, Manila, in common, each owning an
undivided 1/3 portion. Nieves wanted and asked for a partition of the common property,
but failing in this, she offered to sell her 1/3 portion. The share of Nieves was offered for
sale to her sister and her brother but both declined to buy it. The offer was later made to
their mother but the old lady also declined to buy, saying that if the property later
increased in value, she might be suspected of having taken advantage of her daughter.
Finally, the share of Nieves was sold to Gregorio Araneta Inc., a domestic corporation,
and a new Certificate of Title No. 61721 was issued in lieu of the old title No. 60911
covering the same property. The three co-owners agreed to have the whole parcel
subdivided into small lots and then sold, the proceeds of the sale to be later divided
among them. This agreement is embodied in a document (Exh. 6) entitled "Memorandum
of Agreement" consisting of ten pages, dated June 30, 1941.
Before, during and after the execution of this contract (Exh. 6), Atty. J. Antonio Araneta
was acting as the attorney-in-fact and lawyer of the two co-owners, Angela I. Tuason and
her brother Antonio Tuason Jr. At the same time he was a member of the Board of
Director of the third co-owner, Araneta, Inc.
The pertinent terms of the contract (Exh. 6) may be briefly stated as follows: The three
co-owners agreed to improve the property by filling it and constructing roads and curbs
on the same and then subdivide it into small lots for sale. Araneta Inc. was to finance the
whole development and subdivision; it was prepare a schedule of prices and conditions
of sale, subject to the subject to the approval of the two other co-owners; it was invested
with authority to sell the lots into which the property was to be subdivided, and execute
the corresponding contracts and deeds of sale; it was also to pay the real estate taxes
due on the property or of any portion thereof that remained unsold, the expenses of
surveying, improvements, etc., all advertising expenses, salaries of personnel,
commissions, office and legal expenses, including expenses in instituting all actions to
eject all tenants or occupants on the property; and it undertook the duty to furnish each
of the two co-owners, Angela and Antonio Tuason, copies of the subdivision plans and
the monthly sales and rents and collections made thereon. In return for all this
undertaking and obligation assumed by Araneta Inc., particularly the financial burden, it
was to receive 50 per cent of the gross selling price of the lots, and any rents that may
be collected from the property, while in the process of sale, the remaining 50 per cent to
be divided in equal portions among the three co-owners so that each will receive 16.33
per cent of the gross receipts.
Because of the importance of paragraphs 9, 11 and 15 of the contract (Exh. 6), for
purposes of reference we are reproducing them below:
(9) This contract shall remain in full force and effect during all the time that it may
be necessary for the PARTY OF THE SECOND PART to fully sell the said
property in small and subdivided lots and to fully collect the purchase prices due
thereon; it being understood and agreed that said lots may be rented while there
are no purchasers thereof;
(11) The PARTY OF THE SECOND PART (meaning Araneta Inc.) is hereby
given full power and authority to sign for and in behalf of all the said co-owners of
said property all contracts of sale and deeds of sale of the lots into which this
property might be subdivided; the powers herein vested to the PARTY OF THE
SECOND PART may, under its own responsibility and risk, delegate any of its
powers under this contract to any of its officers, employees or to third persons;
(15) No co-owner of the property subject-matter of this contract shall sell,
alienate or dispose of his ownership, interest or participation therein without first
giving preference to the other co-owners to purchase and acquire the same
under the same terms and conditions as those offered by any other prospective
purchaser. Should none of the co-owners of the property subject-matter of this
contract exercise the said preference to acquire or purchase the same, then such
194
 sale to a third party shall be made subject to all the conditions, terms, and
dispositions of this contract; provided, the PARTIES OF THE FIRST PART
(meaning Angela and Antonio) shall be bound by this contract as long as the
PARTY OF THE SECOND PART, namely, the GREGORIO ARANETA, INC. is
controlled by the members of the Araneta family, who are stockholders of the
said corporation at the time of the signing of this contract and/or their lawful heirs;
On September 16, 1944, Angela I. Tuason revoked the powers conferred on her
attorney-in-fact and lawyer, J. Antonio Araneta. Then in a letter dated October 19, 1946,
Angela notified Araneta, Inc. that because of alleged breach of the terms of the
"Memorandum of Agreement" (Exh. 6) and abuse of powers granted to it in the
document, she had decided to rescind said contract and she asked that the property held
in common be partitioned. Later, on November 20, 1946, Angela filed a complaint in the
Court of First Instance of Manila asking the court to order the partition of the property in
question and that she be given 1/3 of the same including rents collected during the time
that the same including rents collected during the time that Araneta Inc., administered
said property.
The suit was administered principally against Araneta, Inc. Plaintiff's brother, Antonio
Tuason Jr., one of the co-owners evidently did not agree to the suit and its purpose, for
he evidently did not agree to the suit and its purpose, for he joined Araneta, Inc. as a co-
defendant. After hearing and after considering the extensive evidence introduce, oral and
documentary, the trial court presided over by Judge Emilio Peña in a long and
considered decision dismissed the complaint without pronouncement as to costs. The
plaintiff appealed from that decision, and because the property is valued at more than
P50,000, the appeal came directly to this Court.
Some of the reasons advanced by appellant to have the memorandum contract (Exh. 6)
declared null and void or rescinded are that she had been tricked into signing it; that she
was given to understand by Antonio Araneta acting as her attorney-in-fact and legal
adviser that said contract would be similar to another contract of subdivision of a parcel
into lots and the sale thereof entered into by Gregorio Araneta Inc., and the heirs of D.
Tuason, Exhibit "L", but it turned out that the two contracts widely differed from each
other, the terms of contract Exh. "L" being relatively much more favorable to the owners
therein the less favorable to Araneta Inc.; that Atty. Antonio Araneta was more or less
disqualified to act as her legal adviser as he did because he was one of the officials of
Araneta Inc., and finally, that the defendant company has violated the terms of the
contract (Exh. 6) by not previously showing her the plans of the subdivision, the schedule
of prices and conditions of the sale, in not introducing the necessary improvements into
the land and in not delivering to her her share of the proceeds of the rents and sales.
We have examined Exh. "L" and compared the same with the contract (Exh. 6) and we
agree with the trial court that in the main the terms of both contracts are similar and
practically the same. Moreover, as correctly found by the trial court, the copies of both
contracts were shown to the plaintiff Angela and her husband, a broker, and both had
every opportunity to go over and compare them and decide on the advisability of or
disadvantage in entering into the contract (Exh. 6); that although Atty. Antonio Araneta
was an official of the Araneta Inc.; being a member of the Board of Directors of the
Company at the time that Exhibit "6" was executed, he was not the party with which
Angela contracted, and that he committed no breach of trust. According to the evidence
Araneta, the pertinent papers, and sent to her checks covering her receive the same;
and that as a matter of fact, at the time of the trial, Araneta Inc., had spent about
P117,000 in improvement and had received as proceeds on the sale of the lots the
respectable sum of P1,265,538.48. We quote with approval that portion of the decision
appealed from on these points:
The evidence in this case points to the fact that the actuations of J. Antonio
Araneta in connection with the execution of exhibit 6 by the parties, are above
board. He committed nothing that is violative of the fiduciary relationship existing
between him and the plaintiff. The act of J. Antonio Araneta in giving the plaintiff
a copy of exhibit 6 before the same was executed, constitutes a full disclosure of
the facts, for said copy contains all that appears now in exhibit 6.
Plaintiff charges the defendant Gregorio Araneta, Inc. with infringing the terms of
the contract in that the defendant corporation has failed (1) to make the
necessary improvements on the property as required by paragraphs 1 and 3 of
the contract; (2) to submit to the plaintiff from time to time schedule of prices and
conditions under which the subdivided lots are to be sold; and to furnish the
plaintiff a copy of the subdivision plans, a copy of the monthly gross collections
from the sale of the property.
The Court finds from the evidence that he defendant Gregorio Araneta,
Incorporated has substantially complied with obligation imposed by the contract
exhibit 6 in its paragraph 1, and that for improvements alone, it has disbursed the
amount of P117,167.09. It has likewise paid taxes, commissions and other
expenses incidental to its obligations as denied in the agreement.
With respect to the charged that Gregorio Araneta, Incorporated has failed to
submit to plaintiff a copy of the subdivision plains, list of prices and the conditions
governing the sale of subdivided lots, and monthly statement of collections form
the sale of the lots, the Court is of the opinion that it has no basis. The evidence
shows that the defendant corporation submitted to the plaintiff periodically all the
195
 data relative to prices and conditions of the sale of the subdivided lots, together
with the amount corresponding to her. But without any justifiable reason, she
refused to accept them. With the indifferent attitude adopted by the plaintiff, it
was thought useless for Gregorio Araneta, Incorporated to continue sending her
statement of accounts, checks and other things. She had shown on various
occasions that she did not want to have any further dealings with the said
corporation. So, if the defendant corporation proceeded with the sale of the
subdivided lots without the approval of the plaintiff, it was because it was under
the correct impression that under the contract exhibit 6 the decision of the
majority co-owners is binding upon all the three.
The Court feels that recission of the contract exhibit 6 is not minor violations of
the terms of the agreement, the general rule is that "recission will not be
permitted for a slight or casual breach of the contract, but only for such breaches
as are so substantial and fundamental as to defeat the object of the parties in
making the agreement" (Song Fo & Co. vs. Hawaiian-Philippine Co., 47 Phil.
821).
As regards improvements, the evidence shows that during the Japanese occupation from
1942 and up to 1946, the Araneta Inc. although willing to fill the land, was unable to
obtain the equipment and gasoline necessary for filling the low places within the parcel.
As to sales, the evidence shows that Araneta Inc. purposely stopped selling the lots
during the Japanese occupantion, knowing that the purchase price would be paid in
Japanese military notes; and Atty. Araneta claims that for this, plaintiff should be
thankfull because otherwise she would have received these notes as her share of the
receipts, which currency later became valueles.
But the main contention of the appellant is that the contract (Exh. 6) should be declared
null and void because its terms, particularly paragraphs 9, 11 and 15 which we have
reproduced, violate the provisions of Art. 400 of the Civil Code, which for the purposes of
reference we quote below:
ART. 400. No co-owner shall be obliged to remain a party to the community.
Each may, at any time, demand the partition of the thing held in common.
Nevertheless, an agreement to keep the thing undivided for a specified length of
time, not exceeding ten years, shall be valid. This period may be a new
agreement.
We agree with the trial court that the provisions of Art. 400 of the Civil Code are not
applicable. The contract (Exh., 6) far from violating the legal provision that forbids a co-
owner being obliged to remain a party to the community, precisely has for its purpose
and object the dissolution of the co-ownership and of the community by selling the parcel
held in common and dividing the proceeds of the sale among the co-owners. The
obligation imposed in the contract to preserve the co-ownership until all the lots shall
have been sold, is a mere incident to the main object of dissolving the co-owners. By
virtue of the document Exh. 6, the parties thereto practically and substantially entered
into a contract of partnership as the best and most expedient means of eventually
dissolving the co-ownership, the life of said partnership to end when the object of its
creation shall have been attained.
This aspect of the contract is very similar to and was perhaps based on the other
agreement or contract (Exh. "L") referred to by appellant where the parties thereto in
express terms entered into partnership, although this object is not expressed in so many
words in Exh. 6. We repeat that we see no violation of Art. 400 of the Civil Code in the
parties entering into the contract (Exh. 6) for the very reason that Art. 400 is not
applicable.
Looking at the case from a practical standpoint as did the trial court, we find no valid
ground for the partition insisted upon the appellant. We find from the evidence as was
done by the trial court that of the 64,928.6 sq. m. which is the total area of the parcel held
in common, only 1,600 sq. m. or 2.5 per cent of the entire area remained unsold at the
time of the trial in the year 1947, while the great bulk of 97.5 per cent had already been
sold. As well observed by the court below, the partnership is in the process of being
dissolved and is about to be dissolved, and even assuming that Art. 400 of the Civil Code
were applicable, under which the parties by agreement may agree to keep the thing
undivided for a period not exceeding 10 years, there should be no fear that the remaining
1,600 sq. m. could not be disposed of within the four years left of the ten-years period
fixed by Art. 400.
We deem it unnecessary to discuss and pass upon the other points raised in the appeal
and which counsel for appellant has extensively and ably discussed, citing numerous
authorities. As we have already said, we have viewed the case from a practical
standpoint, brushing aside technicalities and disregarding any minor violations of the
contract, and in deciding the case as we do, we are fully convinced that the trial court
and this Tribunal are carrying out in a practical and expeditious way the intentions and
the agreement of the parties contained in the contract (Exh. 6), namely, to dissolve the
community and co-ownership, in a manner most profitable to the said parties.
In view of the foregoing, the decision appealed from is hereby affirmed. There is no
pronouncement as to costs.
196
So ordered.
--- xx END OF OBLIGATIONS OF EACH CO-OWNERS xx ---
G.R. No. L-51283 June 7, 1989
MARIANO vs. CA
The proceedings at bar concern (1) an attempt by a married man to prevent execution
against conjugal property of a judgment rendered against his wife, for obligations
incurred by the latter while engaged in a business that had admittedly redounded to the
benefit of the family, and (2) the interference by a court with the proceedings on
execution of a co-equal or coordinate court. Both acts being proscribed by law, correction
is called for and will hereby be effected.
The proceedings originated from a suit filed by Esther Sanchez against Lourdes Mariano
in the Court of First Instance at Caloocan City, 1 for recovery of the value of ladies' ready
2
made dresses allegedly purchased by and delivered to the latter.
A writ of preliminary attachment issued at Esther Sanchez' instance, upon a bond posted
by Veritas Insurance Company in the amount of P 11,000.00, and resulted in the seizure
of Lourdes Mariano's property worth P 15,000.00 or so. 3 Her motion for the discharge of
the attachment having been denied, 4 Lourdes Mariano went up to the Court of Appeals on
certiorari. That Court ordered 5 the Trial Court to receive evidence on whether or not the
attachment had been improvidently or irregularly issued. 6 The Trial Court did so, came to the
conclusion that the attachment had indeed been improperly issued, and consequently
dissolved it. 7
Trial then ensued upon the issues arising from the complaint as well as Lourdes
Mariano's answer with counterclaim-which included a claim for damages resulting from
wrongful attachment. Thereafter judgment was rendered in favor of defendant Lourdes
Mariano and against plaintiff Esther Sanchez containing the following dispositions, to
wit: 8
1. On the complaint, defendant is ordered to pay unto the plaintiff for the
value of the dishonored check (Exhs. G-1, H and I) in the total amount of
P 1,512.00.
2. On the counterclaim, the plaintiff is ordered to pay unto defendant the
following, as follows:
a) P 7,500.00 for loss of income of the defendant for 75 days;
b) P 16,000.00 for the value of attached goods;
c) P 25,000.00 for moral and exemplary damages;
d) P 5,000.00 as attorney's fees plus costs of suit.
The Veritas Insurance Company which issued the attachment bond is ordered to pay
unto the defendant the full insurance coverage of P 11,000.00 to answer for the total
liability of the plaintiff thereof
Esther Sanchez sought to perfect an appeal by filing a notice of appeal, an appeal bond
and a record on appeal. 9
Pending approval of the record on appeal, Lourdes Mariano filed a motion for the
immediate execution of the judgment which the Court granted. 10 In virtue of the writ of
execution which afterwards issued in due course, the sheriff garnished the sum of P
11,000.00 from Veritas Insurance Company, and levied on real and personal property
belonging to the conjugal partnership of Esther Sanchez and her husband, Daniel Sanchez.
Esther Sanchez then filed a petition for certiorari with the Court of Appeals, praying for the
annulment of the execution pending appeal authorized by the Trial Court; but her petition was
adjudged to be without merit and was accordingly dismissed. 11
Daniel Sanchez, Esther's husband, now made his move. He filed a complaint for
annulment of the execution in the Court of First Instance at Quezon City in his capacity
as administrator of the conjugal partnership. 12 He alleged that the conjugal assets could
not validly be made to answer for obligations exclusively contracted by his wife, and that,
moreover, some of the personal property levied on, such as household appliances and
utensils necessarily used in the conjugal dwelling, were exempt from execution. He also
applied for a preliminary injunction pending adjudication of the case on the merits. 13
The Quezon City Court issued an order setting the matter of the injunction for hearing,
and commanding the sheriff, in the meantime, to desist from proceeding with the auction
sale of the property subject of Daniel Sanchez' claim. 14 Lourdes Mariano filed a motion to
dismiss the action; this, the Court denied. 15 She then instituted a special civil action of
certiorari in the Court of Appeals 16 where she initially enjoyed some measure of success: her
petition was given due course, and the Quezon City Court was restrained by the Appellate
Court's Seventh Division 17 from further proceeding with the case. 18 Eventually, however, the
Eighth Division 19 came to the conclusion that there was no merit in her cause and dismissed
her petition. 20 It ruled that the Quezon City Court had not interfered with the execution
process of the Caloocan Court because Daniel Sanchez's action in the former court raised an
issue-the validity of the sheriffs levy on the conjugal partnership assets of the Sanchez
197
spouses different from those adjudicated in the Caloocan Court, and Sanchez was not a
party to the case tried by the latter.
From this verdict Lourdes Mariano has appealed to this Court, contending that the
Appellate Court committed reversible error-
1) in ruling that the conjugal partnership of Daniel and Esther Sanchez
could not be made liable for Esther's judgment obligation arising from the
spouses' joint business with Lourdes Mariano;
2) in ruling that the Quezon City Court of First Instance had not interfered
with the execution process of the Caloocan Court of First Instance; and
3) when its Eighth Division decided the petition of Lourdes Mariano
although the case had been raffled to the Seventh Division and the latter
had in fact given due course to the petition.
1. There is no dispute about the fact that Esther Sanchez was engaged in
business not only without objection on the part of her husband, Daniel,
but in truth with his consent and approval. 21 It is also established that, as
expressly acknowledged by Esther herself and never denied by Daniel, the
profits from the business had been used to meet, in part at least, expenses
for the support of her family, i.e., the schooling of the children, food and other
household expenses. 22 Under the circumstances, Lourdes Mariano action
against Esther Sanchez was justified, the litigation being "incidental to the ...
business in which she is engaged 23 and consequently, the conjugal
partnership of Daniel and Esther Sanchez was liable for the debts and
obligations contracted by Esther in her business since the income derived
therefrom, having been used to defray some of the expenses for the
maintenance of the family and the education of the children, had redounded
to the benefit of the partnership. 24 It was therefore error for the Court of
Appeals to have ruled otherwise.
2. It was also error for the Court of Appeals to have held that there was
no interference by the Quezon City Court of First Instance with the
execution process of the Caloocan Court.
The rule, one of great importance in the administration of justice, is that a Court of First
Instance has no power to restrain by means of injunction the execution of a judgment or
decree of another judge of concurrent or coordinate jurisdictions. 25 But this is precisely
what was done by the Quezon City Court of First Instance: it enjoined the execution of a
judgment authorized and directed by a co-equal and coordinate court, the Caloocan City
Court of First Instance. It did so on the claim of Daniel Sanchez that the property being levied
on belonged to the conjugal partnership and could not be made liable for the wife's
obligations.
The question that arises is whether such a claim that property levied on in execution of a
judgment is not property of the judgment debtor, Daniel Sanchez's wife, but of the
conjugal partnership of the Sanchez Spouses is properly cognizable by a Court other
than that which rendered judgment adversely to the wife.
To be sure, Section 17, Rule 39 of the Rules of Court, authorizes a "third person," i.e.,
"any other person than the judgment debtor or his agent," to vindicate "his claim to the
property by any proper action." The section reads as follows: 26
SEC. 17. Proceedings where property claimed by third person.-If property
levied on be claimed by any other person than the judgment debtor or his
agent, and such person make an affidavit of his title thereto or right to the
possession thereof, stating the grounds of such right or title, and serve
the same upon the officer making the levy, and a copy thereof upon the
judgment creditor, the officer shall not be bound to keep the property,
unless such judgment creditor or his agent, on demand of the officer,
indemnify the officer against such claim by a bond in a sum not greater
than the value of the property levied on. In case of disagreement as to
such value, the same shall be determined by the court issuing the writ of
execution.
The officer is not liable for damages, for the taking or keeping of the
property, to any third-party claimant, unless a claim is made by the latter
and unless an action for damages is brought by him against the officer
within one hundred twenty (120) days from the date of the filing of the
bond. But nothing herein contained shall prevent such claimant or any
third person from vindicating his claim to the property by any proper
action.
xxx xxx xxx
The "proper action" referred to in the section "is and should be an entirely separate and
distinct action from that in which execution has issued, if instituted by a stranger to the
latter suit:" 27 and in "such separate action, the court may issue a writ of preliminary
injunction against the sheriff enjoining him from proceeding with the execution sale." 28 "Upon
the other hand, if the claim of impropriety on the part of the sheriff in the execution
proceedings is made by a party to the action, not a stranger thereto, any relief therefrom may
198
be applied for with, and obtained from, only the executing court; and this is true even if a new
party has been impleaded in the suit." 29
In the case at bar, the husband of the judgment debtor cannot be deemed a "stranger" to
the case prosecuted and adjudged against his wife. A strikingly similar situation was
presented in a case decided by this Court as early as 1976, Rejuso v. Estipona. 30 There,
the sheriff tried to evict petitioner Rejuso and his family from their house and lot which had
been sold in execution of a money judgment rendered by the Court of First Instance of Davao
against Rejuso. What Rejuso did was to institute, together with his wife, Felisa, a separate
suit in the same court against the sheriff and the judgment creditor, Estipona, for the purpose
of annulling the levy, execution sale, and writ of possession issued in the first action in
respect of their residential house and lot, on the theory that that property was conjugal in
character and "hence, not subject to such proceedings considering that Felisa was not a
party to the previous case." The action was however dismissed by the court on the ground
that it had "no jurisdiction over the subject matter of the action or the nature of the action and
of the relief sought." 31 The dismissal was had on motion of Estipona who argued that the
court had no jurisdiction to "vacate or annul and/or enjoin the enforcement of the process
issued by another branch in another case," and since Rejuso had already raised the same
issues in the first case, without success, he should not be allowed to "get from another
branch ... what he failed to get ... (from) Branch l." This Court affirmed that judgment of
dismissal, 32 holding that Rejuso's action was barred by res adjudicata; and "(a)s regards
Felisa Rejuso, who is a new party in Civil Case No. 5102" (the second action) it was ruled
that-
... her remedy, if it has not yet been barred by the statute of limitations or
become stale in some other way, is within Civil Case No. 4435 (the first
suit). Indeed, it is superfluous to start a new action on a matter which can
be more simply and conveniently litigated within a former proceeding of
which it is more logically and legally an integral part. (Ipekdjian
Merchandising Co., Inc, v. CTA, 8 SCRA 59 [1963]). Actually, the court in
which the former proceeding was pending has exclusive jurisdiction
thereof (De Leon vs. Salvador, 36 SCRA 567), the fact that the two cases
are in the same Branch of the same Court of First Instance and presided
over by the same Judge notwithstanding. After all, it is simpler and more
convenient to observe such practice, which insures also consistency in
the resolutions of related questions because they are to be determined in
most if not all instances by the same judge.
In any case, whether by intervention in the court issuing the writ, or by separate action, it
is unavailing for either Esther Sanchez or her husband, Daniel, to seek preclusion of the
enforcement of the writ of possession against their conjugal assets. For it being
established, as aforestated, that Esther had engaged in business with her husband's
consent, and the income derived therefrom had been expended, in part at least, for the
support of her family, the liability of the conjugal assets to respond for the wife's
obligations in the premises cannot be disputed.
The petitioner's appeal must therefore be sustained.
However, the petitioner's theory that the Eighth Division of the Appellate Court had
improperly taken cognizance of the case which had been raffled to the Seventh Division,
must be rejected. It is without foundation, and was evidently made without attempt to
ascertain the relevant facts and applicable rules. The case had originally been assigned
to Mr. Justice Isidro C. Borromeo for study and report while he was still a member of the
Seventh Division. The case was brought by him to the Eighth Division when he was
subsequently transferred thereto; and he had ultimately written the opinion for the
division after due deliberation with his colleagues. All of this took place in accordance
with the Rules of the Court of Appeals.
WHEREFORE, the Decision of the Court of Appeals subject of the petition is
REVERSED AND SET ASIDE, and the Regional Trial Court (formerly Court of First
Instance) at Quezon City is ORDERED to dismiss Civil Case No. 20415 entitled "Daniel
P. Sanchez v. Deputy Sheriff Mariano V. Cachero, et al.," with prejudice. Costs against
private respondents.
SO ORDERED.
G.R. No. L-24419 July 15, 1968
ESTOQUE vs. PAJIMULA
Direct appeal from an order of the Court of First Instance of La Union, in its Civil Case
No. 1990, granting a motion to dismiss the complaint for legal redemption by a co-owner
(retracto legal de comuneros) on account of failure to state a cause of action.
The basic facts and issues are stated in the decision appealed from, as follows:
Plaintiff based her complaint for legal redemption on a claim that she is a co-
owner of Lot No. 802, for having purchased 1/3 portion thereof, containing an
area of 640 square meters as evidenced by a deed of sale, Annex "A", which
was executed on October 28, 1951 by Crispina Perez de Aquitania, one of the
co-owners, in her favor.
On the other hand, the defendant, who on December 30, 1959 acquired the other
2/3 portion of Lot No. 802 from Crispina Aquitania and her children, claimed that
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 the plaintiff bought the 1/3 southeastern portion, which is definitely identified and
segregated, hence there existed no co-ownership at the time and after said
plaintiff bought the aforesaid portion, upon which right of legal redemption can be
exercised or taken advantage of.
From the complaint, it would appear that Lot No. 802 of the Cadastral survey of
Rosario, covered by original certificate of title No. RO-2720 (N.A.) was originally
owned by the late spouses, Rosendo Perez and Fortunata Bernal, who were
survived by her children, namely, Crispina Perez, Lorenzo Perez and Ricardo
Perez. Ricardo Perez is also now dead. On October 28, 1951, Crispina P. Vda.
de Aquitania sold her right and participation in Lot No. 802 consisting of 1/3
portion with an area of 640 square meters to Leonora Estoque (Annex A of the
complaint). On October 29, 1951, Lorenzo Perez, Crispina Perez and Emilia P.
Posadas, widow of her deceased husband, Ricardo Perez for herself and in
behalf of her minor children, Gumersindo, Raquel, Emilio and Ricardo, Jr.,
executed a deed of extrajudicial settlement wherein Lorenzo Perez, Emilia P.
Posadas and her minor children assigned all their right, interest and participation
in Lot No. 802 to Crispina Perez (Annex B of the complaint). On December 30,
1959, Crispina Perez and her children Rosita Aquitania Belmonte, Remedios
Aquitania Misa, Manuel Aquitania, Sergio Aquitania and Aurora Aquitania sold to
Elena Pajimula, the remaining 2/3 western portion of Lot No. 802 with an area of
958 square meters (Annex C of the complaint).
The action of the plaintiff is premised on the claim of co-ownership. From the
deed of sale executed in favor of the plaintiff, it can be seen that the 1/3 portion
sold to plaintiff is definitely identified as the 1/3 portion located on the
southeastern part of Lot No. 802 and specifically bounded on the north by De
Guzman Street, on the east by Posadas Street, on the south by Perez Street,
and on the west by remaining portion of the same lot, which contained an area of
640 square meters. And in the deed of sale executed by Crispina Perez and her
children in favor of defendant Elena Pajimula over the remaining 2/3 portion of
Lot No. 802, said portion is identified as the western portion of Lot No. 802 which
is bounded on the north by De Guzman Street, on the east by properties of
Leonarda Estoque, on the south by the national road and on the west by Lots
Nos. 799 and 801, containing an area of 598 square meters.
The appellant's stand is that the deed in her favor was inoperative to convey the
southeastern third of Lot 802 of the Rosario Cadastre notwithstanding the description in
the deed itself, for the reason that the vendor, being a mere co-owner, had no right to sell
any definite portion of the land held in common but could only transmit her undivided
share, since the specific portion corresponding to the selling co-owner is not known until
partition takes place (Lopez vs. Ilustre, 5 Phil. 567; Ramirez vs. Bautista, 14 Phil. 528).
From this premise, the appellant argues that the sale in her favor, although describing a
definite area, should be construed as having conveyed only the undivided 1/3 interest in
Lot 802 owned at the time by the vendor, Crispina Perez Vda. de Aquitania. Wherefore,
when the next day said vendor acquired the 2/3 interest of her two other co-owners, Lot
802 became the common property of appellant and Crispina Perez. Therefore, appellant
argues, when Crispina sold the rest of the property to appellee Pajimula spouses, the
former was selling an undivided 2/3 that appellant, as co-owner, was entitled to redeem,
pursuant to Article 1620 of the New Civil Code.
ART. 1620. A co-owner of a thing may exercise the right of redemption in case
the shares of all the other co-owners or of any of them, are sold to a third person.
If the price of the alienation is grossly excessive the redemptioner shall pay only
a reasonable one.
Should two or more co-owners desire to exercise the right of redemption, they
may only do so in proportion to the share they may respectively have in the thing
owned in common.
The lower court, upon motion of defendant, dismissed the complaint, holding that the
deeds of sale show that the lot acquired by plaintiff Estoque was different from that of the
defendants Pajimula; hence they never became co-owners, and the alleged right of legal
redemption was not proper. Estoque appealed.
We find no error in the order of dismissal, for the facts pleaded negate the claim that
appellant Estoque ever became a co-owner of appellees Pajimula.
(1) The deed of sale to Estoque (Annex A of the complaint) clearly specifies the object
sold as the southeastern third portion of Lot 802 of the Rosario Cadastre, with an area of
840 square meters, more or less. Granting that the seller, Crispina Perez Vda. de
Aquitania could not have sold this particular portion of the lot owned in common by her
and her two brothers, Lorenzo and Ricardo Perez, by no means does it follow that she
intended to sell to appellant Estoque her 1/3 undivided interest in the lot forementioned.
There is nothing in the deed of sale to justify such inference. That the seller could have
validly sold her one-third undivided interest to appellant is no proof that she did choose to
sell the same. Ab posse ad actu non valet illatio.
(2) While on the date of the sale to Estoque (Annex A) said contract may have been
ineffective, for lack of power in the vendor to sell the specific portion described in the
deed, the transaction was validated and became fully effective when the next day
(October 29, 1951) the vendor, Crispina Perez, acquired the entire interest of her
remaining co-owners (Annex B) and thereby became the sole owner of Lot No. 802 of
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the Rosario Cadastral survey (Llacer vs. Muñoz, 12 Phil. 328). Article 1434 of the Civil The mortgage was registered on TCT No. 188705 on the same date with
Code of the Philippines clearly prescribes that — . the following notation: "... mortgagee's consent necessary in case of
subsequent alienation or encumbrance of the property other conditions
When a person who is not the owner of a thing sells or alienates and delivers it, set forth in Doc. No. 340, Page No. 69, Book No. XIX, of the Not. Public
and later the seller or grantor acquires title thereto, such title passes by operation of Felixberto Abad". On the loan there was due the sum of P828,000.00
of law to the buyer or grantee." and Allied Banking Corporation tried to collect it from Julita Go Ong, (Exh.
E). Hence, the complaint alleging nullity of the contract for lack of judicial
Pursuant to this rule, appellant Estoque became the actual owner of approval which the bank had allegedly promised to secure from the court.
the southeastern third of lot 802 on October 29, 1951. Wherefore, she never acquired an In response thereto, the bank averred that it was plaintiff Julita Go Ong
undivided interest in lot 802. And when eight years later Crispina Perez sold to the who promised to secure the court's approval, adding that Julita Go Ong
appellees Pajimula the western two-thirds of the same lot, appellant did not acquire a informed the defendant that she was processed the sum of P300,000.00
right to redeem the property thus sold, since their respective portions were distinct and by the JK Exports, Inc. which will also take charge of the interest of the
separate. loan.

IN VIEW OF THE FOREGOING, the appealed order of dismissal is affirmed. Costs Concluding, the trial court ruled:
against appellant Estoque. 1äwphï1.ñët

Absent (of) any evidence that the property in question is

--- xxx END OF LIMITATIONS OF SUCH RIGHTS xxx ---
G.R. No. 75884 September 24, 1987
GO ONG vs. CA
This is a petition for review on certiorari of the March 21, 1986 Decision * of the Court of
Appeals in AC-G.R. CV No. 02635, "Julita Ong etc. vs. Allied Banking Corp. et al." affirming, with modification, the January
5, 1984 Decision of the Regional Trial Court of Quezon City in Civil Case No. Q-35230.
The uncontroverted facts of this case, as found by the Court of Appeals, are as follows:
...: Two (2) parcels of land in Quezon City Identified as Lot No. 12, Block
407, Psd 37326 with an area of 1960.6 sq. m. and Lot No. 1, Psd 15021,
with an area of 3,660.8 sq. m. are covered by Transfer Certificate of Title
No. 188705 in the name of "Alfredo Ong Bio Hong married to Julita Go
Ong "(Exh. D). Alfredo Ong Bio Hong died on January 18, 1975 and
Julita Go Ong was appointed administratrix of her husband's estate in
Civil Case No. 107089. The letters of administration was registered on
TCT No. 188705 on October 23, 1979. Thereafter, Julita Go Ong sold Lot
No. 12 to Lim Che Boon, and TCT No. 188705 was partially cancelled
and TCT No. 262852 was issued in favor of Lim Che Boon covering Lot
No. 12 (Exh. D-4). On June 8, 1981 Julita Go Ong through her attorney-
in-fact Jovita K. Yeo (Exh. 1) mortgaged Lot No. 1 to the Allied Banking
Corporation to secure a loan of P900,000.00 obtained by JK Exports, Inc.
the capital of the deceased husband brought into the
marriage, said property should be presumed as acquired
during the marriage and, therefore, conjugal property,
After the dissolution of the marriage with the death of
plaintiff's husband, the plaintiff acquired, by law, her
conjugal share, together with the hereditary rights
thereon. (Margate vs. Rabacal, L-14302, April 30, 1963).
Consequently, the mortgage constituted on said property,
upon express authority of plaintiff, notwithstanding the
lack of judicial approval, is valid, with respect to her
conjugal share thereon, together with her hereditary
rights.
On appeal by petitioner, respondent Court of Appeals affirmed, with modification, the
appealed decision (Record, pp. 19-22). The dispositive portion of the appellate court's
decision reads:
WHEREFORE, with the modification that the extrajudicial foreclosure
proceedings instituted by defendant against plaintiff shall be held in
abeyance to await the final result of Civil Case No. 107089 of the Court of
First Instance of Manila, 6th Judicial District Branch XXXII, entitled "IN
THE MATTER OF THE INTESTATE ESTATE OF THE LATE ALFREDO
ONG BIO: JULITA GO ONG, ADMINISTRATRIX". In pursuance with

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 which the restraining order of the lower court in this case restraining the
sale of the properties levied upon is hereby ordered to continue in full
force and effect coterminous with the final result of Civil Case No.
107089, the decision appealed from is hereby affirmed. Costs against
plaintiff-appellant.
SO ORDERED.
On April 8, 1986, petitioner moved for the reconsideration of the said decision (Ibid., pp.
24-29), but in a Resolution dated September 11, 1986, respondent court denied the
motion for lack of merit (Ibid., p. 23). Hence, the instant petition (Ibid., pp. 6-17).
The Second Division of this Court, in a Resolution dated November 19, 1986 (Rollo, p.
30), without giving due course to the petition, resolved to require private respondent to
comment thereon and it did on February 19, 1987 (Ibid., pp. 37-42). Thereafter, in a
Resolution dated April 6, 1987, the petition was given due course and the parties were
required to file their respective memoranda (Ibid., p. 43).
Petitioner filed her Memorandum on May 13, 1987 (Ibid., pp. 45-56), while private
respondent filed its Memorandum on May 20, 1987 (Ibid., pp. 62-68).
The sole issue in this case is —
WHETHER OR NOT THE MORTGAGE CONSTITUTED OVER THE PARCEL OF LAND
UNDER PETITIONER'S ADMINISTRATION IS NULL AND VOID FOR WANT OF
JUDICIAL APPROVAL.
The instant petition is devoid of merit.
The well-settled rule that the findings of fact of the trial court are entitled to great respect,
carries even more weight when affirmed by the Court of Appeals as in the case at bar.
In brief, the lower court found: (1) that the property under the administration of petitioner
— the wife of the deceased, is a community property and not the separate property of
the latter; (2) that the mortgage was constituted in the wife's personal capacity and not in
her capacity as administratrix; and (3) that the mortgage affects the wife's share in the
community property and her inheritance in the estate of her husband.
Petitioner, asserting that the mortgage is void for want of judicial approval, quoted
Section 7 of Rule 89 of the Rules of Court and cited several cases wherein this Court
ruled that the regulations provided in the said section are mandatory.
While petitioner's assertion may have merit insofar as the rest of the estate of her
husband is concerned the same is not true as regards her conjugal share and her
hereditary rights in the estate. The records show that petitioner willingly and voluntarily
mortgaged the property in question because she was processed by JK Exports, Inc. the
sum of P300,000.00 from the proceeds of the loan; and that at the time she executed the
real estate mortgage, there was no court order authorizing the mortgage, so she took it
upon herself, to secure an order.
Thus, in confirming the findings of the lower court, as supported by law and the evidence,
the Court of Appeals aptly ruled that Section 7 of Rule 89 of the Rules of Court is not
applicable, since the mortgage was constituted in her personal capacity and not in her
capacity as administratrix of the estate of her husband.
Nevertheless, petitioner, citing the cases of Picardal, et al. vs. Lladas (21 SCRA 1483)
and Fernandez, et al. vs. Maravilla (10 SCRA 589), further argues that in the settlement
proceedings of the estate of the deceased spouse, the entire conjugal partnership
property of the marriage is under administration. While such may be in a sense true, that
fact alone is not sufficient to invalidate the whole mortgage, willingly and voluntarily
entered into by the petitioner. An opposite view would result in an injustice. Under similar
circumstances, this Court applied the provisions of Article 493 of the Civil Code, where
the heirs as co-owners shall each have the full ownership of his part and the fruits and
benefits pertaining thereto, and he may therefore alienate, assign or mortgage it, and
even effect of the alienation or mortgage, with respect to the co-owners, shall be limited
to the portion which may be allotted to him in the division upon the termination of the co-
ownership (Philippine National Bank vs. Court of Appeals, 98 SCRA 207 [1980]).
Consequently, in the case at bar, the trial court and the Court of Appeals cannot be
faulted in ruling that the questioned mortgage constituted on the property under
administration, by authority of the petitioner, is valid, notwithstanding the lack of judicial
approval, with respect to her conjugal share and to her hereditary rights. The fact that
what had been mortgaged was in custodia legis is immaterial, insofar as her conjugal
share and hereditary share in the property is concerned for after all, she was the
ABSOLUTE OWNER thereof. This ownership by hers is not disputed, nor is there any
claim that the rights of the government (with reference to taxes) nor the rights of any heir
or anybody else have been prejudiced for impaired. As stated by Associate Justice (later
Chief Justice) Manuel Moran in Jakosalem vs. Rafols, et al., 73 Phil. 618 —
202
 The land in question, described in the appealed decision, originally
belonged to Juan Melgar. The latter died and the judicial administration of
his estate was commenced in 1915 and came to a close on December 2,
1924, only. During the pendency of the said administration, that is, on
July 5, 1917, Susana Melgar, daughter of the deceased Juan Melgar,
sold the land with the right of repurchase to Pedro Cui, subject to the
stipulation that during the period for the repurchase she would continue in
possession of the land as lessee of the purchase. On December 12,
1920, the partition of the estate left by the deceased Juan Melgar was
made, and the land in question was adjudicated to Susana Melgar. In
1921, she conveyed, in payment of professional fees, one-half of the land
in favor of the defendant-appellee Nicolas Rafols, who entered upon the
portion thus conveyed and has been in possession thereof up to the
present. On July 23, 1921, Pedro Cui brought an action to recover said
half of the land from Nicolas Rafols and the other half from the other
defendants, and while that case was pending, or about August 4, 1925,
Pedro Cui donated the whole land in question to Generosa Teves, the
herein plaintiff-appellant, after trial, the lower court rendered a decision
absolving Nicolas Rafols as to the one-half of the land conveyed to him
by Susana Melgar, and declaring the plaintiff owner of the other half by
express acknowledgment of the other defendants. The plaintiff appealed
from that part of the judgment which is favorable to Nicolas Rafols.
The lower court absolved Nicolas Rafols upon the theory that Susana
Melgar could not have sold anything to Pedro Cui because the land was
then in custodia legis, that is, under judicial administration. This is error.
That the land could not ordinary be levied upon while in custodia
legis,does not mean that one of the heirs may not sell the right, interest or
participation which he has or might have in the lands under
administration. The ordinary execution of property in custodia legis is
prohibited in order to avoid interference with the possession by the court.
But the sale made by an heir of his share in an inheritance, subject to the
result of the pending administration, in no wise stands in the way of such
administration.
The reference to judicial approval in Sec. 7, Rule 89 of the Rules of Court cannot
adversely affect the substantiverights of private respondent to dispose of her Ideal [not
inchoate, for the conjugal partnership ended with her husband's death, and her
hereditary rights accrued from the moment of the death of the decedent (Art. 777, Civil
Code) share in the co-heirship and/or co-ownership formed between her and the other
heirs/co-owners (See Art. 493, Civil Code, supra.). Sec. 7, Art. 89 of the Civil Code
applies in a case where judicial approval has to be sought in connection with, for
instance, the sale or mortgage of property under administration for the payment, say of a
conjugal debt, and even here, the conjugal and hereditary shares of the wife are
excluded from the requisite judicial approval for the reason already adverted to
hereinabove, provided of course no prejudice is caused others, including the
government.
Moreover, petitioner is already estopped from questioning the mortgage. An estoppel
may arise from the making of a promise even though without consideration, if it was
intended that the promise should be relied upon and in fact it was relied upon, and if a
refusal to enforce it would be virtually to sanction the perpetration of fraud or would result
in other injustice (Gonzalo Sy Trading vs. Central Bank, 70 SCRA 570).
PREMISES CONSIDERED, the instant petition is hereby DENIED and the assailed
decision of the Court of Appeals is hereby AFFIRMED.
SO ORDERED.
G.R. No. 102380 January 18, 1993
ACEBEDO vs. ABESAMIS
The lower court's jurisdiction in approving a Deed of Conditional Sale executed by
respondents-heirs and ordering herein administrator-petitioner Herodotus Acebedo to
sell the remaining portions of said properties, despite the absence of its prior approval as
a probate court, is being challenged in the case at bar.
The late Felix Acebedo left an estate consisting of several real estate properties located
in Quezon City and Caloocan City, with a conservative estimated value of about P30
million. Said estate allegedly has only the following unsettled claims:
a. P87,937.00 representing unpaid real estate taxes due Quezon City;
b. P20,244.00 as unpaid real estate taxes due Caloocan City;
c. The unpaid salaries/allowances of former Administrator Miguel
Acebedo, and the incumbent Administrator Herodotus Acebedo; and
d. Inheritance taxes that may be due on the net estate.
The decedent was succeeded by eight heirs, two of whom are the petitioners herein, and
the others are the private respondents.
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Due to the prolonged pendency of the case before the respondent Court for sixteen
years, respondents-heirs filed a "Motion for Approval of Sale", on October 4, 1989. The
said sale involved the properties covered by Transfer Certificate of Title Nos. 155569,
120145, 9145, and 18709, all of which are registered in Quezon City, and form part of
the estate. The consideration for said lots was twelve (12) million pesos and by that time,
they already had a buyer. It was further stated in said Motion that respondents-heirs
have already received their proportionate share of the six (6) million pesos paid by the
buyer, Yu Hwa Ping, as earnest money; that the balance of P6,000,000.00 is more than
enough to pay the unsettled claims against the estate. Thus, they prayed for the Court to
direct the administrator, Herodotus Acebedo (referred to as petitioner-administrator
hereafter):
1. to sell the properties mentioned in the motion;
2. with the balance of P6 million, to pay all the claims against the Estate;
and
3. to distribute the residue among the Heirs in final settlement of the
Estate.
To the aforesaid Motion, herein petitioner-administrator interposed an "Opposition to
Approval of Sale", to wit:
1. That he has learned that some of the heirs herein have sold some real
estate property of the Estate located at Balintawak, Quezon City, without
the knowledge of the herein administrator, without the approval of this
Honorable Court and of some heirs, and at a shockingly low price;
2. That he is accordingly hereby registering his vehement objection to the
approval of the sale, perpetrated in a manner which can even render the
proponents of the sale liable for punishment for contempt of this
Honorable Court;
3. The herein Administrator instead herein prays this Honorable Court to
authorize the sale of the above mentioned property of the Estate to
generate funds to pay certain liabilities of the Estate and with the
approval of this Honorable Court if warranted, to give the heirs some
advances chargeable against theirs (sic) respective shares, and, for the
purpose to authorize the herein Administrator, and the other heirs to help
the Administrator personally or through a broker, to look for a buyer for
the highest obtainable price, subject always to the approval of this
Honorable Court. 1
On October 30, 1989, herein petitioners moved to be given a period of forty-five (45)
days within which to look for a buyer who will be willing to buy the properties at a price
higher than P12,000,000.00.
The case was set for hearing on December 15, 1989. However, by said date, petitioners
have not found any buyer offering better terms. Thus, they asked the Court, on February
8, 1990, for an in extendible period of thirty days to look for a buyer.
Petitioner-administrator then filed a criminal complaint for falsification of a public
document against Yu Hwa Ping and notary public Eugenio Obon on February 26, 1990.
He initiated this complaint upon learning that it was Yu Hwa Ping who caused the
notarization of the Deed of Conditional Sale wherein allegedly petitioner-administrator's
signature was made to appear. He also learned that after he confronted the notary public
of the questioned document, the latter revoked his notarial act on the same.
On April 2, 1990, petitioner-administrator filed the civil action to secure the declaration by
the Court of the nullity of the Deed of Conditional Sale and the Deed of Absolute Sale.
The period granted herein petitioners having lapsed without having found a buyer,
petitioner Demosthenes Acebedo sought to nullify the Orders granting them several
periods within which to look for a better buyer. Respondents filed a comment thereon.
Having miserably failed to find a better buyer, after seven long months, petitioner-
administrator filed another "Opposition to Approval of Sale", dated May 10, 1990,
maintaining that the sale should wait for the country to recover from the effects of the
coup d'etat attempts, otherwise, the properties should be divided among the heirs.
On June 21, 1990, petitioners filed a "Motion for Leave of Court to Mortgage and Lease
some of the Properties of the Estate". To this Motion, respondents filed an Opposition on
the following grounds : that the motion is not proper because of the pending motion to
approve the sale of the same properties; that said conditional sale was initiated by
petitioner-administrator who had earlier signed a receipt for P500,000.00 as earnest
money; that the approval of the sale would mean Yu Hwa Ping's assumption of payment
of the realty taxes; that the estate has no further debts and thus, the intestate
administrator may be terminated.
On August 17, 1990, respondent Court issued an Order, the dispositive portion of which,
stated, among others, to wit: 2
204
 b. the motion filed by the heirs-movants, dated October 4, 1989, praying
that the new administrator be directed to sell the properties covered by
TCT Nos. 155569, 120145, 9145 and 18709, in favor of Yu Hwa Ping is
hereby denied; and
c. the new administrator is hereby granted leave to mortgage some
properties of the estate at a just and reasonable amount, subject to the
approval of the Court.
On December 4, 1990, the respondent Judge issued an order resolving to call the parties
to a conference on December 17, 1990. The conference was held, but still the parties
were unable to arrive at an agreement. So, on January 4, 1991, it was continued,
wherein the parties actually agreed that the heirs be allowed to sell their shares of the
properties to Yu Hwa Ping for the price already agreed upon, while herein petitioners
negotiate for a higher price with Yu Hwa Ping.
Petitioners, then, instead filed a "Supplemental Opposition" to the approval of the Deed
of Conditional Sale.
On March 29, 1991, the respondent Court issued the challenged Order, the dispositive
portion of which states, to wit:
WHEREFORE, the Order dated August 7, 1990, is hereby lifted,
reconsidered and set aside, and another one is hereby issued as follows:
1. Approving the conditional sale, dated September 10, 1989, executed
by the heirs-movants, in favor of Yu Hwa Ping, pertaining to their
respective shares in the properties covered by TCT Nos. 155569,
120145, 1945 and 18709 of the Register of Deeds of Quezon City;
2. Ordering the administrator Herodotus Acebedo to sell the remaining
portions of the said properties also in favor of Yu Hwa Ping at the same
price as the sale executed by the herein heirs-movants;
3. Ordering Yu Hwa Ping to deposit with the Court the total remaining
balance of the purchase price for the said lots within TWENTY (20) DAYS
from notice hereof;
4. The motion to cite former administrator Miguel Acebedo in contempt of
court, resulting from his failure to submit the owner's copy of TCT Nos.
155569, and 120145 is hereby denied. 3
Yu Hwa Ping, on April 4, 1991, deposited the remaining balance of the purchase price for
the properties subject of the Deed of Conditional Sale in the amount of P6,500,000.00.
Petitioners herein received the questioned Order on April 11, 1991. Twenty one (21)
days thereafter, they filed a Motion for Reconsideration, praying that the Court reinstate
its Order of August 17, 1990. To this, private respondents filed their Opposition. 4
Instead of making a reply, petitioners herein filed a Supplemental Motion for
Reconsideration. The motions for reconsideration of herein petitioners were denied by
the respondent Court on August 23, 1991.
On September 23, 1991, herein petitioners filed a Motion for Partial Reconsideration,
hoping for the last time that they would be able to convince the Court that its Order dated
March 29, 1991 in effect approving the conditional sale is erroneous and beyond its
jurisdiction.
On October 17, 1991, the respondent Court denied the Motion for Partial
Reconsideration for "lack of merit".
On November 7, 1991, private respondents filed a Motion for Execution of the Order
dated March 29, 1991. This was pending resolution when the petitioners filed this
Petition for Certiorari.
The controversy in the case at bar revolves around one question: Is it within the
jurisdiction of the lower court, acting as a probate court, to issue an Order approving the
Deed of Conditional Sale executed by respondents-heirs without prior court approval and
to order herein Administrator to sell the remaining portion of said properties?
We answer in the positive?
In the case of Dillena vs. Court of Appeals, 5 this Court made a pronouncement that it is
within the jurisdiction of the probate court to approve the sale of properties of a deceased
person by his prospective heirs before final adjudication. Hence, it is error to say that this
matter should be threshed out in a separate action.
The Court further elaborated that although the Rules of Court do not specifically state
that the sale of an immovable property belonging to an estate of a decedent, in a special
proceeding, should be made with the approval of the court, this authority is necessarily
included in its capacity as a probate court. Therefore, it is clear that the probate court in
the case at bar, acted within its jurisdiction in issuing the Order approving the Deed of
Conditional Sale.
205
We cannot countenance the position maintained by herein petitioners that said
conditional sale is null and void for lack of prior court approval. The sale precisely was
made conditional, the condition being that the same should first be approved by the
probate court.
Petitioners herein anchor their claim on Section 7, Rule 89 of the Rules of Court. 6 It is
settled that court approval is necessary for the validity of any disposition of the decedent's
estate. However, reference to judicial approval cannot adversely affect the substantive rights
of the heirs to dispose of their ideal share in the co-heirship and/or co-ownership among the
heirs. 7
This Court had the occasion to rule that there is no doubt that an heir can sell whatever
right, interest, or participation he may have in the property under administration. This is a
matter which comes under the jurisdiction of the probate court. 8
The right of an heir to dispose of the decedent's property, even if the same is under
administration, is based on the Civil Code provision 9 stating that the possession of
hereditary property is deemed transmitted to the heir without interruption and from the
moment of the death of the decedent, in case the inheritance is accepted. Where there are
however, two or more heirs, the whole estate of the decedent is, before its partition, owned in
common by such heirs. 10
The Civil Code, under the provisions on co-ownership, further qualifies this
right. 11 Although it is mandated that each co-owner shall have the full ownership of his part
and of the fruits and benefits pertaining thereto, and thus may alienate, assign or mortgage it,
and even substitute another person in its enjoyment, the effect of the alienation or the
mortgage, with respect to the
co-owners, shall be limited to the portion which may be allotted to him in the division upon the
termination of the co-ownership. 12 In other words, the law does not prohibit a co-owner from
selling, alienating or mortgaging his ideal share in the property held in common. 13
As early as 1942, this Court has recognized said right of an heir to dispose of property
under administration. In the case of Teves de Jakosalem vs. Rafols, et al., 14 it was said
that the sale made by an heir of his share in an inheritance, subject to the result of the
pending administration, in no wise, stands in the way of such administration. The Court then
relied on the provision of the Old Civil Code, Article 440 and Article 339 which are still in force
as Article 533 and Article 493, respectively, in the new Civil Code. The Court also cited the
words of a noted civilist, Manresa: "Upon the death of a person, each of his heirs 'becomes
the undivided owner of the whole estate left with respect to the part or portion which might be
adjudicated to him, a community of ownership being thus formed among the co-owners of the
estate which remains undivided'."
Private respondents having secured the approval of the probate court, a matter which is
unquestionably within its jurisdiction, and having established private respondents' right to
alienate the decedent's property subject of administration, this Petition should be
dismissed for lack of merit.
PREMISES considered, Petition is hereby DISMISSED. With Costs.
SO ORDERED.
G.R. No. 61584 November 25, 1992
PAULMITAN vs. CA
This is a petition for review on certiorari seeking the reversal of the decision 1 of the Court
of Appeals, dated July 14, 1982 in CA-G.R. No. 62255-R entitled "Alicio Paulmitan, et al. v.
Donato Sagario Paulmitan, et al." which affirmed the decision 2 of the then Court of First
Instance (now RTC) of Negros Occidental, 12th Judicial District, Branch IV, Bacolod City, in
Civil Case No. 11770.
The antecedent facts are as follows:
Agatona Sagario Paulmitan, who died sometime in 1953, 3 left the two following parcels of
land located in the Province of Negros Occidental: (1) Lot No. 757 with an area of 1,946
square meters covered by Original Certificate of Title (OCT) No. RO-8376; and (2) Lot No.
1091 with an area of 69,080 square meters and covered by OCT No. RO-11653. From her
marriage with Ciriaco Paulmitan, who is also now deceased, Agatona begot two legitimate
children, namely: Pascual Paulmitan, who also died in 1953, 4 apparently shortly after his
mother passed away, and Donato Paulmitan, who is one of the petitioners. Petitioner Juliana
P. Fanesa is Donato's daughter while the third petitioner, Rodolfo Fanes, is Juliana's
husband. Pascual Paulmitan, the other son of Agatona Sagario, is survived by the
respondents, who are his children, name: Alicio, Elena, Abelino, Adelina, Anita, Baking and
Anito, all surnamed Paulmitan.
Until 1963, the estate of Agatona Sagario Paulmitan remained unsettled and the titles to
the two lots mentioned above remained in the name of Agatona. However, on August 11,
1963, petitioner Donato Paulmitan executed an Affidavit of Declaration of Heirship,
extrajudicially adjudicating unto himself Lot No. 757 based on the claim that he is the
only surviving heir of Agatona Sagario. The affidavit was filed with the Register of Deeds
of Negros Occidental on August 20, 1963, cancelled OCT No. RO-8376 in the name of
Agatona Sagario and issued Transfer Certificate of Title (TCT) No. 35979 in Donato's
name.
206
As regards Lot No. 1091, Donato executed on May 28, 1974 a Deed of Sale over the
same in favor of petitioner Juliana P. Fanesa, his daughter. 5
In the meantime, sometime in 1952, for non-payment of taxes, Lot No. 1091 was
forfeited and sold at a public auction, with the Provincial Government of Negros
Occidental being the buyer. A Certificate of Sale over the land was executed by the
Provincial Treasurer in favor of the Provincial Board of Negros Occidental. 6
On May 29, 1974, Juliana P. Fanesa redeemed the property from the Provincial
Government of Negros Occidental for the amount of P2,959.09. 7
On learning of these transactions, respondents children of the late Pascual Paulmitan
filed on January 18, 1975 with the Court of First Instance of Negros Occidental a
Complaint against petitioners to partition the properties plus damages.
Petitioners set up the defense of prescription with respect to Lot No. 757 as an
affirmative defense, contending that the Complaint was filed more than eleven years
after the issuance of a transfer certificate of title to Donato Paulmitan over the land as
consequence of the registration with the Register of Deeds, of Donato's affidavit
extrajudicially adjudicating unto himself Lot No. 757. As regards Lot No. 1091, petitioner
Juliana P. Fanesa claimed in her Answer to the Complaint that she acquired exclusive
ownership thereof not only by means of a deed of sale executed in her favor by her
father, petitioner Donato Paulmitan, but also by way of redemption from the Provincial
Government of Negros Occidental.
Acting on the petitioners' affirmative defense of prescription with respect to Lot No. 757,
the trial court issued an order dated April 22, 1976 dismissing the complaint as to the
said property upon finding merit in petitioners' affirmative defense. This order, which is
not the object of the present petition, has become final after respondents' failure to
appeal therefrom.
Trial proceeded with respect to Lot No. 1091. In a decision dated May 20, 1977, the trial
court decided in favor of respondents as to Lot No. 1091. According to the trial court, the
respondents, as descendants of Agatona Sagario Paulmitan were entitled to one-half
(1/2) of Lot No. 1091, pro indiviso. The sale by petitioner Donato Paulmitan to his
daughter, petitioner Juliana P. Fanesa, did not prejudice their rights. And the repurchase
by Juliana P. Fanesa of the land from the Provincial Government of Negros Occidental
did not vest in Juliana exclusive ownership over the entire land but only gave her the
right to be reimbursed for the amount paid to redeem the property. The trial court ordered
the partition of the land and directed petitioners Donato Paulmitan and Juliana P. Fanesa
to pay private respondents certain amounts representing the latter's share in the fruits of
the land. On the other hand, respondents were directed to pay P1,479.55 to Juliana P.
Fanesa as their share in the redemption price paid by Fanesa to the Provincial
Government of Negros Occidental. The dispositive portion of the trial court's decision
reads:
WHEREFORE, judgment is hereby rendered on the second cause of
action pleaded in the complain as follows:
1. The deed of sale (Exh. "F") dated May 28, 1974 is valid insofar as the
one-half undivided portion of Lot 1091 is concerned as to vest ownership
over said half portion in favor of defendant Juliana Fanesa and her
husband Rodolfo Fanesa, while the remaining half shall belong to
plaintiffs, pro-indiviso;
2. Lot 1091, Cadastral Survey of Pontevedra, Province of Negros
Occidental, now covered by TCT No. RO-11653 (N.A.), is ordered
partitioned. The parties must proceed to an actual partition by property
instrument of partition, submitting the corresponding subdivision within
sixty (60) days from finality of this decision, and should they fail to agree,
commissioners of partition may be appointed by the Court;
3. Pending the physical partition, the Register of Deeds of Negros
Occidental is ordered to cancel Original Certificate of Title No. RO-11653
(N.A.) covering Lot 1091, Pontevedra Cadastre, and to issue in lieu
thereof a new certificate of title in the name of plaintiffs and defendants,
one-half portion each, pro-indiviso, as indicated in paragraph 1 above;
4. Plaintiffs are ordered to pay, jointly and severally, defendant Juliana
Fanesa the amount of P1,479.55 with interest at the legal rate from May
28, 1974 until paid;
5 Defendants Donato Sagario Paulmitan and Juliana Paulmitan Fanesa
are ordered to account to plaintiffs and to pay them, jointly and severally,
the value of the produce from Lot 1091 representing plaintiffs' share in
the amount of P5,000.00 per year from 1966 up to the time of actual
partition of the property, and to pay them the sum of P2,000.00 as
attorney's fees as well as the costs of the suit.
xxx xxx xxx
On appeal, the Court of Appeals affirmed the trial court's decision. Hence this petition.
207
To determine the rights and obligations of the parties to the land in question, it is well to
review, initially, the relatives who survived the decedent Agatona Sagario Paulmitan.
When Agatona died in 1953, she was survived by two (2) sons, Donato and Pascual. A
few months later in the same year, Pascual died, leaving seven children, the private
respondents. On the other had, Donato's sole offspring was petitioner Juliana P. Fanesa.
At the time of the relevant transactions over the properties of decedent Agatona Sagario
Paulmitan, her son Pascual had died, survived by respondents, his children. It is, thus,
tempting to apply the principles pertaining to the right of representation as regards
respondents. It must, however, be borne in mind that Pascual did no predecease his
mother, 8 thus precluding the operation of the provisions in the Civil Code on the right of representation 9 with
respect to his children, the respondents. When Agatona Sagario Paulmitan died intestate in
1952, her two (2) sons Donato and Pascual were still alive. Since it is well-settled by virtue of
Article 777 of the Civil Code that "[t]he rights to the succession are transmitted from the
moment of the death of the decedent," 10 the right of ownership, not only of Donato but also of
Pascual, over their respective shares in the inheritance was automatically and by operation of
law vested in them in 1953 when their mother died intestate. At that stage, the children of
Donato and Pascual did not yet have any right over the inheritance since "[i]n every
inheritance, the relative nearest in degree excludes the more distant
ones." 11 Donato and Pascual excluded their children as to the right to inherit from Agatona
Sagario Paulmitan, their mother.
From the time of the death of Agatona Sagario Paulmitan to the subsequent passing
away of her son Pascual in 1953, the estate remained unpartitioned. Article 1078 of the
Civil Code provides: "Where there are two or more heirs, the whole estate of the
decedent is, before its partition, owned in common by such heirs, subject to the payment
of debts of the deceased." 12 Donato and Pascual Paulmitan were, therefore, co-owners of
the estate left by their mother as no partition was ever made.
When Pascual Paulmitan died intestate in 1953, his children, the respondents,
succeeded him in the co-ownership of the disputed property. Pascual Paulmitan's right of
ownership over an undivided portion of the property passed on to his children, who, from
the time of Pascual's death, became co-owners with their uncle Donato over the disputed
decedent estate.
Petitioner Juliana P. Fanesa claims ownership over Lot No. 1091 by virtue of two
transactions, namely: (a) the sale made in her favor by her father Donato Paulmitan; and
(b) her redemption of the land from the Provincial of Negros Occidental after it was
forfeited for non-payment of taxes.
When Donato Paulmitan sold on May 28, 1974 Lot No. 1091 to his daughter Juliana P.
Fanesa, he was only a co-owner with respondents and as such, he could only sell that
portion which may be allotted to him upon termination of the co-ownership. 13 The sale did
not prejudice the rights of respondents to one half (1/2) undivided share of the land which
they inherited from their father. It did not vest ownership in the entire land with the buyer but
transferred only the seller's pro-indiviso share in the property 14 and consequently made the
buyer a co-owner of the land until it is partitioned. InBailon-Casilao v. Court of Appeals, 15 the
Court, through Justice Irene R. Cortes, outlined the effects of a sale by one co-owner without
the consent of all the co-owners, thus:
The rights of a co-owner of a certain property are clearly specified in
Article 493 of the Civil Code, Thus:
Art. 493. Each co-owner shall have the full ownership of his part and of
the fruits and benefits pertaining thereto, and he may therefore alienate,
assign or mortgage it and even substitute another person its enjoyment,
except when personal rights are involved. But the effect of the alienation
or mortgage, with respect to the co-owners, shall be limited to the portion
which may be allotted to him in the division upon the termination of the
co-ownership. [Emphasis supplied.]
As early as 1923, this Court has ruled that even if a co-owner sells the
whole property as his, the sale will affect only his own share but not those
of the other co-owners who did not consent to the sale [Punsalan v. Boon
Liat, 44 Phil. 320 (1923)]. This is because under the aforementioned
codal provision, the sale or other disposition affects only his undivided
share and the transferee gets only what would correspond to his grantor
in the partition of the thing owned in common [Ramirez v. Bautista, 14
Phil. 528 (1909)]. Consequently, by virtue of the sales made by Rosalia
and Gaudencio Bailon which are valid with respect to their proportionate
shares, and the subsequent transfers which culminated in the sale to
private respondent Celestino Afable, the said Afable thereby became a
co-owner of the disputed parcel of land as correctly held by the lower
court since the sales produced the effect of substituting the buyers in the
enjoyment thereof [Mainit v. Bandoy, 14 Phil. 730 (1910)].
From the foregoing, it may be deduced that since a co-owner is entitled to
sell his undivided share, a sale of the entire property by one co-owner
without the consent of the other co-owners is not null and void. However,
only the rights of the co-owner-seller are transferred, thereby making the
buyer a co-owner of the property.
208
Applying this principle to the case at bar, the sale by petitioner Donato Paulmitan of the
land to his daughter, petitioner Juliana P. Fanesa, did not give to the latter ownership
over the entire land but merely transferred to her the one half (1/2) undivided share of
her father, thus making her the co-owner of the land in question with the respondents,
her first cousins.
Petitioner Juliana P. Fanesa also claims ownership of the entire property by virtue of the
fact that when the Provincial Government of Negros Occidental bought the land after it
was forfeited for non-payment of taxes, she redeemed it.
The contention is without merit.
The redemption of the land made by Fanesa did not terminate the co-ownership nor give
her title to the entire land subject of the co-ownership. Speaking on the same issue
raised by petitioners, the Court, in Adille v. Court of Appeals, 16 resolved the same with the
following pronouncements:
The petition raises a purely legal issue: May a co-owner acquire
exclusive ownership over the property held in common?
Essentially, it is the petitioners' contention that the property subject of
dispute devolved upon him upon the failure of his co-heirs to join him in
its redemption within the period required by law. He relies on the
provisions of Article 1515 of the old Civil Code, Article 1613 of the
present Code, giving the vendee a retro the right to demand redemption
of the entire property.
There is no merit in this petition.
The right of repurchase may be exercised by co-owner with respect to his
share alone (CIVIL CODE, art. 1612, CIVIL CODE (1889), art. (1514.).
While the records show that petitioner redeemed the property in its
entirety, shouldering the expenses therefor, that did not make him the
owner of all of it. In other words, it did not put to end the existing state of
co-ownership (Supra, Art. 489). There is no doubt that redemption of
property entails a necessary expense. Under the Civil Code:
Art. 488. Each co-owner shall have a right to compel the other co-owners
to contribute to the expenses of preservation of the thing or right owned
in common and to the taxes. Any one of the latter may exempt himself
from this obligation by renouncing so much of his undivided interest as
may be equivalent to his share of the expenses and taxes. No such
waiver shall be made if it is prejudicial to the co-ownership.
The result is that the property remains to be in a condition of co-
ownership. While a vendee a retro, under Article 1613 of the Code, "may
not be compelled to consent to a partial redemption," the redemption by
one co-heir or co-owner of the property in its totality does not vest in him
ownership over it. Failure on the part of all the co-owners to redeem it
entitles the vendee a retro to retain the property and consolidate title
thereto in his name (Supra, art. 1607). But the provision does not give to
the redeeming co-owner the right to the entire property. It does not
provide for a mode of terminating a co-ownership.
Although petitioner Fanesa did not acquire ownership over the entire lot by virtue of the
redemption she made, nevertheless, she did acquire the right to reimbursed for half of
the redemption price she paid to the Provincial Government of Negros Occidental on
behalf of her co-owners. Until reimbursed, Fanesa hold a lien upon the subject property
for the amount due her. 17
Finally, petitioners dispute the order of the trial court, which the Court of Appeals
affirmed, for them to pay private respondents P5,000.00 per year from 1966 until the
partition of the estate which represents the share of private respondents in the fruits of
the land. According to petitioners, the land is being leased for P2,000.00 per year only.
This assigned error, however raises a factual question. The settled rule is that only
questions of law may be raised in a petition for review. As a general rule, findings of fact
made by the trial court and the Court of Appeals are final and conclusive and cannot be
reviewed on appeal. 18
WHEREFORE, the petition is DENIED and the decision of the Court of Appeals
AFFIRMED.
SO ORDERED.
G.R. No. L-33187 March 31, 1980
PAMPLONA vs. MORETO
This is a petition for certiorari by way of appeal from the decision of the Court of
Appeals 1 in CA-G.R. No. 35962-R, entitled "Vivencio Moreto, et al., Plaintiff-Appellees vs.
Cornelio Pamplona, et al., Defendants-Appellants," affirming the decision of the Court of First
Instance of Laguna, Branch I at Biñan.
209
The facts, as stated in the decision appealed from, show that:
Flaviano Moreto and Monica Maniega were husband and wife. During their marriage,
they acquired adjacent lots Nos. 1495, 4545, and 1496 of the Calamba Friar Land
Estate, situated in Calamba, Laguna, containing 781-544 and 1,021 square meters
respectively and covered by certificates of title issued in the name of "Flaviano Moreto,
married to Monica Maniega."
The spouses Flaviano Moreto and Monica Maniega begot during their marriage six (6)
children, namely, Ursulo, Marta, La Paz, Alipio, Pablo, and Leandro, all surnamed
Moreto.
Ursulo Moreto died intestate on May 24, 1959 leaving as his heirs herein plaintiffs
Vivencio, Marcelo, Rosario, Victor, Paulina, Marta and Eligio, all surnamed Moreto.
Marta Moreto died also intestate on April 30, 1938 leaving as her heir plaintiff Victoria
Tuiza.
La Paz Moreto died intestate on July 17, 1954 leaving the following heirs, namely, herein
plaintiffs Pablo, Severina, Lazaro, and Lorenzo, all surnamed Mendoza.
Alipio Moreto died intestate on June 30, 1943 leaving as his heir herein plaintiff Josefina
Moreto.
Pablo Moreto died intestate on April 25, 1942 leaving no issue and as his heirs his
brother plaintiff Leandro Moreto and the other plaintiffs herein.
On May 6, 1946, Monica Maniega died intestate in Calamba, Laguna.
On July 30, 1952, or more than six (6) years after the death of his wife Monica Maniega,
Flaviano Moreto, without the consent of the heirs of his said deceased wife Monica, and
before any liquidation of the conjugal partnership of Monica and Flaviano could be
effected, executed in favor of Geminiano Pamplona, married to defendant Apolonia Onte,
the deed of absolute sale (Exh. "1") covering lot No. 1495 for P900.00. The deed of sale
(Exh. "1") contained a description of lot No. 1495 as having an area of 781 square
meters and covered by transfer certificate of title No. 14570 issued in the name of
Flaviano Moreto, married to Monica Maniega, although the lot was acquired during their
marriage. As a result of the sale, the said certificate of title was cancelled and a new
transfer certificate of title No. T-5671 was issued in the name of Geminiano Pamplona
married to Apolonia Onte (Exh. "A").
After the execution of the above-mentioned deed of sale (Exh. "1"), the spouses
Geminiano Pamplona and Apolonia Onte constructed their house on the eastern part of
lot 1496 as Flaviano Moreto, at the time of the sale, pointed to it as the land which he
sold to Geminiano Pamplona. Shortly thereafter, Rafael Pamplona, son of the spouses
Geminiano Pamplona and Apolonia Onte, also built his house within lot 1496 about one
meter from its boundary with the adjoining lot. The vendor Flaviano Moreto and the
vendee Geminiano Pamplona thought all the time that the portion of 781 square meters
which was the subject matter of their sale transaction was No. 1495 and so lot No. 1495
appears to be the subject matter in the deed of sale (Exh. "1") although the fact is that
the said portion sold thought of by the parties to be lot No. 1495 is a part of lot No. 1496.
From 1956 to 1960, the spouses Geminiano Pamplona and Apolonio Onte enlarged their
house and they even constructed a piggery corral at the back of their said house about
one and one-half meters from the eastern boundary of lot 1496.
On August 12, 1956, Flaviano Moreto died intestate. In 1961, the plaintiffs demanded on
the defendants to vacate the premises where they had their house and piggery on the
ground that Flaviano Moreto had no right to sell the lot which he sold to Geminiano
Pamplona as the same belongs to the conjugal partnership of Flaviano and his deceased
wife and the latter was already dead when the sale was executed without the consent of
the plaintiffs who are the heirs of Monica. The spouses Geminiano Pamplona and
Apolonia Onte refused to vacate the premises occupied by them and hence, this suit was
instituted by the heirs of Monica Maniega seeking for the declaration of the nullity of the
deed of sale of July 30, 1952 above-mentioned as regards one-half of the property
subject matter of said deed; to declare the plaintiffs as the rightful owners of the other
half of said lot; to allow the plaintiffs to redeem the one-half portion thereof sold to the
defendants. "After payment of the other half of the purchase price"; to order the
defendants to vacate the portions occupied by them; to order the defendants to pay
actual and moral damages and attorney's fees to the plaintiffs; to order the defendants to
pay plaintiffs P120.00 a year from August 1958 until they have vacated the premises
occupied by them for the use and occupancy of the same.
The defendants claim that the sale made by Flaviano Moreto in their favor is valid as the
lot sold is registered in the name of Flaviano Moreto and they are purchasers believing in
good faith that the vendor was the sole owner of the lot sold.
After a relocation of lots 1495, 1496 and 4545 made by agreement of the parties, it was
found out that there was mutual error between Flaviano Moreto and the defendants in
the execution of the deed of sale because while the said deed recited that the lot sold is
lot No. 1495, the real intention of the parties is that it was a portion consisting of 781
square meters of lot No. 1496 which was the subject matter of their sale transaction.
210
After trial, the lower court rendered judgment, the dispositive part thereof being as
follows:
WHEREFORE, judgment is hereby rendered for the plaintiffs declaring
the deed of absolute sale dated July 30, 1952 pertaining to the eastern
portion of Lot 1496 covering an area of 781 square meters null and void
as regards the 390.5 square meters of which plaintiffs are hereby
declared the rightful owners and entitled to its possession.
The sale is ordered valid with respect to the eastern one-half (1/2) of
1781 square meters of Lot 1496 measuring 390.5 square meters of which
defendants are declared lawful owners and entitled to its possession.
After proper survey segregating the eastern one-half portion with an area
of 390.5 square meters of Lot 1496, the defendants shall be entitled to a
certificate of title covering said portion and Transfer Certificate of Title No.
9843 of the office of the Register of Deeds of Laguna shall be cancelled
accordingly and new titles issued to the plaintiffs and to the defendants
covering their respective portions.
Transfer Certificate of Title No. 5671 of the office of the Register of
Deeds of Laguna covering Lot No. 1495 and registered in the name of
Cornelio Pamplona, married to Apolonia Onte, is by virtue of this decision
ordered cancelled. The defendants are ordered to surrender to the office
of the Register of Deeds of Laguna the owner's duplicate of Transfer
Certificate of Title No. 5671 within thirty (30) days after this decision shall
have become final for cancellation in accordance with this decision.
Let copy of this decision be furnished the Register of Deeds for the
province of Laguna for his information and guidance.
With costs against the defendants. 2
The defendants-appellants, not being satisfied with said judgment, appealed to the Court
of Appeals, which affirmed the judgment, hence they now come to this Court.
The fundamental and crucial issue in the case at bar is whether under the facts and
circumstances duly established by the evidence, petitioners are entitled to the full
ownership of the property in litigation, or only one-half of the same.
There is no question that when the petitioners purchased the property on July 30, 1952
from Flaviano Moreto for the price of P900.00, his wife Monica Maniega had already
been dead six years before, Monica having died on May 6, 1946. Hence, the conjugal
partnership of the spouses Flaviano Moreto and Monica Maniega had already been
dissolved. (Article 175, (1) New Civil Code; Article 1417, Old Civil Code). The records
show that the conjugal estate had not been inventoried, liquidated, settled and divided by
the heirs thereto in accordance with law. The necessary proceedings for the liquidation of
the conjugal partnership were not instituted by the heirs either in the testate or intestate
proceedings of the deceased spouse pursuant to Act 3176 amending Section 685 of Act
190. Neither was there an extra-judicial partition between the surviving spouse and the
heirs of the deceased spouse nor was an ordinary action for partition brought for the
purpose. Accordingly, the estate became the property of a community between the
surviving husband, Flaviano Moreto, and his children with the deceased Monica Maniega
in the concept of a co-ownership.
The community property of the marriage, at the dissolution of this bond
by the death of one of the spouses, ceases to belong to the legal
partnership and becomes the property of a community, by operation of
law, between the surviving spouse and the heirs of the deceased spouse,
or the exclusive property of the widower or the widow, it he or she be the
heir of the deceased spouse. Every co-owner shall have full ownership of
his part and in the fruits and benefits derived therefrom, and he therefore
may alienate, assign or mortgage it, and even substitute another person
in its enjoyment, unless personal rights are in question. (Marigsa vs.
Macabuntoc, 17 Phil. 107)
In Borja vs. Addision, 44 Phil. 895, 906, the Supreme Court said that "(t)here is no
reason in law why the heirs of the deceased wife may not form a partnership with the
surviving husband for the management and control of the community property of the
marriage and conceivably such a partnership, or rather community of property, between
the heirs and the surviving husband might be formed without a written agreement."
In Prades vs. Tecson, 49 Phil. 230, the Supreme Court held that "(a)lthough, when the
wife dies, the surviving husband, as administrator of the community property, has
authority to sell the property with•ut the concurrence of the children of the marriage,
nevertheless this power can be waived in favor of the children, with the result of bringing
about a conventional ownership in common between the father and children as to such
property; and any one purchasing with knowledge of the changed status of the property
will acquire only the undivided interest of those members of the family who join in the act
of conveyance.
It is also not disputed that immediately after the execution of the sale in 1952, the
vendees constructed their house on the eastern part of Lot 1496 which the vendor
211
pointed out to them as the area sold, and two weeks thereafter, Rafael who is a son of
the vendees, also built his house within Lot 1496. Subsequently, a cemented piggery
coral was constructed by the vendees at the back of their house about one and one-half
meters from the eastern boundary of Lot 1496. Both vendor and vendees believed all the
time that the area of 781 sq. meters subject of the sale was Lot No. 1495 which
according to its title (T.C.T. No. 14570) contains an area of 781 sq. meters so that the
deed of sale between the parties Identified and described the land sold as Lot 1495. But
actually, as verified later by a surveyor upon agreement of the parties during the
proceedings of the case below, the area sold was within Lot 1496.
Again, there is no dispute that the houses of the spouses Cornelio Pamplona and
Apolonia Onte as well as that of their son Rafael Pamplona, including the concrete
piggery coral adjacent thereto, stood on the land from 1952 up to the filing of the
complaint by the private respondents on July 25, 1961, or a period of over nine (9) years.
And during said period, the private respondents who are the heirs of Monica Maniega as
well as of Flaviano Moreto who also died intestate on August 12, 1956, lived as
neighbors to the petitioner-vendees, yet lifted no finger to question the occupation,
possession and ownership of the land purchased by the Pamplonas, so that We are
persuaded and convinced to rule that private respondents are in estoppel by laches to
claim half of the property, in dispute as null and void. Estoppel by laches is a rule of
equity which bars a claimant from presenting his claim when, by reason of abandonment
and negligence, he allowed a long time to elapse without presenting the same.
(International Banking Corporation vs. Yared, 59 Phil. 92)
We have ruled that at the time of the sale in 1952, the conjugal partnership was already
dissolved six years before and therefore, the estate became a co-ownership between
Flaviano Moreto, the surviving husband, and the heirs of his deceased wife, Monica
Maniega. Article 493 of the New Civil Code is applicable and it provides a follows:
Art. 493. Each co-owner shall have the full ownership of his part and of
the fruits and benefits pertaining thereto, and he may therefore alienate,
assign or mortgage it, and even substitute another person in its
enjoyment, except when personal rights are involve. But the effect of the
alienation or the mortgage, with respect to the co-owners, shall be limited
to the portion which may be allotted to him in the division upon the
termination of the co-ownership.
We agree with the petitioner that there was a partial partition of the co-ownership when
at the time of the sale Flaviano Moreto pointed out the area and location of the 781 sq.
meters sold by him to the petitioners-vendees on which the latter built their house and
also that whereon Rafael, the son of petitioners likewise erected his house and an
adjacent coral for piggery.
Petitioners point to the fact that spouses Flaviano Moreto and Monica Maniega owned
three parcels of land denominated as Lot 1495 having an area of 781 sq. meters, Lot
1496 with an area of 1,021 sq. meters, and Lot 4545 with an area of 544 sq. meters. The
three lots have a total area of 2,346 sq. meters. These three parcels of lots are
contiguous with one another as each is bounded on one side by the other, thus: Lot 4545
is bounded on the northeast by Lot 1495 and on the southeast by Lot 1496. Lot 1495 is
bounded on the west by Lot 4545. Lot 1496 is bounded on the west by Lot 4545. It is
therefore, clear that the three lots constitute one big land. They are not separate
properties located in different places but they abut each other. This is not disputed by
private respondents. Hence, at the time of the sale, the co-ownership constituted or
covered these three lots adjacent to each other. And since Flaviano Moreto was entitled
to one-half pro-indiviso of the entire land area or 1,173 sq. meters as his share, he had a
perfect legal and lawful right to dispose of 781 sq. meters of his share to the Pamplona
spouses. Indeed, there was still a remainder of some 392 sq. meters belonging to him at
the time of the sale.
We reject respondent Court's ruling that the sale was valid as to one-half and invalid as
to the other half for the very simple reason that Flaviano Moreto, the vendor, had the
legal right to more than 781 sq. meters of the communal estate, a title which he could
dispose, alienate in favor of the vendees-petitioners. The title may be pro-indiviso or
inchoate but the moment the co-owner as vendor pointed out its location and even
indicated the boundaries over which the fences were to be erectd without objection,
protest or complaint by the other co-owners, on the contrary they acquiesced and
tolerated such alienation, occupation and possession, We rule that a factual partition or
termination of the co-ownership, although partial, was created, and barred not only the
vendor, Flaviano Moreto, but also his heirs, the private respondents herein from
asserting as against the vendees-petitioners any right or title in derogation of the deed of
sale executed by said vendor Flaiano Moreto.
Equity commands that the private respondents, the successors of both the deceased
spouses, Flaviano Moreto and Monica Maniega be not allowed to impugn the sale
executed by Flaviano Moreto who indisputably received the consideration of P900.00
and which he, including his children, benefitted from the same. Moreover, as the heirs of
both Monica Maniega and Flaviano Moreto, private respondents are duty-bound to
comply with the provisions of Articles 1458 and 1495, Civil Code, which is the obligation
of the vendor of the property of delivering and transfering the ownership of the whole
property sold, which is transmitted on his death to his heirs, the herein private
respondents. The articles cited provide, thus:
212
 Art. 1458. By the contract of sale one of the contracting parties obligates
himself to transfer the ownership of and to deliver a determinate thing,
and the other part to pay therefore a price certain in money or its
equivalent.
A contract of sale may be absolute or conditionial.
Art. 1495. The vendor is bound to transfer the ownership of and deliver,
as well as warrant the thing which is the object of the sale.
Under Article 776, New Civil Code, the inheritance which private respondents received
from their deceased parents and/or predecessors-in-interest included all the property
rights and obligations which were not extinguished by their parents' death. And under
Art. 1311, paragraph 1, New Civil Code, the contract of sale executed by the deceased
Flaviano Moreto took effect between the parties, their assigns and heirs, who are the
private respondents herein. Accordingly, to the private respondents is transmitted the
obligation to deliver in full ownership the whole area of 781 sq. meters to the petitioners
(which was the original obligation of their predecessor Flaviano Moreto) and not only
one-half thereof. Private respondents must comply with said obligation.
The records reveal that the area of 781 sq. meters sold to and occupied by petitioners for
more than 9 years already as of the filing of the complaint in 1961 had been re-surveyed
by private land surveyor Daniel Aranas. Petitioners are entitled to a segregation of the
area from Transfer Certificate of Title No. T-9843 covering Lot 1496 and they are also
entitled to the issuance of a new Transfer Certificate of Title in their name based on the
relocation survey.
WHEREFORE, IN VIEW OF THE FOREGOING, the judgment appealed from is hereby
AFFIRMED with modification in the sense that the sale made and executed by Flaviano
Moreto in favor of the petitioners-vendees is hereby declared legal and valid in its
entirely.
Petitioners are hereby declared owners in full ownership of the 781 sq. meters at the
eastern portion of Lot 1496 now occupied by said petitioners and whereon their houses
and piggery coral stand.
The Register of Deeds of Laguna is hereby ordered to segregate the area of 781 sq.
meters from Certificate of Title No. 9843 and to issue a new Transfer Certificate of Title
to the petitioners covering the segregated area of 781 sq. meters.
No costs.
SO ORDERED.
G.R. No. L-25014 October 17, 1973
VDA. DE CASTRO vs. ATIENZA
The Court rejects petitioners' appeal as without merit and affirms the judgment of the
appellate court. Petitioners' predecessor-in-interest as co-owner of an undivided one-half
interest in the fishpond could validly lease his interest to a third party, respondent
Atienza, independently of his co-owner (although said co-owner had also leased his
other undivided one-half interest to the same third party) and could likewise by mutual
agreement independently cancel his lease agreement with said third party. Said
predecessor-in-interest (and petitioners who have substituted him as his heirs) therefore
stands liable on his express undertaking to refund the advance rental paid to him by the
lessee on the cancelled lease and cannot invoke the non-cancellation of the co-owner's
lease to elude such liability.
The Court of Appeals, in its decision affirming in toto the judgment of the Manila court of
first instance ordering therein defendant-appellant Arsenio de Castro, Sr. (now deceased
and substituted by above-named petitioners as his heirs) "to return to the plaintiff
(respondent) Gregorio Atienza the sum P2,500.00 with legal interest from the date of the
filing of complaint until fully paid plus the sum of P250.00 as attorney's fees and the
costs of the suit", found the following facts to undisputed:
On January 24, 1956 the brothers Tomas de Castro and Arsenio de
Castro, Sr. leased to plaintiff a fishpond containing an area of 26 hectares
situated in Polo, Bulacan and forming part of a bigger parcel of land
covered by Transfer Certificate of Title No. 196450 of the registry of the
property of Bulacan. The lessors are co-owners in equal shares of the
leased property.
According to the contract of lease (Exh. 1) the term of the lease was for
five years from January 24, 1956 at a rental of P5,000 a year, the first
year's rental to be paid on February 1, 1956, the second on February 1,
1957 and the rental for the last three years on February 1, 1958. The first
year's rental was paid on time.
In the meantime, Tomas de Castro died.
In the month of November, 1956, plaintiff as lessee and defendant
Arsenio de Castro, Sr. as one of the lessors, agreed to set aside and
annul the contract of lease and for this purpose an agreement (Exh. A)
213
 was signed by them, Exhibit A as signed by plaintiff and defendant shows
that Felisa Cruz Vda. de Castro, widow of Tomas de Castro, was
intended to be made a party thereof in her capacity as representative of
the heirs of Tomas Castro.
Condition No. 2 of Exhibit A reads as follows:
"2. Na sa pamamagitan nito ay pinawawalang kabuluhan namin ang
nasabing kasulatan at nagkasundo kami na ang bawat isa sa amin ni
Arsenio de Castro at Felisa Cruz Vda. de Castro ay isauli kay
GREGORIO ATIENZA ang tig P2,500.00 o kabuuang halagang
P5,000.00 na paunang naibigay nito alinsunod sa nasabing kasulatan; na
ang nasabing tig P2,500.00 ay isasauli ng bawat isa sa amin sa o bago
dumating ang Dec. 30, 1956."
Felisa Cruz Vda. de Castro refused to sign Exhibit A. Defendant did not
pay the P2,500.00 which under the above-quoted paragraph of Exhibit A,
he should have paid on December 30, 1956. Demand for payment was
made by plaintiff's counsel on January 7, 1957 but to no avail, hence the
present action.
On the conflicting contentions between the parties as to who between them would attend
to securing the signature of Mrs. Felisa Cruz Vda. de Castro (widow of Tomas de Castro)
to the agreement of cancellation of the lease with respondent Atienza, the appellate court
found that "the testimony of the defendant (Arsenio de Castro, Sr.) ... supports the
contention of the plaintiff (Atienza) "that it was the defendant Arsenio who was interested
and undertook to do so, citing Arsenio's own declaration that "I agreed to sign this
document (referring to the cancellation) because of my desire to cancel our original
agreement" and that his purpose in obtaining the cancellation of said lease agreement
with plaintiff Atienza was "(B)ecause I had the intention of having said fishpond leased to
other persons and I cannot lease it to third parties unless I can secure the signature of
Felisa Vda. de Castro."
The appellate court thus held in effect that as Arsenio "was the one interested in
cancelling the lease (Exh. 1), it stands to reason that he most probably undertook to
obtain the signature of Mrs. Castro [widow and successor-in-interest of his brother
Tomas]" and that he could not invoke his own failure to obtain such signature to elude
his own undertaking and liability to refund respondent (plaintiff) his share of the rental
paid in advance by respondent on the cancelled lease in the sum of P2,500.00.
The appellate court furthermore correctly held that the consent or concurrence of Felisa
Vda. de Castro (as co-owner in succession of Tomas) was not an essential condition to
the validity and effectivity of the agreement of cancellation of the lease (Exhibit A) as
between Arsenio and respondent-lessee, contrary to petitioners' claim, holding that
"(S)ince there is no specific provision in Exhibit A supporting defendant's claim, we are
not prepared to supply such condition unless the same can be deduced from other
evidence or unless the terms of Exhibit A cannot be performed by plaintiff and defendant
without Mrs. Castro being bound as a party thereto."
The issue is simply reduced to whether Arsenio as co-owner of the fishpond owned pro-
indiviso by him with his brother Tomas (succeeded by Felisa Vda. de Castro) could
validly lease his half-interest to a third party (respondent Atienza) independently of his
co-owner, and in case his co-owner also leased his other half interest to the same third
party, whether Arsenio could cancel his own lease agreement with said third party?
The appellate court correctly resolved the issue thus: "Our view of the contract of lease
Exhibit 1 is that each of the Castro brothers, leased his undivided one-half interest in the
fishpond they owned in common to the plaintiff. Could one of them have validly leased
his interest without the other co-owner leasing his own? The answer to this is given by
appellant in his own brief (p. 14) when he said that it would result in a partnership
between the lessee and the owner of the other undivided half. If the lease could be
entered into partially by one of the co-owners, insofar as his interest is concerned, then
the lease, Exhibit 1, can also be cancelled partially as between plaintiff and defendant.
Therefore, we conclude that the consent of Mrs. Felisa Cruz Vda. de Castro is not
essential for the cancellation of the lease of defendant's one-half undivided share in the
fishpond to plaintiff."
The appellate court's judgment is fully supported by the Civil Code provisions on the
rights and prerogatives of co-owners, and specifically by Article 493 which expressly
provides that
Art. 493. Each co-owner shall have the full ownership of his part and of
the fruits and benefitspertaining thereto, and he may therefore alienate,
assign or mortgage it, and even substitute another person in its
enjoyment, except when personal rights are involved. But the effect of the
alienation or the mortgage, with respect to the co-owners, shall be limited
to the portion which may be alloted to him in the division upon the
termination of the co-ownership. *
ACCORDINGLY, the appealed judgment is hereby affirmed with costs against
petitioners.
214
G.R. No. 137152 January 29, 2001
CITY OF MANDALUYONG vs. AGUILAR
This is a petition for review under Rule 45 of the Rules of Court of the Orders dated
September 17, 1998 and December 29, 1998 of the Regional Trial Court, Branch 168,
Pasig City1 dismissing the petitioner's Amended Complaint in SCA No. 1427 for
expropriation of two (2) parcels of land in Mandaluyong City. 1âw phi1.nêt
The antecedent facts are as follows:
On August 4, 1997, petitioner filed with the Regional Trial Court, Branch 168, Pasig City
a complaint for expropriation entitled "City of Mandaluyong, plaintiff v. Antonio N.,
Francisco N, Thelma N, Eusebio N, Rodolfo N., all surnamed Aguilar,
defendants." Petitioner sought to expropriate three (3) adjoining parcels of land with an
aggregate area of 1,847 square meters registered under Transfer Certificates of Title
Nos. 59780, 63766 and 63767 in the names of the defendants, herein respondents,
located at 9 de Febrero Street, Barangay Mauwag, City of Mandaluyong; on a portion of
the 3 lots, respondents constructed residential houses several decades ago which they
had since leased out to tenants until the present; on the vacant portion of the lots, other
families constructed residential structures which they likewise occupied; in 1983, the lots
were classified by Resolution No. 125 of the Board of the Housing and Urban
Development Coordinating Council as an Area for Priority Development for urban land
reform under Proclamation Nos. 1967 and 2284 of then President Marcos; as a result of
this classification, the tenants and occupants of the lots offered to purchase the land from
respondents, but the latter refused to sell; on November 7, 1996, the Sangguniang
Panlungsod of petitioner, upon petition of the Kapitbisig, an association of tenants and
occupants of the subject land, adopted Resolution No. 516, Series of 1996 authorizing
Mayor Benjamin Abalos of the City of Mandaluyong to initiate action for the expropriation
of the subject lots and construction of a medium-rise condominium for qualified
occupants of the land; on January 10, 1996, Mayor Abalos sent a letter to respondents
offering to purchase the said property at P3,000.00 per square meter; respondents did
not answer the letter. Petitioner thus prayed for the expropriation of the said lots and the
fixing of just compensation at the fair market value of P3,000.00 per square meter.2
In their answer, respondents, except Eusebio N. Aguilar who died in 1995, denied having
received a copy of Mayor Abalos' offer to purchase their lots. They alleged that the
expropriation of their land is arbitrary and capricious, and is not for a public purpose; the
subject lots are their only real property and are too small for expropriation, while
petitioner has several properties inventoried for socialized housing; the fair market value
of P3,000.00 per square meter is arbitrary because the zonal valuation set by the Bureau
of Internal Revenue is P7,000.00 per square meter. As counterclaim, respondents
prayed for damages of P21 million.3
Respondents filed a "Motion for Preliminary Hearing" claiming that the defenses alleged
in their Answer are valid grounds for dismissal of the complaint for lack of jurisdiction
over the person of the defendants and lack of cause of action. Respondents prayed that
the affirmative defenses be set for preliminary hearing and that the complaint be
dismissed.4 Petitioner replied.
On November 5, 1997, petitioner filed an Amended Complaint and named as an
additional defendant Virginia N. Aguilar and, at the same time, substituted Eusebio
Aguilar with his heirs. Petitioner also excluded from expropriation TCT No. 59870 and
thereby reduced the area sought to be expropriated from three (3) parcels of land to two
(2) parcels totalling 1,636 square meters under TCT Nos. 63766 and 63767.5
The Amended Complaint was admitted by the trial court on December 18, 1997.
Respondents, who, with the exception of Virginia Aguilar and the Heirs of Eusebio
Aguilar had yet to be served with summons and copies of the Amended Complaint, filed
a "Manifestation and Motion" adopting their "Answer with Counterclaim" and "Motion for
Preliminary Hearing" as their answer to the Amended Complaint.6
The motion was granted. At the hearing of February 25, 1998, respondents presented
Antonio Aguilar who testified and identified several documentary evidence. Petitioner did
not present any evidence. Thereafter, both parties filed their respective memoranda.7
On September 17, 1998, the trial court issued an order dismissing the Amended
Complaint after declaring respondents as "small property owners" whose land is exempt
from expropriation under Republic Act No. 7279. The court also found that the
expropriation was not for a public purpose for petitioner's failure to present any evidence
that the intended beneficiaries of the expropriation are landless and homeless residents
of Mandaluyong. The court thus disposed of as follows:
"WHEREFORE, the Amended Complaint is hereby ordered dismissed without
pronouncement as to cost.
SO ORDERED."8
Petitioner moved for reconsideration. On December 29, 1998, the court denied the
motion. Hence this petition.
Petitioner claims that the trial court erred
215
 "IN UPHOLDING RESPONDENT'S CONTENTION THAT THEY QUALIFY AS
SMALL PROPERTY OWNERS AND ARE THUS EXEMPT FROM
EXPROPRIATION."9
Petitioner mainly claims that the size of the lots in litigation does not exempt the same
from expropriation in view of the fact that the said lots have been declared to be within
the Area for Priority Development (APD) No. 5 of Mandaluyong by virtue of Proclamation
No. 1967, as amended by Proclamation No. 2284 in relation to Presidential Decree No.
1517.10 This declaration allegedly authorizes petitioner to expropriate the property, ipso
facto, regardless of the area of the land.
Presidential Decree (P.D.) No. 1517, the Urban Land Reform Act, was issued by then
President Marcos in 1978. The decree adopted as a State policy the liberation of human
communities from blight, congestion and hazard, and promotion of their development
and modernization, the optimum use of land as a national resource for public
welfare.11 Pursuant to this law, Proclamation No. 1893 was issued in 1979 declaring the
entire Metro Manila as Urban Land Reform Zone for purposes of urban land reform. This
was amended in 1980 by Proclamation No. 1967 and in 1983 by Proclamation No. 2284
which identified and specified 245 sites in Metro Manila as Areas for Priority
Development and Urban Land Reform Zones.
In 1992, the Congress of the Philippines passed Republic Act No. 7279, the "Urban
Development and Housing Act of 1992." The law lays down as a policy that the state, in
cooperation with the private sector, undertake a comprehensive and continuing Urban
Development and Housing Program; uplift the conditions of the underprivileged and
homeless citizens in urban, areas and resettlement areas by making available to them
decent housing at affordable cost, basic services and employment opportunities and
provide for the rational use and development of urban land to bring about, among others,
equitable utilization of residential lands; encourage more effective people's participation
in the urban development process and improve the capability of local government units in
undertaking urban development and housing programs and projects.12 Towards this end,
all city and municipal governments are mandated to conduct an inventory of all lands
and improvements within their respective localities, and in coordination with the National
Housing Authority, the Housing and Land Use Regulatory Board, the National Mapping
Resource Information Authority, and the Land Management Bureau,identify lands for
socialized housing and resettlement areas for the immediate and future needs of the
underprivileged and homeless in the urban areas, acquire the lands, and dispose of
said lands to the beneficiaries of the program.13
The acquisition of lands for socialized housing is governed by several provisions in the
law. Section 9 of R.A. 7279 provides:
"Sec. 9. Priorities in the Acquisition of Land. — Lands for socialized housing shall
be acquired in the following order:
(a) Those owned by the Government or any of its subdivisions,
instrumentalities, or agencies, including government-owned or controlled
corporations and their subsidiaries;
(b) Alienable lands of the public domain;
(c) Unregistered or abandoned and idle lands;
(d) Those within the declared Areas for Priority Development, Zonal
Improvement Program sites, and Slum Improvement and Resettlement
Program sites which have not yet been acquired;
(e) Bagong Lipunan Improvement of Sites and Services or BLISS Sites
which have not yet been acquired;
(f) Privately-owned lands.
Where on-site development is found more practicable and advantageous to the
beneficiaries, the priorities mentioned in this section shall not apply. The local
government units shall give budgetary priority to on-site development of
government lands."
Lands for socialized housing are to be acquired in the following order: (1) government
lands; (2) alienable lands of the public domain; (3) unregistered or abandoned or idle
lands; (4) lands within the declared Areas for Priority Development (APD), Zonal
Improvement Program (ZIP) sites, Slum Improvement and Resettlement (SIR) sites
which have not yet been acquired; (5) BLISS sites which have not yet been acquired;
and (6) privately-owned lands.
There is no dispute that the two lots in litigation are privately-owned and therefore last in
the order of priority acquisition. However, the law also provides that lands within the
declared APD's which have not yet been acquired by the government are fourth in the
order of priority. According to petitioner, since the subject lots lie within the declared
APD, this fact mandates that the lots be given priority in acquisition.14
216
Section 9, however, is not a single provision that can be read separate from the other
provisions of the law. It must be read together with Section 10 of R.A. 7279 which also
provides:
"Section 10. Modes of Land Acquisition. — The modes of acquiring lands for
purposes of this Act shall include, among others, community mortgage, land
swapping, land assembly or consolidation, land banking, donation to the
Government, joint-venture agreement, negotiated purchase, and
expropriation: Provided, however, That expropriation shall be resorted to only
when other modes of acquisition have been exhausted: Provided,
further, That where expropriation is resorted to, parcels of land owned by
small property owners shall be exempted for purposes of this
Act: Provided, finally, That abandoned property, as herein defined, shall be
reverted and escheated to the State in a proceeding analogous to the procedure
laid down in Rule 91 of the Rules of Court.15
For the purposes of socialized housing, government-owned and foreclosed
properties shall be acquired by the local government units, or by the National
Housing Authority primarily through negotiated purchase:Provided, That qualified
beneficiaries who are actual occupants of the land shall be given the right of first
refusal."
Lands for socialized housing under R.A. 7279 are to be acquired in several modes.
Among these modes are the following: (1) community mortgage; (2) land swapping, (3)
land assembly or consolidation; (4) land banking; (5) donation to the government; (6)
joint venture agreement; (7) negotiated purchase; and (8) expropriation. The mode of
expropriation is subject to two conditions: (a) it shall be resorted to only when the other
modes of acquisition have been exhausted; (b) parcels of land owned by small property
owners are exempt from such acquisition.
Section 9 of R.A. 7279 speaks of priorities in the acquisition of lands. It enumerates the
type of lands to be acquired and the heirarchy in their acquisition. Section 10 deals with
the modes of land acquisition or the process of acquiring lands for socialized housing.
These are two different things. They mean that the type of lands that may be
acquired in the order of priority in Section 9 are to be acquired only in the modes
authorized under Section 10. The acquisition of the lands in the priority list must be
made subject to the modes and conditions set forth in the next provision. In other words,
land that lies within the APD, such as in the instant case, may be acquired only in the
modes under, and subject to the conditions of, Section 10.
Petitioner claims that it had faithfully observed the different modes of land acquisition for
socialized housing under R.A. 7279 and adhered to the priorities in the acquisition for
socialized housing under said law.16 It, however, did not state with particularity whether
it exhausted the other modes of acquisition in Section 9 of the law before it decided to
expropriate the subject lots. The law states "expropriation shall be resorted to when other
modes of acquisition have been exhausted." Petitioner alleged only one mode of
acquisition, i.e., by negotiated purchase. Petitioner, through the City Mayor, tried to
purchase the lots from respondents but the latter refused to sell.17 As to the other modes
of acquisition, no mention has been made. Not even Resolution No. 516, Series of 1996
of the Sangguniang Panlungsod authorizing the Mayor of Mandaluyong to effect the
expropriation of the subject property states whether the city government tried to acquire
the same by community mortgage, land swapping, land assembly or consolidation, land
banking, donation to the government, or joint venture agreement under Section 9 of the
law.
Section 9 also exempts from expropriation parcels of land owned by small property
owners.18 Petitioner argues that the exercise of the power of eminent domain is not
anymore conditioned on the size of the land sought to be expropriated.19 By the
expanded notion of public use, present jurisprudence has established the concept that
expropriation is not anymore confined to the vast tracts of land and landed estates, but
also covers small parcels of land.20 That only a few could actually benefit from the
expropriation of the property does not diminish its public use character.21 It simply is not
possible to provide, in one instance, land and shelter for all who need them.22
While we adhere to the expanded notion of public use, the passage of R.A. No. 7279, the
"Urban Development and Housing Act of 1992" introduced a limitation on the size of the
land sought to be expropriated for socialized housing. The law expressly exempted
"small property owners" from expropriation of their land for urban land reform. R.A. No.
7279 originated as Senate Bill No. 234 authored by Senator Joey Lina23 and House Bill
No. 34310. Senate Bill No. 234 then provided that one of those lands not covered by the
urban land reform and housing program was "land actually used by small property
owners within the just and equitable retention limit as provided under this Act."24 "Small
property owners" were defined in Senate Bill No. 234 as:
"4. Small Property Owners — are those whose rights are protected under Section
9, Article XIII of the Constitution of the Philippines, who own small parcels of land
within the fair and just retention limit provided under this Act and which are
adequate to meet the reasonable needs of the small property owner's family and
their means of livelihood.25
217
The exemption from expropriation of lands of small-property owners was never
questioned on the Senate floor.26This exemption, although with a modified definition, was
actually retained in the consolidation of Senate Bill No. 234 and House Bill No. 34310
which became R.A. No. 7279.27
The question now is whether respondents qualify as "small property owners" as defined
in Section 3 (q) of R.A. 7279. Section 3 (q) provides:
"Section 3 x x x (q). "Small property owners" refers to those whose only real
property consists of residential lands not exceeding three hundred square meters
(300 sq.m.) in highly urbanized cities and eight hundred square meters (800
sq.m.) in other urban areas."
"Small-property owners" are defined by two elements: (1) those owners of real property
whose property consists of residential lands with an area of not more than 300 square
meters in highly urbanized cities and 800 square meters in other urban areas; and (2)
that they do not own real property other than the same.
The case at bar involves two (2) residential lots in Mandaluyong City, a highly urbanized
city. The lot under TCT No. 63766 is 687 square meters in area and the second under
TCT No. 63767 is 949 square meters, both totalling 1,636 square meters in area. TCT
No. 63766 was issued in the names of herein five (5) respondents, viz:
"FRANCISCO N. AGUILAR, widower; THELMA N. AGUILAR, single; EUSEBIO
N. AGUILAR, JR., widower; RODOLFO N. AGUILAR, single and ANTONIO N.
AGUILAR, married to Teresita Puig; all of legal age, Filipinos."28
TCT No. 63767 was issued in the names of the five (5) respondents plus Virginia Aguilar,
thus:
"FRANCISCO N. AGUILAR, widower; THELMA N. AGUILAR, single; EUSEBIO
N. AGUILAR, JR., widower; RODOLFO N. AGUILAR, single and ANTONIO N.
AGUILAR, married to Teresita Puig; and VIRGINIA N. AGUILAR, single, all of
legal age, Filipinos."29
Respondent Antonio Aguilar testified that he and the other registered owners are all
siblings who inherited the subject property by intestate succession from their
parents.30 Their father died in 1945 and their mother in 1976.31 Both TCT's were issued in
the siblings' names on September 2, 1987.31 In 1986, however, the siblings agreed to
extrajudicially partition the lots among themselves, but no action was taken by them to
this end. It was only eleven (11) years later, on November 28, 1997 that a survey of the
two lots was made33 and on February 10, 1998, a consolidation subdivision plan was
approved by the Lands Management Service of the Department of Environment and
Natural Resources.34 The co-owners signed a Partition Agreement on February 24,
199835 and on May 21, 1998, TCT Nos. 63766 and 63767 were cancelled and new titles
issued in the names of the individual owners pursuant to the Partition Agreement.
Petitioner argues that the consolidation of the subject lots and their partition was made
more than six (6) months after the complaint for expropriation was filed on August 4,
1997, hence, the partition was made in bad faith, for the purpose of circumventing the
provisions of R.A. 7279.36
At the time of filing of the complaint for expropriation, the lots subject of this case were
owned in common by respondents; Under a co-ownership, the ownership of an undivided
thing or right belongs to different persons.37During the existence of the co-ownership, no
individual can claim title to any definite portion of the community property until the
partition thereof; and prior to the partition, all that the co-owner has is an ideal or abstract
quota or proportionate share in the entire land or thing.38 Article 493 of the Civil Code
however provides that:
"Art. 493. Each co-owner shall have the full ownership of his part and of the fruits
and benefits pertaining thereto, and he may therefore alienate, assign or
mortgage it, and even substitute another person in its enjoyment, except when
personal rights are involved. But the effect of the alienation or the mortgage, with
respect to the co-owners shall be limited to the portion which may be allotted to
him in the division upon termination of the co-ownership.39
Before partition in a co-ownership, every co-owner has the absolute ownership of his
undivided interest in the common property. The co-owner is free to alienate, assign or
mortgage his interest, except as to purely personal rights.40 He may also validly lease his
undivided interest to a third party independently of the other co-owners.41The effect of
any such transfer is limited to the portion which may be awarded to him upon the
partition of the property.42
Article 493 therefore gives the owner of an undivided interest in the property the right to
freely sell and dispose of his undivided interest.43 The co-owner, however, has no right to
sell or alienate a concrete specific or determinate part of the thing owned in common,
because his right over the thing is represented by a quota or ideal portion without any
physical adjudication.44 If the co-owner sells a concrete portion, this, nonetheless, does
not render the sale void. Such a sale affects only his own share, subject to the results of
the partition but not those of the other co-owners who did not consent to the sale.45
218
In the instant case, the titles to the subject lots were issued in respondents' names as co-
owners in 1987—ten (10) years before the expropriation case was filed in 1997. As co-
owners, all that the respondents had was an ideal or abstract quota or proportionate
share in the lots. This, however, did not mean that they could not separately exercise any
rights over the lots. Each respondent had the full ownership of his undivided interest in
the property. He could freely sell or dispose of his interest independently of the other co-
owners. And this interest could have even been attached by his creditors.46 The partition
in 1998, six (6) months after the filing of the expropriation case, terminated the co-
ownership by converting into certain and definite parts the respective undivided shares of
the co-owners.47 The subject property is not a thing essentially indivisible. The rights of
the co-owners to have the property partitioned and their share in the same delivered to
them cannot be questioned for "[n]o co-owner shall be obliged to remain in the co-
ownership."48 The partition was merely a necessary incident of the co-ownership;49 and
absent any evidence to the contrary, this partition is presumed to have been done in
good faith.
Upon partition, four (4) co-owners, namely, Francisco, Thelma, Rodolfo and Antonio
Aguilar each had a share of 300 square meters under TCT Nos. 13849, 13852, 13850,
13851.50 Eusebio Aguilar's share was 347 square meters under TCT No. 1385351 while
Virginia Aguilar's was 89 square meters under TCT No. 13854.52
It is noted that Virginia Aguilar, although granted 89 square meters only of the subject
lots, is, at the same time, the sole registered owner of TCT No. 59780, one of the three
(3) titles initially sought to be expropriated in the original complaint. TCT No. 59780, with
a land area of 211 square meters, was dropped in the amended complaint. Eusebio
Aguilar was granted 347 square meters, which is 47 square meters more than the
maximum of 300 square meters set by R.A. 7279 for small property owners. In TCT No.
13853, Eusebio's title, however, appears the following annotation:
"... subject to x x x, and to the prov. of Sec. 4 Rule 74 of the Rules of Court with
respect to the inheritance left by the deceased Eusebio N. Aguilar."53
Eusebio died on March 23, 1995,54 and, according to Antonio's testimony, the former was
survived by five (5) children.55 Where there are several co-owners, and some of them die,
the heirs of those who die, with respect to that part belonging to the deceased, become
also co-owners of the property together with those who survive.56After Eusebio died, his
five heirs became co-owners of his 347 square-meter portion. Dividing the 347 square
meters among the five entitled each heir to 69.4 square meters of the land subject of
litigation.
Consequently, the share of each co-owner did not exceed the 300 square meter limit set
in R.A. 7279. The second question, however, is whether the subject property is the only
real property of respondents for them to comply with the second requisite for small
property owners.
Antonio Aguilar testified that he and most of the original co-owners do not reside on the
subject property but in their ancestral home in Paco, Manila.57 Respondents therefore
appear to own real property other than the lots in litigation. Nonetheless, the records do
not show that the ancestral home in Paco, Manila and the land on which it stands are
owned by respondents or anyone of them. Petitioner did not present any title or proof of
this fact despite Antonio Aguilar's testimony.
On the other hand, respondents claim that the subject lots are their only real
property58 and that they, particularly two of the five heirs of Eusebio Aguilar, are merely
renting their houses and therefore do not own any other real property in Metro
Manila.59 To prove this, they submitted certifications from the offices of the City and
Municipal Assessors in Metro Manila attesting to the fact that they have no registered
real property declared for taxation purposes in the respective cities. Respondents were
certified by the City Assessor of Manila;60 Quezon City;61Makati City;62 Pasay
City;63 Paranaque;64 Caloocan City;65 Pasig City;66 Muntinlupa;67 Marikina;68 and the then
municipality of Las Piñas69 and the municipality of San Juan del Monte70 as having no
real property registered for taxation in their individual names.
1âw phi 1.nêt
Finally, this court notes that the subject lots are now in the possession of respondents.
Antonio Aguilar testified that he and the other co-owners filed ejectment cases against
the occupants of the land before the Metropolitan Trial Court, Mandaluyong, Branches 59
and 60. Orders of eviction were issued and executed on September 17, 1997 which
resulted in the eviction of the tenants and other occupants from the land in question.71
IN VIEW WHEREOF, the petition is DENIED and the orders dated September 17. 1998
and December 29, 1998 of the Regional Trial Court, Branch 168, Pasig City in SCA No.
1427 are AFFIRMED.
SO ORDERED.
--- xx END OF EXTINGUISHMENT OF ENCUMBRANCES xx ---
G.R. No. L-29727 December 14, 1988
OLIVERAS vs. LOPEZ
219
This case exemplifies the Filipino custom of keeping inherited property in a prolonged
juridical condition of co-owner ship.
Lorenzo Lopez owned Lot 4685 of the Cadastral survey of Villasis, Pangasinan with an
area of 69,687 square meters as evidenced by Original Certificate of Title No. 15262. 1 In
December, 1931, Lorenzo Lopez died, 2 leaving said property to his wife, Tomasa Ramos
and six (6) children. From that time on, the heirs of Lorenzo Lopez did not initiate any moves
to legally partition the property.
More than twenty-one years later, or on February 11, 1953, Tomasa Ramos and her
eldest son, Candido Lopez, executed a deed of absolute sale of the "eastern undivided
four thousand two hundred and fifty seven-square meters (4,257) more or less, of the
undivided portion of (their) interests, rights and participation" over Lot 4685, in favor of
the spouses Melecio Oliveras and Aniceta Minor, in consideration of the amount of one
thousand pesos (P1,000). 3
On the same day, Tomasa and Candido executed another deed of absolute sale of the
"undivided" four thousand two hundred and fifty-seven (4,257) square meters of the
"eastern part" of Lot 4685 in favor of the spouses Pedro Oliveras and Teodora Gaspar,
also in consideration of P1,000. 4 Each of the said documents bear the thumbmark of
Tomasa and the signature of Candido.
In his affidavit also executed on February 11, 1953, Candido stated that a month prior to
the execution of the deed of sale in favor of Melecio Oliveras, he offered his: "undivided
portion" of Lot 4685 to his "adjacent owners" but none of them was "in a position to
purchase" said property. 5
Since the execution of the two deeds of absolute sale, the vendees, brothers Melecio
and Pedro, had been paying the real property taxes for their respectively purchased
properties. 6 They also had been in possession of their purchased properties which, being
7
planted to palay and peanuts, were segregated from the rest of Lot 4685 by dikes.
More than thirteen years later or on November 21, 1966, the counsel of the Oliveras
brothers wrote the heirs of Lorenzo Lopez reminding them of the Oliverases' demands to
partition the property so that they could acquire their respective titles thereto without
resorting to court action, and that, should they fail to respond, he would be forced to file a
case in court. 8 Apparently, the Lopezes did not answer said letter since on December 15,
1966, the Oliveras brothers and their wives filed a complaint for partition and damages 9 in
the Court of First Instance of Pangasinan.10
The Oliverases stated in their complaint that possession of the disputed properties was
delivered to them with the knowledge and consent of the defendants; that they had been
paying the real estate taxes thereon; that prior to the sale, said properties were offered to
the other co-owners for sale but they refused to buy them; that on February 18, 1953, the
transactions were duly annotated and entered in the Memorandum of encumbrances of
OCT No. 15262 as adverse claims; and that their desire to segregate the portions of Lot
4685 sold to them was frustrated by defendants' adamant refusal to lend them the
owner's duplicate of OCT No. 15262 and to execute a deed of partition of the whole lot.
In claiming moral damages in the amount of P2,000.00 plaintiffs alleged that defendants
also refused to allow them to survey and segregate the portions bought by them.
Plaintiffs prayed that the court order the defendants to partition Lot 4685 and to allow
them to survey and segregate the portions they had purchased. They also demanded
payment of P800.00 as attorney's fees and cost of the suit.
In their answer, the defendants alleged that no sale ever transpired as the alleged
vendors could not have sold specific portions of the property; that plaintiffs' possession
and occupation of specific portions of the properties being illegal, they could not ripen
into ownership; and that they were not under any obligation to lend their copy of the
certificate of title or to accede to plaintiffs' request for the partition or settlement of the
property. As special and affirmative defenses, the defendants contended that the deeds
of sale were null and void and hence, unenforceable against them; that the complaint did
not state a cause of action and that the cause or causes of action if any, had prescribed.
Defendants averred in their counterclaim that despite repeated demands, plaintiffs
refused and failed to vacate the premises; that the properties occupied by the plaintiffs
yielded an average net produce in palay and peanuts in the amount of P1,600.00
annually, and that the complaint was filed to harass them. They prayed for the dismissal
of the complaint and the payment of P1,600.00 per year from 1953 until plaintiffs shall
have vacated the premises and P1,000.00 for attorney's fees.
Plaintiffs filed an answer to defendants' counterclaim, denying all the allegations therein
and stating that defendants never demanded that plaintiffs vacate the portions of Lot
4685 they had bought.
The lower court explored the possibility of an amicable settlement between the parties
without success. Hence, it set the case for trial and thereafter, it rendered a
decision 11 declaring valid the deeds of absolute sale 12 and ordering the defendants to allow
the segregation of the sold portions of Lot 4685 by a licensed surveyor in order that the
plaintiffs could obtain their respective certificates of title over their portions of said lot.
220
In resolving the case, the lower court passed upon the issue of whether the two deeds of
absolute sale were what they purported to be or merely mortgage documents. It
considered as indicia of plaintiffs' absolute dominion over the portions sold to them their
actual possession thereof without any opposition from the defendants until the filing of
the complaint, their payment of taxes thereon and their having benefited from the
produce of the land. The court ruled that the defendants' testimonial evidence that the
deeds in question were merely mortgage documents cannot overcome the evidentiary
value of the public instruments presented by the plaintiffs.
On the issue of whether the two deeds of absolute sale were null and void considering
that the land subject thereof had not yet been partitioned, the court observed that the
total area of 8,514 square meters sold to plaintiffs by Candido was less than his share
should Lot 4685 with an area of 69,687 square meters be divided among the six children
of Lorenzo Lopez and their mother. In this connection, the lower court also found that
during his lifetime, and before Candido got married, Lorenzo Lopez had divided Lot 4685
among his children who then took possession of their respective shares. *
The defendants appealed said decision to this Court contending that the lower court
erred in declaring the two deeds of absolute sale as valid, in ordering the segregation of
the sold portions of Lot 4685 to enable the plaintiffs to obtain their respective certificates
of title, and in not considering their defense of prescription.
The extrinsic validity of the two deeds of absolute sale is not in issue in this case in view
of the finding of the trial court that the defendants admittedly do not question their due
execution. 13 What should pre-occupy the Court is the intrinsic validity of said deeds insofar
as they pertain to sales of designated portions of an undivided, co-owned property.
In a long line of decisions, this Court has held that before the partition of a land or thing
held in common, no individual co-owner can claim title to any definite portion thereof. All
that the co-owner has is an Ideal or abstract quota or proportionate share in the entire
land or thing. 14
However, the duration of the juridical condition of co-ownership is not limitless. Under
Article 494 and 1083 of the Civil Code, co-ownership of an estate should not exceed the
period of twenty (20) years. And, under the former article, any agreement to keep a thing
or property undivided should be for a ten-year period only. Where the parties stipulate a
definite period of in division which exceeds the maximum allowed by law, said stipulation
shall be void only as to the period beyond such maximum. 15
Although the Civil Code is silent as to the effect of the in division of a property for more
than twenty years, it would be contrary to public policy to sanction co-ownership beyond
the period set by the law. Otherwise, the 20-year limitation expressly mandated by the
Civil Code would be rendered meaningless.
In the instant case, the heirs of Lorenzo Lopez maintained the co-ownership for more
than twenty years. We hold that when Candido and his mother (who died before the filing
of the complaint for partition) sold definite portions of Lot 4685, they validly exercised
dominion over them because, by operation of law, the co-ownership had ceased. The
filing of the complaint for partition by the Oliverases who, as vendees, are legally
considered as subrogated to the rights of Candido over portions of Lot 4685 in their
possession, 16 merely served to put a stamp of formality on Candido's otherwise
accomplished act of terminating the co-ownership.
The action for partition has not prescribed. Although the complaint was filed thirteen
years from the execution of the deeds of sale and hence, as contended by the
defendants-appellants, prescription might have barred its filing under the general
provision of Article 1144 (a) of the Civil Code, Article 494 specifically mandates that each
co-owner may demand at any time the partition of the thing owned in common insofar as
his share is concerned. Hence, considering the validity of the conveyances of portions of
Lot 4685 in their favor and as subrogees of Candido Lopez, the Oliverases' action for
partition was timely and properly filed. 17
We cannot write finis to this decision without commenting on the compliance with the
resolution of September 1, 1986 of counsel for defendants-appellants. In said resolution,
the court required the parties to move in the premises "considering the length of time that
this case has remained pending in this Court and to determine whether or not there
might be supervening events which may render the case moot and academic. 18 In his
manifestation and motion dated August 12, 1987, said counsel informed the Court that he
had contacted the defendants-appellants whom he advised "to move in the premises which is
the land in question and to maintain the status quo with respect to their actual possession
thereon" and that he had left a copy of said resolution with the defendants-appellants" for
their guidance in the compliance of their obligations (sic) as specified in said
resolution." 19
Obviously, said counsel interpreted literally the Court's directive "to move in the
premises." For the enlightenment of said counsel and all others of similar perception, a
"move in the premises" resolution is not a license to occupy or enter the premises
subject of litigation especially in cases involving real property. A "move in the premises"
resolution simply means what is stated therein: the parties are obliged to inform the
Court of developments pertinent to the case which may be of help to the Court in its
immediate disposition.
221
WHEREFORE, the decision of the lower court insofar as it declares the validity of the two
deeds of sale and directs the partition of Lot 4685, is AFFIRMED. The lower court is
hereby ordered to facilitate with dispatch the preparation of a project of partition which it
should thereafter approve. This decision is immediately executory. No costs.
SO ORDERED.
--- xxx END OF PARTITION OF CO-OWNERSHIP xxx ---
G.R. No. L-46296 September 24, 1991
DELIMA vs. CA
This is a petition for review on certiorari of the decision of the Court of Appeals reversing
the trial court's judgment which declared as null and void the certificate of title in the
name of respondents' predecessor and which ordered the partition of the disputed lot
among the parties as co-owners.
The antecedent facts of the case as found both by the respondent appellate court and by
the trial court are as follows:
During his lifetime, Lino Delima acquired Lot No. 7758 of the Talisay-Minglanilla Friar
Lands Estate in Cebu by sale on installments from the government. Lino Delima later
died in 1921 leaving as his only heirs three brothers and a sister namely: Eulalio Delima,
Juanita Delima, Galileo Delima and Vicente Delima. After his death, TCT No. 2744 of the
property in question was issued on August 3, 1953 in the name of the Legal Heirs of Lino
Delima, deceased, represented by Galileo Delima.
On September 22, 1953, Galileo Delima, now substituted by respondents, executed an
affidavit of "Extra-judicial Declaration of Heirs." Based on this affidavit, TCT No. 2744
was cancelled and TCT No. 3009 was issued on February 4,1954 in the name of Galileo
Delima alone to the exclusion of the other heirs.
Galileo Delima declared the lot in his name for taxation purposes and paid the taxes
thereon from 1954 to 1965.
On February 29, 1968, petitioners, who are the surviving heirs of Eulalio and Juanita
Delima, filed with the Court of First Instance of Cebu (now Regional Trial Court) an action
for reconveyance and/or partition of property and for the annulment of TCT No. 3009 with
damages against their uncles Galileo Delima and Vicente Delima,. Vicente Delima was
joined as party defendant by the petitioners for his refusal to join the latter in their action.
On January 16, 1970, the trial court rendered a decision in favor of petitioners, the
dispositive portion of which states:
IN VIEW OF THE FOREGOING CONSIDERATIONS, the following are
the declared owners of Lot No. 7758 of the Talisay-Minglanilla Friar
Lands Estate presently covered by transfer Certificate of Title No. 3009,
each sharing a pro-indiviso share of one-fourth;
1) Vicente Delima (one-fourth)
2) Heirs of Juanita Delima, namely: Bibiano Bacus, Olimpio Bacus and
Purificacion Bacus (on-fourth);
3) Heirs of Eulalio Delima, namely Epitacio, Pagano, Fidel, Virgilio and
Galileo Jr., all surnamed Delima (one-fourth); and
4) The Heirs of Galileo Delima, namely Flaviana Vda. de Delima, Lily D.
Arias, Helen Niadas and Dionisio, Antonio, Eotu Irenea, and Fely, all
surnamed Delima (one-fourth).
Transfer Certificate of Title No. 3009 is declared null and void and the
Register of Deeds of Cebu is ordered to cancel the same and issue in
lieu thereof another title with the above heirs as pro-indiviso owners.
After the payment of taxes paid by Galileo Delima since 1958, the heirs of
Galileo Delima are ordered to turn a over to the other heirs their
respective shares of the fruits of the lot in question computed at P170.00
per year up to the present time with legal (interest).
Within sixty (60) days from receipt of this decision the parties are ordered
to petition the lot in question and the defendants are directed to
immediately turn over possession of the shares here awarded to the
respective heirs.
Defendants are condemned to pay the costs of the suit.
The counterclaim is dismissed.
SO ORDERED. (pp. 54-55, Rollo)
222
Not satisfied with the decision, respondents appealed to the Court of Appeals. On May
19, 1977, respondent appellate court reversed the trial court's decision and upheld the
claim of Galileo Delima that all the other brothers and sister of Lino Delima, namely
Eulalio, Juanita and Vicente, had already relinquished and waived their rights to the
property in his favor, considering that he (Galileo Delima) alone paid the remaining
balance of the purchase price of the lot and the realty taxes thereon (p. 26, Rollo).
Hence, this petition was filed with the petitioners alleging that the Court of Appeals erred:
1) In not holding that the right of a co-heir to demand partition of
inheritance is imprescriptible. If it does, the defenses of prescription and
laches have already been waived.
2) In disregarding the evidence of the petitioners.(p.13, Rollo)
The issue to be resolved in the instant case is whether or not petitioners' action for
partition is already barred by the statutory period provided by law which shall enable
Galileo Delima to perfect his claim of ownership by acquisitive prescription to the
exclusion of petitioners from their shares in the disputed property. Article 494 of the Civil
Code expressly provides:
Art. 494. No co-owner shall be obliged to remain in the co-ownership.
Each co-owner may demand at any time the partition of the thing owned
in common, insofar as his share is concerned.
Nevertheless, an agreement to keep the thing undivided for a certain
period of time, not exceeding ten years, shall be valid. This term may be
extended by a new agreement.
A donor or testator may prohibit partition for a period which shall not
exceed twenty years.
Neither shall there be any partition when it is prohibited by law.
No prescription shall run in favor of a co-owner or co-heir against his co-
owners or co-heirs so long as he expressly or impliedly recognizes the
co-ownership.
As a rule, possession by a co-owner will not be presumed to be adverse to the others,
but will be held to benefit all. It is understood that the co-owner or co-heir who is in
possession of an inheritance pro-indiviso for himself and in representation of his co-
owners or co-heirs, if, as such owner, he administers or takes care of the rest thereof
with the obligation of delivering it to his co-owners or co-heirs, is under the same
situation as a depository, a lessee or a trustee (Bargayo v. Camumot, 40 Phil, 857;
Segura v. Segura, No. L-29320, September 19, 1988, 165 SCRA 368). Thus, an action
to compel partition may be filed at any time by any of the co-owners against the actual
possessor. In other words, no prescription shall run in favor of a co-owner against his co-
owners or co-heirs so long as he expressly or impliedly recognizes the co-ownership (Del
Blanco v. Intermediate Appellate Court, No. 72694, December 1, 1987, 156 SCRA 55).
However, from the moment one of the co-owners claims that he is the absolute and
exclusive owner of the properties and denies the others any share therein, the question
involved is no longer one of partition but of ownership (De Castro v. Echarri, 20 Phil. 23;
Bargayo v. Camumot, supra; De los Santos v. Santa Teresa, 44 Phil. 811). In such case,
the imprescriptibility of the action for partition can no longer be invoked or applied when
one of the co-owners has adversely possessed the property as exclusive owner for a
period sufficient to vest ownership by prescription.
It is settled that possession by a co-owner or co-heir is that of a trustee. In order that
such possession is considered adverse to the cestui que trust amounting to a repudiation
of the co-ownership, the following elements must concur: 1) that the trustee has
performed unequivocal acts amounting to an ouster of the cestui que trust; 2) that such
positive acts of repudiation had been made known to the cestui que trust; and 3) that the
evidence thereon should be clear and conclusive (Valdez v. Olorga, No. L-22571, May
25, 1973, 51 SCRA 71; Pangan v. Court of Appeals, No. L-39299, October 18, 1988, 166
SCRA 375).
We have held that when a co-owner of the property in question executed a deed of
partition and on the strength thereof obtained the cancellation of the title in the name of
their predecessor and the issuance of a new one wherein he appears as the new owner
of the property, thereby in effect denying or repudiating the ownership of the other co-
owners over their shares, the statute of limitations started to run for the purposes of the
action instituted by the latter seeking a declaration of the existence of the co-ownership
and of their rights thereunder (Castillo v. Court of Appeals, No. L-18046, March 31, 1964,
10 SCRA 549). Since an action for reconveyance of land based on implied or
constructive trust prescribes after ten (10) years, it is from the date of the issuance of
such title that the effective assertion of adverse title for purposes of the statute of
limitations is counted (Jaramil v. Court of Appeals, No. L-31858, August 31, 1977, 78
SCRA 420).
223
Evidence shows that TCT No. 2744 in the name of the legal heirs of Lino Delima,
represented by Galileo Delima, was cancelled by virtue of an affidavit executed by
Galileo Delima and that on February 4, 1954, Galileo Delima obtained the issuance of a
new title in Ms name numbered TCT No. 3009 to the exclusion of his co-heirs. The
issuance of this new title constituted an open and clear repudiation of the trust or co-
ownership, and the lapse of ten (10) years of adverse possession by Galileo Delima from
February 4, 1954 was sufficient to vest title in him by prescription. As the certificate of
title was notice to the whole world of his exclusive title to the land, such rejection was
binding on the other heirs and started as against them the period of prescription. Hence,
when petitioners filed their action for reconveyance and/or to compel partition on
February 29, 1968, such action was already barred by prescription. Whatever claims the
other co-heirs could have validly asserted before can no longer be invoked by them at
this time.
ACCORDINGLY, the petition is hereby DENIED and the assailed decision of the Court of
Appeals dated May 19, 1977 is AFFIRMED.
SO ORDERED.
G.R. No. L-57062 January 24, 1992
MARIATEGUI vs. CA
This is a petition for review on certiorari of the decision * of the Court of Appeals dated
December 24, 1980 in CA-G.R. No. 61841, entitled "Jacinto Mariategui, et al. v. Maria
del Rosario Mariategui, et al.," reversing the judgment of the then Court of First Instance
of Rizal, Branch VIII ** at Pasig, Metro Manila.
The undisputed facts are as follows:
Lupo Mariategui died without a will on June 26, 1953 (Brief for respondents, Rollo, pp.
116; 8). During his lifetime, Lupo Mariategui contracted three (3) marriages. With his first
wife, Eusebia Montellano, who died on November 8, 1904, he begot four (4) children,
namely: Baldomera, Maria del Rosario, Urbana and Ireneo. Baldomera died and was
survived by her children named Antero, Rufina, Catalino, Maria, Gerardo, Virginia and
Federico, all surnamed Espina. Ireneo also died and left a son named Ruperto. With his
second wife, Flaviana Montellano, he begot a daughter named Cresenciana who was
born on May 8, 1910 (Rollo, Annex "A", p. 36).
Lupo Mariategui and Felipa Velasco (Lupo's third wife) got married sometime in 1930.
They had three children, namely: Jacinto, born on July 3, 1929, Julian, born on February
16, 1931 and Paulina, born on April 19, 1938. Felipa Velasco Mariategui died in 1941
(Rollo, Ibid).
At the time of his death, Lupo Mariategui left certain properties which he acquired when
he was still unmarried (Brief for respondents, Rollo, pp. 116; 4). These properties are
described in the complaint as Lots Nos. 163, 66, 1346 and 156 of the Muntinglupa Estate
(Rollo, Annex "A", p. 39).
On December 2, 1967, Lupo's descendants by his first and second marriages, namely,
Maria del Rosario, Urbana, Ruperto, Cresencia, all surnamed Mariategui and Antero,
Rufina, Catalino, Maria, Gerardo, Virginia and Federico, all surnamed Espina, executed
a deed of extrajudicial partition whereby they adjudicated unto themselves Lot No. 163 of
the Muntinglupa Estate. Thereafter, Lot No. 163 was the subject of a voluntary
registration proceedings filed by the adjudicatees under Act No. 496, and the land
registration court issued a decree ordering the registration of the lot. Thus, on April 1,
1971, OCT No. 8828 was issued in the name of the above-mentioned heirs.
Subsequently, the registered owners caused the subdivision of the said lot into Lots Nos.
163-A to 163-H, for which separate transfer certificates of title were issued to the
respective parties (Rollo, ibid).
On April 23, 1973, Lupo's children by his third marriage with Felipa Velasco (Jacinto,
Julian and Paulina) filed with the lower court an amended complaint claiming that Lot No.
163 together with Lots Nos. 669, 1346 and 154 were owned by their common father,
Lupo Mariategui, and that, with the adjudication of Lot No. 163 to their co-heirs, they
(children of the third marriage) were deprived of their respective shares in the lots.
Plaintiffs pray for partition of the estate of their deceased father and annulment of the
deed of extrajudicial partition dated December 2, 1967 (Petition, Rollo, p. 10). Cresencia
Mariategui Abas, Flaviana Mariategui Cabrera and Isabel Santos were impleaded in the
complaint as unwilling defendants as they would not like to join the suit as plaintiffs
although they acknowledged the status and rights of the plaintiffs and agreed to the
partition of the parcels of land as well as the accounting of their fruits (Ibid., Rollo, p. 8;
Record on Appeal, p. 4).
The defendants (now petitioners) filed an answer with counterclaim (Amended Record on
Appeal, p. 13). Thereafter, they filed a motion to dismiss on the grounds of lack of cause
of action and prescription. They specifically contended that the complaint was one for
recognition of natural children. On August 14, 1974, the motion to dismiss was denied by
the trial court, in an order the dispositive portion of which reads:
It is therefore the opinion of the Court that Articles 278 and 285 of the
Civil Code cited by counsel for the defendants are of erroneous
224
 application to this case. The motion to dismiss is therefore denied for lack
of merit.
SO ORDERED. (Ibid, p. 37).
However, on February 16, 1977, the complaint as well as petitioners' counterclaim were
dismissed by the trial court, in its decision stating thus:
The plaintiffs' right to inherit depends upon the acknowledgment or
recognition of their continuous enjoyment and possession of status of
children of their supposed father. The evidence fails to sustain either
premise, and it is clear that this action cannot be sustained. (Ibid, Rollo,
pp. 67-68)
The plaintiffs elevated the case to the Court of Appeals on the ground that the trial court
committed an error ". . . in not finding that the parents of the appellants, Lupo Mariategui
and Felipa Velasco (were) lawfully married, and in holding (that) they (appellants) are not
legitimate children of their said parents, thereby divesting them of their inheritance . . . "
(Rollo, pp. 14-15).
On December 24, 1980, the Court of Appeals rendered a decision declaring all the
children and descendants of Lupo Mariategui, including appellants Jacinto, Julian and
Paulina (children of the third marriage) as entitled to equal shares in the estate of Lupo
Mariategui; directing the adjudicatees in the extrajudicial partition of real properties who
eventually acquired transfer certificates of title thereto, to execute deeds of
reconveyance in favor, and for the shares, of Jacinto, Julian and Paulina provided rights
of innocent third persons are not prejudiced otherwise the said adjudicatees shall
reimburse the said heirs the fair market value of their shares; and directing all the parties
to submit to the lower court a project of partition in the net estate of Lupo Mariategui after
payment of taxes, other government charges and outstanding legal obligations.
The defendants-appellees filed a motion for reconsideration of said decision but it was
denied for lack of merit. Hence, this petition which was given due course by the court on
December 7, 1981.
The petitioners submit to the Court the following issues: (a) whether or not prescription
barred private respondents' right to demand the partition of the estate of Lupo
Mariategui, and (b) whether or not the private respondents, who belatedly filed the action
for recognition, were able to prove their successional rights over said estate. The
resolution of these issues hinges, however, on the resolution of the preliminary
matter, i.e., the nature of the complaint filed by the private respondents.
The complaint alleged, among other things, that "plaintiffs are the children of the
deceased spouses Lupo Mariategui . . . and Felipa Velasco"; that "during his lifetime,
Lupo Mariategui had repeatedly acknowledged and confirmed plaintiffs as his children
and the latter, in turn, have continuously enjoyed such status since their birth"; and "on
the basis of their relationship to the deceased Lupo Mariategui and in accordance with
the law on intestate succession, plaintiffs are entitled to inherit shares in the foregoing
estate (Record on Appeal, pp. 5 & 6). It prayed, among others, that plaintiffs be declared
as children and heirs of Lupo Mariategui and adjudication in favor of plaintiffs their lawful
shares in the estate of the decedent (Ibid, p. 10).
A perusal of the entire allegations of the complaint, however, shows that the action is
principally one of partition. The allegation with respect to the status of the private
respondents was raised only collaterally to assert their rights in the estate of the
deceased. Hence, the Court of Appeals correctly adopted the settled rule that the nature
of an action filed in court is determined by the facts alleged in the complaint constituting
the cause of action (Republic vs. Estenzo, 158 SCRA 282 [1988]).
It has been held that, if the relief demanded is not the proper one which may be granted
under the law, it does not characterize or determine the nature of plaintiffs' action, and
the relief to which plaintiff is entitled based on the facts alleged by him in his complaint,
although it is not the relief demanded, is what determines the nature of the action (1
Moran, p. 127, 1979 ed., citing Baguioro vs. Barrios, et al., 77 Phil. 120).
With respect to the legal basis of private respondents' demand for partition of the estate
of Lupo Mariategui, the Court of Appeals aptly held that the private respondents are
legitimate children of the deceased.
Lupo Mariategui and Felipa Velasco were alleged to have been lawfully married in or
about 1930. This fact is based on the declaration communicated by Lupo Mariategui to
Jacinto who testified that "when (his) father was still living, he was able to mention to
(him) that he and (his) mother were able to get married before a Justice of the Peace of
Taguig, Rizal." The spouses deported themselves as husband and wife, and were known
in the community to be such. Although no marriage certificate was introduced to this
effect, no evidence was likewise offered to controvert these facts. Moreover, the mere
fact that no record of the marriage exists does not invalidate the marriage, provided all
requisites for its validity are present (People vs. Borromeo, 133 SCRA 106 [1984]).
Under these circumstances, a marriage may be presumed to have taken place between
Lupo and Felipa. The laws presume that a man and a woman, deporting themselves as
husband and wife, have entered into a lawful contract of marriage; that a child born in
lawful wedlock, there being no divorce, absolute or from bed and board is legitimate; and
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that things have happened according to the ordinary course of nature and the ordinary
habits of life (Section 5 (z), (bb), (cc), Rule 131, Rules of Court; Corpus v. Corpus, 85
SCRA 567 [1978]; Saurnaba v. Workmen's Compensation, 85 SCRA 502 [1978];
Alavado v. City Gov't. of Tacloban, 139 SCRA 230 [1985]; Reyes v. Court of Appeals,
135 SCRA 439 [1985]).
Courts look upon the presumption of marriage with great favor as it is founded on the
following rationale:
The basis of human society throughout the civilized world is that of
marriage. Marriage in this jurisdiction is not only a civil contract, but it is a
new relation, an institution in the maintenance of which the public is
deeply interested. Consequently, every intendment of the law leans
toward legalizing matrimony. Persons dwelling together in apparent
matrimony are presumed, in the absence of any counterpresumption or
evidence special to that case, to be in fact married. The reason is that
such is the common order of society and if the parties were not what they
thus hold themselves out as being, they would be living in the constant
violation of decency and of
law . . . (Adong vs. Cheong Seng Gee, 43 Phil. 43, 56 [1922] quoted in
Alavado vs. City Government of Tacloban, 139 SCRA 230 [1985]).
So much so that once a man and a woman have lived as husband and wife and such
relationship is not denied nor contradicted, the presumption of their being married must
be admitted as a fact (Alavado v. City Gov't. of Tacloban, supra).
The Civil Code provides for the manner under which legitimate filiation may be proven.
However, considering the effectivity of the Family Code of the Philippines, the case at
bar must be decided under a new if not entirely dissimilar set of rules because the parties
have been overtaken by events, to use the popular phrase (Uyguangco vs. Court of
Appeals, G.R. No. 76873, October 26, 1989). Thus, under Title VI of the Family Code,
there are only two classes of children — legitimate and illegitimate. The fine distinctions
among various types of illegitimate children have been eliminated (Castro vs. Court of
Appeals, 173 SCRA 656 [1989]).
Article 172 of the said Code provides that the filiation of legitimate children may be
established by the record of birth appearing in the civil register or a final judgment or by
the open and continuous possession of the status of a legitimate child.
Evidence on record proves the legitimate filiation of the private respondents. Jacinto's
birth certificate is a record of birth referred to in the said article. Again, no evidence which
tends to disprove facts contained therein was adduced before the lower court. In the
case of the two other private respondents, Julian and Paulina, they may not have
presented in evidence any of the documents required by Article 172 but they
continuously enjoyed the status of children of Lupo Mariategui in the same manner as
their brother Jacinto.
While the trial court found Jacinto's testimonies to be inconsequential and lacking in
substance as to certain dates and names of relatives with whom their family resided,
these are but minor details. The nagging fact is that for a considerable length of time and
despite the death of Felipa in 1941, the private respondents and Lupo lived together until
Lupo's death in 1953. It should be noted that even the trial court mentioned in its
decision the admission made in the affidavit of Cresenciana Mariategui Abas, one of the
petitioners herein, that " . . . Jacinto, Julian and Paulina Mariategui ay pawang mga
kapatid ko sa
ama . . ." (Exh. M, Record on Appeal, pp. 65-66).
In view of the foregoing, there can be no other conclusion than that private respondents
are legitimate children and heirs of Lupo Mariategui and therefore, the time limitation
prescribed in Article 285 for filing an action for recognition is inapplicable to this case.
Corollarily, prescription does not run against private respondents with respect to the filing
of the action for partition so long as the heirs for whose benefit prescription is invoked,
have not expressly or impliedly repudiated the co-ownership. In other words, prescription
of an action for partition does not lie except when the co-ownership is properly
repudiated by the co-owner (Del Banco vs. Intermediate Appellate Court, 156 SCRA 55
[1987] citing Jardin vs. Hollasco, 117 SCRA 532 [1982]).
Otherwise stated, a co-owner cannot acquire by prescription the share of the other co-
owners absent a clear repudiation of co-ownership duly communicated to the other co-
owners (Mariano vs. De Vega, 148 SCRA 342 [1987]). Furthermore, an action to
demand partition is imprescriptible and cannot be barred by laches (Del Banco vs. IAC,
156 SCRA 55 [1987]). On the other hand, an action for partition may be seen to be at
once an action for declaration of co-ownership and for segregation and conveyance of a
determinate portion of the property involved (Roque vs. IAC, 165 SCRA 118 [1988]).
Petitioners contend that they have repudiated the co-ownership when they executed the
extrajudicial partition excluding the private respondents and registered the properties in
their own names (Petition, p. 16; Rollo, p. 20). However, no valid repudiation was made
by petitioners to the prejudice of private respondents. Assuming petitioners' registration
of the subject lot in 1971 was an act of repudiation of the co-ownership, prescription had
not yet set in when private respondents filed in 1973 the present action for partition
(Ceniza vs. C.A., 181 SCRA 552 [1990]).
226
In their complaint, private respondents averred that in spite of their demands, petitioners,
except the unwilling defendants in the lower court, failed and refused to acknowledge
and convey their lawful shares in the estate of their father (Record on Appeal, p. 6). This
allegation, though denied by the petitioners in their answer (Ibid, p. 14), was never
successfully refuted by them. Put differently, in spite of petitioners' undisputed
knowledge of their relationship to private respondents who are therefore their co-heirs,
petitioners fraudulently withheld private respondent's share in the estate of Lupo
Mariategui. According to respondent Jacinto, since 1962, he had been inquiring from
petitioner Maria del Rosario about their (respondents) share in the property left by their
deceased father and had been assured by the latter (Maria del Rosario) not to worry
because they will get some shares. As a matter of fact, sometime in 1969, Jacinto
constructed a house where he now resides on Lot No. 163 without any complaint from
petitioners.
Petitioners' registration of the properties in their names in 1971 did not operate as a valid
repudiation of the co-ownership. In Adille vs. Court of Appeals (157 SCRA 455, 461-462
[1988]), the Court held:
Prescription, as a mode of terminating a relation of co-ownership, must
have been preceded by repudiation (of the co-ownership). The act of
repudiation, in turn, is subject to certain conditions: (1) a co-owner
repudiates the co-ownership; (2) such an act of repudiation is clearly
made known to the other co-owners; (3) the evidence thereon is clear
and conclusive; and (4) he has been in possession through open,
continuous, exclusive, and notorious possession of the property for the
period required by law.
xxx xxx xxx
It is true that registration under the Torrens system is constructive notice
of title, but it has likewise been our holding that the Torrens title does not
furnish shield for fraud. It is therefore no argument to say that the act of
registration is equivalent to notice of repudiation, assuming there was
one, notwithstanding the long-standing rule that registration operates as
a universal notice of title.
Inasmuch as petitioners registered the properties in their names in fraud of their co-heirs
prescription can only be deemed to have commenced from the time private respondents
discovered the petitioners' act of defraudation (Adille vs. Court of Appeals, supra).
Hence, prescription definitely may not be invoked by petitioners because private
respondents commenced the instant action barely two months after learning that
petitioners had registered in their names the lots involved.
WHEREFORE, the petition is DENIED and the assailed decision of the Court of Appeals
dated December 24, 1980 is Affirmed.
SO ORDERED.
G.R. No. 109910 April 5, 1995
SALVADOR vs. CA
Assailed in this petition is the legal determination made by the Court of Appeals on the
issues of which portion of Lot No. 6080 and Lot No. 6180 formed part of the conjugal
assets of the spouses Pastor Makibalo and Maria Yabo, and of whether or not the rights
of Pastor's co-heirs in the estate of Maria Yabo were extinguished through prescription or
laches.
Alipio Yabo was the owner of Lot No. 6080 and Lot No. 6180 situated in Barrio Bulua,
Cagayan de Oro City, containing an area of 1,267 and 3,816 square meters,
respectively. Title thereto devolved upon his nine children, namely, Victoriano, Procopio,
Lope, Jose, Pelagia, Baseliza, Francisca, Maria, and Gaudencia, upon his death
sometime before or during the second world war.
On 28 April 1976, Pastor Makibalo, who is the husband of Maria Yabo, one of Alipio's
children, filed with the then Court of First Instance of Misamis Oriental a complaint,
docketed as Civil Case No. 5000, against the spouses Alberto and Elpia Yabo for
"Quieting of Title, Annulment of Documents, and Damages." In the complaint, he alleged
that he owned a total of eight shares of the subject lots, having purchased the shares of
seven of Alipio's children and inherited the share of his wife, Maria, and that except for
the portion corresponding to Gaudencia's share which he did not buy, he occupied,
cultivated, and possessed continuously, openly, peacefully, and exclusively the two
parcels of land. He then prayed that he be declared the absolute owner of 8/9 of the lots
in question. 1
On 8 October 1976, the grandchildren and great-grandchildren of the late Alipio
Yabo 2 lodged with the same court a complaint for partition and quieting of title with
damages, 3 docketed as Civil Case No. 5174, against Pastor Makibalo, Enecia Cristal, and
the spouses Eulogio and Remedies Salvador. They alleged that Lot No. 6080 and Lot No.
6180 are the common property of the heirs of Alipio Yabo, namely, the plaintiffs, defendant
Enecia Cristal, Maria Yabo and Jose Yabo, whose share had been sold to Alberto Yabo; that
after Alipio's death, the spouses Pastor and Maria Makibalo, Enecia Cristal and Jose Yabo
227
became the de facto administrators of the said properties; and that much to their surprise,
they discovered that the Salvador spouses, who were strangers to the family, have been
harvesting coconuts from the lots, which act as a cloud on the plaintiffs' title over the lots.
The plaintiffs then prayed that (a) they, as well as defendant Pastor Makibalo, in
representation of his wife, and Enecia Cristal, in representation of Gaudencia, be
declared as the owners of the lots; (b) the Salvador spouses be declared as having no
rights thereto except as possible assignees of their co-defendants, Pastor Makibalo and
Enecia Cristal; (c) the lots be partitioned according to law among the aforementioned co-
owners; and (d) the defendants be made to pay for the value of the fruits they harvested
from the lots and for moral and exemplary damages, attorney's fees, expenses of the
litigation, and costs of the suit.
The two cases were consolidated and jointly heard by Branch 5 of the Court of First
Instance of Cagayan de Oro City.
By evidence, Pastor, Makibalo sought to prove the following allegations:
He was married to Maria Yabo who died on 17 March 1962. 4 In August 1949, Jose and
Victoriano, both surnamed Yabo, sold their respective shares in the disputed lots to one
Pedro Ebarat, and in 1952 the latter sold both shares to Pastor Makibalo. 5 Ebarat formalized
this conveyance by executing an Affidavit of Waiver and Quitclaim dated 30 May 1969 in
favor of Pastor. 6
On 16 January 1951, the heirs of the late Lope Yabo sold Lope's shares in the litigated
properties to one Dominador Canomon, 7 who, in turn, sold the same to Pastor. 8 Canomon
afterwards executed an Affidavit of Waiver and Quitclaim in favor of the latter. 9
Pastor Makibalo likewise purchased the shares of Baseliza in the two lots in 1942, of
Procopio in 1957, of Francisca in 1958, and of Pelagia in 1967. The only share he did not
buy was that of Gaudencia. After every purchase, he took possession of the portions
bought and harvested the products thereof. 10
In 1966, Pastor sold back to Alberto a portion of Lot No. 6180 which was formerly the
share of Alberto's father, Procopio. 11
In December 1968, Pastor mortgaged the two lots to the spouses Eulogio and Remedios
Salvador. 12 On 26 September 1978, he executed a document denominated as a
"Confirmation and Quitclaim" whereby he waived all his rights, interests, and participation in
the lots in favor of the Salvador spouses. 13
On the other hand, by their evidence, l4 the spouses Alberto and Elpia Yabo tried to prove that they had
repurchased from Pastor Makibalo the share of Procopio, which was previously sold to Pastor, and had bought the shares of
Jose and Maria. 15
Filoteo Yabo denied having sold the share of his father, Lope Yabo, in the contested lots
and disowned his signature and those of his mother, brothers, and sisters appearing at
the back of Exhibit "C". 16
Ignacio Yabo testified that his father, Victoriano Yabo, did not know how to write and sign
his name. He further declared that he had no knowledge that his father affixed his
thumbmark in the document marked as Exhibit "A" purporting to alienate his father's
share in the disputed lots. l7
On 15 January 1983, the trial court rendered its decision 18 holding as follows:
Assuming that the thumbmark on the typewritten name "Jose Yabo" in
Exh. 3 was that of Jose Yabo, Alberto Yabo and Elpia R. Yabo purchased
the share of Jose Yabo in bad faith because they knew before and up to
the execution of Exh. 3 on October 24, 1972 that Jose Yabo was no
longer the owner of that area because from the documents she borrowed
from Mrs. Salvador they came to know that Jose Yabo had sold his
shares to Pedro Ebarat, and they have seen that Pastor Makibalo has
been in possession of those shares together with the seven others
exclusively as owner, he having mortgaged them to Mrs. Salvador.
As Jose Yabo was no longer the owner of the one-ninth (1/9) shares
which he sold to Alberto Yabo and Elpia Yabo under Exh. 3, the sale is
null and void, and Alberto and Elpia acquired nothing because Jose Yabo
had no more title, right or interest to dispose of.
...
Pastor Makibalo had been in possession of Jose Yabo's share since
1949 after purchasing it from Ebarat, and has been in possession thereof
up to September 26, 1978 when he sold it to the spouses Eulogio
Salvador and Remedios Salvador, who are now in possession of the
same.
Exh. A, evidencing the sale of Victoriano Yabo's share to Pedro Ebarat
was identified by the latter who testified that he sold it to Pastor Makibalo
in 1951. Exh. A is an ancient document — 1949 when the document
228
came to existence up to now is more than 30 years, and the document
had been in the possession of Pastor Makibalo, then Remedios Salvador
who had interest in its preservation.
As regards the shares of Lope Yabo, the same had been sold by his
surviving spouse Juana Legaspi, and his children Filoteo, Andresa,
Jovita, Bonifacio, and Rundino for P105.00 on January 16, 1951 to
Dominador Conomon (Exh. C and C-1), who in turn sold it to Pastor
Makibalo in 1952, executing a formal Deed of Waiver and Quitclaim on
May 30, 1969
(Exh. D).
Exh. C is an ancient document, being more than 30 years old and has
been in the possession of Pastor Makibalo and then the spouses Eulogio
and Remedios Salvador — who had an interest in its preservation. The
claim of Filoteo Yabo that the signatures appearing in Exh. C are not his
and those of his brothers and sisters are of no avail, for if they were not
the ones who affixed those signatures and so they did not sell the shares
of their father Lope Yabo, why did they not then take possession of said
shares — they remained silent from 1951 to September 16, 1976 a
period of 25 years. They are now [e]stopped by laches.
And as regards the shares of Baseliza, Francisca and Pelagia, there is no
evidence presented to effectively rebut the testimony of Pastor Makibalo
that he acquired the shares of Baseliza Yabo in 1942 by changing it with
a buffalo; that he bought the shares of Francisca Yabo in 1958 and that
he bought the shares of Pelagia Yabo in 1967; Pastor Makibalo had been
in possession of these shares from the time he acquired them,
continuously, adversely, openly, and peacefully, as owner up to the time
he sold his rights and interest therein to the spouses Eulogio and
Remedies Salvador. The heirs of Baseliza, Francisca and Pelagia have
not taken any step to protect their rights over those shares for over 40
years in the case of Baseliza's share, for about 20 years in the case of
Francisca's share, and for more than 10 years in the case of Pelagia's
share. Laches, likewise has rendered their rights stale.
On March 10, 1966 Pastor Makibalo sold back to Alberto Yabo the share
of Procopio Yabo in Lot 6180 (Exh. 1 and 2), but there is nothing to show
that. Pastor Makibalo also sold back Procopio's share in Lot 6080.
So then, by purchase, Pastor Makibalo and Maria Yabo acquired the
shares of Baseliza, Victoriano, Jose, Lope, Procopio and Francisca, or
six (6) shares from Lots 6080 and 6180. These belonged to the conjugal
partnership of Pastor Makibalo and Maria Yabo. Maria Yabo had also a
share from Lots 6080 and 6180, and Pastor Makibalo acquired the
shares of Pelagia Yabo in both Lots 6080 and 6180. All in all; Pastor
Makibalo acquired eight shares in both Lot 6080 and 6180.
While Maria Yabo died on March 17, 1962, and so one-fourth (1/4) of the
shares of Baseliza, Victoriano, Jose, Lope, and Francisca, or one-fourth
of five-ninth (5/9) of both lots and one-fourth (1/4) of Lot 6080 should go
to the children of the brothers and sisters of Maria Yabo by virtue of the
provisions of Article 1001 of the New Civil Code, the latter have lost their
rights thereto by laches for their inaction for a very long period and their
rights have become stale. On the other hand, Pastor Makibalo who had
been in possession of the whole of the eight shares in both Lots 6080
and 6180, enjoying the fruits thereof exclusively, uninterruptedly, publicly,
peacefully, and continuously from the death of Maria Yabo up to the filing
of the complaint in Civil Case No. 5174 on October 8, 1976, or a period of
14 years, had acquired title to the whole of the eight shares in Lot 6080
and seven shares in Lot 6180 (the share of Procopio in Lot 6180 had
been sold back to Alberto Yabo).
IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered
finding Pastor Makibalo, now Eulogio Salvador and Remedios Salvador
the owner of eight (8) shares, equivalent to eight-ninth (8/9) of Lot No.
6080, and of seven (7) shares, equivalent to seven-ninth (7/9) of Lot No.
6180, and therefore, ordering the partition of Lot 6080 so that the one-
ninth (1/9) alloted to Gaudencia Yabo will go to her heirs or their assigns,
and the remaining eight-ninth (8/9) will go to the spouses Eulogio
Salvador and Remedios Salvador, as successor of Pastor Makibalo, and
the partition of Lot 6180 so that the seven-ninth (7/9) portion which
formerly belonged to Baseliza, Victoriano, Jose, Lope, Maria, Francisca,
and Pelagia will go to the spouses Eulogio and Remedios Salvador, the
one-ninth (1/9) which formerly belonged to Procopio, will go to Alberto
Yabo, and the remaining one-ninth (1/9) which formerly belonged to
Gaudencia, will go to Gaudencia's heirs or their assigns.
Doc. No. 720, recorded on page 28 of Notarial Register No. VII, and
acknowledged before Notary Public Isidro S. Baculio (Exh. E)
[purportedly executed by Maria Yabo and Pastor Makibalo] is hereby
declared null and void, and so the Office of the City Fiscal is directed to
229
 cause an investigation of this matter to find out the person or persons
responsible for the falsification of the said document, and if the evidence
warrants, to file the corresponding criminal action in court. The Office of
the City Assessor of Cagayan de Oro City is, likewise, directed to cause
the cancellation of Tax Declarations Nos. 33553, marked as Exh. H-3,
33557, marked as Exh. H-2, both in the name of Alberto Yabo, for having
been issued on the basis of a falsified document. Let copies of this
decision be furnished the Offices of the City Fiscal and City Assessor,
both of Cagayan de Oro City.
No pronouncement as to damages, attorney's fees and costs.
SO ORDERED. 19
The defendants in Civil Case No. 5000 and the plaintiffs in Civil Case No. 5174 appealed
from the decision to the Court of Appeals on 19 August 1983. 20
In its decision of 3 February 1993, 21 the Court of Appeals held that (a) Maria Yabo did not
sell her share to Alberto and Elpia Yabo; (b) prescription and laches have not run against the
private respondents with respect to the 1/9 share of Maria Yabo in the estate of her father
and to her conjugal share in the portions acquired from her brothers and sisters; and (c)
Procopio never sold his share in Lot No. 6080 to Pastor Makibalo. More specifically it stated:
Exh. E is the document found by the lower court to be a falsification. This
finding appellants do not dispute and have not raised an error.
...
While acknowledging. that upon the death of Maria Yabo on March 17,
1962, one-half (1/2) of the share of Maria Yabo in Lots 6080 and 6180
and one-half (1/2) of Maria Yabo's conjugal share in the portions bought
from Basiliza, Victoriano, Jose, Lope, Pelagia and Francisca should go to
the children of the brothers and sisters of Maria in accordance with Article
1001 of the Civil Code, the lower court rule that said children have lost
their rights by laches "for their inaction for a very long period and their
rights have become stale" (Decision, p. 16; Record, Vol. 2, p. 158).
Appellants in their second assignment of error aver that this is an error.
We agree that the lower court erred.
While between March 17, 1962 when Maria Yabo died and October 8,
1976, when Civil Case No. 5174 for partition was filed, was a period of
more than fourteen (14) years, that alone to our mind would not suffice to
establish laches or prescription. Upon the death of Maria Yabo, appellee
Pastor Makibalo and appellants and the other children of the brothers
and sisters of Maria, by operation of law become co-owners of the one-
ninth (1/9) share of Maria as heir of her father Alipio and the conjugal
share of Maria in the portions acquired from Basiliza, Victoriano, Jose,
Lope, Pelagia and Francisca. Time alone is not a decisive factor.
Appellee Pastor Makibalo, it must be remembered, is the husband of
Maria and, therefore, an uncle in-law of appellants. In our culture, a
demand by an heir or heirs for partition immediately upon the death of a
relative is more often taken not as a legitimate assertion of a right but of
something else, like greed. It must also be noted that the spouses, the
appellee Pastor Makibalo and his deceased wife Maria, were childless
and, therefore, appellants and the other children of the brothers and
sisters of Maria must have felt that at any rate the property would go to
them in the course of time. This probably explains why appellants started
asserting their right over the property only after appellee Pastor Makibalo
sold the same to the spouses Eulogio and Remedios Salvador. Besides,
Lots 6080 and 6180 have a combined area only of 5,083 square meters
and before the development of Northern Mindanao, and even in 1962
when Maria Yabo died, were not that valuable. This is shown by the fact
that each heir sold his other share only for P110.00.
As we have said not time alone. In the early case of Cortes v. Oliva, 33
Phil. 480, it was held that"(o)rdinarily, possession by one joint owner will
not be presumed to be adverse to the others, but will, as a rule, be held
to be for the benefit of all. Much stronger evidence is required to show an
adverse holding by one of several joint owners than by a stranger; and in
such cases, to sustain a plea of prescription, it must always clearly
appear that one who was originally a joint owner has repudiated the
claims of his co-owners, and that his co-owners were apprised or should
have been apprised of his claim of adverse and exclusive ownership
before the alleged prescription began to run (at page 484). This ruling on
prescription should apply with equal force to laches.
The third assignment of error challenges the finding of the lower court
that "there is nothing to show that Pastor Makibalo also sold back
Procopio's share in Lot 6080" (Decision, p. 16; Records, Vol. 2,p. 158).
230
 Exhibits 1 and 2 cover only Procopio's share in Lot 6180. In other words,
Exhibits 1 and. 2 conveyed back to Alberto Yabo only his father,
Procopio's share in Lot 6180.
There is indeed no evidence that Pastor Makibalo also sold back to
Alberto, his father Procopio's share in Lot 6080.
But from the evidence it appears that Procopio Yabo never sold his share
in Lot 6080 to Pastor Makibalo. So there was no need to convey back
Procopio's share in Lot 6080.
This fact is evident from the Affidavit of Confirmation of Sale (Exh. M)
dated April 22, 1970, executed by Alberto Yabo, which is the very
document relied upon by the lower court (Decision, p. 11; Record, Vol. 2,
p. 153) in finding that "Alberto Yabo admitted that the share of his father
Procopio Yabo was previously bought by Pastor Makibalo." A look at
Exh. M, particularly par. 3 thereof, reveals that AlbertoYabo merely
acknowledged or confirmed the sale of his father's share to Pastor
Makibalo in Lot 6180. In effect, it at the same time proves that Lot 6080
was never sold by Procopio to appellee Pastor Makibalo; otherwise, it
would have been included in the said Affidavit of Confirmation of Sale.
The Deed of Absolute Sale (Exh. 2) subsequently executed by Pastor
Makibalo in favor of Alberto Yabo on April 23, 1970, further proves this
point, since the latter merely bought back what was previously sold, his
father's share in Lot 6180. 22
The respondent court then concluded and held as follows:
In summary, appellee Pastor Makibalo and his assigns, the spouses
Eulogio and Remedios Salvador, are entitled only to one-half (½) of the
one-ninth (1/9) share of Maria and three-fourths (3/4) of the six-ninth (6/9)
shares acquired from Basiliza, Victoriano, Jose, Lope, Pelagia and
Francisca. Accordingly, the partition should be done as follows:
(1) 1/9 of Lots 6080 end 6180 should be given to the heirs
of Gaudencia Yabo or their successors and assigns;
(2) 1/9 of Lot 6180 should go to Alberto Yabo and his wife
Elpia Yabo;
(3) 1/9 of Lot 6080 should be given to the heirs of
Procopio Yabo and their successors end assigns,
including Alberto Yabo;
(4) The 1/9 share of Maria Yabo in Lots 6080 and 6180
should be partitioned: One-half (1/2) for the surviving
spouse Pastor Makibalo (now the spouses Eulogio
Salvador and Remedios Salvador) and the other half for
the children of the brothers and sisters of Maria Yabo in
equal shares.
(5) The remaining 6/9, one-half (1/2) of which is conjugal
between Maria Yabo and appellee Pastor Makibalo
should be partitioned three-fourths (3/4) for Pastor
Makibalo (now the spouses Eulogio Salvador and
Remedios Salvador) and one-fourth (1/4) for the children
of the brothers and sisters of Maria Yabo in equal shares.
(6) Jose Yabo if he is still alive should participate in the
partition as heir of Maria otherwise he shall be
represented by his children.
WHEREFORE, premises considered, subject to the modification in the
partition, as indicated above, the decision appealed from is AFFIRMED,
without pronouncement as to costs. The lower court is directed if
necessary to fully effect the partition, to conduct further hearings and
determine whether Jose Yabo is still alive and who are the children of the
brothers and sisters of Maria Yabo. 23
Unable to obtain a reconsideration of the said-decision, Remedios Salvador, together
with her daughter, Ma. Gracia Salvador, as one of the successors-in-interest of Eulogio
M. Salvador who died during the pendency of the appeal, 24 elevated the case to this Court
contending that the respondent court erred in ruling that: (1) the shares of Pelagia Yabo
should be included in the partition; (2) prescription and laches have not run against the
private respondents in relation to the 1/9 share of Maria Yabo in the estate of her father and
to her ½ conjugal share in those acquired by purchase; (3) Procopio Yabo never sold to
Pastor Makibalo his share in Lot No. 6080; and(4) Jose Yabo should be allowed to participate
as heir of Maria even as he had openly rejected this option by refusing to participate in both
civil cases. 25
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Article 160 of the Civil Code provides that all property of the marriage is presumed to
belong to the conjugal partnership, unless it be proved that it pertains .exclusively to the
husband or to the wife. Since the shares of Jose, Victoriano, Lope, Baseliza, Procopio,
and Francisca in Lot No. 6180 and Lot No. 6080 had been purchased by Pastor during
his marriage with Maria, and there is no proof that these were acquired with his exclusive
money, the same are deemed conjugal properties. Not forming part of the conjugal
partnership are: (1) the 1/9 share inherited by Maria which remained as her exclusive
property pursuant to Article 146 (2) of the Civil Code; (2) the 1/9 share of Gaudencia
which was not sold to Pastor; and (3) the 1/9 share of Pelagia which was acquired by
Pastor in 1967 or five years after the death of his wife and which was therefore his
exclusive property.
There is, thus; merit in the petitioners' first assigned error. The Court of .Appeals should
have excluded from the conjugal partnership the share of Pelagia which Pastor had
acquired after his wife's death.
Upon Maria's death in 1962, the conjugal partnership of gains was dissolved. 26 Half of
the conjugal properties, together with Maria's l/9 hereditary share in the disputed lots,
constituted Maria's estate and should thus go to her surviving heirs. 27 Under Article 1001 of
the Civil Code, her heirs are her spouse, Pastor Makibalo, who shall be entitled to-one-half
(1/2) of her estate, her brother, Jose, and the children of her other brothers and sisters, who
shall inherit the other half. There having been no actual partition of the estate yet, the said
heirs became co-owners thereof by operation of law. 28
We now determine whether prescription and laches can be applied against the co-heirs
of Pastor Makibalo.
It has been said that Article 494 of the Civil Code which provides that each co-owner
may demand at any time the partition of the common property implies that an action to
demand partition is imprescriptible or cannot be barred by laches. 29 The imprescriptibility
of the action cannot, however, be invoked when one of the co-owners has possessed the
property as exclusive owner and for a period sufficient to acquire it by prescription. 30
What needs to be addressed first is whether or not Pastor Makibalo has acquired by
prescription the shares of his other co-heirs or co-owners. Prescription as a mode of
acquiring ownership requires a continuous, open, peaceful, public, and adverse
possession for a period of time fixed by law.
This Court has held that the possession of a co-owner is like that of a trustee and shall
not be regarded as adverse to the other co-owners but in fact as beneficial to all of
them. 31 Acts which may be considered adverse to strangers may not be considered adverse
insofar as co-owners are concerned. A mere silent possession by a co-owner, his receipt of
rents, fruits or profits from the property, the erection of buildings and fences and the planting
of trees thereon, and the payment of land taxes, cannot serve as proof of exclusive
ownership, if it is not borne out by clear and convincing evidence that he exercised acts of
possession which unequivocably constituted an ouster or deprivation of the rights of the other
co-owners. 32
Thus, in order that a co-owner's possession may be deemed adverse to the cestui que
trust or the other co-owners, the following elements must concur: (1) that he has
performed unequivocal acts of repudiation amounting to an ouster of the cestui que
trust or the other co-owners; (2) that such positive acts of repudiation have been made
known to the cestui que trust or the other co-owners; and (3) that the evidence thereon
must be clear and convincing. 33
In Pangan vs. Court of Appeals, 34 this Court had occasion to lay down specific acts which
are considered as acts of repudiation:
Filing by a trustee of an action in court against the trustor to quiet title to
property, or for recovery of ownership thereof, held in possession by the
former, may constitute an act of repudiation of the trust reposed on him
by the latter.
The issuance of the certificate of title would constitute an open and clear
repudiation of any trust, and the lapse of more than 20 years, open and
adverse possession as owner would certainly suffice to vest title by
prescription.
An action for the reconveyance of land based on implied or constructive
trust prescribes within 10 years. And it is from the date of the issuance of
such title that the effective assertion of adverse title for purposes of the
statute of limitation is counted.
The prescriptive period may only be counted from the time petitioners
repudiated the trust relation in 1955 upon the filing of the complaint for
recovery of possession against private respondents so that the
counterclaim of the private respondents contained in their amended
answer wherein they asserted absolute ownership of the disputed realty
by reason of the continuous and adverse possession of the same is well
within the l0-year prescriptive period.
232
 There is clear repudiation of a trust when one who is an apparent At this juncture, it is worthy to quote pertinent portions of the testimony of Pastor
administrator of property causes the cancellation of the title thereto in the Makibalo:
name of the apparent beneficiaries and gets a new certificate of title in his
own name. COURT: (To the witness.)

It is only when the defendants, alleged co-owners of the property in Q Where is AlbertoYabo living?
question, executed a deed of partition and on the strength thereof
obtained the cancellation of the title in the name of their predecessor and A It is there in their house at Bulua.
the issuance of a new one wherein they appear as the new owners of a
definite area each, thereby in effect denying or repudiating the ownership
ATTY. JARAULA: (Continuing.)
of one of the plaintiffs over his alleged share in the entire lot, that the
statute of limitations started to run for the purposes of the action instituted
by the latter seeking a declaration of the existence of the co-ownership Q In whose land?
and of their rights thereunder.
A Alipio Yabo's land.
The records do not show that Pastor Makibalo adjudicated to himself the whole estate of
his wife by means of an affidavit filed with the Office of the Register of Deeds as allowed Q What relation has that land to the two (2) parcels of
under Section 1 Rule 74 of the Rules of Court, or that he caused the issuance of a land under litigation?
certificate of title in his name or the cancellation of the tax declaration in Alipio's name
and the issuance of a new one in his own name. The only act which may be deemed as A I bought already.
a repudiation by Pastor of the co-ownership over the lots is his filing on 28 April 1976 of
an action to quiet title (Civil Case No. 5000). The period of prescription started to run only Q So, will you please tell the Honorable Court, why
from this repudiation. However, this was tolled when his co-heirs, the private Alberto Yabo is staying on that land when you said you
respondents herein, instituted on 8 October 1976 an action for partition (Civil Case No. have bought that land already.
5174) of the lots. Hence, the adverse possession by Pastor being for only about six
months would not vest in him exclusive ownership of his wife's estate, and absent A So, I sold back a portion to them because they
acquisitive prescription of ownership, laches and prescription of the action for partition requested me.
will not lie in favor of Pastor. 35
COURT: (To the witness.)
The issue presented by the petitioners in their third assigned error involves a question of
fact. This Court is not ordinarily a trier of facts, its jurisdiction being limited to errors of Q When was that when you said that Alberto Yabo
law. Thus; the findings of facts of the Court of Appeals are as a rule deemed conclusive. requested a portion?
However, when the findings of facts of the appellate court vary with those of the trial
court, this Court has to review the evidence in order to arrive at the correct findings. 36
A In 1967.
In the instant case, a conflict in the findings of facts of the lower courts exists. The trial
court found that Pastor was the owner of Procopio's share in Lot No. 6080, as there was COURT:
nothing to show that he sold it back to Alberto Yabo. The respondent court on the other
hand, held that Procopio Yabo never sold his share in Lot No. 6080 to pastor, thus, there Q Did you give that portion which they requested?
was no need to convey it back to Procopio's son, Alberto.

233
A Their share being inherited from their father Procopio COURT:
was the portion they requested.
All right.
COURT
ATTY. JARAULA (Continuing.)
Q Yes. Did you grant that?
Q Now, for how much did you buy. the shares of each of
A Yes. the brothers and sisters of your wife?

Q That is the area you sold to Alberto Yabo, pursuant to A One Hundred Ten (P110.00) Pesos.
his request?
Q When you sold back to Alberto Yabo, the portion
A Because that was the land they inherited from their corresponding to the share of his father Procopio in the
father that was what they requested. Poblacion, how much did he pay you?

Q All right. So that, the area now being occupied by A The same.
Alberto Yabo?
Q By the same, you are referring by the same amount of
A Yes. That land in the Centro. One Hundred Ten (P110.00) Pesos?

Q This is now identified as Lot No. 6180? A Yes, Sir. The same amount. 37

A Yes, Your Honor. The petitioners contend that the sales or conveyances made by Alipio's heirs were for
their consolidated shares in the two lots. If this was so, and the receipt which Procopio
ATTY. JARAULA: (Continuing.) signed when he sold his consolidated share to Pastor was turned over to Alberto, the
inevitable conclusion is that Alberto redeemed his father's share in both lots, not only in
Q Where did you sign a document ceding that portion Lot: No. 6180. This conclusion is further buttressed by the above-quoted testimony of
requested by Alberto Yabo? Pastor that he bought the shares (consolidated) of each of Alipio's heirs for P110.00 and
that when he sold back to Alberto the former share of Procopio, Alberto paid him the
same amount of P110.00.
A We did not make any receipt in favor of AlbertoYabo
because they got only the receipt of that of his father.
However, since the share of Procopio in the two litigated parcels of land was purchased
by Pastor during his marriage with Maria, the same became conjugal property, and half
COURT: (To the witness.)
of it formed part of Maria's estate upon her death in 1962. Accordingly, Pastor's resale in
favor of Alberto could only be valid with respect to Pastor's one-half (1/2) conjugal share
Q You mean to say, that the receipt which Procopio and one-fourth (1/4) hereditary share as heir of Maria. 38 The remaining one-fourth (1/4)
signed when he sold his share for [sic] the document should go to Pastor's co-heirs, the private respondents herein.
which Alberto got?
Now on the fourth assigned error.
A Yes.

234
Section 1, Rule 69 of the Rules of Court requires that all persons interested in the land
sought to be partitioned must be joined as defendants in the complaints. All co-owners
and persons having an interest in the property are considered indispensable parties and
an action for partition will not lie without the joinder of said persons. 39 It has been held
that the absence of an indispensable party in a case renders ineffective all the proceedings
subsequent to the filing of the complaint including the judgment. 40
It must be recalled that in Civil Case No. 5174 the private respondents sought the
partition of the two lots based on the co-ownership which arose from the right of
succession to Alipio's estate. Since Jose Yabo confirmed, through his thumbmark in the
verification of the complaint, that he had already parted with his share in Alipio's estate,
he in effect admitted that he had ceased to be a co-owner of the two lots which
comprised his father's estate. Thus, his non-joinder as a party-plaintiff in the complaint
would appear to be proper. He does not, as well, appear to be an indispensable party in
Civil Case No. 5000.
As it turned out, however, the evidence and the issues which cropped up rendered
imperative the determination of the conjugal assets of Pastor Makibalo and Maria Yabo
and the partition of the latter's estate among her heirs. Her estate consists of one-half(½)
of the conjugal properties, which should then be divided pursuant to Article 1001 of the
Civil Code since the marriage produced no child; thus: one-half (½) to Pastor, and the
other half to her brother Jose, and to her nephews and nieces.
Insofar as the partition of Maria Yabo's estate is concerned, Jose is an indispensable
party. Strictly, the rule on indispensable parties may bar a partition of Maria's estate.
Considering, however, that such estate or its partition are but incidents in Civil Case No.
5000 and Civil Case No. 5174, and the parties have not offered any objection to the
propriety of the determination and partition of her estate, then in the light of Section 11 of
Rule 3 41 and Sections 1 and 5, Rule 10 42 of the Rules of Court, and following the rulings of
this Court in the 1910 case of Alonso vs. Villamor 43 and the 1947 case of Cuyugan vs.
Dizon, 44 an amendment of the complaint in Civil Case No. 5174 to implead Jose Yabo as
party plaintiff would be in order.
In Alonso, it was held that under Section 110 of the Code of Civil Procedure — whose
first paragraph is substantially the same as the aforesaid Section 1 of Rule 10 — and
Section 503 thereof, this Court "has full power, apart from that power and authority which
is inherent, to amend the process, pleadings, proceedings, and decision in this case by
substituting, as party plaintiff, the real party in interest." Our ruling in Cuyugan states:
We, however, do not believe that the case should be dismissed for
plaintiff's failure to join her husband. (Sec. 11, Rule 2, Rules of Court).
Nor should the case be remanded to the court below and a new trial
ordered on this account. The complaint may and should be amended
here, to cure the defect of party plaintiffs, after final decision is rendered.
Section 11, Rule 2, and Section 2, Rule 17, explicitly authorize such
procedure. As this Court had occasion to say in Quison vs. Salud, (12
Phil., 109, 116), "a second action would be but a repetition of the first and
would involve both parties, plaintiffs and defendant, in much additional
expense and would cause much delay, in that way defeating the purpose
of the section, which is expressly stated to be "that the actual merits of
the controversy may speedily be determined without regard to
technicalities and in the most expeditious and inexpensive manner." (See
also Diaz vs. De la Rama, 73 Phil., 104)
To avoid further delay in the disposition of this case, we declare Civil Case No. 5174 as
thus duly amended. Consequently, Jose Yabo may participate in the partition of the
estate of Maria Yabo. The fourth assigned error must then be rejected.
In view of the foregoing disquisitions, the appealed judgment should be modified as
follows: (a) the former 1/9 share of Pelagia Yabo in Lots No. 6180 and 6080 which she
sold to Pastor should be treated as the latter's exclusive property which should now
pertain to the petitioners, his successors-in-interest; and (b) the former 1/9 share of
Procopio Yabo in both lots should be divided as follows: 3/4 (respondent Pastor's 1/2
conjugal share and 1/4 representing his share therein as Maria's heir) for the spouses
Alberto and Elpia Yabo, and 1/4 (representing the share therein of Maria's collateral
relatives as Maria's heirs) for the private respondents, including Alberto and Jose Yabo.
The partition of the two lots in controversy should therefore be made in this wise:
(1) 1/9 share of Gaudencia Yabo should be allotted to her heirs or
successors-in-interest;
(2) 1/9 share formerly belonging to Pelagia Yabo — to the petitioners as
successors-in-interest of Pastor Makibalo;
(3) 1/9 hereditary share of Maria Yabo to be divided as follows:
(a) 1/2 for the petitioners (as successors-in-interest of
Pastor Makibalo), and
(b) 1/2 for the private respondents, including Jose Yabo
or his heirs;
235
 (4) 1/9 share formerly belonging to Procopio Yabo to be divided thus:
(a) 3/4 for Spouses Alberto and Elpia Yabo, and
(b) 1/4 for the other private respondents, including Jose
Yabo or his heirs;
(5) 5/9 shares which became the conjugal properties of Pastor Makibalo
and Maria Yabo to be divided thus:
(a) 3/4 for the petitioners (as successors-in-interest of
Pastor Makibalo), and
(b) ¼ for the private respondents, including Jose Yabo or
his heirs.
In sum, Lots Nos. 6180 anid 6080 should be partitioned as follows:
1/9 or 4/36 — to Guadencia Yabo's heirs or successors-in-interest;
3/4 of 1/9 or 3/36 — to the spouses Alberto and Elpina Yabo;
8/36 — to the private respondents, including Jose Yabu or his heirs;
21/36 — to the petitioners as successors-in-interest of Pastor Makibalo.
WHEREFORE, the challenged decision of the Court of Appeals of 8 February 1993 in
CA-G.R. CV No. 12839 is AFFIRMED, subject to the modifications indicated above.
Upon the finality of this decision, let this case be forthwith remanded to the court a
quo for further proceedings on the partition of Lots Nos. 6180 and 6080 in conformity
with this decision.
No pronouncement as to costs.
SO ORDERED.
G.R. No. 184109 February 1, 2012
MERCADO vs. ESPINOCILLA
The Case
Petitioner Celerino E. Mercado appeals the Decision1 dated April 28, 2008 and
Resolution2 dated July 22, 2008 of the Court of Appeals (CA) in CA-G.R. CV No. 87480.
The CA dismissed petitioner’s complaint3 for recovery of possession, quieting of title,
partial declaration of nullity of deeds and documents, and damages, on the ground of
prescription.
The Antecedent Facts
Doroteo Espinocilla owned a parcel of land, Lot No. 552, with an area of 570 sq. m.,
located at Magsaysay Avenue, Zone 5, Bulan, Sorsogon. After he died, his five children,
Salvacion, Aspren, Isabel, Macario, and Dionisia divided Lot No. 552 equally among
themselves. Later, Dionisia died without issue ahead of her four siblings, and Macario
took possession of Dionisia’s share. In an affidavit of transfer of real property4 dated
November 1, 1948, Macario claimed that Dionisia had donated her share to him in May
1945.
Thereafter, on August 9, 1977, Macario and his daughters Betty Gullaba and Saida
Gabelo sold5 225 sq. m. to his son Roger Espinocilla, husband of respondent Belen
Espinocilla and father of respondent Ferdinand Espinocilla. On March 8, 1985, Roger
Espinocilla sold6 114 sq. m. to Caridad Atienza. Per actual survey of Lot No. 552,
respondent Belen Espinocilla occupies 109 sq. m., Caridad Atienza occupies 120 sq. m.,
Caroline Yu occupies 209 sq. m., and petitioner, Salvacion's son, occupies 132 sq. m.7
The Case For Petitioner
Petitioner sued the respondents to recover two portions: an area of 28.58 sq. m. which he
bought from Aspren and another 28.5 sq. m. which allegedly belonged to him but was
occupied by Macario’s house.9 His claim has since been modified to an alleged
encroachment of only 39 sq. m. that he claims must be returned to him. He avers that he
is entitled to own and possess 171 sq. m. of Lot No. 552, having inherited 142.5 sq. m.
from his mother Salvacion and bought 28.5 sq. m. from his aunt Aspren. According to
him, his mother’s inheritance is 142.5 sq. m., that is, 114 sq. m. from Doroteo plus 28.5
sq. m. from Dionisia. Since the area he occupies is only 132 sq. m.,10 he claims that
respondents encroach on his share by 39 sq. m.11
The Case For Respondents
Respondents agree that Doroteo’s five children each inherited 114 sq. m. of Lot No. 552.
However, Macario’s share increased when he received Dionisia’s share. Macario’s
increased share was then sold to his son Roger, respondents’ husband and father.
236
Respondents claim that they rightfully possess the land they occupy by virtue of
acquisitive prescription and that there is no basis for petitioner’s claim of encroachment.12
The Trial Court’s Decision
On May 15, 2006, the Regional Trial Court (RTC) ruled in favor of petitioner and held that
he is entitled to 171 sq. m. The RTC found that petitioner inherited 142.5 sq. m. from his
mother Salvacion and bought 28.5 sq. m. from his aunt Aspren. The RTC computed that
Salvacion, Aspren, Isabel and Macario each inherited 142.5 sq. m. of Lot No. 552. Each
inherited 114 sq. m. from Doroteo and 28.5 sq. m. from Dionisia. The RTC further ruled
that Macario was not entitled to 228 sq. m. Thus, respondents must return 39 sq. m. to
petitioner who occupies only 132 sq. m.13
There being no public document to prove Dionisia’s donation, the RTC also held that
Macario’s 1948 affidavit is void and is an invalid repudiation of the shares of his sisters
Salvacion, Aspren, and Isabel in Dionisia’s share. Accordingly, Macario cannot acquire
said shares by prescription. The RTC further held that the oral partition of Lot No. 552 by
Doroteo’s heirs did not include Dionisia’s share and that partition should have been the
main action. Thus, the RTC ordered partition and deferred the transfer of possession of
the 39 sq. m. pending partition.14 The dispositive portion of the RTC decision reads:
WHEREFORE, in view of the foregoing premises, the court issues the following ORDER,
thus -
a) Partially declaring the nullity of the Deed of Absolute Sale of Property dated
August 9, 1977 x x x executed by Macario Espinocilla, Betty E. Gullaba and
Saida E. Gabelo in favor of Roger Espinocilla, insofar as it affects the portion or
the share belonging to Salvacion Espinocilla, mother of [petitioner,] relative to the
property left by Dionisia Espinocilla, including [Tax Declaration] No. 13667 and
other documents of the same nature and character which emanated from the
said sale;
b) To leave as is the Deeds of Absolute Sale of May 11, 1983 and March 8,
1985, it having been determined that they did not involve the portion belonging to
[petitioner] x x x.
c) To effect an effective and real partition among the heirs for purposes of
determining the exact location of the share (114 sq. m.) of the late Dionisia
Espinocilla together with the 28.5 sq. m. belonging to [petitioner’s] mother
Salvacion, as well as, the exact location of the 39 sq. m. portion belonging to the
[petitioner] being encroached by the [respondents], with the assistance of the
Commissioner (Engr. Fundano) appointed by this court.
d) To hold in abeyance the transfer of possession of the 39 sq. m. portion to the
[petitioner] pending the completion of the real partition above-mentioned.15
The CA Decision
On appeal, the CA reversed the RTC decision and dismissed petitioner’s complaint on
the ground that extraordinary acquisitive prescription has already set in in favor of
respondents. The CA found that Doroteo’s four remaining children made an oral partition
of Lot No. 552 after Dionisia’s death in 1945 and occupied specific portions. The oral
partition terminated the co-ownership of Lot No. 552 in 1945. Said partition also included
Dionisia’s share because the lot was divided into four parts only. And since petitioner’s
complaint was filed only on July 13, 2000, the CA concluded that prescription has set
in.16 The CA disposed the appeal as follows:
WHEREFORE, the appeal is GRANTED. The assailed May 15, 2006 Decision of the
Regional Trial Court (RTC) of Bulan, Sorsogon is hereby REVERSED and SET ASIDE.
The Complaint of the [petitioner] is hereby DISMISSED. No costs.17
The Instant Petition
The core issue to be resolved is whether petitioner’s action to recover the subject portion
is barred by prescription.
Petitioner confirms oral partition of Lot No. 552 by Doroteo's heirs, but claims that his
share increased from 114 sq. m. to 171 sq. m. and that respondents encroached on his
share by 39 sq. m. Since an oral partition is valid, the corresponding survey ordered by
the RTC to identify the 39 sq. m. that must be returned to him could be made.18 Petitioner
also alleges that Macario committed fraud in acquiring his share; hence, any evidence
adduced by him to justify such acquisition is inadmissible. Petitioner concludes that if a
person obtains legal title to property by fraud or concealment, courts of equity will
impress upon the title a so-called constructive trust in favor of the defrauded party.19
The Court’s Ruling
We affirm the CA ruling dismissing petitioner’s complaint on the ground of prescription.
1âwphi1
237
Prescription, as a mode of acquiring ownership and other real rights over immovable
property, is concerned with lapse of time in the manner and under conditions laid down
by law, namely, that the possession should be in the concept of an owner, public,
peaceful, uninterrupted, and adverse. Acquisitive prescription of real rights may be
ordinary or extraordinary. Ordinary acquisitive prescription requires possession in good
faith and with just title for 10 years. In extraordinary prescription, ownership and other
real rights over immovable property are acquired through uninterrupted adverse
possession for 30 years without need of title or of good faith.20
Here, petitioner himself admits the adverse nature of respondents’ possession with his
assertion that Macario’s fraudulent acquisition of Dionisia’s share created a constructive
trust. In a constructive trust, there is neither a promise nor any fiduciary relation to speak
of and the so-called trustee (Macario) neither accepts any trust nor intends holding the
property for the beneficiary (Salvacion, Aspren, Isabel). The relation of trustee and cestui
que trust does not in fact exist, and the holding of a constructive trust is for the trustee
himself, and therefore, at all times adverse.21 Prescription may supervene even if the
trustee does not repudiate the relationship.22
Then, too, respondents’ uninterrupted adverse possession for 55 years of 109 sq. m. of
Lot No. 552 was established. Macario occupied Dionisia’s share in 1945 although his
claim that Dionisia donated it to him in 1945 was only made in a 1948 affidavit. We also
agree with the CA that Macario’s possession of Dionisia’s share was public and adverse
since his other co-owners, his three other sisters, also occupied portions of Lot No. 552.
Indeed, the 1977 sale made by Macario and his two daughters in favor of his son Roger
confirms the adverse nature of Macario’s possession because said sale of 225 sq.
m.23 was an act of ownership over Macario’s original share and Dionisia’s share. In 1985,
Roger also exercised an act of ownership when he sold 114 sq. m. to Caridad Atienza. It
was only in the year 2000, upon receipt of the summons to answer petitioner’s complaint,
that respondents’ peaceful possession of the remaining portion (109 sq. m.) was
interrupted. By then, however, extraordinary acquisitive prescription has already set in in
favor of respondents. That the RTC found Macario’s 1948 affidavit void is of no moment.
Extraordinary prescription is unconcerned with Macario’s title or good faith. Accordingly,
the RTC erred in ruling that Macario cannot acquire by prescription the shares of
Salvacion, Aspren, and Isabel, in Dionisia’s 114-sq. m. share from Lot No. 552.
Moreover, the CA correctly dismissed petitioner’s complaint as an action for
reconveyance based on an implied or constructive trust prescribes in 10 years from the
time the right of action accrues.24 This is the other kind of prescription under the Civil
Code, called extinctive prescription, where rights and actions are lost by the lapse of
time.25 Petitioner’s action for recovery of possession having been filed 55 years after
Macario occupied Dionisia’s share, it is also barred by extinctive prescription. The CA
while condemning Macario’s fraudulent act of depriving his three sisters of their shares in
Dionisia’s share, equally emphasized the fact that Macario’s sisters wasted their
opportunity to question his acts.
WHEREFORE, we DENY the petition for review on certiorari for lack of merit
and AFFIRM the assailed Decision dated April 28, 2008 and Resolution dated July 22,
2008 of the Court of Appeals in CA-G.R. CV No. 87480.
No pronouncement as to costs.
SO ORDERED.
--- xx END OF PRESCRIPTION BY CO-OWNER xx ---
G.R. No. L-27952 February 15, 1982
RAMIREZ vs. RAMIREZ
The main issue in this appeal is the manner of partitioning the testate estate of Jose
Eugenio Ramirez among the principal beneficiaries, namely: his widow Marcelle
Demoron de Ramirez; his two grandnephews Roberto and Jorge Ramirez; and his
companion Wanda de Wrobleski.
The task is not trouble-free because the widow Marcelle is a French who lives in Paris,
while the companion Wanda is an Austrian who lives in Spain. Moreover, the testator
provided for substitutions.
Jose Eugenio Ramirez, a Filipino national, died in Spain on December 11, 1964, with
only his widow as compulsory heir. His will was admitted to probate by the Court of First
Instance of Manila, Branch X, on July 27, 1965. Maria Luisa Palacios was appointed
administratrix of the estate. In due time she submitted an inventory of the estate as
follows:
INVENTARIO
Una sexta parte (1/6) proindiviso de un te
rreno, con sus mejoras y edificaciones, situadoen
la Escolta, Manila............................................................. P500,000.00
Una sexta parte (1/6) proindiviso de dos
238
 parcelas de terreno situadas en Antipolo, Rizal................... 658.34
Cuatrocientos noventa y uno (491) acciones
de la 'Central Azucarera de la Carlota a P17.00
por accion ................................................................................8,347.00
Diez mil ochocientos seize (10,806) acciones
de la 'Central Luzon Milling Co.', disuelta y en
liquidacion a P0.15 por accion ..............................................1,620.90
Cuenta de Ahorros en el Philippine Trust
Co.............................................................................................. 2,350.73
TOTAL..............................................................
P512,976.97
MENOS:
Deuda al Banco de las Islas Filipinas, garan-
tizada con prenda de las acciones de La Carlota ......... P 5,000,00
VALOR LIQUIDO........................................... P507,976.97
The testamentary dispositions are as follows:
A.—En nuda propiedad, a D. Roberto y D. Jorge Ramirez, ambas
menores de edad, residentes en Manila, I.F., calle 'Alright, No. 1818,
Malate, hijos de su sobrino D. Jose Ma. Ramirez, con sustitucion vulgar a
favor de sus respectivos descendientes, y, en su defecto, con sustitucion
vulgar reciprocal entre ambos.
El precedente legado en nuda propiedad de la participacion indivisa de la
finca Santa Cruz Building, lo ordena el testador a favor de los legatarios
nombrados, en atencion a que dicha propiedad fue creacion del querido
padre del otorgante y por ser aquellos continuadores del apellido
Ramirez,
B.—Y en usufructo a saber: —
a. En cuanto a una tercera parte, a favor de la esposa del testador, Da.
Marcelle Ramirez, domiciliada en IE PECO, calle del General Gallieni No.
33, Seine Francia, con sustitucion vulgar u fideicomisaria a favor de Da.
Wanda de Wrobleski, de Palma de Mallorca, Son Rapina Avenida de los
Reyes 13,
b.—Y en cuanto a las dos terceras partes restantes, a favor de la
nombrada Da. Wanda de Nrobleski con sustitucion vulgar v
fideicomisaria a saber:—
En cuanto a la mitad de dichas dos terceras partes, a favor de D. Juan
Pablo Jankowski, de Son Rapina Palma de Mallorca; y encuanto a la
mitad restante, a favor de su sobrino, D. Horace V. Ramirez, San Luis
Building, Florida St. Ermita, Manila, I.F.
A pesar de las sustituciones fideiconiisarias precedentemente ordinadas,
las usufiructuarias nombradas conjuntamente con los nudo propietarios,
podran en cualquier memento vender a tercero los bienes objeto
delegado, sin intervencion alguna de los titulares fideicomisaarios.
On June 23, 1966, the administratrix submitted a project of partition as follows: the
property of the deceased is to be divided into two parts. One part shall go to the widow
'en pleno dominio" in satisfaction of her legitime; the other part or "free portion" shall go
to Jorge and Roberto Ramirez "en nuda propriedad." Furthermore, one third (1/3) of the
free portion is charged with the widow's usufruct and the remaining two-thirds (2/3) with a
usufruct in favor of Wanda.
Jorge and Roberto opposed the project of partition on the grounds: (a) that the provisions
for vulgar substitution in favor of Wanda de Wrobleski with respect to the widow's
usufruct and in favor of Juan Pablo Jankowski and Horacio V. Ramirez, with respect to
Wanda's usufruct are invalid because the first heirs Marcelle and Wanda) survived the
testator; (b) that the provisions for fideicommissary substitutions are also invalid because
the first heirs are not related to the second heirs or substitutes within the first degree, as
provided in Article 863 of the Civil Code; (c) that the grant of a usufruct over real property
in the Philippines in favor of Wanda Wrobleski, who is an alien, violates Section 5, Article
239
III of the Philippine Constitution; and that (d) the proposed partition of the testator's
interest in the Santa Cruz (Escolta) Building between the widow Marcelle and the
appellants, violates the testator's express win to give this property to them Nonetheless,
the lower court approved the project of partition in its order dated May 3, 1967. It is this
order which Jorge and Roberto have appealed to this Court.
1. The widow's legitime.
The appellant's do not question the legality of giving Marcelle one-half of the estate in full
ownership. They admit that the testator's dispositions impaired his widow's legitime.
Indeed, under Art. 900 of the Civil Code "If the only survivor is the widow or widower, she
or he shall be entitled to one-half of the hereditary estate." And since Marcelle alone
survived the deceased, she is entitled to one-half of his estate over which he could
impose no burden, encumbrance, condition or substitution of any kind whatsoever. (Art.
904, par. 2, Civil Code.)
It is the one-third usufruct over the free portion which the appellants question and
justifiably so. It appears that the court a quo approved the usufruct in favor of Marcelle
because the testament provides for a usufruct in her favor of one-third of the estate. The
court a quo erred for Marcelle who is entitled to one-half of the estate "en pleno dominio"
as her legitime and which is more than what she is given under the will is not entitled to
have any additional share in the estate. To give Marcelle more than her legitime will run
counter to the testator's intention for as stated above his dispositions even impaired her
legitime and tended to favor Wanda.
2. The substitutions.
It may be useful to recall that "Substitution is the appoint- judgment of another heir so
that he may enter into the inheritance in default of the heir originally instituted." (Art. 857,
Civil Code. And that there are several kinds of substitutions, namely: simple or common,
brief or compendious, reciprocal, and fideicommissary (Art. 858, Civil Code.) According
to Tolentino, "Although the Code enumerates four classes, there are really only two
principal classes of substitutions: the simple and the fideicommissary. The others are
merely variations of these two." (111 Civil Code, p. 185 [1973].)
The simple or vulgar is that provided in Art. 859 of the Civil Code which reads:
ART. 859. The testator may designate one or more persons to substitute
the heir or heirs instituted in case such heir or heirs should die before
him, or should not wish, or should be incapacitated to accept the
inheritance.
A simple substitution, without a statement of the cases to which it refers,
shall comprise the three mentioned in the preceding paragraph, unless
the testator has otherwise provided.
The fideicommissary substitution is described in the Civil Code as follows:
ART. 863. A fideicommissary substitution by virtue of which the fiduciary
or first heir instituted is entrusted with the obligation to preserve and to
transmit to a second heir the whole or part of inheritance, shall be valid
and shall take effect, provided such substitution does not go beyond one
degree from the heir originally instituted, and provided further that the
fiduciary or first heir and the second heir are living at time of the death of
the testator.
It will be noted that the testator provided for a vulgar substitution in respect of the
legacies of Roberto and Jorge Ramirez, the appellants, thus: con sustitucion vulgar a
favor de sus respectivos descendientes, y, en su defecto, con substitution vulgar
reciprocal entre ambos.
The appellants do not question the legality of the substitution so provided. The appellants
question the sustitucion vulgar y fideicomisaria a favor de Da. Wanda de Wrobleski" in
connection with the one-third usufruct over the estate given to the widow Marcelle
However, this question has become moot because as We have ruled above, the widow
is not entitled to any usufruct.
The appellants also question the sustitucion vulgar y fideicomisaria in connection with
Wanda's usufruct over two thirds of the estate in favor of Juan Pablo Jankowski and
Horace v. Ramirez.
They allege that the substitution in its vulgar aspect as void because Wanda survived the
testator or stated differently because she did not predecease the testator. But dying
before the testator is not the only case for vulgar substitution for it also includes refusal
or incapacity to accept the inheritance as provided in Art. 859 of the Civil Code, supra.
Hence, the vulgar substitution is valid.
As regards the substitution in its fideicommissary aspect, the appellants are correct in
their claim that it is void for the following reasons:
(a) The substitutes (Juan Pablo Jankowski and Horace V. Ramirez) are not related to
Wanda, the heir originally instituted. Art. 863 of the Civil Code validates a
240
fideicommissary substitution "provided such substitution does not go beyond one degree
from the heir originally instituted."
What is meant by "one degree" from the first heir is explained by Tolentino as follows:
Scaevola Maura, and Traviesas construe "degree" as designation,
substitution, or transmission. The Supreme Court of Spain has decidedly
adopted this construction. From this point of view, there can be only one
tranmission or substitution, and the substitute need not be related to the
first heir. Manresa, Morell and Sanchez Roman, however, construe the
word "degree" as generation, and the present Code has obviously
followed this interpretation. by providing that the substitution shall not go
beyond one degree "from the heir originally instituted." The Code thus
clearly indicates that the second heir must be related to and be one
generation from the first heir.
From this, it follows that the fideicommissary can only be either a child or
a parent of the first heir. These are the only relatives who are one
generation or degree from the fiduciary (Op. cit., pp. 193-194.)
(b) There is no absolute duty imposed on Wanda to transmit the usufruct to the
substitutes as required by Arts. 865 and 867 of the Civil Code. In fact, the appellee
admits "that the testator contradicts the establishment of a fideicommissary substitution
when he permits the properties subject of the usufruct to be sold upon mutual agreement
of the usufructuaries and the naked owners." (Brief, p. 26.)
3. The usufruct of Wanda.
The appellants claim that the usufruct over real properties of the estate in favor of Wanda
is void because it violates the constitutional prohibition against the acquisition of lands by
aliens.
The 1935 Constitution which is controlling provides as follows:
SEC. 5. Save in cases of hereditary succession, no private agricultural
land shall be transferred or assigned except to individuals, corporations,
or associations qualified to acquire or hold lands of the public domain in
the Philippines. (Art. XIII.)
The court a quo upheld the validity of the usufruct given to Wanda on the ground that the
Constitution covers not only succession by operation of law but also testamentary
succession. We are of the opinion that the Constitutional provision which enables aliens
to acquire private lands does not extend to testamentary succession for otherwise the
prohibition will be for naught and meaningless. Any alien would be able to circumvent the
prohibition by paying money to a Philippine landowner in exchange for a devise of a
piece of land.
This opinion notwithstanding, We uphold the usufruct in favor of Wanda because a
usufruct, albeit a real right, does not vest title to the land in the usufructuary and it is the
vesting of title to land in favor of aliens which is proscribed by the Constitution.
IN VIEW OF THE FOREGOING, the estate of Jose Eugenio Ramirez is hereby ordered
distributed as follows:
One-half (1/2) thereof to his widow as her legitime;
One-half (1/2) thereof which is the free portion to Roberto and Jorge Ramirez in naked
ownership and the usufruct to Wanda de Wrobleski with a simple substitution in favor of
Juan Pablo Jankowski and Horace V. Ramirez.
The distribution herein ordered supersedes that of the court a quo. No special
pronouncement as to costs.
SO ORDERED.
G.R. No. L-45142 April 26, 1991
VDA. DE ESPINA vs. ABAYA
This is a petition for certiorari with prayer for the issuance of a writ of preliminary
injunction seeking the nullification of the orders issued by the respondent Judge Otilio
Abaya, in his capacity as the presiding judge of the Court of First Instance of Surigao del
Sur, Branch II, Lianga, Surigao del Sur in Civil Case No. L-108, entitled "Simprosa Vda.
de Espina, et. al. v. Sofia Espina, et. al." dated May 9, 1975 dismissing the complaint for
partition; July 25, 1975 denying the motion for reconsideration; August 13, 1975 denying
the second motion for reconsideration and March 15, 1976 denying plaintiffs' notice of
appeal.
The antecedent facts are as follows:
Marcos Espina died on February 14, 1953 and was survived by his spouses, Simprosa
Vda. de Espina and their children namely, Recaredo, Timoteo, Celia, Gaudiosa,
241
Necifora, Sora and Jose, all surnamed Espina. Decedent's estate comprises of four (4)
parcels of land located at the Municipality of Barobo Province of Surigao del Sur.
On August 23, 1973 an action for partition of the aforementioned parcels of land was
filed by petitioners Simprosa and her children Recaredo, Timoteo, Celia, Gaudencia and
Necifora.
The complaint alleges that parcel No. 1 is the exclusive property of the deceased, hence
the same is owned in common by petitioners and private respondents in eight (8) equal
parts, while the other three (3) parcels of land being conjugal properties, are also owned
in common, one-half (1/2) belongs to the widow Simprosa and the other half is owned by
her and her children in eight (8) equal parts.
It also alleges that parcel No. 1 has been subdivided into two lots. Lot No. 994 PL8-44 is
covered by Original Certificate of Title No. 5570 in the name of one of the heirs, Sofia
Espina, who acquired the title as a trustee for the beneficiaries or heirs of Marcos
Espina, while lot No. 1329 PCS-44 is covered by Original Certificate of Title No. 3732
issued in the name of one of the heirs, Jose Espina as trustee for the heirs of Marcos
Espina. Said parcel of land is in the possession of petitioners and private respondents
who have their respective houses thereon.
Simprosa presently occupies parcel No. 2 while parcel No. 3 is occupied by Timoteo,
although the same is actually titled in the name of Sofia. Parcel No. 4 is occupied by
Recaredo.
Petitioners have several times demanded the partition of the aforementioned properties,
but notwithstanding such demands private respondents refused to accede.
Private respondents alleged in their answer that in or about April, 1951, the late Marcos
Espina and his widow, Simprosa, together with their children made a temporary verbal
division and assignment of shares among their children. After the death of Marcos, the
temporary division was finalized by the heirs. Thereafter the heirs took immediate
possession of their respective shares on April 20, 1952. Private respondents took actual
physical possession of their respective shares including the portions ceded to them by
Simprosa upon their payment of P50.00 each per quarter starting April, 1952 until the
latter's death pursuant to their contract of procession The assignment of shares was as
follows:
(a) To the surviving spouses, (sic) Simprosa Vda. de Espina, herein plaintiffs,
one-half (1/2) of the parcel of land adjudicated to each of said plaintiffs-heirs and
defendants;
(b) To each of the following compulsory heirs, to wit:
1. To Recaredo (sic) Espina, one-half (1/2) portion which contains an area of one
and three-fourths (1 3/4) hectares and which forms part of Parcel 4 whose
description is given in paragraph III of the complaint, the said Parcel IV has been
in the possession of both Recaredo Espina and plaintiff Simprosa Vda. de Espina
from April 20, 1952 until the present time;
2. To Timoteo Espina, one half (1/2) portion which contains an area of not less
than one-half (1/2) hectare and which forms part of Parcel 3 whose description is
given in paragraph III of the complaint, the said Parcel III was originally assigned
by Marcos Espina who thereupon obtained an Original Certificate of Title in her
(sic) name but was finally adjudicated to said Timoteo Espina in April, 1952, the
other half (1/2) portion of which parcel III was the share of the surviving spouses
(sic), Simprosa Vda. de Espina, and said Parcel III has been in the possession of
said Timoteo Espina and Simprosa Vda. de Espina from April, 1952 until the
present time as their share;
3. To Cecilia (sic) Espina, Gaudiosa Espina and Necifora Espina, one-half (1/2)
portion, share and share alike which contains two (2) hectares and which forms
part of Parcel II whose description is given in paragraph III of the complaint, the
other half (1/2) of said Parcel III (sic) is the share of the surviving spouses (sic)
Simprosa Vda. de Espina, and said Parcel III (sic) has been in the possession of
said Cecilia. (sic) Espina, Gaudiosa Espina and Necifora Espina and Simprosa
Vda. de Espina from April, 1952 until the present time;
4. To Sofia Espina, one-half (1/2) portion of the parcel of land included in the
deception of Parcel 1 in paragraph III of the complaint, the other half (1/2) of said
parcel being the share of the surviving spouses (sic) Simprosa Vda. de Espina
and having been ceded by said Simprosa Vda. de Espina to said Sofia Espina for
a valuable consideration payable quarterly at the rate of P50.00 beginning April,
1952 until her death, and said Sofia Espina has been regularly paying to said
Simprosa Vda. de Espina quarterly from April, 1952 the said amount of P50.00
until the present time, and by virtue of said agreement, Sofia Espina obtained
Original Certificate of Title in her name of said parcel of land which is included in
the description of said parcel 1, as her exclusive property;
5. To Jose Espina, one-half (1/2) portion of the other parcel of land included in
the description of Parcel 1 in paragraph 1 of the complaint, the other half (1/2) of
said parcel being the share of the surviving spouses (sic) Simprosa Vda. de
Espina and having been coded (sic) by said Simprosa Vda. de Espina to said
242
 Jose Espina for a valuable consideration payable quarterly at the rate of P50.00
beginning April, 1952 until her death, and said Jose Espina has been regularly
quarterly paying to said Simprosa Vda. de Espina from April, 1952 until the
present time, the said amount of P50.00, and by virtue of said agreement, Jose
Espina obtained Original Certificate of Title in his name of said parcel of land
which is included in the description of said Parcel 1 as his exclusive property.
(Rollo, pp. 27-28)
On February 13, 1974 private respondents filed a motion to dismiss the complaint
alleging the following grounds, to wit:
I On March 15, 1976, the respondent judge disapproved petitioners' Record on Appeal
THAT THE FACTS ALLEGED IN THE COMPLAINT FAIL TO CONFER UPON
THE COURT COMPLETE AND LAWFUL JURISDICTION OVER THE CASE
FOR NON-COMPLIANCE WITH THE CONDITION SINE QUA NON
CONCERNING SUIT BETWEEN MEMBERS OF THE SAME FAMILY.
xxx xxx xxx
II
THAT THE CAUSE OF ACTION IS BARRED BY . . . . STATUTE OF
LIMITATIONS.
xxx xxx xxx
III
THAT THE PLAINTIFFS HAS NO LEGAL CAPACITY TO SUE, (Motion to
Dismiss Complaint, pp. 1-5; Rollo, pp. 34-38)
xxx xxx xxx
On May 9, 1975 the trial court granted the motion and thereafter dismissed the
complaint. On May 23, 1975 petitioners filed a motion for reconsideration on the following
grounds, to wit:
1. THAT THE ORDER OF DISMISSAL HAS NO LEGAL BASIS IN FACT AND IN
LAW.
2. THAT THE STATUTE OF LIMITATIONS IS NOT APPLICABLE IN THE CASE
AT BAR. (Rollo, p. 50)
However, petitioners' motion was denied in an order dated July 23, 1975. On August 11,
1975 petitioners filed another motion for reconsideration stressing that they were denied
due process when their motion was not heard. Again said motion was denied on August
13, 1975.
Thereafter, petitioners filed their notice of appeal on September 11, 1975 and a motion
for extension of time to file their Record on Appeal on September 18, 1975.
and appeal bond on the ground that the notice of appeal was filed out of time. Hence,
this petition. The petitioners raised four (,41) assignment of errors:
1. Whether or not an action for partition among co-heirs prescribes.
2. Whether or not an oral partition among co-heirs is valid.
3. Whether or not a hearing on a motion for reconsideration is indispensable the
lack of which is a deal of due process.
4. Whether or not the second motion for reconsideration is pro forma Rollo, p. 10)
Petitioners maintain that the present action is not for reconveyance but one for partition.
Hence, the rule insisted by the private respondents on prescriptibility of an action for
reconcile conveyance of real property based on an implied trust is not applicable in the
case at bar. In addition, petitioners, argue that private respondents cannot set up the
defense of prescription or laches because their possession of the property no matter how
long cannot ripen into ownership. (Memorandum for Petitioners, p. 7)
However, the private respondents stress that 'any supposed right of the petitioners to
demand a new division or partition of said estate of Marcos Espina has long been barred
by the Statute of Limitations and has long prescribed." (Memorandum for Private
Respondents, p. 5)
The petitioners claim that the alleged oral partition is invalid and strictly under the
coverage of the statute of Frauds on two grounds, to wit:
243
Firstly, parcel No. 1 being an exclusive property of the deceased should have been
divided into eight (8) equal parts. Therefore, Simprosa . could only cede her share of the
land which is 1/8 portion thereof and cannot validly cede the shares of her then minor
children without being duly appointed as guardian.
Secondly, under Article 1358 of the New Civil Code, Simprosa could not have ceded her
right and that of her other children except by a public document. (Memorandum of
Petitioners, pp. 8-9)
On the other hand, private respondents insist that the oral partition is valid and binding
and does not fall under the coverage of the Statute of Frauds.
Petitioners claim that they were denied due process when the motion for reconsideration
was denied without any hearing.
However, private respondents maintain that the hearing of a motion for reconsideration in
oral argument is a matter which rest upon the sound discretion of the Court.
Finally, petitioners stress that the second motion for reconsideration is not pro forma,
thus, it suspends the running of the period of appeal. Hence, the notice of appeal was
timely filed.
On this point, private respondent maintain that the order of respondent judge dated
March 1 5, 1976 disapproving petitioners' Record on Appeal and appeal bond may not
properly be a subject of a petition for certiorari. (Memorandum of Private Respondents,
p. 13)
We find the petition devoid of merit.
We already ruled in Lebrilla, et al. v. Intermediate Appellate Court (G.R. No. 72623,
December 18, 1989, 180 SCRA 188; 192) that an action for partition is imprescriptible.
However, an action for partition among co-heirs ceases to be such, and becomes one for
title where the defendants allege exclusive ownership.
In the case at bar, the imprescriptibility of the action for partition cannot be invoked
because two of the co-heirs, namely private respondents Sora and Jose Espina
possessed the property as exclusive owners and their possession for a period of twenty
one (21) years is sufficient to acquire it by prescription. Hence, from the moment these
co-heirs claim that they are the absolute and exclusive owners of the properties and
deny the others any share therein, the question involved is no longer one of partition but
of ownership.
Anent the issue of oral partition, We sustain the validity of said partition. "An agreement
1âw phi 1
of partition may be made orally or in writing. An oral agreement for the partition of the
property owned in common is valid and enforceable upon the parties. The Statute of
Frauds has no operation in this kind of agreements, for partition is not a conveyance of
property but simply a segregation and designation of the part of the property which
belong to the co-owners." (Tolentino, Commentaries and Jurisprudence on the Civil
Code of the Philippines, Vol. II, 1983 Edition, 182-183 citing Hernandez v. Andal, et. al.,
G.R. No. L275, March 29, 1957)
Time and again, the Court stresses that the hearing of a motion for reconsideration in
oral argument is a matter which rests upon the sound discretion of the Court. Its refusal
does not constitute a denial of due process in the absence of a showing of abuse of
discretion. (see Philippine Manufacturing Co. v. Ang Bisig ng PMC et. al., 118 Phil. 431,
434)
The absence of a formal hearing on the petitioners' motion for reconsideration is
thoroughly explained in the order of the respondent judge dated August 13, 1975, which
is hereunder quoted as follows:
When the court issued its order of June 5, 1975 requiring counsel for defendants
to answer plaintiffs' motion for reconsideration, the court opted to resolve
plaintiffs' motion based on the pleadings of the parties, without further oral
arguments. The court considered the arguments of the parties stated in their
pleadings as already sufficient to apprise the court of the issues involved in said
motion.
Plaintiffs' allegation that the Clerk of Court failed to calendar their motion for
reconsideration for oral argument has not deprived the plaintiffs of any
substantial right or his right to due process.
SO ORDERED. (Memorandum of Private Respondents, pp. 1213)
A cursory reading of the aforequoted order will show that there was indeed no formal
hearing on the motion for reconsideration. There is no question however, that the motion
is grounded on the lack of basis in fact and in law of the order of dismissal and the
existence or lack of it is determined by a reference to the facts alleged in the challenged
pleading. The issue raised in the motion was fully discussed therein and in the opposition
thereto. Under such circumstances, oral argument on the motion is reduced to an
unnecessary ceremony and should be overlooked (see Ethel Case, et al. v. Jugo, 77
Phil. 517, 522).
244
We adhere to the findings of the trial court that the second motion for reconsideration
dated August 11, 1975 ispro forma, to it
The grounds stated in said motion being in reiteration of the same grounds
alleged in his first motion, the same is pro-forma. (Order dated March 15, 1976,
p. 2, Rollo, p. 74)
xxx xxx xxx
Furthermore, the second motion for reconsideration has not stated new grounds
considering that the alleged failure of the Clerk of Court to set plaintiffs' motion
for reconsideration, although seemingly a different ground than those alleged in
their first motion for reconsideration, is only incidental to the issues raised in their
first motion for reconsideration, as it only refers to the right of plaintiffs' counsel to
argue his motion in court just to amplify the same grounds already deed by the
court. (Ibid, p. 3, Rollo, p. 75)
Therefore, it is very evident that the second motion for reconsideration being pro-
forma did not suspend the running of the period of appeal. Thus, the lower court
committed no error when it held that the notice of appeal was filed after the lapse of thirty
five (35) days, which is clearly beyond the period of thirty (30) days allowed by the rules.
Finally, it has been a basic rule that certiorari is not a substitute for appeal which had
been lost. (see Edra v. Intermediate Appellate Court, G.R. No. 75041, November 13,
1989, 179 SCRA 344) A special civil action under Rule 65 of the Rules of Court will not
be a substitute or cure for failure to file a timely petition for review oncertiorari (appeal)
under Rule 45 of the Rules of Court. (Escudero v. Dulay, G.R. No. 60578, February 23,
1988, 158 SCRA 69, 77)
The application of the abovecited rule should be relaxed where it is shown that it will
result in a manifest failure or miscarriage of justice. (Ibid, p. 77) However, as emphasized
earlier, the case at bar is totally devoid of merit, thus, the strict application of the said file
will not in any way override sub-substantial justice.
Therefore, the delay of five (5) days in filing a notice of appeal and a motion for extension
to file a record on appeal cannot be excused on the basis of equity.
All premises considered, the Court is convinced that the acts of respondent judge, in
dismissing the action for partition and in subsequently denying the motions for
reconsideration of the petitioners, does not amount to grave abuse of discretion.
ACCORDINGLY, the petition is DISMISSED.
SO ORDERED.
G.R. No. 180269 February 20, 2013
CASILANG vs. CASILANG-DIZON
Before us is a petition for review of the Decision1 dated July 19, 2007 of the Court of
Appeals (CA) in CA-G.R. CV No. 79619, which reversed and set aside the
Decision2 dated April 21, 2003 of the Regional Trial Court (RTC) of Dagupan City,
Branch 41, in Civil Case No. 98-02371-D.
Antecedent Facts
The late spouses Liborio Casilang (Liborio) and Francisca Zacarias (Francisca) had eight
(8) children, namely: Felicidad Casilang (Felicidad), Ireneo Casilang (Ireneo), Marcelina
Casilang (Marcelina), Jacinta Casilang (Jacinta), Bonifacio Casilang (Bonifacio), Leonora
Casilang (Leonora), Jose Casilang (Jose) and Flora Casilang (Flora). Liborio died
intestate on October 11, 1982 at the age of 83, followed not long after by his wife
Francisca on December 25, 1982. Their son Bonifacio also died in 1986, survived by his
child Bernabe Casilang (Bernabe), while son Ireneo died on June 11, 1992, survived by
his four (4) children, namely: Mario Casilang (Mario), Angelo Casilang (Angelo), Rosario
Casilang-Dizon (Rosario) and Rodolfo Casilang (Rodolfo), herein respondents.
The estate of Liborio, which left no debts, consisted of three (3) parcels of land located
in Barangay Talibaew, Calasiao, Pangasinan, namely: (1) Lot No. 4676, with an area of
4,164 square meters; (2) Lot No. 4704, containing 1,164 sq m; and (3) Lot No. 4618, with
897 sq m.
On May 26, 1997, respondent Rosario filed with the Municipal Trial Court (MTC) of
Calasiao, Pangasinan a complaint for unlawful detainer, docketed as Civil Case No. 847,
to evict her uncle, petitioner Jose from Lot No. 4618. Rosario claimed that Lot No. 4618
was owned by her father Ireneo, as evidenced by Tax Declaration (TD) No. 555 issued in
1994 under her father’s name. On April 3, 1997, the respondents executed a Deed of
Extrajudicial Partition with Quitclaim3 whereby they adjudicated Lot No. 4618 to
themselves. In the same instrument, respondents Mario, Angelo and Rodolfo renounced
their respective shares in Lot No. 4618 in favor of Rosario.
In his Answer, Jose raised the defense that he was the "lawful, absolute, exclusive owner
and in actual possession" of the said lot, and that he acquired the same "through
intestate succession from his late father."4For some reason, however, he and his lawyer,
245
who was from the Public Attorney’s Office, failed to appear at the scheduled pre-trial
conference, and Jose was declared in default; thus, the adverse judgment against him.5
On February 18, 1998, the MTC rendered judgment finding Rosario to be the owner of
Lot No. 4618, and ordering Jose to remove his house, vacate Lot No. 4618, and pay
Rosario P500.00 in monthly rentals from the filing of the complaint until she was placed
in possession, plus attorney’s fees of P5,000.00, litigation expenses and costs. On
March 23, 1998, the MTC issued a writ of execution; and on August 28, 1998, a Writ of
Demolition6was issued.
On June 2, 1998, the petitioners, counting 7 of the 8 children of Liborio and
Francisca,7 filed with the RTC of Dagupan City a Complaint,8 docketed as Civil Case No.
98-02371-D for "Annulment of Documents, Ownership and Peaceful Possession with
Damages" against the respondents. On June 10, 1998, the petitioners moved for the
issuance of a writ of preliminary injunction or temporary restraining order, which the RTC
however denied on June 23, 1998.
Among the documents sought to be annulled was the 1997 Deed of Extrajudicial
Partition executed by Ireneo’s children over Lot No. 4618, as well as TD No. 555, and by
necessary implication its derivatives, TD No. 15177 (for the lot) and TD No. 15176 (for
the house), both of which were issued in 1998 in the name of Rosario Casilang-Dizon.9
The petitioners alleged in their complaint that all eight (8) children of Liborio entered into
a verbal partition of his estate, pursuant to which Jose was allotted Lot No. 4618 as his
share; that Ireneo never claimed ownership of Lot No. 4618, nor took possession of it,
because his share was the southwestern 1/5 portion of Lot No. 4676, containing an area
of 1,308 sq m,10 of which he took exclusive possession during his lifetime; that Jose has
always resided in Lot No. 4618 since childhood, where he built his family’s semi-concrete
house just a few steps away from his parents’ old bamboo hut; that he took in and cared
for his aged parents in his house until their deaths in 1982; that one of his children has
also built a house on the lot.11 Jose, said to be the most educated of the Casilang
siblings, worked as an insurance agent.12 The complete disposition of the intestate estate
of Liborio per the parties’ verbal partition appears as follows:
1. Lot No. 4676, with 4,164 sq m, declared under TD No. 534 in Liborio’s
name,13 was verbally partitioned among Marcelina (236 sq m), Leonora (1,965 sq
m), Flora (655 sq m), and Ireneo, represented by his children, the herein
respondents-defendants (1,308 sq m), as shown in a Deed of Extrajudicial
Partition with Quitclaim dated January 8, 1998, subsequently executed by all the
Casilang siblings and their representatives.
2. Lot No. 4704, with 1,164 sq m, declared under TD No. 276 in Liborio’s
name,14 was divided among Jacinta and Bonifacio, who died in 1986 and is now
represented by his son Bernabe; and
3. Lot No. 4618, containing 897 sq m, declared since 1994 under TD No. 555 in
Ireneo’s name,15 is now the subject of the controversy below. Jose insists that he
succeeded to it per verbal partition, and that he and his family have always
occupied the same peacefully, adversely and exclusively even while their parents
were alive.16
For her part, Rosario alleged in her answer with counterclaim,17 which she filed on
September 15, 1998, that:
a) She is the actual and lawful owner of Lot No. 4618 with an area of 897 square
meters, having acquired the same by way of a Deed of Extra judicial Partition
with Quitclaim dated 3 April 1997 which was duly executed among herein
Appellant ROSARIO and her brothers, namely, MARIO, ANGELO and
RODOLFO, all surnamed CASILANG;
b) Her ownership over subject property could be traced back to her late father
IR[E]NEO which the latter inherited by way of intestate succession from his
deceased father LIBORIO sometime in 1992; that the residential house
described in herein Appellee JOSE’s complaint is an illegal structure built by him
in 1997 without her (ROSARIO’s) knowledge and consent; that in fact, an
ejectment suit was filed against Appellee JOSE with the Municipal Trial Court in
Calasiao, Pangasinan in Civil Case No. 847;
c) The subject lot is never a portion of Appellee JOSE’s share from the intestate
of his deceased father, LIBORIO; that on the contrary, the lot is his deceased
brother IR[E]NEO’s share from the late LIBORIO’s intestate estate; that in fact,
the property has long been declared in the name of the late IRENEO as shown
by Tax Declaration No. 555 long before his children ROSARIO DIZON, MARIO,
ANGELO and RODOLFO, all surnamed CASILANG, executed the Deed of
Partition dated 18 February 1998; that Appellee JOSE had actually consumed his
shares which he inherited from his late father, and after a series of sales and
dispositions of the same made by him, he now wants to take Appellants’
property;
d) Appellee JOSE is never the rightful owner of the lot in question and has not
shown any convincing proof of his supposed ownership; that the improvements
introduced by him, specifically the structures he cited are the subject of a Writ of
246
 Demolition dated 28 August 1998 pursuant to the Order dated 17 August 1998 of
the MTC of Calasiao, Pangasinan;
e) No protestation or objection was ever made by Appellee JOSE in Civil Case
No. 847 (Unlawful Detainercase) where he was the defendant; that the truth was
that his possession of the subject property was upon the tolerance and
benevolence of his late brother IRENEO during the latter’s lifetime and that
Appellant ROSARIO;
f) The RTC Clerk of Court and Ex-officio Provincial Sheriff would just be doing
her job if she and her deputies would implement the writ of execution/demolition
issued by the MTC of Calasiao, Pangasinan since it is its ministerial duty to do
so;
g) The Appellees have no cause of action; not having shown in their complaint
the basis, the reason and the very core of their claim as to why the questioned
document should be nullified.18 (Citation omitted)
In their reply19 to Rosario’s aforesaid answer, the petitioners asserted that the MTC
committed a grave error in failing to consider a material fact-that Jose had long been in
prior possession under a claim of title which he obtained by partition.
At the pre-trial conference in Civil Case No. 98-02371-D, the parties entered into the
following stipulations:
1. That the late LIBORIO is the father of FELICIDAD, MARCELINA, JUANITA,
LEONORA, FLORA and IRENEO, all surnamed CASILANG;
2. That the late LIBORIO died in 1982; That the late LIBORIO and his family
resided on Lot [No.] 4618 up to his death in 1982; That the house of the late
LIBORIO is located on Lot [No.] 4618;
3. That Plaintiff JOSE used to reside on the lot in question because there was a
case for ejectment filed against him;
4. That the house which was demolished is the family house of the late LIBORIO
and FRANCISCA ZACARIAS with the qualification that it was given to the
defendants;
5. That the action involves members of the same family; and
6. That no earnest efforts were made prior to the institution of the case in court.20
Ruling of the RTC
After a full trial on the merits, the RTC in its Decision21 dated April 21, 2003 decreed as
follows:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
plaintiffs and against the defendants as follows:
1. Declaring the Deed of Extrajudicial Partition with Quitclaim dated April 3, 1997
null and void;
2. Declaring plaintiff Jose Z. Casilang Sr. as the lawful owner and possessor of
the subject Lot No. 4618 and as such, entitled to the peaceful possession of the
same;
3. Ordering the defendants to pay to plaintiff Jose Z. Casilang Sr. attorney’s fees
in the amount ofP20,000.00 and litigation expenses in the amount of P5,000.00,
and to pay the costs of suit.
SO ORDERED.22
The RTC affirmed Jose’s ownership and possession of Lot No. 4618 by virtue of the oral
partition of the estate of Liborio by all the siblings. In the Deed of Extrajudicial Partition
with Quitclaim23 dated January 8, 1998, subsequently executed by all the eight (8)
Casilang siblings and their legal representatives―with Ireneo represented by his four (4)
children, and Bonifacio by his son Bernabe―petitioners Jose, Felicidad, Jacinta and
Bernabe, acknowledged that they had “already received their respective shares of
inheritance in advance,"24 and therefore, renounced their claims over Lot No. 4676 in
favor of co-heirs Marcelina, Leonora, Flora and Ireneo, as follows:
We hereby RENOUNCED, WAIVED AND QUITCLAIM, all our rights, interests and
participations over the WHOLE parcel of land [Lot No. 4676], left by the late, LIBORIO
CASILANG, in favor of our coheirs, namely: MARCELINA Z. CASILANG-PARAYNO,
LEONORA Z. CASILANG-SARMIENTO, FLORA Z. CASILANG, MARIO A. CASILANG,
ANGELO A. CASILANG, ROSARIO A. CASILANGDIZON AND RODOLFO A.
CASILANG.25
247
Thus, Jose expressly renounced his share in Lot No. 4676, which has an area of 4,164 the land without a contract of lease and no rentals being paid by the former; that
sq m, because he had already received in advance his share in his father’s estate, Lot Appellant ROSARIO allowed Appellee JOSE to continue occupying the land after the
No. 4618 with 897 sq m: Extra Judicial Partition with Quitclaim was executed.29

To the mind of the court, Jose Casilang could have not [sic] renounced and waived his Moreover, noting that the decision in Civil Case No. 847 in favor of Rosario was issued
rights and interests over Lot [No.] 4676 if he believes that Lot [No.] 4618 is not his, while on February 18, 1998 while the petitioners’ complaint in Civil Case No. 98-02371-D was
the other lot, Lot [No.] 470[4], was divided between sister Jacinta Casilang and brother filed on June 2, 1998, the CA concluded that the latter case was a mere afterthought:
Bonifacio Casilang[,] Sr., who was represented by his son. In the same [way] as testified
to by plaintiffs Felicidad Casilang and Jacinta Casilang, they signed the Deed of If the latter has really a strong and valid reason to question the validity of the Deed of
Extrajudicial Partition with Quitclaim wherein they waived and renounced their rights and Extra Judicial Partition with Quitclaim, supra, he could have done it soon after the said
interests over Lot [No.] 4676 because they have already received their share, which is Deed was executed on 3 April 1997. However, curiously enough, it was only when the
Lot [No.] 470[4].26 MTC ordered his eviction from the subject property that he decided to file the instant
case against the Appellants.30
The RTC found baseless the claim of Rosario that Lot No. 4618 was an inheritance of
her father Ireneo considering that a tax declaration is not conclusive proof of ownership. Petition for Review in the Supreme Court
The RTC even noted that the tax declaration of Ireneo started only in 1994, although he
had been dead since 1992. "Such being the case, the heirs of Ir[e]neo Casilang has [sic] Now in this petition for review on certiorari, petitioners maintain that:
no basis in adjudicating unto themselves Lot No. 4618 and partitioning the same by
executing the Deed of Extrajudicial Partition with Quitclaim."27
IN UPHOLDING THE LEGALITY [OF] THE DEED OF EXTRAJUDICIAL PARTITION
AND QUITCLAIM DATED APRIL 3, 1997, THE HONORABLE COURT OF APPEALS
Appeal to the CA GROSSLY VIOLATED THE SUBSTANTIVE RIGHT OF JOSE Z. CASILANG, SR. AS
DIRECT COMPULSORY HEIR.31
Undeterred, Rosario appealed to the CA averring that: (1) the lower court erred in
declaring the Deed of Extrajudicial Partition with Quitclaim dated April 3, 1997 as null and Our Ruling and Discussions
void; and (2) the lower court erred in declaring Jose as the lawful owner and possessor
of the subject Lot No. 4618.28
There is merit in the petition.
In the now assailed decision, the CA reversed the RTC by relying mainly on the factual
Inferior courts are empowered to rule on the question of ownership raised by the
findings and conclusions of the MTC in Civil Case No. 847, viz:
defendant in an ejectment suit, but only to resolve the issue of possession; its
determination is not conclusive on the issue of ownership.
Per the records, the above described property was subject of Civil Case No. 847 decided
by the MTC of Calasiao, First Judicial Region, Province of Pangasinan which rendered a
It is well to be reminded of the settled distinction between a summary action of ejectment
judgment, supra, in favor of Appellant ROSARIO ordering herein Appellee JOSE and all
and a plenary action for recovery of possession and/or ownership of the land. What really
persons claiming rights under him to vacate the land of Appellant ROSARIO. It was
distinguishes an action for unlawful detainer from a possessory action (accion publiciana)
found by the MTC that the latter is the owner of the subject parcel of land located at
and from a reinvindicatory action (accion reinvindicatoria) is that the first is limited to the
Talibaew, Calasiao, Pangasinan; that the former owner of the land is the late IRENEO
question of possession de facto. Unlawful detainer suits (accion interdictal) together with
(who died on 11 June 1992), father of Appellant ROSARIO; that Extra Judicial Partition
forcible entry are the two forms of ejectment suit that may be filed to recover possession
with Quitclaim was executed by and among the heirs of the late IRENEO; that MAURO
of real property. Aside from the summary action of ejectment, accion publiciana or the
[sic], ANGELO and RODOLFO, all surnamed CASILANG waived and quitclaimed their
plenary action to recover the right of possession and accion reinvindicatoria or the action
respective shares over the subject property in favor of Appellant ROSARIO; that
to recover ownership which also includes recovery of possession, make up the three
Appellee JOSE was allowed by the late IRENEO during his lifetime to occupy a portion of
kinds of actions to judicially recover possession.32
248
Under Section 3 of Rule 70 of the Rules of Court, the Summary Procedure governs the
two forms of ejectment suit, the purpose being to provide an expeditious means of
protecting actual possession or right to possession of the property. They are not
processes to determine the actual title to an estate. If at all, inferior courts are
empowered to rule on the question of ownership raised by the defendant in such suits,
only to resolve the issue of possession and its determination on the ownership issue is
not conclusive.33 As thus provided in Section 16 of Rule 70:
Sec. 16. Resolving defense of ownership.―When the defendant raises the defense of
ownership in his pleadings and the question of possession cannot be resolved without
deciding the issue of ownership, the issue of ownership shall be resolved only to
determine the issue of possession.
It is apropos, then, to note that in contrast to Civil Case No. 847, which is an ejectment
case, Civil Case No. 98-02371-D is for "Annulment of Documents, Ownership and
Peaceful Possession;" it is an accion reinvindicatoria, or action to recover ownership,
which necessarily includes recovery of possession34 as an incident thereof. Jose asserts
his ownership over Lot No. 4618 under a partition agreement with his co-heirs, and
seeks to invalidate Ireneo’s "claim" over Lot No. 4618 and to declare TD No. 555 void,
and consequently, to annul the Deed of Extrajudicial Partition and Quitclaim executed by
Ireneo’s heirs.
It is imperative to review the CA’s factual conclusions since they are entirely
contrary to those of the RTC, they have no citation of specific supporting
evidence, and are premised on the supposed absence of evidence, particularly on
the parties’ verbal partition, but are directly contradicted by the evidence on
record.
It must be noted that the factual findings of the MTC, which the CA adopted without
question, were obtained through Summary Procedure and were based solely on the
complaint and affidavits of Rosario, after Jose had been declared in default. But since a
full trial was had in Civil Case No. 98-02371-D, the CA should have pointed out the
specific errors and weaknesses in the RTC’s factual conclusions before it could rule that
Jose was unable to present "any evidentiary support" to establish his title, and that his
continued possession of Lot No. 4618 was by mere tolerance of Rosario. At most,
however, the CA only opined that it was conjectural for the RTC to conclude, that Jose
had already received his inheritance when he renounced his share in Lot No. 4676. It
then ruled that the RTC erred in not considering the findings of the MTC in Civil Case No.
847-that Jose’s possession over subject property was by mere tolerance. Said the
appellate court:
Given the claim of the Appellee that Lot [No.] 4618 was orally given/assigned to him by
his deceased father LIBORIO, or that his claim was corroborated by his sisters (his co-
plaintiffs-Appellees), or that their claim is indubitably tied up with the Deed of
Extrajudicial Partition with Quitclaim over Lot No. 4676, still We cannot fully agree with
the pronouncement of the court a quo that Appellee JOSE could not have renounced and
waived his rights and interest over Lot [No.] 4676 if he believes that Lot [No.] 4618 is not
his. Wanting any evidentiary support, We find this stance as conjectural being
unsubstantiated by law or convincing evidence. At the most and taking the factual or
legal circumstances as shown by the records, We hold that the court a quo erred in not
considering the findings of the MTC in Civil Case No. 847 ruling that herein Appellee
JOSE’s possession over subject property was by mere tolerance. Based as it is on mere
tolerance, Appellee JOSE’s possession therefore could not, in any way, ripen into
ownership.35 (Citations omitted)
By relying solely on the MTC’s findings, the CA completely ignored the testimonial,
documentary and circumstantial evidence of the petitioners, obtained by the RTC after a
full trial on the merits. More importantly, the CA did not point to any evidence of Rosario
that Ireneo had inherited Lot No. 4618 from Liborio. All it did was adopt the findings of
the MTC.
The Supreme Court is not a trier of facts, and unless the case falls under any of the well-
defined exceptions, the Supreme Court will not delve once more into the findings of facts.
In Sps. Sta. Maria v. CA,36 this Court stated:
Settled is the rule that the jurisdiction of this Court in cases brought before it from the
Court of Appeals via Rule 45 of the Rules of Court is limited to reviewing errors of law.
Findings of fact of the latter are conclusive, except in the following instances: (1) when
the findings are grounded entirely on speculation, surmises, or conjectures; (2) when the
inference made is manifestly mistaken, absurd, or impossible; (3) when there is grave
abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5)
when the findings of fact are conflicting; (6) when in making its findings the Court of
Appeals went beyond the issues of the case, or its findings are contrary to the
admissions of both the appellant and the appellee; (7) when the findings are contrary to
those of the trial court; (8) when the findings are conclusions without citation of specific
evidence on which they are based; (9) when the facts set forth in the petition as well as
in the petitioner’s main and reply briefs are not disputed by the respondent; and (10)
when the findings of fact are premised on the supposed absence of evidence and
contradicted by the evidence on record.37 (Citation omitted)
249
In the instant case, the factual findings of the CA and the RTC are starkly contrasting.
Moreover, we find that the CA decision falls under exceptions (7), (8) and (10) above,
which warrants another review of its factual findings.
The evidence supporting Rosario’s claim of sole ownership of Lot No. 4618 is the Deed
of Extrajudicial Partition with Quitclaim, which she executed with her brothers Mario,
Angelo and Rodolfo. There is no question that by itself, the said document would have
fully conveyed to Rosario whatever rights her brothers might have in Lot No. 4618. But
what needs to be established first is whether or not Ireneo did in fact own Lot No. 4618
through succession, as Rosario claims. And here now lies the very crux of the
controversy.
A review of the parties’ evidence shows that they entered into an oral partition,
giving Lot No. 4618 to Jose as his share, whereas Rosario presented no proof
whatsoever that her father inherited Lot No. 4618 from his father Liborio.
Rosario’s only proof of Ireneo’s ownership is TD No. 555, issued in his name, but she did
not bother to explain why it was dated 1994, although Ireneo died on June 11, 1992.
Liborio’s ownership of Lot No. 4618 is admitted by all the parties, but it must be asked
whether in his lifetime Liborio did in fact transmit it to Ireneo, and if not, whether it was
conveyed to him by Liborio’s heirs. It is imperative for Rosario to have presented proof of
this transfer to Ireneo, in such a form as would have vested ownership in him. We find,
instead, a preponderance of contrary evidence.
1. In his testimony, Jose claimed that his parents’ bamboo house in Lot No. 4618
disintegrated from wear and tear; so he took them in to his semi-concrete house
in the same lot, which was just a few steps away, and he cared for them until
they died; shortly before Liborio’s death, and in the presence of all his siblings,
his father Liborio assigned Lot No. 4618 to him as his inheritance; his house was
demolished in 1998 as a result of the ejectment case filed against him; but his
family continued to live thereat after reconstructing the house; Ireneo and his
family did not live in Lot No. 4618; although Jose’s job as an insurance agent
took him around Pangasinan, he always came home to his family in his house in
Lot No. 4618, which he used as his permanent address; only Lot No. 4676 was
included in the Deed of Extrajudicial Partition dated January 8, 1998 because Lot
No. 4618 had already been distributed to Jose, and Lot No. 4704 had already
been assigned to Jacinta and Bonifacio as their share in their father’s estate.38
2. Jose’s testimony was corroborated by petitioners
Felicidad,39 Jacinta,40 Leonora,41 and Flora,42 who all confirmed that their brother
Jose has always resided in Lot No. 4618 from his childhood up to the present,
that he took their aged parents into his house after their bamboo house was
destroyed, and he attended to their needs until they died in 1982. The sisters
were also one in saying that their father Liborio verbally willed Lot No. 4618 to
Jose as his share in his estate, and that their actual partition affirmed their
father’s dispositions. Jacinta claimed that she and Bonifacio have since taken
possession of Lot No. 4704 pursuant to their partition, and have also declared
their respective portions for tax purposes.43 Flora corroborated Jacinta on their
taking possession of Lot No. 4704, as well as that Jose built his house on Lot No.
4618 next to his parents and they came to live with him in their old age. Flora
affirmed that Exhibit "F" correctly reflects their verbal partition of Lot No. 4676,
and that she was fully in accord with it. She added that Felicidad and Marcelina
had since constructed their own houses on the portions of Lot No. 4676 assigned
to them.44 Felicidad mentioned that in their partition, Ireneo was given a portion of
Lot No. 4676, while Lot No. 4704 was divided between Jacinta and Bonifacio,
and Jose alone got Lot No. 4618. Leonora confirmed that they were all present
when their father made his above dispositions of his estate.
3. Benjamin Lorenzo, a long-time neighbor of the Casilangs testified that Jose’s
house stands on Lot No. 4618 and Ireneo did not live with his family on the said
lot but was a tenant in another farm some distance away.45
4. For her part, Rosario merely asserted that her father Ireneo succeeded to Lot
No. 4618 from Liborio, as shown in TD No. 555 (Exhibit "1"); that she and her
brothers extra-judicially settled Ireneo’s estate, and that they each waived their
shares in her favor; and, that she has been paying taxes on Lot No. 4618.
Rosario admitted, however, that Jose has lived in the lot since he was a child,
and he has reconstructed his house thereon after its court-ordered
demolition.46 But Rosario on cross-examination backtracked by claiming that it
was her father Ireneo and grandfather Liborio who built the old house in Lot No.
4618, where Ireneo resided until his death; he even planted various fruit trees.
Yet, there is no mention whatsoever to this effect by any of the witnesses.
Rosario also contradicted herself when she denied that Jose lived there because
his job as insurance agent took him away often and yet admitted that Jose’s
house stands there, which he reconstructed after it was ordered demolished by
the MTC. Inexplicably, Rosario disclaimed knowledge of Ireneo’s share in Lot No.
4676, although she was a signatory, along with her brothers and all the
petitioners, in the deed of partition of the said lot, whereby she got 1,308 sq m.
Rosario also admitted that taxes were paid on the lot only beginning in 1997, not
before.47
5. Benjamin Dizon, husband of Rosario, testified that Rosario was losing appetite
and sleep because of the case filed by Jose; that Ireneo died in another farm;
250
 that Ireneo had a house in Lot No. 4618 but Jose took over the house after he
died in 1992.48 Respondent Angelo, brother of Rosario, claimed that when he
was 13 or 14 years old, he heard his grandfather tell his father Ireneo that he
would inherit Lot No. 4618. On cross-examination, Angelo insisted that his father
had always lived with his family in his grandfather’s house in Lot No. 4618, that
Jose did not live there but was given another lot, although he could not say which
lot it was; he admitted that his grandmother lived with Jose when she died, and
Ireneo’s share was in Lot No. 4676.49
6. On rebuttal, Jose recounted that after his four children were married, Ireneo
lived as a tenant in another farm; that during a period of illness he lived in Manila
for some time, and later resided in Cagayan with his two married sons; and lastly
on his return, worked as a tenant of the Maningding family for about 10 years in
Calasiao, staying in a hut one kilometer away. Jose also claimed that Ireneo had
asked Liborio for a portion of Lot No. 4676, a lot which is bigger than Lot No.
4618 by several hundreds of square meters.50
7. On sur-rebuttal, Rosario claimed that her grandparents, father and mother
lived in Lot No. 4618 when she was a child until she married and left in 1976; that
her uncle Jose asked permission from Liborio to be allowed to stay there with his
family. She admitted that Jose built his house in 1985, three years after Liborio
died, but as if to correct herself, she also claimed that Jose built his house in Lot
No. 4676, and notin Lot No. 4618. (Contrarily, her aunt Leonora testified that
Jose built his house in Lot No. 4618 while their parents were alive.)51 Moreover, if
such was the case, Rosario did not explain why she filed Civil Case No. 847, if
she thought her uncle built his house in Lot No. 4676, and not in Lot No.
4618.52 Rosario also claimed that Ireneo always came home in the evenings to
his father Liborio’s house from the Maningding farm, which he tenanted for 10
years, but obviously, by then Liborio’s house had long been gone. Again,
confusedly, Rosario denied that she knew of her father’s share in Lot No. 4676.
From the testimonies of the parties, we are convinced that the conclusion of the RTC is
well-supported that there was indeed a verbal partition among the heirs of Liborio,
pursuant to which each of his eight children received his or her share of his estate, and
that Jose’s share was Lot No. 4618.
The parties’ verbal partition is valid, and has been ratified by their taking
possession of their respective shares.
The validity of an oral partition is well-settled in our jurisdiction. In Vda. de Espina v.
Abaya,53 this Court declared that an oral partition is valid:
Anent the issue of oral partition, We sustain the validity of said partition. "An agreement
of partition may be made orally or in writing. An oral agreement for the partition of the
property owned in common is valid and enforceable upon the parties. The Statute of
Frauds has no operation in this kind of agreements, for partition is not a conveyance of
property but simply a segregation and designation of the part of the property which
belong to the co-owners."54
In Maestrado v. CA,55 the Supreme Court upheld the partition after it found that it
conformed to the alleged oral partition of the heirs, and that the oral partition was
confirmed by the notarized quitclaims executed by the heirs subsequently.56 In Maglucot-
Aw v. Maglucot,57 the Supreme Court elaborated on the validity of parol partition:
On general principle, independent and in spite of the statute of frauds, courts of equity
have enforce [sic] oral partition when it has been completely or partly performed.
Regardless of whether a parol partition or agreement to partition is valid and enforceable
at law, equity will [in] proper cases, where the parol partition has actually been
consummated by the taking of possession in severalty and the exercise of ownership by
the parties of the respective portions set off to each, recognize and enforce such parol
partition and the rights of the parties thereunder. Thus, it has been held or stated in a
number of cases involving an oral partition under which the parties went into possession,
exercised acts of ownership, or otherwise partly performed the partition agreement, that
equity will confirm such partition and in a proper case decree title in accordance with the
possession in severalty.
In numerous cases it has been held or stated that parol partition may be sustained on the
ground of estoppel of the parties to assert the rights of a tenant in common as to parts of
land divided by parol partition as to which possession in severalty was taken and acts of
individual ownership were exercised. And a court of equity will recognize the agreement
and decree it to be valid and effectual for the purpose of concluding the right of the
parties as between each other to hold their respective parts in severalty.
A parol partition may also be sustained on the ground that the parties thereto have
acquiesced in and ratified the partition by taking possession in severalty, exercising acts
of ownership with respect thereto, or otherwise recognizing the existence of the partition.
A number of cases have specifically applied the doctrine of part performance, or have
stated that a part performance is necessary, to take a parol partition out of the operation
of the statute of frauds. It has been held that where there was a partition in fact between
tenants in common, and a part performance, a court of equity would have regard to and
enforce such partition agreed to by the parties.58
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Jose’s possession of Lot No. 4618 under a claim of ownership is well borne out by the
records. It is also consistent with the claimed verbal partition with his siblings, and fully
corroborated by his sisters Felicidad, Jacinta, Leonora, and Flora, who further testified
that they each had taken possession of their own shares and built their houses thereon.
A possessor of real estate property is presumed to have title thereto unless the adverse
claimant establishes a better right.59 Moreover, under Article 541 of the Civil Code, one
who possesses in the concept of owner has in his favor the legal presumption that he
possesses with a just title, and he cannot be obliged to show or prove it. Similarly, Article
433 of the Civil Code provides that actual possession under a claim of ownership raises
a disputable presumption of ownership. Thus, actual possession and exercise of
dominion over definite portions of the property in accordance with an alleged partition are
considered strong proof of an oral partition60 which the Court will not hesitate to uphold.
Tax declarations and tax receipts are not conclusive evidence of ownership.
It is settled that tax declarations and tax receipts alone are not conclusive evidence of
ownership. They are merely indicia of a claim of ownership,61 but when coupled with
proof of actual possession of the property, they can be the basis of claim of ownership
through prescription.62 In the absence of actual, public and adverse possession, the
declaration of the land for tax purposes does not prove ownership.63 We have seen that
there is no proof that Liborio, or the Casilang siblings conveyed Lot No. 4618 to Ireneo.
There is also no proof that Ireneo himself declared Lot No. 4618 for tax purposes, and
even if he or his heirs did, this is not enough basis to claim ownership over the subject
property. The Court notes that TO No. 555 was issued only in 1994, two years after
Ireneo's death. Rosario even admitted that she began paying taxes only in 1997.64 More
impmiantly, Ireneo never claimed Lot No. 4618 nor took possession of it in the concept of
owner.
WHEREFORE, premises considered, the Petition is GRANTED. The Decision dated July
19, 2007 of the Court of Appeals in CA-G.R. CV No. 79619 is hereby REVERSED and
SET ASIDE, and the Decision dated April 21, 2003 of the Regional Trial Court of
Dagupan City, Branch 41 in Civil Case No. 98-02371-D is REINSTATED.
SO ORDERED.
--- xxx END OF ACTION FOR PARTITION xxx ---
G.R. No. L-52361 April 27, 1981
SUNSET CONDOMINIUM vs. CAMPOS
These two cases which involve similar facts and raise Identical questions of law were
ordered consolidated by resolution of this Court dated March 17, 1980. 1
The petitioner, Sunset View Condominium Corporation, in both cases, is a condominium
corporation within the meaning of Republic Act No. 4726 in relation to a duly registered
Amended Master Deed with Declaration of Restrictions of the Sunset View Condominium
Project located at 2230 Roxas Boulevard, Pasay City of which said petitioner is the
Management Body holding title to all the common and limited common areas. 2
G.R. NO. 52361
The private respondent, Aguilar-Bernares Realty, a sole proprietorship with business
name registered with the Bureau of Commerce, owned and operated by the spouses
Emmanuel G. Aguilar and Zenaida B. Aguilar, is the assignee of a unit, "Solana", in the
Sunset View Condominium Project with La Perla Commercial, Incorporated, as
assignor. 3 The La Perla Commercial, Incorporated bought the "Solana" unit on installment
from the Tower Builders, Inc. 4The petitioner, Sunset View Condominium Corporation, filed
for the collection of assessments levied on the unit against Aguilar-Bernares Realty, private
respondent herein, a complaint dated June 22, 1979 docketed as Civil Case No. 7303-P of
the Court of First Instance of Pasay City, Branch XXX. The private respondent filed a Motion
to Dismiss the complaint on the grounds (1) that the complaint does not state a cause of
action: (2) that the court has no jurisdiction over the subject or nature other action; and (3)
that there is another action pending between the same parties for the same cause. The
petitioner filed its opposition thereto. The motion to dismiss was granted on December 11,
1979 by the respondent Judge who opined that the private respondent is, pursuant to Section
2 of Republic Act No. 4726, a "holder of a separate interest" and consequently, a shareholder
of the plaintiff condominium corporation; and that "the case should be properly filed with the
Securities & Exchange Commission which has exclusive original jurisdiction on controversies
arising between shareholders of the corporation." the motion for reconsideration thereof
having been denied, the petitioner, alleging grave abuse of discretion on the part of
respondent Judge, filed the instant petition for certiorari praying that the said orders be set
aside.
G.R. NO. 52524
The petitioner filed its amended complaint dated July 16, 1979 docketed as Civil Case
No. 14127 of Branch I of the City Court of Pasay City for the collection of overdue
accounts on assessments and insurance premiums and the interest thereon amounting
to P6,168 06 as of March 31, 1979 against the private respondent Lim Siu Leng 5to whom
was assigned on July 11, 1977 a unit called "Alegria" of the Sunset. View Condominium
Project by Alfonso Uy 6who had entered into a "Contract to Buy and Sell" with Tower Builders,
Inc. over the said unit on installment basis. 7
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The private respondent filed a motion to dismiss on the ground of lack of jurisdiction,
alleging that the amount sought to be collected is an assessment. The correctness and
validity of which is certain to involve a dispute between her and the petitioner
corporation; that she has automatically become, as a purchaser of the condominium unit,
a stockholder of the petitioner pursuant to Section 2 of the Condominium Act, Republic
Act No. 4726; that the dispute is intra-corporate and is consequently under the exclusive
jurisdiction of the Securities & Exchange Commission as provided in Section 5 of P.D.
No. 902-A. 8
The petitioner filed its opposition thereto, alleging that the private respondent who had
not fully paid for the unit was not the owner thereof, consequently was not the holder of a
separate interest which would make her a stockholder, and that hence the case was not
an intra-corporate dispute. 9
After the private respondent had filed her answer to the opposition to the motion to
dismiss 10 of the petitioner, the trial court issued an order dated August 13, 1979 denying the
motion to dismiss. 11 The private respondent's motion for reconsideration thereof was denied
by the trial court in its Order dated September 19, 1979. 12
The private respondent then appealed pursuant to Section 10 of Rule 40 of the Rules of
Court to the Court of First Instance, where the appeal was docketed as Civil Case No.
7530P. The petitioner filed its "Motion to Dismiss Appeal" on the ground that the order of
the trial court appealed from is interlocutory. 13
The motion to dismiss the appeal was denied and the parties were ordered to submit
their respective memorandum on the issue raised before the trial court and on the
disputed order of the trial judge. 14 After the parties had submitted their respective
memoranda on the matter, the respondent Judge issued an order dated December 14, 1979
in which he directed that "the appeal is hereby dismissed and d the judgment of the lower
court is reversed. The case is dismissed and the parties are directed to ventilate their
controversy with the Securities & Exchange Commission. 15 The petitioner's motion for
reconsideration thereof was denied in an order dated January 14, 1980. 16 Hence this petition
for certiorari, alleging grave abuse of discretion on the part of the respondent Judge.
Issues Common to Both Cases
It is admitted that the private respondents in both cases have not yet fully paid the
purchase price of their units. The Identical issues raised in both petitions are the
following:
1. Is a purchaser of a condominium unit in the condominium project managed by the
petitioner, who has not yet fully paid the purchase price thereof, automaticaly a
,stockholder of the petitioner Condominium Corporation
2. Is it the regular court or the Securities & Exchange Commission that has jurisdiction
over cases for collection of assessments assessed by the Condominium Corporation on
condominium units the full purchase price of which has not been paid?
The private respondents in both cases argue that every purchaser of a condominium
unit, regardless of whether or not he has fully paid the purchase price, is a "holder of a
separate interest" mentioned in Section 2 of Republic Act No. 4726, otherwise known as
"The Condominium Act" and is automatically a shareholder of the condominium
corporation.
The contention has no merit. Section 5 of the Condominium Act expressly provides that
the shareholding in the Condominium Corporation will be conveyed only in a proper
case. Said Section 5 provides:
Any transfer or conveyance of a unit or an apartment, office or other
space therein, shall include the transfer or conveyance of the undivided
interests in the common areas or, in a proper case, the membership or
shareholding in the condominium corporation ...
It is clear then that not every purchaser of a condominium unit is a shareholder of the
condominium corporation. The Condominium Act leaves to the Master Deed the
determination of when the shareholding will be transferred to the purchaser of a unit.
Thus, Section 4 of said Act provides:
The provisions of this Act shall apply to property divided or to be divided
into condominium only if there shall be recorded in the Register of Deeds
of the province or city in which the property lies and duly annotated in the
corresponding certificate of title of the land ... an enabling or master deed
which shall contain, among others, the following:
xxx xxx xxx
(d) Astatement of the exact nature of the interest acquired or to be
acquired by the purchaser in the separate units and in the common areas
of the condominium project ...
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The Amended Master Deeds in these cases, which were duly registered in the Register
of Deeds, and which contain, by mandate of Section 4, a statement of the exact nature of
the interest acquired by a purchaser of a unit, provide in Section 6 of Part 1:
(d) Each Unit owner shall, as an essential condition to such ownership,
acquire stockholding in the Condominium Corporation herein below
provided ... 17
The Amended Master Deeds likewise provide in Section 7 (b), thus.
(b) All unit owners shall of necessity become stockholders of the
Condominium Corporation. TOWER shall acquire all the shares of stock
of SUNSET VIEW and shall allocate the said shares to the units in
proportion to the appurtenant interest in the COMMON AREAS and
LIMITED COMMON AREAS as provided in Section 6 (b) above. Said
shares allocated are mere appurtenances of each unit, and therefore, the
same cannot be transferred, conveyed, encumbered or otherwise
disposed of separately from the Unit ... 18
It is clear from the above-quoted provisions of the Master Deeds that the shareholding in
the Condominium Corporation is inseparable from the unit to which it is only an
appurtenant and that only the owner of a unit is a shareholder in the Condominium
Corporation.
Subparagraph (a) of Part 1, Section 6, of the Master Deeds determines when and under
what conditions ownership of a unit is acquired by a purchaser thus:
(a) The purchaser of a unit shall acquire title or ownership of such Unit,
subject to the terms and conditions of the instrument conveying the unit
to such purchaser and to the terms and conditions of any subsequent
conveyance under which the purchaser takes title to the Unit, and subject
further to this MASTER DEED ... 19
The instrument conveying the unit "Solana" in G.R. NO. 52361 is the "Contract to Buy
and Sell" dated September 13, 1977, Annex "D", while that conveying the unit "Alegria"
in G.R. NO. 52524 is the "Contract to Buy and Sell" dated May 12, 1976, Annex "C". In
both deeds of conveyance, it is provided:
4. Upon full payment by the BUYER of the total purchase price and full
compliance by the BUYER of an its obligations herein, the SELLER will
convey unto the BUYER, as soon as practicable after completion of the
construction, full and absolute title in and to the subject unit, to the shares
of stock pertaining thereto and to an rights and interests in connection
therewith ... 20
The share of stock appurtenant to the unit win be transferred accordingly to the
purchaser of the unit only upon full payment of the purchase price at which time he will
also become the owner of the unit. Consequently, even under the contract, it is only the
owner of a unit who is a shareholder of the Condominium Corporation. Inasmuch as
owners is conveyed only upon full payment of the purchase price, it necessarily follows
that a purchaser of a unit who has not paid the full purchase price thereof is not The
owner of the unit and consequently is not a shareholder of the Condominium
Corporation.
That only the owner of a unit is a stockholder of the Condominium Corporation is inferred
from Section 10 of the Condominium Act which reads:
SEC. 10. ... Membership in a condominium corporation, regardless of
whether it is a stock or non-stock corporation, shall not be transferable
separately from the condominium unit of which it is an appurtenance
When a member or stockholder ceases is to own a unit in the project in
which the condominium corporation owns or holds the common areas, he
shall automatically cease to be a member or stockholder of the
condominium corporation.
Pursuant to the above statutory provision, ownership of a unit is a condition sine qua
non to being a shareholder in the condominium corporation. It follows that a purchaser of
a unit who is not yet the owner thereof for not having fully paid the full purchase price, is
not a shareholder By necessary implication, the "separate interest" in a condominium,
which entitles the holder to become automatically a share holder in the condominium
corporation, as provided in Section 2 of the Condominium Act, can be no other than
ownership of a unit. This is so because nobody can be a shareholder unless he is the
owner of a unit and when he ceases to be the owner, he also ceases automatically to be
a shareholder.
The private respondents, therefore, who have not fully paid the purchase price of their
units and are consequently not owners of their units are not members or shareholders of
the petitioner condominium corporation,
Inasmuch as the private respondents are not shareholders of the petitioner condominium
corporation, the instant case for collection cannot be a "controversy arising out of
intracorporate or partnership relations between and among stockholders, members or
254
associates; between any or all of them and the corporation, partnership or association of
which they are stockholders, members or associates, respectively" which controversies
are under the original and exclusive jurisdiction of the Securities & Exchange
Commission, pursuant to Section 5 (b) of P.D. No. 902- A. The subject matters of the
instant cases according to the allegations of the complaints are under the jurisdiction of
the regular courts: that of G.R. NO. 52361, which is for the collection of P8,335.38 with
interest plus attorney's fees equivalent to the principal or a total of more than P10,000.00
is under the jurisdiction of the Court of First Instance; and that of G.R. NO. 52524, which
is for the collection of P6,168-06 is within the jurisdiction of the City Court.
In view of the foregoing, it is no longer necessary to resolve the issue raised in G.R. NO.
52524 of whether an order of the City Court denying a motion to dismiss on the ground of
lack of jurisdiction can be appealed to the Court of First Instance.
WHEREFORE, the questioned orders of the respondent Judge dated December 11,
1979 and January 4, 1980 in Civil Case No. 7303-P, subject matter of the Petition in G.R.
No. 52361, are set aside and said Judge is ordered to try the case on the merits. The
orders dated December 14, 1979 and January 14, 1980 in Civil Case No. 7530-P,
subject matter of the petition in G.R. No. 52524 are set aside and the case is ordered
remanded to the court a quo, City Court of Pasay City, for trial on the merits, with costs
against the private respondents.
SO ORDERED.
G.R. No. 188802 February 14, 2011
LIMSON vs. WACK WACK CONDOMINIUM
On January 22, 1996, Revelina Limson1 (Revelina) purchased from Conchita Benitez an
apartment unit (Unit 703) at Wack Wack Apartments, Wack Wack Road, Mandaluyong
City.
Upon moving in, Revelina noticed defects in the electrical main panel located inside the
unit, drawing her to report them, by letter of February 22, 1996, to the Wack Wack
Condominium Corporation (respondent), a non-stock corporation organized for the
purpose of holding title to and managing the common areas of Wack Wack Apartments
Racquel Gonzalez, who sits as Member of respondent’s Board of Directors, replied by
letter of February 23, 1996 that under Section 3 of the House Rules and Regulations, it is
the duty of the unit owner to maintain the electrical and plumbing systems at his/her
expense.
By still another letter dated February 28, 1996, Revelina informed respondent that the
"switch board is such that No. 12 wire is protected by 30 ampere fuse" and that five
appliances – refrigerator, freezer, iron, dryer and washing machine – are connected to
only one fuse.
Revelina later sought professional assistance from a private electrical consultant,
Romago, Incorporated. It was concluded that the wirings in Unit 703 are unsafe,
hazardous and did not comply with the Philippine Electrical Code.
On Revelina’s request, the City Building Office conducted an inspection of Unit 703
following which a Report dated January 21, 1997 was accomplished with the following
findings and recommendations:
Findings:
1. The load center consists of 100 A 2 pst main switch and fusible cut out Blocks
with 16 circuits. The fusible cut out block enclosure is not provided with cover,
exposing electrical live part that makes it hazardous, unsafe and will be difficult to
maintain because a portion was blocked by a shelf.
2. The jumper cable from main safety switch to fusible cut-out blocks used 2 #10
wire (Capt. 60 amp) per phase. This is undersized and would overheat.
3. The fusible current protective devise where all 30 Amp., sp., 240 v FOR 2 #12
TW (20 AMP. Capacity wire) this does not comply with the provision of the
Philippine Electrical Code that stipulates rating of the protective devise shall be
the same as the conductor ampacity especially on a multi outlet circuit.
4. Power supply for water heaters was tapped to small appliance for convenience
outlet circuit.
Recommendation:
1. Replacement of fusible load center with panel board and circuit breaker
components to correct the problem as enumerated on items 2, 3, 4 of our
findings.
2. Replace the embedded circular loom with conduit on moulding.
3. Check all grounded circuit for water heater lad.
255
 4. Provide separate circuit for water heater lad.
5. Submit As Built Electrical Plan signed and sealed by a Professional Electrical
Engineer together with the previous approved Electrical Plan. (emphasis and
underscoring supplied)
The Report was sent by then Mayor Benjamin Abalos, Sr. to respondent by letter dated
January 31, 1997. On February 3, 1997, respondent, through Architect Eugenio
Gonzalez, wrote Revelina to demand that repairs in line with the above-stated
recommendation of the City Building Office be undertaken within ten (10) days.
Before the deadline, respondent’s Board of Directors convened on February 7, 1997 and
resolved to impose a daily fine of P1,000.00 on Revelina and her husband Benjamin, to
commence on February 14, 1997, should the latter fail to comply.
Revelina and her husband refused to undertake the repairs and to pay the fine. They
claimed that the electrical main panel forms part of the common areas, citing Section 6 of
Republic Act No. 47262, "An Act to Define Condominium, Establish Requirements for its
Creation and Government of its Incidents," the pertinent provision of which reads:
Sec. 6. Unless otherwise expressly provided in the enabling or master deed or the
declaration of restrictions, the incidents of a condominium grant are as follows:
a.) x x x The following are not part of the unit: bearing walls, columns, floors, roofs,
foundations, and other common structural elements of the buildings; lobbies, stairways,
hallways and other areas of common use, elevator equipment and shafts, central
heating, central refrigeration and central air conditioning equipment, reservoir, tanks,
pumps and other central services and facilities, pipes, ducts, flues, chutes, conduits
wires and other utility installations, wherever located, except the outlets thereof when
located within the unit. (emphasis and underscoring supplied)
They argued that an electrical main panel is in the nature of a utility installation.
Meanwhile, Revelina and her husband purchased an oversized whirlpool. In the process
of installation, the 7th floor utility room which is adjacent to Unit 703 was damaged.
Revelina claimed that an agreement had been reached under which respondent would
take charge of the repair of the utility room and would bill her for the cost incurred
therefor but respondent failed to do so. Yet the Board of Directors assessed her and her
husband a fine of P1,000.00 per day until the utility room is repaired.
Respondent thereupon filed a complaint for specific performance and damages against
Revelina and Benjamin before the Securities and Exchange Commission (SEC) upon the
following causes of action:
1. To compel the defendants (Spouses Limson) to undertake the necessary
repairs of the defective and hazardous condition of the electrical wiring of their
Unit 703 in accordance with the report and recommendation of the Office of the
Building Official of Mandaluyong City;
2. To seek payment of liquidated damages from the defendants in accordance
with the Resolution of the Board of Directors of plaintiff (respondent herein),
starting February 15, 1997 until the defendants shall have complied with the
aforestated report and recommendation of the building officials; and
3. To seek payment of [sic] from the defendants for the damages they have
caused to the common area of Wack Wack Apartments due to their insistence to
install in their unit an over-sized whirlpool.3
Pursuant to A.M. No. 00-11-03,4 the complaint was transferred to the Regional Trial
Court (RTC) of Mandaluyong City for disposition.
As of June 30, 1997, the assessments and penalties charged against the spouses had
reached P569,736.94. On July 17, 1997, respondent filed a Notice of Assessment with
the Register of Deeds, Mandaluyong City with application for foreclosure and public
auction of Unit 703.
At the public auction held on August 28, 1997, respondent emerged as highest bidder
and thereupon purchased Unit 703 in the amount of P569,736.94, on account of which it
was issued a Certificate of Sale on September 15, 1997.
By Decision of December 22, 2003, Branch 214 of the Mandaluyong RTC dismissed
respondent’s complaint for lack of merit in this wise:
Guided by the findings and recommendation of the building official of Mandaluyong City,
it would appear that the questioned electrical installations are to be considered as part of
the common area and not of Unit 703, though the same are necessarily found inside the
said unit. As contained in Section 6, par. 1 of the Condominium Act: "a) The boundary of
the Unit granted are the interior surfaces of the perimeter walls, floors, ceilings, windows
and doors thereof. The following are not part of the unit: bearing walls, columns,
floors, roofs, foundations, and other common structural elements of the buildings;
256
lobbies, stairways, hallways and other areas of common use, elevator equipment and
shafts,
central heating, central refrigeration and central air conditioning equipment, reservoir,
tanks, pumps and other central services and facilities, pipes, ducts, flues, chutes,
conduits wires and other utility installations, wherever located, except the outlets
thereof when located within the unit. (underscoring supplied; emphasis in the
original)5
On appeal, the Court of Appeals, by Decision of December 19, 2008,6 reversed the
decision of the trial court, holding in the main that for the electrical main panel to be
considered as part of the common areas, it should have been intended for communal
use and benefit. The subject electrical main panel being located inside the unit and its
principal function being to control the flow of electricity into the unit, the appellate court
concluded that charges for its repair cannot be for respondent’s account.
On the imposition of fine on the spouses Limson for failure to correct the faulty electrical
wiring despite notice, the appellate court upheld respondent’s authority to enforce the
same. Finding, however, that the amount of P1,000 fine per day was excessive, it
reduced the same to P200.
Respecting respondent’s imposition of a fine of P1,000 per day on the spouses’
alleged failure to repair the 7th floor utility room, the appellate court disallowed the same,
however, it holding that respondent did not first seek reimbursement from them before
assessment.
Finally, the appellate court denied respondent’s prayer for actual damages in the amount
of P5,000 representing repair expenses on the utility room, it having failed to present
receipts therefor.
Her Motion for Reconsideration having been denied, Revelina filed the present petition
for review.
The Court finds for Revelina.
The pertinent provisions of the Wack Wack Apartments Master Deed follow:
Section 5. The Common Areas. – The common elements or areas of the Project (herein
referred to as the"Common Areas") shall comprise all parts of the Project other than the
Units, including without limitation the following:
xxxx
(e) All central and appurtenant equipment and installations for common facilities
and utilities such as power, light, sewerage, drainage, garbage chute, and water
connections (including all outlets, pipes, ducts, wires, cables and conduits used
in connection therewith, whether located in Common Areas or in Units); all
elevators, elevator shafts, tanks, pumps, motors, fans, compressors, and control
equipment; all common utility spaces and areas;
(f) All other parts of the Project and all apparatus, equipment
and installations therein which are for common use or necessary or convenient
for the existence, maintenance of safety of the Project. (emphasis and
underscoring supplied)
Section 3. Maintenance, Repairs and Alterations. – (a) All maintenance of and repairs of
any Unit (other than the maintenance of and repairs to any of the Common Areas
contained therein not necessitated by the act or negligence of the owner, tenant or
occupant of such Unit) shall be made [by], and at the expense of, the owner of such unit.
Each Unit owner shall be responsible for all damages to any other Unit and to the
Common Areas resulting from his failure to effect such maintenance and repairs. Each
Unit owner shall also be responsible for promptly reporting to the Condominium
Corporation any defect or need for repairs in any of the Common Areas in his Unit.
(emphasis and underscoring supplied)
xxxx
Section 3 (e) of R.A. 4726 defines "common areas" as "the entire project except all units
separately granted or held or reserved." Section 6 (a) of the same law provides:
a.) x x x The following are not part of the unit: bearing walls, columns, floors, roofs,
foundations, and other common structural elements of the buildings; lobbies, stairways,
hallways and other areas of common use, elevator equipment and shafts, central
heating, central refrigeration and central air conditioning equipment, reservoir, tanks,
pumps and other central services and facilities, pipes, ducts, flues, chutes, conduits
wires and other utility installations, wherever located, except the outlets thereof
when located within the unit.(emphasis and underscoring supplied)
The electrical panel’s location inside the unit notwithstanding, it is not automatically
considered as part of it. The above-quoted pertinent provisions of the law and the master
deed contemplate that "common areas," e.g. utility installations, may be
situated within the unit.
257
Where a statute is clear, plain and free from ambiguity, it must be given its literal
meaning and applied without attempt to interpret.7 Verba legis non est recedendum,
index animi sermo est. There should be no departure from the words of the statute, for
speech is the index of intention.
An explanation of the Apartment’s electrical supply system was presented by
respondent, viz:
a.) x x x [T]he electrical system of the Apartments commences with a common
main electrical line (main line) provided by the Apartments, connected to a
Meralco line outside the building. This common main line runs to the ground floor
of the building, where the common meter station is located; from where individual
secondary lines, are tapped to the common main line. There are as many
individual secondary lines tapped to the common main line, as there are units.
EVERY SECONDARY LINE TRAVELS VERTICALLY TO ITS DESIGNATED
FLOOR AND LEADS TO AN INDIVIDUAL UNIT.
b.) The construction is such, that every secondary line is embedded within the
wall of a unit, until it surfaces from the wall, ready to supply electricity to that unit;
the UNIT, in this case, has two (2) metal boxes, inside the UNIT; both attached to
the wall of the UNIT. The first of the two (2) metal boxes is the main switch box.
(Annex "B" and "B-1" The main switch box has a hole, through which
the secondary line enters and is attached to the upper end of two (2) big fuses,
located in the main switch box (Annex "B-1-a"). The upper end of the two (2) big
fuses, where the secondary line (tapped to the main line) ends are indicated and
marked as (Annex "B-1-b" and "B-1-c") 1avvphi1
c.) At the lower end of these two (2) big fuses, there are separate electrical wires
(technically called "jumper cables"). The jumper cables originate in the UNIT’s
second metal box which is the fusible cutout box (fuse box), and the jumper
cables are connected to the lower end of the two (2) big fuses in the main switch
boxto draw electricity to feed the fuse box. x x x 8 (capitalization and underscoring
in the original)
In a multi-occupancy dwelling such as Apartments, limitations are imposed under R.A.
47269 in accordance with the common interest and safety of the occupants therein which
at times may curtail the exercise of ownership. To maintain safe, harmonious and
secured living conditions, certain stipulations are embodied in the duly registered deed of
restrictions, in this case the Master Deed, and in house rules which the condominium
corporation, like respondent, is mandated to implement. Upon acquisition of a unit, the
owner not only affixes his conformity to the sale; he also binds himself to a contract with
other unit owners.10
Unquestionably, the fuse box controls the supply of electricity into the unit. Power is
sourced through jumper cables attached to the main switch which connects the unit’s
electrical line to the Apartment’s common electrical line. It is an integral component of a
power utility installation. Respondent cannot disclaim responsibility for the maintenance
of the Apartments’ electrical supply system solely because a component thereof is
placed inside a unit.
As earlier stated, both the law and the Master Deed refer to utility installations as forming
part of the common areas, which reference is justified by practical considerations.
Repairs to correct any defects in the electrical wiring should be under the control and
supervision of respondent to ensure safety and compliance with the Philippine Electrical
Code,11 not to mention security and peace of mind of the unit owners
WHEREFORE, the petition is GRANTED. The Court of Appeals Decision of December
19, 2008 is REVERSEDand SET ASIDE. The Decision of Branch 214 of the
Mandaluyong Regional Trial Court dismissing the complaint of Wack Wack
Condominium Corporation against Revelina and Benjamin Limson is, in light of the
foregoing discussions, REINSTATED.
SO ORDERED.
---- XXX END OF CONDOMINIUM ACT XXX ----
G.R. No. L-60219 June 29, 1984
AMISTOSO vs. ONG
This is a Petition for Review on certiorari of the Order of the defunct Court of First
Instance of Camarines Sur, Branch VI dated January 14, 1981, dismissing its Civil Case
No. P-153, for lack of jurisdiction.
The pertinent antecedents are as follows:
On July 27, 1981, petitioner as plaintiff, filed before the then Court of First Instance of
Camarines Sur, a conplaint for Recognition of Basement with Preliminary Injunction and
Damages. The complaint which was docketed in the a resaid Court as Civil Case No. P-
153 among others alleged, that plaintiff (now petitioner) and defendant Epifania Neri,
(one of the herein private respondents) are the owners of adjoining parcels of agricultural
land situated in Cauayanan, Tinambac, Camarines Sur; that an irrigation canal traverses
258
the land of defendant Neri through which irrigation water from the Silmod River passes
and flows to the land of the petitioner for the latter's beneficial use and that respondent
Neri, owner of the land on which said irrigatrion canal exists and Senecio Ong, the
cultivator of the said property, despite repeated demands refused to recognize the rights
and title of the petitioner to the beneficial use of the water passing through the aforesaid
irrigation canal and to have petitioner's rights and/or claims annotated on the Certificate
of Title of respondent Neri . . . . Hence, the filing of the said complaint.
In their Answer, private respondents denied the existence of any right on the part of the
petitioner to the use of the canal mentioned in the complaint nor any contract, much less
any deed or encumbrance on their property and assert that they have not performed any
act prejudicial to the petitioner that will warrant the filing of the complaint against them.
By way of affirmative and special defenses, private respondents alleged that petitioner's
complaint states no cause of action and that the Court has no jurisdiction over the same.
Issues having been joined, trial was held. After petitioner has rested his case by a formal
offer of his testimonial and documentary evidences, private respondents instead of
presenting their evidence, filed a motion to dismiss. In the said motion, respondents
contedn that the instant case, involving as it does development, exploitation,
conservation and utilization of water resources falls within the exclusive jursidiction of the
National Water Resources Council pursuant to P.D. NO. 424, Section 2(b) and Section
88 thereof. Acting on private respondent's motion, respondent Judge dismissed
petitioner's complaint for lack of jurisdiction in an Order dated January 14, 1981. The
pertinent portion of that Order reads as follows:
... The basis of the motion to dismiss are the provisions of Presidential
Decree No. 424 and the Water Code known as Presidential Decree No.
1067. In opposing the motion to dismiss, plaintiff contends that the
present action does not involve water dispute and that since the present
action was filed before the court prior to the effectivity of the Presidential
Decree No. 424, it is the old law on the matter that should be applied.
These contentions of the plaintiff are without merit. The complaint belies
the plaintiff's contention. Allegations in the complaint are explicit
regarding the claim of the right of plaintiff over the water passing through
his land. The right over irrigation water not having been shown as
established or vested or that said vested right, if any, has not been
alleged to be registered in accordance with the water code, the provisions
of Presidential Decrees 424 and 1067 shall govern. As stated by the
Supreme Court in the case of Abe-Abe vs. Manta, No. L-4827, May 31,
1979, 90 SCRA 523, to wit: 4
It is incontestable that the petitioner's immediate recourse
is to ventilate their grievance with the National Water
Resources Council which, as already noted, is the
administrative agency exclusively vested with original
jurisdiction to settle water rights disputes under the water
code under Presidential Decree No. 4 24.
The code assumes that it is more expeditious and
pragmatic to entrust to an administrative agency the
settlement of water rights disputes rather than require the
claimants to go directly to the court where the
proceedings are subject to unavoidable delays which are
detrimental to the parties ...
That jurisdiction of the Council under Section 2(b) of
Presidential Decree No. 424 is reaffirmed in Sec. 88 of
the Water Code and in Section 3rd thereof which provides
that 'the utilization, exploitation, development,
conservation and protection of water resources shall be
subject to the control and regulation of the government
through Council.
Failing to obtain a favorable reconsideration of the Order of dismissal, petitioner now
comes before Us through the instant petition contending:
(1) That the case at bar is not to settle any water dispute between the
parties but a complaint which calls purely for a determination of the right
of the plaintiff to have an established right amounting to an easement
annotated on the certificate of title of the defendant, hence the question is
judicial which may be taken cognizance of by the respondent court;
(2) That since the case was filed on July 26, 1972. Which was before the
effectivity of PD NO. 424, therefore, even if defendant's contention is
correct — that the case involved water rights dispute — the old law on
water applies and not the present water code otherwise the Court shall
lose jurisdiction contrary to the well-settled rule that once be lost;
(3) That the herein defendant can no longer raise the question of
plaintiff's right to the beneficial use of irrigation water since the right to
use had already been determined, decided and laid to rest when the
Department of Public Works, Transportation and Communications
259
 awarded petitioner Water Rights Grant after complying with all the legal
requirements such as publication, payment of fees, survey, investigation,
etc.; and
(4) That the issue in the case at bar which was erroneously overlooked
by the respondent Judge does not involve a determination of the right of
the parties to the utilizatio conservation and protection of the parties'
respective water rights, hence it does not fan within the competence nor
jurisdiction of the National Water Resources Council.
In a Resolution promulgated on August 11, 1982, we required the respondents to
comment on the petition. Private respondents' COMMENT was filed on March 2, 1984.
Petitioner's REPLY thereto on the other hand was filed on May 10, 1984.
We considered the COMMENT as an Answer and gave due course to the petition.
Private respondents contend that the assailed order of dismissal was in order since a
mere cursory reading of the complaint shows that petitioner claims for the right to use
water coming from the Silmod River and prays that his right to the utilization thereof be
respected and not be disturbed and/or obstructed by the respondents. On its face then,
the dispute is on the use, conservation and protection of the right to water either by the
petitioner or by the private respondents. The annotation of the alleged encumbrance on
the title of the private respondent is merely the relief prayed for on the basis of the claim
to the use and protection of water passing through the land of the respondents. And
since the controversy hinges on the right to use and protect the water from the Silmod
River that passes on the land of the private respondents to the petitioner's property, the
proper authority to determine such a controversy is the National Water Resources
Council which is vested with exclusive jurisdiction over such question pursuant to P.D.
NOS. 424 and 1067.
We find the petition impressed with merit.
Private respondents' insistence that what is involved in the instant case is the right to
use, exploit and convey water is controverted by the "STIPULATION OF FACTS"
entered into between them and the petitioner in the court below which was approved in
an Order dated February 20, 1975, the pertinent portion of which reads as follows:
1. That there exists an irrigation canal for the use of the defendants
diverting water coming from the Silmod River, Tinambac, Camarines Sur,
passing on the ricelands of the latter to the plaintiff's land irrigating the
land of the latter, although plaintiff claims it existed since 1952 up to the
present, but disputed by the defendants.
2. That the plaintiff has an approved water rights Grant issued by the
Department of Public Works, Transportation and Communications, which
plaintiff claims it for beneficial use to irrigate their land from the Silmod
River and defendants dispute said claim
3. That as of now, defendants have no approved Water Rights Grant
issued by the proper authorities for the use of the water for irrigation
purposes from the Silmod River. However, defendants have a pending
application for Water Rights, the water of which shall pass thru a different
irrigation canal.
4. That one of the defendants' predecessors-in-interest, Abundio Barallas
had a written contract with the plaintiff, which defendants claim easement
of aqueduct Defendants are questioning the legality, enforceability and
validity of such contract.
xxx xxx xxx
6. That defendants refused to surrender their Transfer Certificate of Title
of her land for purposes of annotation of the contract, allegedly an
easement of aqueduct on the ground that she questions the validity,
enforceability, legality and therefore they are not bound by the same.
From the foregoing stipulations, private respondents admit that petitioner, then plaintiff,
has an approved Water Rights Grant issued by the Department of Public Works,
Transportation and Communications. Private respondents, however, contend that the
said grant does not pertain to the beneficial use of irrigation water from Silmod River.
The records, however, do not show any other irrigation water going to petitioner's
property passing thru respondents' lot aside from that coming from the Silmod River.
Respondents' controversion of petitioner's right to irrigation water specifically from
Silmod River is undoubtedly a lame denial.
Aside from this admission, the record clearly discloses an approved Water Rights Grant
in favor of petitioner. Dr. Bienvenido V. Amistoso, which was approved on November 13,
the Acting Secretary of Public Works and Commission David M. Consunji. (Exh. 1) The
grant was made three (3) years before the promulgation of P.D. 1067 on December 31,
1976, known as the Water Code of the Philippines, which revised and consolidated the
laws governing ownership, appropriation, option exploitation, development, conservation
260
and protection of water resources thereby repealing among others, the provisions of the
Spanish Law of Water of August 3, 1866, the Civil Code of Spain of 1889, and the Civil
Code of the Philippines on ownership of water, easement relating to water and of public
water and acquisitive prescription on the use of water which are inconsistent with the
provisions of said Code (Art. 10, P.D. 1067).lwphl@itç
The water rights grant partakes the nature of a document known as a water
permit recognized under Article 13 of P.D. 1067, which provides:
Article 13. Except as otherwise herein provided, no person, including
Government instrumentalities or government-owned or controlled
corporations, shall appropriate water without a water right, which shall be
evidenced by a document known as a water permit.
Water right is the 7 granted by the government to appropriate and use
water.
As to the validity of the WATER RIGHTS GRANT of Amistoso upon the promulgation of
P.D. 1067 on December 31, 1976, the governing provision of law is found in the
Transitory and Final Provisions of P.D. 1067. It fans under "acts and contracts under the
regime of old laws". Article 97 provides, thus:
Article 97. Acts and contracts under the regime of old laws, ff they are
valid in accordance therewith, shag be respected, subject to the stations
established in this Code. Any modification or extension of these acts and
contracts after the promulgation of this Code, shall be subject to the
provisions hereof.
It may be observed that the WATER RIGHTS GRANT of Amistoso does not fall under
"claims for a right to use water existing on or before December 31, 1974" which under
P.D. 1067 are required to be registered with the National Water Resources Council
within two (2) years from promulgation of P.D. 1067, otherwise it is deemed waived and
the use thereof deemed abandoned. It is no longer a mere "claim" inasmuch as there
was already a GRANT by the Secretary of Public Works, Transportation and
Communications (the official then authorized to issue said grant) on November 13, 1973
after complying with all the requirements then prescribed by law for such grant.
The grant contradicts the erroneous findings of the respondent Judge, and
incontrovertibly entitles petitioner to the beneficial use of water from Silmod River. That
right is now a. vested one and may no longer be litigated as to bring petitioner's case
within the jurisdiction of the National Water Resources Council. To resurrect that issue —
right to the use of invistigation water from Silmod River — will be violative of the rule
on res judicata which also applies with equal vigor and effect to quasi judicial tribunal
(Brillantes vs. Castro, 99 Phils. 497, Ipekdjian Merchandising, Inc. vs. Court of Tax
Appeals, 9 SCRA 72, September 30,1963).
As correctly postulated by the petitioner, the court a quo is not being asked to grant
petitioner the right to use but to compel private respondents to recognize that right and
have the same annotated on respondent Neri's Torrens Certificate of Title. Resort to
judicial intervention becomes necessary because of the closure made by the
respondents of the irrigation canal thus depriving the petitioner to continue enjoying
irrigation water coming from Silmod River through respondents' property. The interruption
of the free flow of water caused by the refusal to re-open the closed irrigation canal
constituted petitioner's cause of action in the court below, which decidedly do not fall
within the domain of the authority of the National Water Resources Council
Respondents, however, rely very heavily on the dictum laid down in the Abe-Abe vs.
Manta, No. L-4827, May 31, 1979, 90 SCRA 524, wherein it was held that —
It is incontestable that the petitioner's immediate recourse is to ventilate
their grievance with the National Water Resources Council which, as
already noted, is the administrative agency exclusively vested with
original jurisdiction to settle water rights disputes under the water code
and under Presidential Decree No. 424.
The Code assumes that it is more expeditious and pragmatic to entrust to
an administrative agency the settlement of water rights disputes rather
than require the claimants to go directly to the court where the
proceedings are subject to unavoidable delays which are detrimental to
the parties ...
That jurisdiction of the Council under Section 2(b) of Presidential Decree
No. 424 is reaffirmed in Section 88 of the Water Code and in Section 3rd
thereof which provides that 'the utlization exploitation, development,
conservation and protection of water resources shall be subject to the
control and regulation of the government through the Council
The said pronouncement, however, finds no application to the instant case for in there,
both petitioners and respondent have no established right emanating from any grant by
any governmental agency to the use, appropriation and exploitation of water. In the case
at bar, however, a grant indubitably exists in favor of the petitioner. It is the enjoyment of
the right emanating from that grant that is in litigation. Violation of the grantee's right,
261
who in this case is the petitioner, by the closure of the irrigation canal, does not bring the
case anew within the jurisdiction of the National Water Resources Council.
WHEREFORE, the Order of the Honorable respondent Judge of January 14, 1981, is
hereby SET ASIDE. Private respondents are hereby ordered to RECOGNIZE petitioner's
BASEMENT of water and to surrender to the Register of Deeds of Camarines Sur the
owner's duplicate Transfer Certificate of Title No. 14216 covering respondent Epifania
Neri's property so that petitioner's right to the beneficial use of said irrigation canal and
water passing through the same may be annotated thereon.
SO ORDERED.
--- xxx END OF WATER CODE xxx ----
G.R. No. L-13298 November 19, 1918
RAMOS vs. DIRECTOR OF LANDS
This is an appeal by the applicant and appellant from a judgment of the Court of First
Instance of Nueva Ecija, denying the registration of the larger portion of parcel No. 1
(Exhibit A of the petitioner), marked by the letters A, B, and C on the plan, Exhibit 1, of
the Government.
One Restituto Romero y Ponce apparently gained possession of a considerable tract of
land located in the municipality of San Jose, Province of Nueva Ecija, in the year 1882.
He took advantage of the Royal Decree of February 13, 1894, to obtain a possessory
information title to the land, registered as such on February 8, 1896. Parcel No. 1,
included within the limits of the possessory information title of Restituto Romero, was
sold in February, 1907, to Cornelio Ramos, the instant petitioner, and his wife Ambrosia
Salamanca.
Ramos instituted appropriate proceedings to have his title registered. Opposition was
entered by the Director of Lands on the ground that Ramos had not acquired a good title
from the Spanish government and by the Director of Forestry on the ground that the first
parcel was forest land. The trial court agreed with the objectors and excluded parcel No.
1 from registration. So much for the facts.
As to the law, the principal argument of the Solicitor-General is based on the provisions
of the Spanish Mortgage Law and of the Royal Decree of February 13, 1894, commonly
known as the Maura Law. The Solicitor-General would emphasize that for land to come
under the protective ægis of the Maura Law, it must have been shown that the land was
cultivated for six years previously, and that it was not land which pertained to the "zonas
forestales." As proof that the land was, even as long ago as the years 1894 to 1896,
forestal and not agricultural in nature is the fact that there are yet found thereon trees
from 50 to 80 years of age.
We do not stop to decide this contention, although it might be possible, following the
doctrine laid down by the United States Supreme Court with reference to Mexican and
Spanish grantes within the United States, where some recital is claimed to be false, to
say that the possessory information, apparently having taken cognizance of the
requisites for title, should not now be disturbed. (Hancock vs. McKinney [1851], 7 Tex.,
192; Hornsby and Roland vs. United States [1869], 10 Wall., 224.) It is sufficient, as will
later appear, merely to notice that the predecessor in interest to the petitioner at least
held this tract of land under color of title.
Subsection 6 of section 54, of Act No. 926, entitled The Public Land Law, as amended by
Act No. 1908, reads as follows:
6. All persons who by themselves or their predecessors and interest have been
in the open, continuous, exclusive, and notorious possession and occupation of
agricultural public lands, as defined by said Act of Congress of July first, nineteen
hundred and two, under a bona fide claim of ownership except as against the
Government, for a period of ten years next preceding the twenty-sixth day of
July, nineteen hundred and four, except when prevented by war or force
majeure, shall be conclusively presumed to have performed all the conditions
essential to a government grant and to have received the same, and shall be
entitled to a certificate of title to such land under the provisions of this chapter.
There are two parts to the above quoted subsection which must be discussed. The first
relates to the open, continuous, exclusive, and notorious possession and occupation of
what, for present purposes, can be conceded to be agricultural public land, under a bona
fide claim of ownership.
Actual possession of land consists in the manifestation of acts of dominion over it of such
a nature as a party would naturally exercise over his own property. Relative to actuality
of possession, it is admitted that the petitioner has cultivated only about one fourth of the
entire tract. This is graphically portrayed by Exhibit 1 of the Government, following:
262

The question at once arises: Is that actual occupancy of a part of the land described in
the instrument giving color of title sufficient to give title to the entire tract of land?
lawphil.net
The doctrine of constructive possession indicates the answer. The general rule is that the
possession and cultivation of a portion of a tract under claim of ownership of all is a
constructive possession of all, if the remainder is not in the adverse possession of
another. (Barr vs. Gratz's Heirs [1819], 4 Wheat., 213; Ellicott vs. Pearl [1836], 10 Pet.,
412; Smith vs. Gale [1892], 144 U. S., 509.) Of course, there are a number of
qualifications to the rule, one particularly relating to the size of the tract in controversy
with reference to the portion actually in possession of the claimant. It is here only
necessary to apply the general rule.
The claimant has color of title; he acted in good faith; and he has had open, peaceable,
and notorious possession of a portion of the property, sufficient to apprise the community
and the world that the land was for his enjoyment. (See arts. 446, 448, Civil Code.)
Possession in the eyes of the law does not mean that a man has to have his feet on
every square meter of ground before it can be said that he is in possession. Ramos and
his predecessor in interest fulfilled the requirements of the law on the supposition that he
premises consisted of agricultural public land.
The second division of the law requires consideration of the term "agricultural public
land." The law affirms that the phrase is denied by the Act of Congress of July 1st, 1902,
known as the Philippine bill. Turning to the Philippine Bill, we find in sections 13 to 18
thereof that three classes of land are mentioned. The first is variously denominated
"public land" or "public domain," the second "mineral land," and the third "timber land."
Section 18 of the Act of Congress comes nearest to a precise definition, when it makes
the determination of whether the land is more valuable for agricultural or for forest uses
the test of its character.
Although these sections of the Philippine Bill have come before the courts on numerous
occasions, what was said in the case of Jones vs. Insular Government ([1906], 6 Phil.,
122), is still true, namely: "The meaning of these sections is not clear and it is difficult to
give to them a construction that will be entirely free from objection." In the case which
gave most serious consideration to the subject (Mapa vs. Insular Government [1908], 10
Phil., 175), it was found that there does exist in the Act of Congress a definition of the
phrase "agricultural public lands." It was said that the phrase "agricultural public lands"
as used in Act No. 926 means "those public lands acquired from Spain which are not
timber or mineral lands."
The idea would appear to be to determine, by exclusion, if the land is forestal or mineral
in nature and, if not so found, to consider it to be agricultural land. Here, again, Philippine
law is not very helpful. For instance, section 1820 of the Administrative Code of 1917
provides: "For the purposes of this chapter, 'public forest' includes, except as otherwise
specially indicated, all unreserved public land, including nipa and mangrove swamps,
and all forest reserves of whatever character." This definition of "public forest," it will be
noted, is merely "for the purposes of this chapter." A little further on, section 1827
provides: "Lands in public forests, not including forest reserves, upon the certification of
the Director of Forestry that said lands are better adapted and more valuable for
agricultural than for forest purposes and not required by the public interests to be kept
under forest, shall be declared by the Department Head to be agricultural lands." With
reference to the last section, there is no certification of the Director of Forestry in the
record, as to whether this land is better adapted and more valuable for agricultural than
for forest purposes.
The lexicographers define "forest" as "a large tract of land covered with a natural growth
of trees and underbrush; a large wood." The authorities say that he word "forest" has a
263
significant, not an insignificant meaning, and that it does not embrace land only partly
woodland. It is a tract of land covered with trees, usually of considerable extent.
(Higgins vs. Long Island R. Co. [1908], 114 N. Y. Supp., 262; People vs. Long Island R.
Co. [1908], 110 N. Y. Supp., 512.)
The foresters say that no legal definition of "forest" is practicable or useful. B. H. Baden-
Powell, in his work on Forest Law of India, states as follows:
Every definition of a forest that can be framed for legal purposes will be found
either to exclude some cases to which the law ought to apply, or on the other
hand, to include some with which the law ought not to interfere. It may be
necessary, for example, to take under the law a tract of perfectly barren land
which at present has neither trees, brushwood, nor grass on it, but which in the
course f time it is hoped will be "reboise;" but any definition wide enough to take
in all such lands, would also take in much that was not wanted. On the other
hand, the definition, if framed with reference to tree-growth, might (and indeed
would be almost sure to) include a garden, shrubbery, orchard, or vineyard,
which it was not designed to deal with.
B. E. Fernow, in his work on the Economics of Forestry, states as follows:
A forest in the sense in which we use the term, as an economic factor, is by no
means a mere collection of trees, but an organic whole in which all parts,
although apparently heterogeneous, jumbled together by accident as it were and
apparently unrelated, bear a close relation to each other and are as
interdependent as any other beings and conditions in nature.
The Director of Forestry of the Philippine Islands has said:
During the time of the passage of the Act of Congress of July 1, 1902, this
question of forest and agricultural lands was beginning to receive some attention
and it is clearly shown in section 18 of the above mentioned Act; it leaves to the
Bureau of Forestry the certification as to what lands are for agricultural or forest
uses. Although the Act states timber lands, the Bureau has in its administration
since the passage of this act construed this term to mean forest lands in the
sense of what was necessary to protect, for the public good; waste lands without
a tree have been declared more suitable for forestry in many instances in the
past. The term 'timber' as used in England and in the United States in the past
has been applied to wood suitable for construction purposes but with the
increase in civilization and the application of new methods every plant producing
wood has some useful purpose and the term timber lands is generally though of
as synonymous with forest lands or lands producing wood, or able to produce
wood, if agricultural crops on the same land will not bring the financial return that
timber will or if the same land is needed for protection purposes.
xxx xxx xxx
The laws in the United States recognize the necessity of technical advice of duly
appointed boards and leave it in the hands of these boards to decide what lands
are more valuable for forestry purposes or for agricultural purposes.
In the Philippine Islands this policy is follows to as great an extent as allowable
under the law. In many cases, in the opinion of the Bureau of Forestry, lands
without a single tree on them are considered as true forest land. For instance,
mountain sides which are too steep for cultivation under ordinary practice and
which, if cultivated, under ordinary practice would destroy the big natural
resource of the soil, by washing, is considered by this bureau as forest land and
in time would be reforested. Of course, examples exist in the Mountain Province
where steep hillsides have been terraced and intensive cultivation practiced but
even then the mountain people are very careful not to destroy forests or other
vegetative cover which they from experience have found protect their water
supply. Certain chiefs have lodged protests with the Government against other
tribes on the opposite side of the mountain cultivated by them, in order to prevent
other tribes from cutting timber or destroy cover guarding their source of water for
irrigation.
Dr. M. S. Shaler, formerly Dean of the Lawrence Scientific School, remarked that
if mankind could not devise and enforce ways dealing with the earth, which will
preserve this source of like "we must look forward to the time, remote it may be,
yet equally discernible, when out kin having wasted its great inheritance will fade
from the earth because of the ruin it has accomplished."
The method employed by the bureau of Forestry in making inspection of lands, in
order to determine whether they are more adapted for agricultural or forest
purposes by a technical and duly trained personnel on the different phases of the
conservation of natural resources, is based upon a previously prepared set of
questions in which the different characters of the land under inspection are
discussed, namely:
Slope of land: Level; moderate; steep; very steep.
Exposure: North; South; East; West.
264
Soil: Clay; sandy loam; sand; rocky; very rocky.
Character of soil cover: Cultivated, grass land, brush land, brush land and timber
mixed, dense forest.
If cultivated, state crops being grown and approximate number of hectares under
cultivation. (Indicate on sketch.)
For growth of what agricultural products is this land suitable?
State what portion of the tract is wooded, name of important timber species and
estimate of stand in cubic meters per hectare, diameter and percentage of each
species.
If the land is covered with timber, state whether there is public land suitable for
agriculture in vicinity, which is not covered with timber.
Is this land more valuable for agricultural than for forest purposes? (State
reasons in full.)
Is this land included or adjoining any proposed or established forest reserve or
communal forest? Description and ownership of improvements.
If the land is claimed under private ownership, give the name of the claimant, his
place of residence, and state briefly (if necessary on a separate sheet) the
grounds upon which he bases his claim.
When the inspection is made on a parcel of public land which has been applied
for, the corresponding certificate is forwarded to the Director of Lands; if it is
made on a privately claimed parcel for which the issuance of a title is requested
from the Court of Land Registration, and the inspection shows the land to be
more adapted for forest purposes, then the Director of Forestry requests the
Attorney-General to file an opposition, sending him all data collected during the
inspection and offering him the forest officer as a witness.
It should be kept in mind that the lack of personnel of this Bureau, the limited
time intervening between the notice for the trial on an expediente of land and the
day of the trial, and the difficulties in communications as well as the distance of
the land in question greatly hinder the handling of this work.
In the case of lands claimed as private property, the Director of Forestry, by
means of his delegate the examining officer, submits before the court all
evidence referring to the present forest condition of the land, so that the court
may compare them with the alleged right by the claimant. Undoubtedly, when the
claimant presents a title issued by the proper authority or evidence of his right to
the land showing that he complied with the requirements of the law, the forest
certificate does not affect him in the least as such land should not be considered
as a part of the public domain; but when the alleged right is merely that of
possession, then the public or private character of the parcel is open to
discussion and this character should be established not simply on the alleged
right of the claimant but on the sylvical condition and soil characteristics of the
land, and by comparison between this area, or different previously occupied
areas, and those areas which still preserve their primitive character.
Either way we look at this question we encounter difficulty. Indubitably, there should be
conservation of the natural resources of the Philippines. The prodigality of the spendthrift
who squanders his substance for the pleasure of the fleeting moment must be restrained
for the less spectacular but surer policy which protects Nature's wealth for future
generations. Such is the wise stand of our Government as represented by the Director of
Forestry who, with the Forester for the Government of the United States, believes in "the
control of nature's powers by man for his own good." On the other hand, the presumption
should be, in lieu of contrary proof, that land is agricultural in nature. One very apparent
reason is that it is for the good of the Philippine Islands to have the large public domain
come under private ownership. Such is the natural attitude of the sagacious citizen.
If in this instance, we give judicial sanction to a private claim, let it be noted that the
Government, in the long run of cases, has its remedy. Forest reserves of public land can
be established as provided by law. When the claim of the citizen and the claim of the
Government as to a particular piece of property collide, if the Government desires to
demonstrate that the land is in reality a forest, the Director of Forestry should submit to
the court convincing proof that the land is not more valuable for agricultural than for
forest purposes. Great consideration, it may be stated, should, and undoubtedly will be,
paid by the courts to the opinion of the technical expert who speaks with authority on
forestry matters. But a mere formal opposition on the part of the Attorney-General for the
Director of Forestry, unsupported by satisfactory evidence will not stop the courts from
giving title to the claimant.
We hold that the petitioner and appellant has proved a title to the entire tract of land for
which he asked registration, under the provisions of subsection 6, of section 54, of Act
No. 926, as amended by Act No. 1908, with reference to the Philippine Bill and the Royal
Decree of February 13, 1894, and his possessory information.
265
Judgment is reversed and the lower court shall register in the name of the applicant the
entire tract in parcel No. 1, as described in plan Exhibit A, without special finding as to
costs. So ordered.
G.R. No. L-31408 April 22, 1991
DIRECTOR OF LANDS vs. CA
Whether the land in dispute was formed by the action of the sea or by deposits of soil
and sedimentary matter carried by river currents is the main issue in this case, which
was elevated to the Court by petition for review of a decision of the Court of Appeals.1
In October 1956 the corporation R. Borromeo Bros. Estate, Inc. instituted in the Court of
First Instance of Leyte original proceedings2 for confirmation and registration of title in its
favor of a parcel of land fronting the sea in the coastal town of San Isidro, Leyte with an
area of 130,537 square meters. The application3 alleged that the land was bounded on
the North, East and South by property of the applicant and on the West by San Isidro
Bay; that it had been formed by accretion of sediments carried from the highlands by the
natural action of the Si-ong and Sinubdan Rivers when these overflowed their banks
during the rainy season;4 that it had been publicly, openly, continuously and adversely
possessed by the applicant for 20 years prior to the filing of the application; and that to
the applicant's knowledge there existed no mortgage, lien or other adverse claim on the
land.5
Two oppositions to the application were filed. One, filed by the Director of Lands,
asserted that the land applied for was part of the public domain, and that the applicant or
its predecessors-in-interest had no sufficient title to the land, by way of either
composition of possessory information, or by virtue of open, public, adverse and
continuous possession under claim of ownership since July 26, 1894.6
The other opposition, filed by the Municipality of San Isidro, echoed the contention of the
Director of Lands that the land formed part of the public domain, alleging that it was
classified as Timber Block-J, Leyte Project No. 40; denied the applicant's claim of open,
adverse, continuous and exclusive possession and averred that the land was occupied
by other parties who had waived their claims in favor of said oppositor; and alleged,
further, that it (oppositor) needed the land for municipal expansion, having in fact
adopted resolutions requesting the Government to reserve the land for that purpose, and
that the applicant had applied for, but had been denied, a lease of the land after it had
been released for private occupation by the Bureau of Forestry.7
The case was then heard. It would appear that after the applicant had presented its
evidence, it sought and was allowed to amend its application, which originally alleged
that the land applied for had been formed of alluvium deposited by the action of the
sea,8 in order to allege, as said appellant's evidence had tended to establish, that said
land had been formed instead from accretions of soil and sediment carried from higher
places by the currents of the Si-ong and Sinubdan Creeks.
Thereafter, evidence for the oppositors also having been presented, the Trial Court
rendered judgment denying the application and declaring the land applied for public land
formed by the action of the sea and not of any river.9The applicant then appealed to the
Court of Appeals, which reversed the decision of the Trial Court, sustained the
applicant's contention as to the origin of the land, on that basis declared the land to be
private land of said applicant and decreed its registration in the applicant's name.10
The Appellate Court's judgment was in turn appealed to this Court by the Director of
Lands who, in the main, argues that the Appellate Court erred in concluding that the
evidence showed the land to have been formed by the action of rivers and in not holding
the applicant bound by the averment in its original application that the land was formed
by the natural action of the sea.11
The first assignment of error may be disposed of by the simple expedient of pointing out
that the assailed "conclusion" of the Court of Appeals is one of fact, not of law, and is,
therefore, beyond the province of this Court to review,12 save in certain exceptional
circumstances.13
To dispel any doubts, however, and not to rely solely on what might appear to some to
be a fine distinction, particularly considering that the finding of the Court of Appeals on
the crucial factual question of how the land in dispute came into existence conflicts with
that of the Trial Court, this Court has reviewed the available record14and finds no sound
basis for ascribing any error to the Appellate Court in its appreciation of the evidence.
The petitioner's case is anchored on evidence tending to establish that the Sinubdan and
Si-ong Rivers whose currents, according to the private respondent, formed the land in
question from the sediments they carried were not natural streams, but mere canals dug
as part of an irrigation system; that they had no intrinsic water sources and in fact dried
up during the summer season; that a survey commissioned by the petitioner itself in
1949 did not indicate their existence on the plan; and that part of the land is swampy with
mangrove trees growing thereon.15
More persuasive, however, is the countervailing evidence of the private respondent
which consists, principally, of the testimony of Felix Sablado, a bridge foreman of the
Bureau of Public Highways, and Teofilo Pacana, overseer of the petitioner's lands.
According to the petitioner's uncontradicted summary of Sablado's testimony, said
266
witness had undertaken studies of the Sinubdan and Si-ong Rivers, measuring their
depth and width, the volume of water that they carried, and the size of the bridges
spanning them. He had declared the Si-ong was more than seven meters deep, while the
Sinubdan had a depth of more than three meters, that the Filemon Bridge crossing the
Si-ong was seven meters long and four meters wide and the Sinubdan Bridge had the
same dimensions. And under cross-examination, he had maintained that there is a
source of water under the Filemon Bridge.16 Pacana, for his part, testified that there is a
continuous flow of water in both rivers throughout the year, and not merely during the
rainy season, as claimed by one of the oppositors' witnesses, and that while a few
mangrove trees grow in the salvage zone which is far from the land, none are found
within the boundaries of the land itself.17 This is at least partly confirmed by photographs
received in evidence18 showing rice, coconut trees and bamboo groves growing on the
land, and which apparently persuaded the Trial Court that at least a part of the land had
been . . . transformed (through cultivation by the private respondent) into a veritable first
class rice land.19
The petitioner's argument that accretion, by definition imperceptible, could hardly
account for such an area of land (more than thirteen hectares) being built up within a
period of six years, hinges upon an unwarrantedly literal advertence to the testimony of
one of the private respondent's witnesses who declared that the process took place from
1930 to 1936.20 Assuming that the witness attested to what he sincerely believed to be
the truth, the possibility of his being mistaken cannot be discounted because, the age of
the rivers in question never having been established, the process of accretion through
the action of their currents could have started much earlier than 1930. It is also entirely
possible –– and reasonably presumable, lacking any proof to the contrary –– even
granting that accretion started only in 1930, for the land to have grown to thirteen
hectares in the twenty years that followed until 1956 when the application for registration
was filed.
The Court therefore finds no error in the ruling of the Court of Appeals that the land was
formed by accretion through the action of river currents and belonged to the private
respondent as riparian owner pursuant to Art. 457 of the Civil Code. 1âwphi1
The Court of Appeals also correctly overruled the petitioner's contention that the
averment in the original application for registration attributing the origin of the land to the
action of the sea, which averment, with leave of court, was later superseded by an
amendment to the effect that the land was formed by the action of rivers, was binding on
the private respondent as a judicial admission. Pleadings that have been amended
disappear from the record, lose their status as pleadings and cease to be judicial
admissions. While they may nonetheless be utilized against the pleader as extra-judicial
admissions, they must, in order to have such effect, be formally offered in evidence.21 It
does not appear that the original application for registration containing the averment in
question, or that particular averment itself, was offered or received in evidence for the
petitioner in the Trial Court.
WHEREFORE, the Decision of the Court of Appeals subject of the petition for review is
AFFIRMED, without pronouncement as to costs.
SO ORDERED.
G.R. No. 57092 January 21, 1993
DE JESUS vs. CA
This has reference to a petition for review on certiorari seeking the reversal of the
decision of the Court of Appeals in CA-G.R. No. 59613 (December 24, 1980, Sison, P.V.,
Cenzon. Asuncion [P], JJ) which reversed the decision dated September 7, 1975 of the
then Court of First Instance of Bulacan. In consequence, the appellate court dismissed
herein petitioners' complaint and declared private respondent Primitive Felipe de Jesus
to be the absolute owner entitled to the possession of the land in question to the
exclusion of petitioners.
The property in dispute is a parcel of residential land situated in Dampol 2nd, Pulilan,
Bulacan, bounded on the North by a Vereda: on the South, by the Provincial Road; on
the East, by Catalino Tayag (Tayao); on the West, by Macario de Leon, containing an
area of 2565 square meters (Brief for the Petitioners, p. 3), and covered by Tax
Declaration No. 2383 of the Office of the Provincial Assessor of Bulacan, in the name of
Victoriano Felipe (Exh. "5-C").
Respondent appellate court found the above-described parcel of land to be the same
parcel of land which was —
. . . the subject of the Kasulatang-Biling-Mabibiling-Muli (Exh. 1) executed
on November 25, 1932, by Emilia Camacho (surviving widow of Catalino
Esguerra), Jose C. Esguerra and Socorro Esguerra, conveying or selling
this land to the spouses, Victoriano Felipe and Guillerma de la Cruz, with
right to repurchase the same within a period of five years, but that the
vendors-a-retro failed to repurchase the land. The vendors-a-retro were
the heirs of the deceased Catalino Esguerra. Since the date of the sale
the spouses Victoriano Felipe and Guillerma de la Cruz, possessed and
lived on this land. The appellant [herein private respondent] was living
with her parents on the land, and upon their deaths, she continued to live
on and possess the same. (pp. 33-34, Rollo.)
267
On November 29, 1961 private respondent executed a sworn statement declaring herself and declaring the appellant to be the absolute owner, and entitled to the
the only heir of the deceased Victoriano Felipe and adjudicating to herself the ownership possession of this land in question, to the exclusion of plaintiffs-
of the land in question (Exh. "4"). appellees. (p. 38, Rollo.)

More than twelve years later or on April 27, 1973, petitioners herein filed in the Court of
First Instance of Bulacan, an action for recovery of ownership and possession and
quieting of title to the abovementioned piece of land covered by Tax Declaration No.
2383, alleging among others: "that their grandfather, Santiago de Jesus during his
lifetime owned the residential lot; that Santiago de Jesus died before the outbreak of
World War II, leaving three (3) sons, namely: Mariano, Exequiel, and Jose, all surnamed
de Jesus; that Mariano de Jesus died on September 3, 1956 leaving eight (8) surviving
children, namely: Edgardo, Remedios, Juanita, Juliano, Jose, Flordeliza, Reynaldo, and
Ernesto, all surnamed de Jesus and all of them plaintiffs; that Exequiel de Jesus died on
April 3, 1948, survived by two (2) children — Priscilo and Corazon, both surnamed de
Jesus, also plaintiffs in this case; while Jose de Jesus died before the outbreak of World
War II without any issue . . . "(p. 35, Record on Appeal).
The trial court found for the plaintiffs, petitioners herein. The dispositive portion of the
decision dated September 7, 1975 reads:
FOR ALL OF THE FOREGOING, judgment is hereby rendered:
(1) Declaring the plaintiffs as having the better right to ownership and
possession of the residential lot in question by virtue of hereditary
succession;
(2) Ordering the defendant to surrender the ownership and possession of
the said property to the herein plaintiffs;
(3) Ordering the defendant to pay to the plaintiffs the sum of P500.00 for
and as attorney's fees, and the costs of suit.
Thus, the instant petition for review on certiorari which was filed with this Court on
August 13, 1981 (p. 9, Rollo) with the following assigned errors:
I
THE COURT OF APPEALS ERRED IN SETTING ASIDE THE
JUDGMENT OF THE TRIAL COURT WHICH AWARDED THE
RESIDENTIAL LOT IN QUESTION TO THE PETITIONERS BY VIRTUE
OF HEREDITARY SUCCESSION AND ORDERED THE PRIVATE
RESPONDENT TO SURRENDER THE OWNERSHIP AND
POSSESSION OF THE SAME TO THEM.
II
THE COURT OF APPEALS ERRED IN RULING THAT THE LAND
DESCRIBED IN THE PETITIONERS' COMPLAINT IS THE SAME LAND
WHICH IS THE SUBJECT OF THE SALE WITH RIGHT TO
REPURCHASE (Exh. 1) EXECUTED ON NOVEMBER 5, 1932 BY THE
ESGUERRAS IN FAVOR OF THE PARENTS OF THE PRIVATE
RESPONDENT.
III
THE COURT OF APPEALS ERRED IN DECLARING THE PRIVATE
RESPONDENT TO BE THE ABSOLUTE OWNER AND ENTITLED TO
THE POSSESSION OF THE LAND IN QUESTION TO THE EXCLUSION
OF THE PETITIONERS.

SO ORDERED. (pp. 56-57, Record, on Appeal.) IV

As earlier intimated, on appeal, the Court of Appeals set aside the judgment of the trial THE COURT OF APPEALS ERRED IN HOLDING THAT THIS LAND
court in a decision promulgated on December 24, 1980 WAS PURCHASED BY THE PARENTS OF THE PRIVATE
(pp. 32-38, Rollo), the dispositive portion of which reads: RESPONDENT FROM THE HEIRS OF THE LATE CATALINO
ESGUERRA ON NOVEMBER 5, 1932 AND THE PRIVATE
IN VIEW OF THE FOREGOING CONSIDERATION, finding serious RESPONDENT AND HER PARENTS HAD BEEN IN OPEN,
errors to have been committed by the trial court in its judgment, the same CONTINUOUS, ADVERSE, PUBLIC AND NOTORIOUS POSSESSION
is hereby set aside and another one entered, dismissing the complaint,
268
 OF THE SAME SINCE 1932 UP TO THE PRESENT, IN THE CONCEPT
OF OWNER.
In effect, the sole issue in this petition boils down to this question: Who has the right to
the ownership and possession of the residential lot subject matter of the case, petitioners
by virtue of hereditary succession, or private respondent who claims ownership through
purchase of the property by her parents?
According to the trial court, petitioners have the better right but according to the appellate
court, the property rightly belongs to private respondent. In view of the fact that the
findings of the trial court and the appellate court are contrary to each other, this Court
shall exercise its authority of reviewing the evidence in order to arrive at the correct facts
based on the record (Director of Lands vs. Court of Appeals, 117 SCRA 346 [1982];
Quality Tobacco Corporation vs. Intermediate Appellate Court, 187 SCRA 210 [1990];
Valenzuela vs. Court of Appeals, 191 SCRA 1 [1990]; Shauf vs. Court of Appeals, 191
SCRA 713 [1990] ; Bustamante vs. Court of Appeals, 194 SCRA 645 [1991).
It is not disputed that petitioners are the heirs of their late grandfather, Santiago de
Jesus; what is in dispute is their claim that the residential lot in question belonged to their
grandfather and therefore theirs by hereditary succession (Brief for the Respondent, pp.
8-9). Neither is it contradicted that Santiago de Jesus was married to Maria Reyes, a
widow with three children by a prior marriage, namely: Basilio, Violeta, and Guillerma,
the last having been the mother of herein private respondent (tsn, August 15, 1974, pp.
14-15; September 16, 1974, pp. 14-15, 39-41).
The only documentary evidence of Santiago de Jesus' alleged ownership of the
residential lot in question is Tax Declaration No. 2384 (Exh. "A") in the name of
Victoriano Felipe. Therein, Felipe claimed ownership for tax purposes of a house of
mixed materials and a nipa roof, valued at P190.00 and constructed on the lot or "solar"
belonging to Santiago de Jesus. The statement therein regarding Santiago de Jesus'
ownership of the lot is supported by the testimony of petitioners Edgardo de Jesus and
Corazon de Jesus-Masiglat, and three other witnesses. They asserted personal
knowledge of said fact which, they swore, was also common knowledge in Dampol 2nd,
Pulilan, Bulacan (tsn, August 15, 1974, p. 16; September 16, 1974, pp. 18, 39). As a
child, for instance, witness Antonio Roxas was frequently in the house of his aunt, Maria
Reyes, a sister of his mother. When his aunt was still alive, she told him and his mother,
in the presence of Victoriano Felipe, that she had no right at all over the property,
including the old house, as it really belonged to Santiago de Jesus (tsn, September 16,
1974, pp. 39, 46-49).
On the other hand, private respondent presented a contract of sale with right of
repurchase, "Kasulatang-Biling-Mabibiling-Muli" (Exh. "1"), entered into in 1932 between
her parents, Victoriano Felipe and Guillerma de la Cruz, and the vendors-a-retro Emilia
Camacho, Socorro Esguerra, and Jose Esguerra; a "Sinumpaang Salaysay"; or an
affidavit of adjudication which private respondent executed in 1961 (Exh. "4"); and tax
declarations and official receipts.
On the evidentiary value of these documents, it should be recalled that the notarization of
a private document converts it into a public one and renders it admissible in court without
further proof of its authenticity (Joson vs. Baltazar, 194 SCRA 114 [1991]). This is so
because a public document duly executed and entered in the proper registry is presumed
to be Valid and genuine until the contrary is shown by clear and convincing proof (Asido
vs. Guzman, 37 Phil. 652 [1918]; U.S. vs. Enriquez, 1 Phil. 241 [1902]; Favor vs. Court of
Appeals, 194 SCRA 308 [1991]). As such, the party challenging the recital of the
document must prove his claim with clear and convincing evidence (Diaz vs. Court of
Appeals, 145 SCRA 346 [1986]).
There is no doubt that the pacto de retro deed of sale has assumed the character of a
public document, having been notarized by then Justice of the Peace Francisco
Makapugay, Jr. in his capacity as Notary Public Ex-Oficio. Hence, it is presumed valid
and authentic until proven otherwise. Petitioners, however, challenge this presumption of
validity and authenticity. They contend that private respondent's non-production of Tax
Declaration No. 5096, specifically mentioned in Exh. "1" as containing the description of
the piece of land subject of the "Kasulatang-Biling-Mabibiling-Muli" shattered such
presumption and rendered suspect the latter document (Brief for the Petitioners, pp. 9,
19-22).
While both Socorro Olarte, a signatory to the "Kasulatang-Biling-Mabibiling-Muli" as one
of the vendors-a-retro, and private respondent testified that the land subject of the sale
was covered by Tax Declaration No. 5096 in the name of the original owner Catalino
Esguerra (tsn, October 21, 1974, p. 6 and December 18, 1974, pp. 3-5), they could not
produce a copy of said tax declaration. Capitalizing on said omission, petitioners
presented a certified true copy of said Tax Declaration No. 5096 (Exh. "G") covering the
year 1948 and which, however, concerns a piece of lot owned by a certain Teodoro
Sinson. Further, petitioners also produced certified true copies of Tax Declarations Nos.
2214 (Exh. "H"), 2215 (Exh "I") and 2216 (Exh. "J"), all in the name of Catalino Esguerra
as owner, and all for the year 1967.
Pablo H. Domingo, Senior Deputy Assessor, who was subpoenaed to present in court
Tax Declaration No. 5096 in the name of Catalino Esguerra identified the above-
mentioned certified true copies of tax declarations as having been issued by the Office of
269
the Provincial Assessor of Bulacan (tsn, March 12, 1975, pp. 13-14). However, he said
he could not bring with him a copy of Tax Declaration No. 5096 in the name of Catalino
Esguerra as the records of the Office of the Provincial Assessor only started with the
year 1948 because the old Assessor's Office was burned down during the early part of
the liberation (Transcript, March 12, 1975, pp. 5-6, 12).
It is significant to note that the land covered by Tax Declaration No. 5096 (Exh. "G")
described therein as bamboo land, was previously covered by Tax Declaration No. 233
for the same owner, while Tax Declaration No. 2383 (Exh. "5-C") beginning with the year
1948 and covering the residential lot in question declared in the name of Victoriano
Felipe, cancelled Tax Declaration No. 5326 (Exh. "5-C-1"). An uncertified copy of said
Tax Declaration No. 5326 for Victoriano Felipe purporting to commence with the year
1939 allegedly superseded Tax Declaration No. 252 in the name of Catalino Esguerra
(Exh. "3").
In other words, the piece of residential lot covered by Tax Declaration No. 2383 (Exh.
"5"), or by Tax Declaration No. 252 (Exh. "3") at around the time of the alleged sale, until
superseded by Tax Declaration No. 5326 (Exh. "5-C-1") beginning with the year 1939, is
not the piece of land covered by Tax Declaration No. 5096 specifically referred to in Exh.
"1" as the subject of the "Kasulatang-Biling-Mabibiling-Muli". Thus, the fact that Guillerma
de la Cruz, mother of private respondent, made real property tax payments purportedly
on Tax Declaration No. 5096 for the years 1935 (Exh. "2-d" and "2-e") and 1936 (Exh. "2-
b") and probably for the years 1933, 1934, 1937 and 1938, in the name of Catalino
Esguerra neither alters the fact that the piece of land covered by Tax Declaration No.
2383 (Exh. "5") is not the subject of the "Kasulatang-Biling-Mabibiling-Muli" (Exh. "1") nor
demonstrates that the payments were made for the residential lot under litigation.
It is, therefore, evident that Tax Declaration No. 5096 was inexistent at the time of the
alleged sale. By a simply analysis of the different tax declarations presented as evidence
in this case, it is likewise clear that when by virtue of the alleged sale, a new tax
declaration numbered 5326, was made in 1938 in the name of Victoriano Felipe (Exh. "5-
C-1"), what was cancelled was Tax Declaration No. 252 (Exh. "3"), not Tax Declaration
No. 5096 which supposedly covered the property subject of the "Kasulatang-Biling-
Mabibiling-Muli". It should be noted that the property under Tax Declaration No. 5326
bears an identical description to the property under litigation. Thus, the inevitable
conclusion is that, without any legal basis, Victoriano Felipe had declared himself the
owner of the disputed property for tax purposes. Tax Declaration No. 5326 thereafter
became the basis for Tax Declaration
No. 2383 in 1948 (Exh. "5-C") until it was cancelled and new tax declarations were made
in the name of private respondent, viz., Tax Declaration No. 9453 in 1962 (Exh. "5-b"),
then Tax Declaration No. 2657 in 1967 (Exh. "5") and finally Tax Declaration No. 2962 in
1974 (Exh. "5-A").
As earlier stated, Guillerma de la Cruz had also been paying real property tax on the
house described as located in Dampol 2nd in the name of Victoriano Felipe under Tax
Declaration No. 14984 since 1933 (Exh. "2-C"), and then under Tax Declaration No.
3975 since 1941 (Exh. "2-4") until 1947, and under Tax Declaration No. 2384 in 1948. By
a twist of fate, however, Tax Declaration No. 2384 describes the house, among others,
as located in the residential lot belonging to Santiago de Jesus or "solar de Santiago de
Jesus" (Exh. "A-1"). While real property tax continued to be paid under the latter
declaration until 1958 (Exh. "2-y"), by stating in said tax declaration that his house was
located in the land of Santiago de Jesus. Victoriano Felipe recognized and admitted the
ownership of Santiago de Jesus over the residential lot involved herein. Such admission
puts to naught the claim of private respondent for when one derives title to property from
another, the act, declaration or omission of the latter in relation to the property is
evidence against the former (Rolleza vs. Court of Appeals, 174 SCRA 354 (1989]).
The authenticity of the signature of Victoriano Felipe in the deed of sale with right to
repurchase is also in question. Both Moises de Jesus and Antonio Roxas testified that
Victoriano Felipe could not even vote as he did not know how to read and write (tsn,
September 16, 1974, pp. 30, 42). Although Socorro Esguerra Olarte identified the
signature of Victoriano Felipe on the "Kasulatang-Biling-Mabibiling-Muli" as his (tsn,
October 21, 1974, p. 13), she also testified that Victoriano Felipe has a brother who
looked exactly like Victoriano (tsn, October 21, 1974, p. 36). On the issue, all that private
respondent could say was that her father studied thecartilla (tsn, January 24, 1975, p. 8).
Under the circumstances, there is strong, convincing, and conclusive proof of the nullity
and falsity of Exhibit "1". Its evidentiary nature cannot, therefore, be sustained (Legaspi
vs. Court of Appeals, 142 SCRA 82 [1986]). Even if the document were to be considered
simply as a private document, it would still need evidence of its due execution and
authenticity even if it is already more than 30 years old as it cannot be considered
unblemished by any circumstance of suspicion (Heirs of Demetria Lacsa vs. Court of
Appeals, 197 SCRA 234 [1991]).
Consequently, the affidavit of adjudication executed by private respondent on May 21,
1961 (Exh. "4"), has no evidentiary value as it has become baseless. Furthermore,
private respondent falsely stated therein that she is the only heir of Victoriano Felipe for,
at the time of its execution, her mother, Guillerma de la Cruz, was still living. Guillerma
de la Cruz died on April 23, 1964 (Exh. "B"), three years after the "Sinumpaang
Salaysay" (Exh. "4") was executed. Moreover, the tax receipts and declarations of
ownership for tax purposes upon which private respondent basically anchors her claim,
are not incontrovertible evidence of ownership; they only become evidence of ownership
acquired by prescription when accompanied by proof of actual possession of the
property (Tabuena vs. Court of Appeals, 196 SCRA 650 [1991]; Rojas vs. Court of
Appeals, 192 SCRA 709 [1992]).
270
On the issue of ownership by acquisitive prescription, private respondent contends:
"Granting that it was formerly owned by their late grandfather, they (petitioners) have lost
whatever right they may have over the land by extinctive prescription" for the reason that
she, private respondent has acquired the same by acquisitive prescription (Brief for the
Respondents, p. 9), citing Section 41 of the old Code of Civil Procedure which states:
Sec. 41. Title to Land by Prescription. — Ten years of actual adverse
possession by any person claiming to be the owner for that time of any
land or interest in land, uninterruptedly, continuously for ten years by
occupancy, descent, grants, or otherwise, in whatever way such
occupancy may have commenced or continued, shall vest in every actual
possessor of such land, a full and complete title . . . .
Corazon de Jesus Masiglat testified that from 1930 to 1952, the period of time she was
living in the house her grandfather erected on the contested property, her grandmother,
Victoriano Felipe, Guillerma de la Cruz, and private respondent also lived there (tsn, July
16, 1974, p. 23). She was corroborated by petitioner Edgardo de Jesus who also testified
that in 1932 up to the time of his death in 1948, Exequiel de Jesus was taking charge of
the property and that while the parents of private respondent were the ones paying the
real property taxes the money therefor came from Exequiel (tsn, July 16, 1974, pp. 11-
14). Witness Salvador Esguerra testified that Victoriano Felipe began to reside in the
house when he married Guillerma de la Cruz and that Corazon and her father, Exequiel,
also resided there after the death of Santiago de Jesus (tsn, August 15, 1974, pp. 14, 21,
22). Moises de Jesus, for his part, testified that while Victoriano Felipe started staying in
the property only when the children of Santiago de Jesus had died, Corazon de Jesus
continued to reside there (tsn, September 16, 1974, p. 27).
In her own defense private respondent first testified that Corazon de Jesus never lived
with them and that Exequiel de Jesus never went to their place (tsn., October 11, 1974,
pp. 35-36). She did not contradict, however, the testimony of Edgardo de Jesus on
rebuttal that he himself at the age of 12 used to stay in the house and was witness to the
occasion when Corazon fell in a ditch going towards their place, that as a result of such
accident, Corazon sustained a permanent deformity on one hand; and that Corazon left
the place only in 1952 when she got married (tsn, April 23, 1975, pp. 23-24). Neither did
private respondent or her witnesses traverse the testimony of Corazon de
Jesus-Masiglat, also on rebuttal, that since childhood she had been residing in the house
owned by her grandfather Santiago de Jesus, together with private respondent and the
latter's parents, and actually left the place only in 1952: that her parents as well as her
child died in that house; and that private respondent was, in fact, the one who caused the
registration of her child's death (tsn, April 23, 1975, p. 25). Even Socorro Esguerra
Olarte, witness for private respondent, testified that she remembers Exequiel de Jesus
as he was always around whenever she visited the place and he was the one who got
santol fruits for her sometimes (tsn, September 23, 1974, p. 17).
It thus appears that Victoriano Felipe was residing in the house of Santiago de Jesus
simply because he was married to Guillerma de la Cruz, daughter of Maria Reyes by a
first marriage, who, obviously, was living with her mother who had taken Santiago de
Jesus for her second husband. In effect, their possession of the contested lot was neither
exclusive nor in the concept of owner. Possession, to constitute the foundation of a
prescriptive right, must be possession under a claim of title or it must be adverse or in
the concept of owner or concepto de dueño(Ordoñez vs. Court of Appeals, 188 SCRA
109 [1990]; Coronado vs. Court of Appeals, 191 SCRA 814 [1990]; Manila Electric
Company vs. Intermediate Appelate Court, 174 SCRA 313 [1989]).
In this case, Victoriano Felipe and his family were residing in the land by mere tolerance.
There is no way of knowing how the house on the lot was described in Tax Declaration
Nos. 14984 and 3975, but, to repeat, in Tax Declaration No. 2384 which commenced
with the year 1948 (Exh. "A"), the house was described as constructed on the lot
or solar of Santiago de Jesus up to the year 1961 when private respondent was still
paying property tax (Exh.
"2-x").
Significantly, the "Kasulatang-Biling-Mabibiling-Muli" was not even given to private
respondent by her parents; she admitted having found it in the house although they
mentioned its existence to her when they were still alive (tsn, December 18, 1974, pp.
18-19). Under the circumstances, the prescriptive period cannot be considered to have
accrued during the lifetime of Victoriano Felipe.
It is interesting to note that when private respondent executed her "Sinumpaang
Salaysay" (Exh. "4") adjudicating the disputed lot to herself on the basis of the contract of
sale as no repurchase had been made by the vendors of retro, Exequiel de Jesus was
already dead and Corazon de Jesus-Masiglat was no longer residing in the property in
question. As she was in possession of the property, private respondent then had it
declared in her name for real property tax purposes under Tax Declaration No. 9453
(Exh. "5-b") thereby cancelling Tax Declaration No. 2383 (Exh. "5-b-1") which was in the
name of Victoriano Felipe.
As to Tax Declaration No. 2384, the last vestige of Santiago de Jesus' ownership of the
property in question, there is no evidence on record as to whether private respondent
had it cancelled, had a new declaration made on the property in her name, or whether
she continued paying tax after her payment for the year 1961. It was established,
however, through the testimony of Salvador Esguerra, that the old house was
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demolished and a new bungalow was constructed on the lot (tsn, August 15, 1974, pp.
23-24).
To create a fundamental basis for her claim of ownership by acquisitive prescription,
private respondent mortgaged the questioned property to the Rural Bank of Pulilan (Exh.
"5-b") not as a mere possessor but as an owner thereof. She also registered both the
mortgage and the "Sinumpaang Salaysay" (tsn, December 18, 1974, p. 23). However,
she never attempted to obtain a certificate of title over the property. This omission
indicates, to say the least, that private respondent realizes her lack of any lawful claim of
ownership over the property for while registration is not a mode of acquiring ownership, it
is evidence of such title over the particular property (Avila v. Tapucar, 201 SCRA 148
[1991]).
Private respondent's pretensions to acquisitive prescription may not succeed even under
Act No. 190, the Code of Civil Procedure. Under Section 41 thereof, good faith and just
title are not required for purposes of acquisitive prescription; adverse possession in
either character ripens into ownership after the lapse of ten years (Cruz vs. Court of
Appeals, 93 SCRA 619 [1979]; Quilisado vs, Court of Appeals, 182 SCRA 401 [1990];
Ongsiaco vs. Dallo, 27 SCRA 161 [1969]; Miraflor vs. Court of Appeals, 142 SCRA 18
[1986]). The just title required for acquisitive prescription to set in is not "titulo verdadero
y valido" — such title which by itself is sufficient to transfer ownership without the
necessity of letting the prescriptive period elapse, but only "titulo
colorado" — or such title where, although there was a mode of transferring ownership,
still something is wrong because the grantor is not the owner (Doliendo vs. Biannesa, 7
Phil. 232 [1906] cited in Solis vs. Court of Appeals, 176 SCRA 678 [1989]), and
incidentally, it may perhaps be mentioned that prescription running even after the
effectivity of the New Civil Code on August 30, 1950, continued to be governed by
Section 41 of the Old Civil Code (Solis vs. Court of Appeals, supra).
Under the present Civil Code, the prescriptive period required for acquisition of
immovable property is ten years if the possession is in good faith, and thirty years if in
bad faith (South City Homes, Inc. vs. Republic, 185 SCRA 693 [1990]). Such open,
continuous, exclusive and notorious occupation of the disputed property for thirty years
must be conclusively established (San Miguel Corporation vs. Court of Appeals, 185
SCRA 722 [1990]).
Reckoned from the time she executed the affidavit of adjudication in 1961, eleven years
after the New Civil Code had taken effect, private respondent's possession of the
contested lot is far too short of the prescriptive period of thirty years considering that her
possession is in bad faith. The filing of the petition for recovery of ownership and
possession and quieting of title by petitioners on April 27, 1973 was well below the
acquisitive prescriptive period for private respondent, which is thirty years under Article
1141 of the present Civil Code. In this case, the statutory period of prescription is
deemed to have commenced when petitioners were made aware of a claim adverse to
them (Coronel vs. Intermediate Appellate Court, 155 SCRA 270 [1987]), that is, when the
affidavit of adjudication was duly registered with the Registry of Deeds which, at the
earliest may be considered to be in 1974, when private respondent was able to secure a
tax declaration in her name.
WHEREFORE, the decision of the Court of Appeals under review is hereby SET ASIDE
and the decision of the trial court, dated September 7, 1975, REINSTATED.
SO ORDERED.
G.R. No. 79688 February 1, 1996
PLEASANTVILLE vs. CA
Is a lot buyer who constructs improvements on the wrong property erroneously delivered
by the owner's agent, a builder in good faith? This is the main issue resolved in this
petition for review on certiorari to reverse the Decision1 of the Court of Appeals2 in CA-
G.R. 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.
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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 Kee's 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 Kee's wife, Donabelle Kee, to inspect Lot 8.
Unfortunately, the parcel of land pointed by Octaviano was Lot 9. Thereafter, Kee
proceeded to construct his residence, a store, an auto repair shop and other
improvements on the lot.
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, Jardinico's 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 latter's failure to pay the installments due, and that Kee had not
contested the rescission. The rescission was effected in 1979, before the complaint was
instituted. The MTCC concluded that Kee no longer had any right over the lot subject of
the contract between him and 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 the 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
P15.00 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 C.T. Torres Enterprises, Inc. and Pleasantville
Subdivision are ordered to pay the plaintiff jointly and severally the sum of
P3,000.00 as attorney's 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 Kee5. 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 (P15.00) 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 attorney's 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 attorney's fees to plaintiff and costs
of litigation is reversed.6
273
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 attorney's 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 Court's
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 attorney's 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 attorney's fees proper?
274
 The First Issue: Good Faith
Petitioner contends that the Court of Appeals erred in reversing the RTC's 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. . . .
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 developer's agent and applied
and paid for the relocation of the lot, as well as for the production of a lot plan by
CTTEI's geodetic engineer. Upon Kee's receipt of the map, his wife went to the
subdivision site accompanied by CTTEI's employee, Octaviano, who
authoritatively declared that the land she was pointing to was indeed Lot 8.
Having full faith and confidence in the reputation of CTTEI, and because of the
company's positive identification of the property, Kee saw no reason to suspect
that there had been a misdelivery. The steps Kee had taken to protect his
interests were reasonable. There was no need for him to have acted ex-
abundantia cautela, such as being present during the geodetic engineer's
relocation survey or hiring an independent geodetic engineer to countercheck for
errors, for the final delivery of subdivision lots to their owners is part of the
regular course of everyday business of CTTEI. Because of CTTEI's blunder,
what Kee had hoped to forestall did in fact transpire. Kee's 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, Kee's good faith. Petitioner failed to prove otherwise.
To demonstrate Kee's bad faith, petitioner points to Kee's 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 petitioner's cause of action against Kee under
the said contract (contractual breach), but may not be bases to negate the presumption
that Kee was a builder in good faith.
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
275
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 petitioner's negligence. Such waiver would be contrary
to public policy and cannot be allowed. "Rights may be waived, unless the waiver is
contrary to law, public order, public policy, morals, or good customs, or prejudicial to a
third person with a right recognized by law." 12
The Second Issue: Petitioner's 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 I 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.
Petitioner's 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 petitioner's 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 whatso-ever; 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, petitioner's 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
Court's Decision would require petitioner and CTTEI jointly and solidarily to "answer" or
reimburse Kee therefor.
We agree with petitioner.
276
Petitioner' s 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 flow 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: Attorney's Fees
The MTCC awarded Jardinico attorney's 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 attorney's fees after ruling that petitioner was
liable for its agent's negligence.
The award of attorney's 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 petitioner's 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. Torres
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 Development Corporation and respondent C.T. Torres
Enterprises, Inc. are ordered to pay in solidum the amount of P3,000.00 to
Jardinico as attorney's fees, as well as litigation expenses; and
(4) The award of rentals to Jardinico is dispensed with.
SO ORDERED.
--- xxx END OF POSSESSIONS THE KINDS THEREOF xxx ---
G.R. No. 3088 February 6, 1907
BANCO ESPANOL vs. PETERSON
On the 24th of October, 1905, the Spanish-Filipino Bank, a corporation, through its
attorneys, Del-Pan, Ortigas and Fisher, filed a complaint against the sheriff of the city of
Manila and the other defendant, Juan Garcia, praying that judgment be rendered against
the said sheriff, declaring that the execution levied upon the property referred to in the
complaint, to wit, wines, liquors, canned goods, and other similar merchandise, was
illegal, and directing the defendants to return the said goods to the plaintiff corporation,
and in case that he had disposed of the same, to pay the value thereof, amounting to
P30,000, Philippine currency, and further that it be declared that the said plaintiff
corporation, under the contract of pledge referred to in the complaint had the right to
apply the proceeds of the sale of the said goods to the payment of the debt of P40,000,
Philippine currency, for the security of which the said merchandise was pledged, with
preference over the claim of the other defendant, Juan Garcia and that both defendants
be held jointly liable to the plaintiff for the sum of P500, Philippine currency, as damages,
and the said defendants to pay the costs of the proceedings, and for such other and
further relief as the plaintiff might be entitled to under the law. Plaintiff alleges in its
complaint that under the contract entered into on the 4th of March, 1905, by and between
the Spanish-Filipino Bank and Francisco Reyes, the former, loaned to the latter the sum
of P141,702, Philippine currency; that on the same date Francisco Reyes was already
indebted to the bank in the sum of P84,415.38, Philippine currency, which, added to the
amount of the loan, made a total of P226,117.38, Philippine currency, received by the
said Reyes as a loan from the plaintiff bank, the entire sum at an annual interest of 8 per
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cent; that to secure the payment of these two sums and the interest thereon, the debtor,
Francisco Reyes, by a public instrument executed before a notary on the aforesaid date
mortgaged in favor of the plaintiff bank several pieces of property belonging to him, and
pledged to the said bank part of his personal property, specifying the proportion on which
the said real and personal property thus mortgaged and pledged in favor of the plaintiff
corporation would be respectively liable for the payment of the debt; that the property
pledged by the debtor to the bank included a stock or merchandise, consisting of wines,
liquors, canned goods, and other similar articles valued at P90,591.75, Philippine
currency, then stored in the warehouses of the debtor, Reyes, No. 12 Plaza Moraga, in
the city of Manila, which said goods and merchandise were liable for the payment of the
said sum of P90,591.75, Philippine currency; that in the aforesaid deed of pledge it was
agreed by and between the bank and the debtor, Reyes, that the goods should be
delivered to Ramon Garcia y Planas for safe-keeping, the debtor having actually turned
over to the said Garcia y Planas the goods in question by delivering to him the keys of
the warehouse in which they were kept; that in a subsequent contract entered into by
and between the debtor, Reyes, and the plaintiff bank on the 29th of September, 1905,
the said contract executed on the 4th of March was modified so as to provide that the
goods then (September 29) in possession the depositary should only be liable for the
sum of P40,000, Philippine currency, the said contract of the 4th of March remaining in
all other respects in full force and effect, Luis M.a Sierra having been subsequently
appointed by agreement between the bank and the debtor as depositary of the goods
thus pledged in substitution for the said Ramon Garcia y Planas.
On the 19th of October, 1905, in an action brought in the Court of First Instance of the
city of Manila by Juan Garcia y Planas against Francisco Reyes and Ramon Agtarat,
judgment was rendered against the last-mentioned two for the sum of P15,000,
Philippine currency, to be paid by them severally or jointly, upon which judgment
execution was issued against the property of the defendants, Reyes and Agtarap. On the
aforesaid 19th day of October, for the purpose of levying upon the property of the
defendants, the sheriff at the request of Garcia, the plaintiff in that case, entered the
warehouse where the goods pledged to the plaintiff bank were stored under the custody
of the depositary, Sierra, and levied upon them as per list attached to the complaint
marked "Exhibit A." The sheriff seized the goods which had been pledged to the bank,
depriving the latter of the possession of the same, to which said contract executed on the
4th of March, 1905. Without the authority of the bank, Reyes could not dispose of the
said goods. The value of the goods seized by the sheriff was P30,000, Philippine
currency, the said sheriff, having refused, and still refusing, to return to the same to the
bank, notwithstanding repeated demands made upon him to this effect, and it being
alleged in the complaint that unless prohibited by the court the sheriff would proceed to
sell the said goods at public auction and apply the proceeds to the satisfaction of the
judgment rendered in favor of the Juan Garcia y Planas, while the other debtor Reyes
had not paid to the bank the P40,000, Philippine currency, to secure the payment of
which the goods mentioned in Exhibit A had been pledged to the bank, that is, to secure
the payment of a sum in excess of the actual value of the goods in the hands of the
sheriff.
The defendant sheriff, James J. Peterson, and Juan Garcia, his codefendant, through
their attorneys, Hartigan, Marple, Rohde and Gutierrez, answering the complaint, stated
that they admitted the allegations contained in paragraphs 1, 2, 3, 4, 5, 12, and 17 of the
complaint, but denied the allegations contained in paragraphs 6, 7, 8, 9, 10, 11, 14, 16,
and 18. They further denied the allegations contained in paragraph 12, with the
exception that the defendant sheriff levied upon the goods mentioned in Exhibit A
attached to the complaint for the purpose of satisfying the judgment referred to therein;
and also the allegations contained in paragraph 13 of the complaint, with the exception
that the sheriff seized the property mentioned in Exhibit A under the execution referred to
therein; and finally defendants denied the allegation contained in paragraph 15 of the
complaint, with the exception of the allegation that the value of the property seized is
P30,000. They accordingly asked that the action be dismissed and that it be adjudged
that the plaintiff had no interest whatever in the property described in the complaint, and
that the plaintiff be taxed with the costs of these proceedings.
The testimony introduced by the parties having been received, and the exhibits having
been attached to the record, the court below entered judgment on the 4th of January,
1906, dismissing plaintiff's action and directing that the defendant recover from the
Spanish-Filipino Bank the costs of this action, for which execution was duly issued. To
this judgment counsel for plaintiff excepted and announced his intention of prosecuting a
bill of exceptions, and further made a motion for a new trial on the ground that the
judgment of the court below was contrary to law and that the findings of fact were plainly
and manifestly contrary to the weight of the evidence.
The decision of this case depends mainly upon the question as to whether the contract of
pledge entered into by and between the Spanish-Filipino Bank and Francisco Reyes to
secure a loan made by the former to the latter was valid, all the requisites prescribed by
the Civil Code having been complied with.
If so, the bank's claim had preference over the claim of a third person not secured, as
was the bank's, by a pledge, with reference to the property pledged to the extent of its
value, and therefore such property could not have been legally levied upon by the sheriff
at the request of the defendant, Juan Garcia. (Arts. 1921, 1922, Civil Code.)
The contract in question complies with all the requisites provided in article 1857 of the
Civil Code, such as that the property was pledged to secure a debt, the date of the
execution, the terms of the pledge, and the property pledged, all of which appears in a
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public document, and the property pledged was placed in the hands of a third person by
common consent of the debtor and creditor, under the supervision of an agent of the
bank. (Arts. 1863, 1865, 1866, 1869, 1871, Civil Code.) The defect alleged to exist in the
said contract is that the debtor, Reyes, continued in possession of the property pledged;
that he never parted with the said property, and that neither the creditor nor the
depositary appointed by common consent of the parties were ever in possession of the
property pledged, and for this reason, and upon the further ground that the contract was
fraudulent, the court below dismissed the complaint with the costs against the plaintiff.
In the motion for a new trial it was alleged by the plaintiff that the judgment of the court
below was contrary to law, and that the findings of fact contained therein were plainly
and manifestly against the weight of the evidence. If plaintiffs contention is correct, then
the judgment of the court below should be reversed.
From the evidence introduced at the trial, both oral and documentary, it appears that a
third person, appointed by the common consent of the debtor and creditor, was in
possession of the goods pledged in favor of the bank under the direct supervision of an
agent of the bank expressly appointed for this purpose, and it has not been shown that
the said Reyes continued in the possession of the goods after they had been pledged to
the plaintiff bank.
Exhibit C and the testimony of Francisco Reyes, Luis M.a Sierra, and Mariano Rodriguez
corroborate the existence and authenticity of the contract of pledge recorded in a public
instrument and conclusively and satisfactorily show that the debtor, after the pledge of
the property, parted with the possession of the same, and that it was delivered to a third
person designated by common consent of the parties. For the purpose of giving this
possession greater effect, the pledgee appointed a person to examine daily the property
in the warehouse where the same was kept.
The witness Matias Garcia also testified as to the status of these goods, and informed
Juan Garcia of such status before the same were levied upon.
The sheriff's testimony supports the allegation that the depositary, Sierra, was present at
the place where the goods were kept, as well as the representative of the bank,
Rodriguez, when he, the sheriff, went there for the purpose of levying upon the said
property. He further testified that Rodriguez, the representative of the bank, then
protested and notified him that the property in question was pledged to the Spanish-
Filipino Bank.
The contract in question was, therefore, a perfect contract of pledge under articles 1857
and 1863 of the Civil Code, it having been conclusively shown that the pledgee took
charge and possession of the goods pledged through a depository and a special agent
appointed by it, each of whom had a duplicate key to the warehouse wherein the said
goods were stored, and that the pledgee, itself, received and collected the proceeds of
the goods as they were sold.
The fact that the said goods continued in the warehouse which was formerly rented by
the pledgor, Reyes, does not affect the validity and legality of the pledge, it having been
demonstrated that after the pledge had been agreed upon, and after the depository
appointed with the common consent of the parties had taken possession of the said
property, the owner, the pledgor, could no longer dispose of the same, the pledgee being
the only one authorized to do so through the depositary and special agent who
represented it, the symbolical transfer of the goods by means of the delivery of the keys
to the warehouse where the goods were stored being sufficient to show that the
depositary appointed by the common consent of the parties was legally placed in
possession of the goods. (Articles 438, 1463, Civil Code.)
The fact that the debtor, Reyes, procured purchasers and made arrangements for the
sale of the goods pledged and that the bills for the goods thus sold were signed by him
does not affect the validity of the contract, for the pledgor, Reyes, continued to be the
owner of the goods, (art. 1869, Civil Code), he being the one principally interested in the
sale of the property on the best possible terms.
As to the reservation stipulated in paragraph 13 of the contract executed on the 4th of
March, 1905, it could not affect the contract in question for the reason that reservation
referred to the rent from the property mortgaged, to the bank and the dividends from the
shares of stock also pledged to the bank, and not the merchandise so pledged, and such
reservation could not have rendered the contract of pledge null.
If the case is to be decided in accordance with the facts alleged and established, the
defendant not having introduced any evidence to show that the said contract of pledge
was fraudulent as to other creditors, there was no legal ground upon which the court
below could have held that the contract evidenced by the instrument in question was
entered into to defraud other creditors of the pledgor.
For the reason hereinbefore set out, and the judgment of the court below being contrary
to the evidence, the said judgment is hereby reversed, and it is hereby adjudged that the
plaintiff corporation, under and by virtue of the contract of pledge in question, had a
preferential right over that of the defendant, Juan Garcia, to the goods pledged or the
value thereof, the value to be applied to the payment of the debt of P40,000, Philippine
currency, for the security of which the said property was pledged, and the defendants are
accordingly hereby ordered to return to the plaintiff corporation the property improperly
279
levied upon, or to pay its value, amounting to P30,000, Philippine currency, without
special provision as to costs. After the expiration of twenty days let judgment be entered
in accordance herewith, and ten days thereafter the case be remanded to the court
below for execution. So ordered.
G.R. No. L-9989 March 13, 1918
CUAYCONG vs. BENEDICTO
The issues in this case relate to the right of plaintiffs to make use of two roads existing
on the Hacienda Toreno, a tract of land in the municipality of Victorias, Negros
Occidental, the property of the defendants, Blasa Benedicto and Ramona Benedicto.
One of these roads is referred to in the proceedings as the Nanca-Victorias road and the
other as the Dacuman — Toreno road. The Court of First Instance held that those of the
plaintiffs who claimed to be entitled to make use of the Dacuman — Toreno road had
failed to establish the asserted right, and dismissed the action as to them. From this
decision they appealed to this court but, their brief not having been filed within the time
prescribed by the rules, their appeal was dismissed, on motion of defendants, by
resolution dated February 14, 1916. Consequently, the issues presented on this appeal
are limited to those which relate to the rights of the parties with respect to the Nanca-
Victorias road, and the determination of the correctness of the decision of the court
concerning that part of the controversy submitted to its decision.
The allegations in the complaint with respect to the Nanca-Victorias road are that the
appellees, Eduardo Cuaycong, Lino Cuaycong, and Eulalio Dolor, are the owners of a
group of haciendas situated between the southern boundary of the Hacienda Toreno and
the barrio of Nanca, of the municipality of Seravia, and that the appellees Silverio Ginoo,
Gervasio Ascalon, and Juan Ledesma, are the lessees of part of said haciendas; that
more than twenty years the appellees and their predecessors in interest have made use
of the Nanca-Victorias road, which crosses the Hacienda Toreno, openly, publicly, and
continiously, with the knowledge of the owners of the said hacienda, for the purpose of
conveying the products of their haciendas to the town of Victorias and to the landing
place there situated, and for the purpose of transporting supplies from those points to
their haciendas, making use of the said road by means of carts, carabaos, and other
usual means of transportation; that there is no outlet to a public road from the hacienda
occupied by these plaintiffs, the only road and way by which the products of the plaintiffs'
property can be taken to the town of Victorias and to the landing place there being
across the Hacienda Toreno by the road marked on the plan attached to the complaint;
that on the fifteenth day of November, 1912, the defendants closed the road in question
at the point at which it crosses the Hacienda Toreno, and refused to permit plaintiffs to
continue using it; that plaintiffs were about to commence to grind their crop of sugar
cane, and that, if prevented from transporting their sugar across the Hacienda Toreno to
their point of embarkation, would suffer damages difficult to estimate. Upon these
averments of fact the plaintiffs prayed for a judgment that they are entitled to use the
road in question as they have been using it in the past, and that a perpetual injunction be
issued against plaintiffs restraining them from impending such use. Upon the filing of the
complaint, plaintiffs moved the court to issue a preliminary injunction restraining
defendants from interfering with the use of the road during the pendency of the suit,
which motion was granted by the court.
Defendants in their answer put in issue all the special averments of the complaint, as
above set forth, and by way of counterclaim and special defense, averred that the road
crossing the Hacienda Toreno, over which plaintiffs claim the right of passage, is the
private property of defendants; and, further, that they have not refused plaintiffs
permission to pass over this road but have required them to pay toll for the privilege of
doing so. Defendants also claimed damages for the use of the road by plaintiffs during
the pendency of the suit, alleging that the preliminary injunction had been improvidently
issued upon false statements contained in the verified complaint filed by plaintiffs.
The case was tried in July, 1913. The court on December 8, 1913, rendered judgment,
dismissing the complaint with respect to the plaintiffs Felix Suarez, Probo Jereza,
Enrique Azcona, and Melecio Pido, these being the plaintiffs who claimed the right to use
the Dacuman — Toreno road. With respect to the Nanca-Victorias road, the court held
that it was a public highway over which the public had acquired a right of use by
immemorial prescription, and ordered the issuance of a perpetual injunction against
plaintiffs, restraining them from interfering in any manner with the use of the said road.
The conclusion of the court with respect to the facts affecting the Nanca-Victorias road
are as follows:
Turning to a consideration of the evidence relative to the Nanca-Victorias road
we find incontestable proof that it has been in existence for at least forty years.
That the hacenderos located in the southwestern section of Victorias and the
public generally passed over it freely and that it was used for all purposes of
transportation of farm produce, animals, etc. and by pedestrians as well as
carromatas and other conveyances without break or interruption until two or three
years ago when the defendants announced that the road was private and that
those who wished to pass over it with sugar carts would be obliged to pay a toll
of ten centavos — all other vehicles, it appears, were permitted to pass free
charge. This arrangement seems to have existed during the years of 1911 and
1912 and part of 1913, the money being collected apparently from some
hacenderos and not from others. There is some reason to believe from the
evidence presented by defendants themselves that the practice of making these
payments to hacienda 'Toreno' originated in an attempt to raise a fund for the
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 repair of the road. There is no evidence that any other hacenderos between
Nanca and Victorias or any other person made any attempt to close the road or
to collect toll. On the contrary the road appears to have been repaired by the
hacenderos when it needed repairing and everyone used it on equal terms until
the defendants in 1910 or 1911 interposed the objection that the road in dispute
was private. This we think is a fair deduction from the evidence and although it is
asserted that toll was collected at an earlier date by the late Leon Montinola,
brother of the defendant Ruperto Montinola, there is no tangible evidence that
this was so and that toll has been paid only during the years of 1911, 1912, and
part of 1913.
The question presented by the assignment of error are in effect:
(a) Is the Nanca-Victorias road at the point at which it traverses the Hacienda Toreno a
public highway or not?
(b) If it be held that the road in question is not a public highway, have plaintiffs proven
their acquisition of an easement of way over the Hacienda Toreno at the point traversed
by the road in question?
The trial judge, in holding that the road in question is public, bases in conclusion upon
the fact, which he deems to have been proven, that the road has been in existence "from
time immemorial," and had been "continiously used as a public road . . . and open to
public as such for thirty or forty years . . . until . . . the defendants undertook to claim it as
private and to collect toll for the passage of carts." (Bill of Exceptions, p. 56.) There is no
doubt that for the past thirty or forty years a road has existed between the former site of
the town of Victorias and the barrio of Nanca, of the municipality of Seravia, and that this
road crosses defendants' hacienda. It is also true that during this period the plaintiffs and
their predecessors in the ownership of the hacienda now held by them have made use of
this road for the purpose of going and coming from their haciendas to the town of
Victorias; but the question is whether this use was limited to the plaintiffs, and their
tenants and employees, or whether it was, as held by the lower court, a use enjoyed by
the public in general. Plaintiffs produced only two witnesses, Segundo de Leon (stet.
notes, pp. 21-22) and Eduardo Cuaycong, (stet. notes, pp. 27-33) to testify as regards
the use of the Nanca-Victorias road. Several other witnesses testified on behalf of
plaintiffs, but their testimony relates to the Dacuman — Toreno road, which is not
involved in this appeal. We have carefully read the testimony of the witnesses Leon and
Cuaycong, given upon their direct and cross examination, but we have been unable to
find that either of them has testified that the road in question was ever used by the public
in general. These witnesses testified with regard to the use of the road by the present
and former owners and occupants of the estates of Bacayan, Esperanza, Alcaigan,
Pusot, and Dolores for the transportation of the products of these estates to the town of
Victorias, and of supplies and agricultural implements from Victorias to the haciendas,
but neither of them testified expressly that any other use had been made of said road.
Nevertheless, it may be reasonably inferred from the testimony of these witnesses that
all persons having occasion to travel between Victorias and the haciendas of Bacayan,
Esperanza, Alacaigan, Pusot, and Dolores, whether or not they were owners, tenants, or
employees of said estates, made use of the road now in dispute, crossing the Hacienda
Toreno, and to this limited extent it may be said that the public made use of the road, but
there is nothing in the evidence to indicate that the so — called public use extended
beyond this.
Apart from the fact that there is no direct evidence to support the finding of the court
concerning the general public use of the road in dispute, the record contains data
strongly tending to show that when the complaint was filed plaintiffs did not contend that
the road was a public highway, but merely contended that they had acquired by
prescription an easement of way across the Hacienda Toreno. For example, the action is
entitled an "action concerning a right of away." (Bill of Exceptions, pp. 64 and 65.) It is
not averred in the complaint that the road in question was used by the public. On the
contrary, it is averred that it was used by the plaintiffs and their predecessors. The
averment in paragraph 8 of the complaint that the plaintiffs have no other "outlet to a
public road" than that which they have been accustomed to used by going across the
defendants' hacienda for the purpose of going to the town of Victorias also shows that
when they commenced this action they had in mind the provisions of articles 564, et seq.
of the Civil Code, which relate to the method of establishing the compulsory easement of
way. The owners of an existing easement, as well as those whose properties are
adjacent with a public road, have no occasion to invoke these provisions of the Code,
which relate to the creation of new rights, and not the enforcement of rights already in
existence.
It is true in the opening statement made to the court, counsel for plaintiffs, who was not
the same attorney by whom the complaint was signed, stated that plaintiffs contend that
the road in question is public, but as no evidence was introduced tending to establish this
contention concerning the Nanca — Victorias road, counsel for defendants had no
occasion to object upon the ground that such testimony was not relevant to the
averments of the complaint. No evidence was taken to indicate that at any time since the
road in question has been in existence any part of the expense of its upkeep has been
defrayed by the general government, the province, or the municipality. The trial judge
said upon this subject:
It is true that whatever repairs were made on the road were made irregularly. The
municipality of Victorias had no funds to devote to the construction and repair of
roads, and the upkeep of the road depending entirely therefore on the initiative of
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 the persons who used it, was attended to only at such times as repairs were
absolutely necessary. (Bill of Exceptions, p. 49.)
The court also held that it appears from the government grant issued in 1885 to the
original owner of the hacienda adjacent to the Hacienda Toreno on its western boundary,
that the Nanca-Victorias road at that time separated that estate from the Jalbuena
Hacienda, and that these facts constitute "circumstantial evidence that the road was in
existence in 1885." We have examined the document to which the court refers, and we
agree that the road in question existed in 1885; but we do not believe that the document
in question proves that the road was public highway.
Another circumstance established by the evidence, and which is some importance in the
determination of this issue, is that although the defendants closed the Nanca-Victorias
road in the month of February, 1911, and since that time have collected toll from persons
passing over it with carts loaded with sugar, including those belonging to several of the
plaintiffs, nothing was done by them to prevent the continuation of this restriction until
December, 1912, when this action was commenced. It is natural to assume that if
plaintiffs had considered that the road in question was public, they would have protested
immediately against the action of the defendants, and would have either commenced a
civil action, as they subsequently did, or would have brought about a prosecution under
section 16 of Act No. 1511.
Upon the evidence taken and admissions contained in the pleadings and those made
during the course of the trial we consider that the following findings are warranted:
1. The town of Victorias has always been the shipping point of the products of the
Hacienda Toreno, and of the haciendas of appellees, as well as the place from which
supplies were brought to those properties.
2. For thirty or forty years before the commencement of the suit a wagon road, herein
called the Nanca-Victorias road, has been in existence, connecting the haciendas of
appellees with the town of Victorias, and this road traverses the property of defendants.
Since the removal of the town of Victorias to a new site the Nanca-Victorias road has
been used by appellees in travelling between their properties and the provincial road
which crosses the Hacienda Toreno from east to west.
3. No public funds have at any time been expended on the construction or upkeep of the
Nanca-Victorias road, but from time to time work has been done on it by the laborers
employed by the present and former owners of the Hacienda Toreno and the haciendas
owned by the appellees and their predecessors in title.
4. The Nanca-Victorias wagon road, including that part of it which crosses the Hacienda
Toreno, has for thirty-five or forty years been used by the appellees and their
predecessors in title for the transportation, by the usual means, of the products of their
estates to their shipping points in or near the town of Victorias, and the transportation to
their estates of all supplies required by them, and has been used by all persons having
occasion to travel to and from all or any of the estates now owned by the appellees.
5. The use of the Nanca-Victorias road in the manner and by the person above
mentioned was permitted without objection by the owners of the Hacienda Toreno until
the year 1911, when they closed it, and began charging a toll of 5 centavos for each cart
which passed over the road, including carts belonging to the appellants, until restrained
from continuing to do so by the preliminary injunction granted in this case.
6. The Nanca-Victorias road constitutes the only outlet from the estates of appellants to
the nearest public road which is the provincial road which crosses the Hacienda Toreno
from east to west.
Upon these facts the questions of law to be decided are:
(a) Is the Nanca-Victorias road a public highway?
(b) If the Nanca-Victoria road, or that part of it which crosses the Hacienda Toreno, is not
a public highway, is it subject to a private easement of way in favor of the appellees?
The defendants are the owners of the Hacienda Toreno under a Torrens title issued in
accordance with the Land Registration Act, conferring to them its absolute ownership,
subject only to the limitations of paragraph four of section 39 of said Act. It is admitted
that there is no annotation on the certificate of title regarding the road here in question,
either as a "public road" or as a "private way established by law," and, therefore, the
questions presented by this appeal are to be determined precisely as they would be had
the Hacienda Toreno not been brought under the operation of the Land Registration Act.
The plaintiffs being the owners of the property in question, the presumption of law is that
it is free from any lien or encumbrance whatever, and the burden therefore rests upon
plaintiffs to establish the contrary. As this court said in case of Fabie vs. Lichauco and
the children of Francisco L. Roxas (11 Phil. Rep., 14):
It is settled of law that a property is assumed to be free from all encumbrance
unless the contrary is proved.
There is admittedly no evidence to show that the land occupied by the road here in
question was any time conveyed to the general government or any of its political
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subdivisions by the present or any of the former owners of the Hacienda Toreno. There
is no evidence, even remotely, tending to show that the road existed prior to the time
when the property now known as the Hacienda Toreno passed from the State into
private ownership. The record fails to disclose any evidence whatever tending to show
that the Government has at any time asserted any right or title in or to the land occupied
by the road, or that it has incurred any expense whatever in its upkeep or construction.
The Civil Code defines as public roads those which are constructed by the State (art.
339), and as provincial and town roads those "the expense of which is borne by such
towns or provinces." (Civil Code, art. 344.) While it is not contended that this definition is
exclusive, it does show that during the Spanish regime, under normal conditions, roads
which were public were maintained at the public expense, and that the fact that at no
time was any expense incurred by the Government with respect to the road here in
question tends strongly to support the contention of the defendants that it is private way.
During the Spanish regime the law required each able to bodied citizen not within one of
the exempted classes to work a certain number of days in each year, his labor to be
devoted to "services of general utility" to the municipality of his residence. (Royal Decree
of July 11, 1883, art. 5.) Under this Decree and the Regulations for its enforcement
(Berriz, vol. 11, 258) the greater part of the work on the public road of the Islands was
accomplished. Had the road here in question been a public way, it is reasonable to
assume that the polistas of the town of Victorias would have been employed in
maintaining it. It is most significant that no mention is made in the testimony of the
plaintiffs' witnesses of any work of this character having been done on the road at any
time, particularly in view of the fact that their attention was drawn to this point. (Stet.
note, pp. 8, 10, 11, 12, 13 and 14.)
The evidence shows that the repairs were made by the owners of the estates benefited
by the road, and by their laborers, as a pure voluntary act for their own convenience and
interest. There being no evidence of a direct grant to the government of the land
occupied by the road in question or that any Government funds or labor were expended
upon it, the question presents itself whether the use to which the road has been put was
such as to justify the conclusion of the lower court that it has become public property.
There being no evidence that the original use of the road by plaintiffs' predecessors was
based upon any grant of the fee to the road or of an easement of way, or that it began
under the assertion of a right on their part, the presumption must be that the origin of the
use was the mere tolerance or license of the owners of the estates affected.
This being so, has that merely permissive use been converted into a title vested in the
public at large, or in the plaintiffs by reason of their ownership of the land beneficially
affected by the use?
Had it been shown that the road had been maintained at the public expense, with the
acquiescence of the owners of the estates crossed by it, this would indicate such
adverse possession by the government as in course of time would ripen into title or
warrant the presumption of a grant or of a dedication. But in this case there is no such
evidence, and the claims of plaintiffs, whether regarded as members of the public
asserting a right to use the road as such, or as persons claiming a private easement of
way over the land of another must be regarded as resting upon the mere fact of user.
If the owner of a tract of land, to accommodate his neighbors or the public in general,
permits them to cross his property, it is reasonable to suppose that it is not his intention,
in so doing, to divest himself of the ownership of the land so used, or to establish an
easement upon it and that the persons to whom such permission, tacit or express, is
granted, do not regard their privilege of use as being based upon an essentially
revocable license. If the use continues for a long period of time, no change being made
in the relations of the parties by any express or implied agreement, does the owner of the
property affected lose his right of revocation? Or, putting the same question in another
form, does the mere permissive use ripen into title by prescription?
It is a fundamental principle of the law in this jurisdiction concerning the possession of
real property that such possession is not affected by acts of a possessory character
which are "merely tolerated" by the possessor, or which are due to his license (Civil
Code, arts. 444 and 1942). This principle is applicable not only with respect to the
prescription of the dominium as a whole, but to the prescription of right in rem. In the
case of Cortes vs. Palanca Yu Tibo (2 Phil. Rep., 24, 38), the Court said:
The provision of article 1942 of the Civil Code to the effect that acts which are
merely tolerated produce no effect with respect to possession is applicable as
much to the prescription of real rights as to the prescription of the fee, it being a
glaring and self-evident error to affirm the contrary, as does the appellant in his
motion papers. Possession is the fundamental basis of the prescription. Without
it no kind of prescription is possible, not even the extraordinary. Consequently, if
acts of mere tolerance produce no effect with respect to possession, as that
article provides, in conformity with article 444 of the same Code, it is evident that
they can produce no effect with respect to prescription, whether ordinary or
extraordinary. This is true whether the prescriptive acquisition be of a fee or of
real rights, for the same reason holds in one and the other case; that is, that
there has been no true possession in the legal sense of the word. (See also
Ayala de Roxas vs. Maglonso, 8 Phil Rep., 745; Municipality of Nueva Caceres
vs. Director of Lands and Roman Catholic Bishop of Nueva Caceres, 24 Phil.
Rep., 485.)
283
Possession, under the Civil Code, to constitute the foundation of a prescriptive right,
must be possession under claim of title (en concepto de dueno), or use the common law
equivalent of the term, it must be adverse. Acts of a possessory character performed by
one who holds by mere tolerance of the owner are clearly not en concepto de dueño,
and such possessory acts, no matter how long so continued, do not start the running of
the period of prescription.
A similar question was presented in the case of the Roman Catholic Archbishop of
Manila vs. Roxas (22 Phil. Rep., 450), in which case it appeared that Roxas, the owner
of the Hacienda de San Pedro Macati, claimed a right of way across the property of the
church to Calle Tejeron, a public street of the town of San Pedro Macati. The proof
showed that the road in question had been used by the tenants of the Hacienda de San
Pedro Macatifor the passage of carts in coming and leaving the hacienda "from time
immemorial," and further that the road had been used for time out of mind, not only by
the tenants of the hacienda but by many other people in going and coming from a church
half-way between the boundary line of the hacienda and Calle Tejeron. The court held
that the facts did not give rise to a prescriptive right of easement in favor of the owner of
the hacienda, upon the ground that such use "is to be regarded as permissive and under
an implied license, and not adverse. Such a use is not inconsistent with the only use
which the proprietor thought fit to make of the land, and until the appellee thinks proper
to inclose it, such use is not adverse and will not preclude it from enclosing the land
when other views of its interest render it proper to do so. And though an adjacent
proprietor may make such use of the open land more frequently than another, yet the
same rule will apply unless there be some decisive act indicating a separate and
exclusive use under a claim of right. A different doctrine would have a tendency to
destroy all neighborhood accommodations in the way of travel; for if it were once
understood that a man, by allowing his neighbor to pass through his farm without
objection over the pass-way which he used himself, would thereby, after the lapse of
time, confer a right on such neighbor to require the pass-way to be kept open for his
benefit and enjoyment, a prohibition against all such travel would immediately ensue."
The decisions of the supreme court of Louisiana, a State whose jurisdiction is based, as
is our own, upon the Roman Law, and whose Civil Code is taken, as is our own,. very
largely from the Code of Napoleon, are particularly persuasive in matters of this
character. In the case of Torres vs. Fargoust (37 La. Ann., 497), cited by appellants in
their brief, in which the issues were very similar to those of the present case, the court
held that—
The mere fact that for thirty or forty years the public was permitted to pass over
this ground would not of itself constitute the place a locus publicus . . . dedication
must be shown by evidence so conclusive as to exclude all idea of private
ownership; . . . such dedication cannot be inferred from ere user alone; . . . no
one is presumed to give away his property. The burden is on him who avers a
divestiture of ownership to prove it clearly.
We are, therefore, of the opinion, and so hold, that upon the facts established by the
evidence it does not appear that the road in question is a public road or way. We are also
of the opinion that plaintiffs have failed to show that they have acquired by prescription a
private right of passage over the lands of defendants. The supreme court of Spain has
decided that under the law in force before the enactment of the Civil Code, the easement
of way was discontinous, and that while such an easement might be acquired by
prescription, it must be used in good faith, in the belief of the existence of the right, and
such user must have been continuous from time immemorial. (Judgment of December
15, 1882.) In the appealed decision the court below says that the plaintiffs and their
predecessors made use of the road in question "from time immemorial," but there is no
evidence whatever in the record to sup[port this finding, although it is true that the
evidence shows the existence of the road and its use by the plaintiffs and their
predecessors for thirty-five or forty years. Speaking of the evidence required under the
present Code of Civil Procedure to show immemorial use of an easement, this court said
in the case of Ayal de Roxas vs. Case (8 Phil. Rep., 197, 198):
Third Partida in title 31, law 15 . . . says that discontinues servitudes . . . must be
proved by usage or a term so long that men can not remember its
commencement. . . . In many judgments the supreme court of Spain has refused
to accept proof of any definite number of years as a satisfaction of this
requirement of the law. . . . We are of the opinion that in order to establish a right
of prescription [title of prescription based upon use from time immemorial]
something more required than memory of living witnesses. Whether this
something should be the declaration of persons long dead, repeated by those
who testify, as exacted by the Spanish law, or should be the common reputation
of ownership recognized by the Code of Procedure, it is unnecessary for us to
decide. On either theory the appellant has failed in his proof . . . .
The same thing may be said in this case. Witnesses have testified that they have known
the road for a certain period of years, beginning at a time prior to the enactment of the
Civil Code, but no evidence has been made to prove immemorial use by either of the
means of proof mentioned in this decision cited, nor is immemorial user averred in the
complaint as the basis of the right. It is evident, therefore, that no vested right by user
from time immemorial had been acquired by plaintiffs at the time the Civil Code took
effect. Under that Code (art 539) no discontinuous easement could be acquired by
prescription in any event. Assuming, without deciding, that this rule has been changed by
the provisions of the present Code of Civil Procedure relating to prescription, and that
since its enactment discontinuous easement may be required by prescription, it is clear
that this would not avail plaintiffs. The Code of Civil Procedure went into effect on
284
October 1, 1901. The term of prescription for the acquisition of rights in real estate is
fixed by the Code (sec. 41) at ten years. The evidence shows that in February, 1911,
before the expiration of the term of ten years since the time the Code of Civil Procedure
took effect, the defendants interrupted the use of the road by the plaintiffs by constructing
and maintaining a toll gate on it and collecting toll from persons making use of it with
carts and continued to do so until they were enjoined by the granting of the preliminary
injunction by the trial court in December, 1912. Our conclusion is, therefore, that the
plaintiffs have not acquired by prescription a right to an easement of way over the
defendant's property; that their use of the Nanca-Victorias road across the Hacienda
Toreno was due merely to the tacit license and tolerance of the defendants and their
predecessors in title; that license was essentially revokable; and that, therefore, the
defendants were within their rights when they closed the road in 1911.
While in the allegations from the plaintiffs' complaint it might be inferred that it was their
purpose to seek to impose upon the defendants the easement to which arts. 564 et seq.
of the Civil Code relate, that purpose was evidently abandoned, and the case was tried
upon a wholly different theory. Proof was offered to show that the right of passage across
defendants' land is necessary to enable plaintiffs to get their products to market, but
there was no offer on their part to pay defendants the indemnity required by section 564.
For the reasons stated the judgment of the court below is reversed, the injunction issued
against defendants is allowed on this appeal. So ordered.
G.R. No. L-28066 September 22, 1976
ASTODILLO vs. PHHC
Peregrina Astudillo appealed from the "resolution" dated April 18, 1967 of the Court of
First Instance of Rizal, Quezon City Branch V, granting the motion for summary judgment
filed by Ramon P. Mitra and dismissing her petition for certiorari and mandamus (Civil
Case No. Q-8741).
According to the pleadings of respondents Mitra and the People's Homesite and Housing
Corporation (PHHC) *, Mitra on December 28, 1957 applied, in behalf of his minor son, Ramon Mitra Ocampo, for
the purchase of Lot 16, Block E-155 of the East Avenue Subdivision of the PHHC in Piñahan, Quezon City.
His application was approved on January 3, 1958. He made a downpayment of P840, an
amount equivalent to ten percent of the price of the lot. On September 9, 1961 the PHHC
and Mitra executed a contract of conditional sale. After Mitra had paid in full the price,
which totalled more than nine thousand pesos, a final deed of sale was executed in his
favor on February 18, 1965. Transfer Certificate of Title No. 89875 was issued to him on
March 1, 1965.
The lot in question is acqually in the possession of Peregrina Astudillo. She constructed
thereon a residential house (a shanty, according to Mitra). She admits that she has been
squatting on the said lot "uninterruptedly since 1957 up to the present" (p. 52, Record).
She filed with the administrative investigating committee of the PHHC a request dated
February 24, 1963, praying for the cancellation of the award of Lot 16 to Congressman
Mitra and asking the committee to recommend that it be re-awarded to her. No action
was taken on that request.
On May 3, 1965 Peregrina filed in the lower court her aforementioned petition against the
PHHC board of directors, the register of deeds of Quezon City and the spouses Ramon
P. Mitra and Salud O. Mitra. She questioned the legality of the award of Lot 16 to Mitra.
She asked that Lot 16 be sold to her.
After the respondents had filed their answers, the Mitra spouses filed a verified motion
for summary judgment. They assumed that there was no genuine issue as to any
material fact. Peregrina Astudillo opposed the motion. The parties submitted
memoranda.
The lower court treated the motion for summary judgment as a motion to dismiss. It
dismissed Peregrina's petition on the grounds that she is a mala fide squatter and that
the sale of Lot 16 to Mitra cannot be assailed by means of certiorari
and mandamus. Peregrina appealed to this Court.
Her four assignments of error raise questions of law. She contends that the lower court
erred in holding that certiorari and mandamus do not lie in this case and that she has no
right to question the award to Mitra, and in not holding that the award of Lot 16 to him
was in contravention of the Anti-Graft and Corrupt Practice Law and of the constitutional
provision that a Senator or Representative should not directly or indirectly be financially
interested in any contract with the government of any subdivision or instrumentality
thereof during his term of office.
In the ultimate analysis the issue is whether Peregrina Astudillo has a cause of action to
annul the sale of Lot 16 to Mitra and to compel the PHHC board to award that lot to her.
We hold that she has no cause of action to impugn the award to Mitra and to require that
she be allowed to purchase the lot. As a squatter, she has no possessory rights over Lot
16. In the eyes of the law, the award to Mitra did not prejudice her since she was bereft
of any rights over the said lot which could have been impaired by that award (Bañez vs.
Court of Appeals, L-30351, September 11, 1974, 59 SCRA 15, 22).
285
The record does not show, and Peregrina does not claim, that she is a member of the
Piñahan Homeowners Association some of whose members are "deserving squatters"
(Kempis vs. Gonzales, L-31701, October 31, 1974, 60 SCRA 439).
In the familiar language of procedure, she was not entitled to sue Mitra and the PHHC for
the enforcement or protection of a right, or the prevention of a wrong. Those respondents
did not commit any delict or wrong in violation of her rights because, in the first place,
she has no right to the lot. Not being principally or subsidiarily bound in the contract of
sale between Mitra and the PHHC, she is not entitled to ask for its annulment (Art. 1397,
Civil Code).
Peregrina invokes the PHHC charter (erroneously referred to as section 11 of
Commonwealth Act No. 648) which provides that the PHHC should acquire buildings so
as to provide "decent housing for those who may be unable otherwise to provide
themselves therewith" and that it should acquire large estates for their resale to bona
fideoccupants.
Those provisions do not sustain her action in this case. They do not justify her act of
squatting on a government-owned lot and then demanding that the lot be sold her
because she does not yet own a residential lot and house. She is not a bona
fide occupant of Lot 16.
The State is committed to promote social justice and to maintain adequate social
services in the field of housing (Secs. 6 and 7, Art. II, New Constitution). But the State's
solicitude for the destitute and the have-nots does not mean that it should tolerate
usurpations of property, public or private.
"In carrying out its social readjustment policies, the government could not simply lay
aside moral standards, and aim to favor usurpers, squatters, and intruders, unmindful of
the lawful and unlawful origin and character of their occupancy. Such a Policy would
perpetuate conflicts instead of attaining their just solution" (Bernardo vs. Bernards, 96
Phil. 202, 206).
Indeed, the government has enunciated a militant policy against squatters. Thus, Letter
of Instruction No. 19 dated October 2, 1972 orders city and district engineers "to remove
all illegal constructions, including buildings ... and those built without permits on public or
private property" and provides for the relocation of squatters (68 O.G. 7962. See Letter of
Instruction No. 19-A). As noted by Justice Sanchez, "since the last global war, squatting
on another's property in this country has become a widespread vice" (City of Manila vs.
Garcia, L-26053, February 21, 1967, 19 SCRA 413, 418).
The lower court did not err in holding that Peregrina Astudillo cannot use the special civil
actions of certiorari and mandamus to secure a judicial review of the award of Lot 16 to
Mitra. Rule 65 of the Rules of Court provides: ñé+.£ªw ph!1
SECTION 1. Petition for certiorari. — When any tribunal, board, or officer
exercising judicial functions, has acted without or in excess of its or his
jurisdiction, or with grave abuse of discretion and there is no appeal, nor
any plain, speedy, and adequate remedy in the ordinary course of law, a
person aggrieved thereby may file a verified petition in the proper court
alleging the facts with certainty and praying that judgment be rendered
annulling or modifying the proceedings, as the law requires, of such
tribunal, board or officer.
The petition shall be accompanied by a certified true copy of the
judgment or order subject thereof, together with copies of all pleadings
and documents relevant and pertinent thereto.
SEC. 3. Petition for mandamus. — When any tribunal, corporation, board,
or person unlawfully neglects the performance of an act which the law
specifically enjoins as a duty resulting from an office, trust, or station, or
unlawfully excludes another from the use and enjoyment of a right or
office to which such other is entitled, and there is no other plain, speedy
and adequate remedy in the ordinary course of law, the person agrieved
thereby may file a verified petition in the proper court alleging the facts
with certainty and praying that judgment be rendered commanding the
defendant, immediately or at some other specified time, to do the act
required to be done to protect the rights of the petitioner, and to pay the
damages sustained by the petitioner by reason of the wrongful acts of the
defendant.
Respondent PHHC board is not the board contemplated in section 1 of Rule 65. It does
not exercise judicial functions. The award being questioned was a routinary corporate act
that was within the board's competence. No jurisdictional issue was involved in that
award. certiorari lies only for the correction of jurisdictional errors (Gov't. of the P.I. vs.
Judge of 1st Instance of Iloilo 34 Phil 157, 159).
Nor is the relief sought by Peregrina Astudillo, which is to compel the PHHC board to
cancel the award of Lot 16 to Mitra and to resell it to her, a right that can be enforced
by mandamus. What she wants is to force the PHHC to execute a contract of sale in her
favor. That is not within the purview of the writ of mandamus.
286
Thus, it was held that "the writ of mandamus is not an appropriate or even admissible
remedy to enforce, the performance of a private contract which has not been fully
performed by either party" (Quiogue vs. Romualdez, 46 Phil. 337). In Jacinto vs. Director
of Lands, 49 Phil. 853, a petition for a writ of mandamus to compel the Director of Lands
to execute a deed of conveyance for certain lots in favor of the petitioner was denied.
Generally, title to property cannot be litigated in a mandamus proceeding (City of Manila
vs. Posadas, 48 Phil. 309, 337).
It is not a ministerial duty of the PHHC board to award Lot 16 to Peregrina. Anyway, it
has already been shown that as a squatter she is not clothed with any right to Lot 16 that
may be enforced in a court of justice.
The PHHC board completely ignored the alleged demands of Peregrina for the purchase
of Lot 16. It did not render any decision against her. Its inaction cannot be assailed by
certiorari or mandamus.
Peregrina's other assignment of error is that the award of Lot 16 to Congressman Mitra
was a violation of section 3(h) of the Anti-Graft and Corrupt Practices Law and of section
17, Article VI of the 1935 Constitution, now section 11, Article VIII of the new
Constitution.
On the other hand, Mitra contends that the PHHC performs proprietary functions. He
observed that the following high-ranking officials were awarded PHHC lots: Felixberto
Serrano, Dominador Antonio, Manuel Lim, Fernando Lopez, Pacita M. Gonzales, Genaro
Magsaysay, Daniel Romualdez, Felipe A. Abrigo, Bartolome Cabangbang, Juan Duran,
Manuel Enverga, Angel Fernandez, Jose Nuguid, Antonio de Pio, Lorenzo Teves,
Faustino Tobia, Pedro Trono, Marcelino Veloso and Valeriano Yancha.
We are of the opinion that that assignment of error need not be resolved in this case.
Having shown that Peregrina has no cause of action to assail the award of Lot 16 to
Mitra, it follows that in this particular case she cannot assail that award by invoking the
provisions of the Anti-Graft and Corrupt Practices Law and the Constitution. This is not
the proper forum for the ventilation of that question. (See Commonwealth Act No. 626;
Hernandez vs. Albano, 112 Phil. 506; Solidum and Concepcion, Jr. vs. Hernandez, 117
Phil. 335).
WHEREFORE, the lower court's order of dismissal is affirmed. No costs.
SO ORDERED.
G.R. No. L-57259 October 13, 1983
PERAN vs. CFI
The decision of the then Court of First Instance of Sorsogon, Branch II, Gubat, Sorsogon,
rendered in the exercise of its appellate jurisdiction, dismissing Civil Case No. 1277,
entitled "Angel P. Peran vs. Encarnacion Evasco, et al.", for Forcible Entry and Illegal
Detainer, is being assailed in this Petition for Review on certiorari on a question of law.
Said Decision reversed the judgment of the 2nd Municipal Circuit Court of Bulusan-
Barcelona, Sorsogon, for Forcible Entry & Illegal Detainer.
The antecedent facts follow:
The property in question, an unregistered residential land, with an area of 1,225 square
meters more or less, situated at Tagdon Barcelona, Sorsogon, was originally owned by
Jose Evasco. On December 29, 1950, Jose Evasco executed a "Reparticion Ex-
trajudicial" whereby he partitioned his properties among his five heirs. 1Subject property
was one of those alloted to his son, Alejandro Evasco, who had it surveyed in 1956 (Exhibits
"I" and "I-1") who had it declared in his name under Tax Declaration No. 1900. The other
heirs received their own shares, one of them, the deceased Anacleto Evasco, one of whose
children was listed as Encarnacion, possibly, the principal private respondent herein.
Alejandro Evasco sold his property to Jose E. Torella on December 31, 1972, 2 who
declared it for taxation purposes under Tax Declaration No. 5157. 3 On July 10, 1977, Jose E.
Torella, in turn, sold the land to Jose Enriquez Sabater, 4 and the latter also declared the
property in his name under Tax Declaration No. 7127. 5 Petitioner Angel P. Peran acquired
the land by purchase from Jose Enriquez Sabater on December 27, 1978, 6 and
subsequently declared it, too, in his name under Tax Declaration No. 7310. 7 The sale was
duly recorded in the Register of Deeds' Office of the province of Sorsogon on January 3,
1979 in accordance with the provisions of Sec. 194 of the Revised Administrative Code as
amended by Act No. 3344.
Sometime in January 1979, petitioner personally asked private respondents,
Encarnacion Evasco and her common-law husband Ramon Espera, whose house is
erected on a 440 square meter portion (44 sq, ms. according to petitioner) of the lot in
question, to remove the same and vacate the premises. Respondents refused, and
consequently, a confrontation between the parties was had before the, Municipal Mayor
of Barcelona and later before the Municipal Judge of Bulusan-Barcelona to settle the
dispute, but to no avail.
On February 8, 1979, petitioner filed a complaint for Forcible Entry and Illegal Detainer
against private respondents before the 2nd Municipal Circuit Court of Bulusan-
287
Barcelona, seeking the ejectment of the latter from the portion in question contending
that respondents are mere squatters thereon; that they had prevented plaintiff from
entering the property and deprived him of possession; and that they were tolerating
persons in getting soil and bringing about a gradual erosion of the land to his extreme
prejudice.
Private respondents answered denying the material allegations of the Complaint, and
alleging that they are the lawful possessors for more than twenty (20) years of the said
portion, which formerly belonged to Jose Evasco, grandfather of Encarnacion Evasco
and that petitioner has no right to eject them therefrom.
On September 1, 1979, the 2nd Municipal Circuit Court of Bulusan-Barcelona rendered
its Decision ordering private respondents to vacate the lot in question, return its
possession to petitioner, reimburse him attorney's fees of P300.00 and litigation
expenses, and to pay the costs. Reconsideration of the said decision filed by private
respondents was denied by said Court on November 12, 1979. Private respondents
appealed to respondent Court of First Instance of Sorsogon, Branch II.
Respondent Court reversed the Municipal Circuit Court and dismissed the case on
March 28, 1980, ruling that said Court had no jurisdiction over the case as the same was
filed only on February 4, (8), 1979, which was well beyond the one-year-period of
limitation, the cause of action having accrued from the sale of the property by Alejandro
Evasco to Jose E. Torella on December 31, 1972; and that since the only issue in an
illegal detainer case is physical possession, "whoever has prior possession, no matter in
what character, is protected by law."
Reconsideration of the said Decision sought by petitioner was denied by respondent
Court.
Petitioner appealed said judgment directly to this Tribunal on a question of law, raising as
the lone issue:
... whether the respondent court was in error when for purposes of
determining the jurisdiction of the 2nd Municipal Circuit Court of Bulusan-
Barcelona, to try Civil Case No. 1227, for Illegal Detainer:
(a) it reckoned the counting of one-year period within which to file the
action from the sale of the property in question by Alejandro Evasco to
Jose Torella on December 31, 1972 and not from the date of demand
made by the petitioner upon the respondents; and
(b) by assuming that "prior possession in whatever character is protected
by law.
We rule for petitioner.
Private respondents admit that the land in question was originally owned by Jose
Evasco. The tax declarations covering their house clearly state "house built on land
owned by Jose Evasco under Tax No. 1599". 8 Since the land had been partitioned to
Alejandro Evasco by his father, Jose Evasco, respondent Encarnacion can lay no claim to the
property even as a grand-daughter of Jose Evasco. Respondents may have been in
possession of the portion they occupy prior to petitioner but they have not proved their title
thereto, nor their right to possess the same. As the 2nd Municipal Circuit Court of Bulusan-
Barcelona found, no concrete evidence was introduced by respondents on this point.
Moreover, it is noteworthy that the validity of the "Reparticion Extrajudicial" whereby said lot
was adjudicated to Alejandro Evasco by his father Jose Evasco, predecessors-in-interest of
petitioner, had never been challenged.
If at all, private respondents' possession of their portion of the property was by mere
tolerance of petitioner's predecessors-in-interest, which, however, does not vest in them
a right which they can assert against petitioner. Possession by tolerance is lawful but this
becomes illegal when, upon demand to vacate by the owner, the possessor refuses to
comply with such demand. 9 A possessor by tolerance is necessarily bound by an implied
promise to vacate upon demand, failing which a summary action for ejectment is the proper
remedy against him. 10 It is not necessary that there be a formal agreement or contract of
lease before an unlawful detainer suit may be filed against a possessor by
tolerance. 11 Neither is prior physical possession of the property by petitioner an
indispensable requisite. 12The ruling of respondent Court, therefore, that "since the only issue
in forcible entry and illegal detainer action is the physical possession of real property—
possession de facto and n t possession de jure—whoever has prior possession, no matter in
what character, is protected by law," is erroneous under the factual milieu herein,
A Forcible Entry and Unlawful Detainer action must be brought within one year from the
unlawful deprivation or withholding of possession. 13 The one-year-period of limitation
commences from the time of demand to vacate, and when several demands are made, the
same is counted from the last letter of demand. 14 Demand may either be personal or in
writing. 15 The demand to vacate having been made by petitioner in January 1979, and the
ejectment suit having been instituted on February 8, 1979, the 2nd Municipal Circuit Court of
Bulusan-Barcelona acted well within its jurisdiction in taking cognizance of the case.
WHEREFORE, the assailed Decision of respondent Court of First Instance of Sorsogon,
Branch II, in Civil Case No.1227, is SET ASIDE, and the Decision of the 2nd Municipal
Circuit Court of Bulusan-Barcelona is hereby reinstated,
288
Costs against private respondents.
SO ORDERED.
--- xxx END OF ACQUISITION OF POSSESSION xx ---
G.R. No. L-35933 June 29, 1984
LAINGO vs. CAMILO
The issue raised in this petition is whether or not the execution ordered by the
respondent court conforms to the final judgment embodied in the decision of the Court of
Appeals in CA-G.R. No. 43920-R.
The petitioners filed a complaint as plaintiffs in Civil Case No. 5438 of the Court of First
Instance of Davao to recover a seven hectare portion of a twenty-two hectare parcel of
land in Malita, Davao.
The disputed property is part of a homestead applied for by Gaudencio Dacuyan married
to Susana de la Cerna and awarded in 1934 to the "heirs of Gaudencio Dacuyan"
because the applicant had died in the meantime. The title was registered in October,
1934. In 1942, the widow Susana de la Cerna describing herself as "half owner of the
conjugal property" sold seven (7) hectares of the land to Damian Camilo, respondent in
this case. Camilo, in turn, sold the land in 1966 to the other respondent, Juan
Magallanes.
The dispositive portion of the decision in the reivindicacion case states:
WHEREFORE, judgment is hereby rendered:
1. Dismissing the complaint;
2. Divesting the plaintiffs of ownership over seven hectares of the
southern side of the land covered by Original Certificate of Title No. 1175
of the Register of Deeds of Davao, more particularly, the portion
described in the deed of sale executed by Susana Cerna de Laingo on
November 20, 1972, in the presence of Jorge Agonias and Juan
Magailanes and acknowledged before Atty. Ramon M. Kimpo, and the
accompanying sketch marked as Exhibits 1 and 1-A, respectively and
vesting the same in Juan A. Magallanes, Filipino, married to Fedilina
Neri, Filipino, and residing at Malita, Davao;
3. Directing the plaintiffs to allow Juan Magallanes to have the aforesaid
land surveyed; and,
4. Sentencing the plaintiffs jointly and severally to pay the defendants
P3,000.00 as attorney's fees, with costs.
Upon appeal by the petitioners, however, the Court of Appeals modified the lower court's
decision. The dispositive portion of the appellate decision reads:
IN VIEW WHEREOF, this Court is constrained to modify as it now
modifies the judgment appealed from: the sale to appellees is held to be
valid only as to an undivided seven (7) hectares not of the specific portion
now litigated; appellants are entitled to co-possession thereof with
appellees until the undivided seven (7) hectares to which appellees are
entitled are definitely segregated thru partition; the adjudication of
attorney's fee is set aside; no more pronouncement as to cost.
After the judgment of the Court of Appeals had become final and executory, the
petitonerrs filed the necessary motion with the Court of First Instance of Davao to issue a
writ of execution placing them in co-possession with the private respondents of the seven
(7) hectares being litigated.
The private respondents filed a counter motion for the issuance of a writ of excution
praying that the petitioners be ordered to execute a project of partition among the heirs
and while doing so, segregate the seven (7) hectares purchased and possessed by them
from the date of the document of sale. The petitioners, however, opposed the counter
motion emphasizing that the execution of judgment referred to an action for recovery of
possession of a specific seven (7) hectares of land and not to an action for partition of
property.
The respondent countered with a rejoinder which admitted that the judgment, while
ambiguous, confirmed their rights over seven (7) hectares of land sold to them. Since
they have been in possession of a specific seven (7) hectares of land on which they
planted coconuts already bearing fruits, the most equitable execution according to them
was for those seven (7) hectares to be the seven hectares adjudged in the decision.
The Court of First Instance decided the matter by issuing a writ of execution allowing the
respondents to enjoy possession over the entire twenty-two (22) hectares with the
petitioners. The questioned order, the second paragraph of which is assailed in this
petition reads:
289
 On motion of the plaintiffs, through Aty. Ampig, and without objection of Camilo and afterwards in 1966 his successor-in-interest Juan Magallanes
Atty. Latorilla, counsel for the defendant, let a writ of possession issue had beein in possession apparently exclusive since the sale to Camilo in
with respect to the seven (7) hectares, subject matter of the suit, by 1942 under Exh. 1 but the trouble is that exclusive possession by a co-
allowing the plaintiffs to enjoy with the defendants possession of the owner cannot give riose to prescription; the law has always been to the
same. effect that between co-owners prescription cannot run, Cortez v. Oliva, 33
Phil. 480 and in order for prescription to run between themselves the
On oral motion of Atty. Latorilla, let a writ of possession issue with repudiation of co-ownership must be clearly manifested which is not at all
respect to the remainder of the twenty-two (22) hectares by allowing the the case here bearing in mind the undisputed fact that Camilo Damian did
defendants to enjoy with the plaintiffs possession of the rest of the not even attempt to register Exh. 1 nor notify said other children of
twnety-two (22) hectares. Gaudencio Dacuyan and tell them he was claiming the seven (7) hectare
portion as solely his own; and neither should it be overlooked that the title
SO ORDERED. being a Torrens title it cannot be the subject matter of prescription; this
will mean that notwithstanding the possession apparently exclusive of
Camilo Damian for more than twenty (20) years over the seven (7)
The motions for reconsideration having been denied, the petitioners raised the case to us
hectare portion, he cannot under the law be permitted to claim absolute
directly on a pure legal issue which they state as follows:
ownership therein; and as a corollary neither can his successor-in-
interest Juan Magallanes but since Susana was entitled to at least 11
THE COURT A QUO OR THE RESPONDENTN JUDGE ERRED IN hectares; therefore her sale ov seven (7) hectares is undivided would
ORDERING THE ISSUANCE OF A WRIT OF POSSESSION WITH have been valid, but a sale by her of this specific portion litigated could
RESPECT TO THE REMAINDER OF THE TWENTY TWO (22) not bvind her co-plaintiffs; and this being the final result the adjudication
HECTARES BY ALLOWING THE DEFENDANTS TO ENJOY WITH THE of attorney's fees must have to be discarded;
PLAINTIFFS POSSESSION OF THE REST OF THE TWENTY TWO (22)
HECTARES AND IN DENYING THE TWO (2) MOTIONS FOR
xxx xxx xxx
RECONSIDERATION OF THE SAID ORDER.
The judgment of the Court of Appeals, with the foregoing reasons for seemingly
The reason given by the Court of Appeals for not granting undisputed ownership of the
ambigtous judgment calling for a future segregation of seven (7) hectares out of the
seven (7) hectares already possessed by the respondents are:
twenty-two (22) hectares, has long become final and executory.
xxx xxx xxx
We agree with the petitioners that the execution ordered by the court of first instance did
not conform to the final judgment being executed.
3. CONSIDERING: Now, as to this that while it is true that the Land Tax
Declaration in the name of the heirs of Gaudencio Dacuyan Exh. 3 was
We stated in Phil-American Accident Insurance Co., Inc. (97 SCRA 811) —
afterwards cancelled and reduced from its area of 22 hectares to 15
hectares under Exh. 3-A the remaining seven (7) hectares coming to be
declared in the name of the buyer Camilo Damian under Exh. 5-A, 5-B, 5- The questioned Order cannot be sustained. The judgment which was
C and 5-D, yet a scrutiny of these documents would not show any sought to be executed ordered the payment of simple "legal interest"
participation of the other children of Gaundencio and Susana namely only. It said nothing about the payment of compound interes. Accordingly,
Teodoro, Elena and Samson the co-plaintiffs in this case not even any when the respondent judge ordered the payment of compound interest
proof that they were informed of the sale; neither is there any evidenc34 he went beyond the confines of his own judgment which had been
present in the rcord positive in character that they had ever consented to affirmed by the Court of Appeals and which had become
a physical segregation of the seven (7) hectare portion sold by Susana final. Fundamental is the rule that execution must conform to that
unto Camilo so that the point of laches is without any basis; it is true that ordained or decreed in the dispositive part of the decision. Likewise, a

290
 court cannot, except for clerical errors or omissions, amend a judgment WHEREFORE, the petition is hereby GRANTED. The second paragraph of the
that has become final. (Jaob, et al. v. Alo, et al., 91 Phil. 750 [1952]; questioned order is DELETED. The respondents shall continue to exclusively possess
Robles v. Timario, et al., 107 Phil. 809 [1960]; Collector of Internal and enjoy the seven (7) hectares actually held by them in accordance with the terms of
Revenue v. Gutierrez, et al., 108 Phil. 215 [1960]; Ablaza v. Sycip, et al., this decision until a partition is effected and their share is definitely segregated.
110 Phil. 4 [1960].) (emphasis supplied)
SO ORDERED.
At the same time, the mode of execution desireed by the petitioners would be unfair to
the respondents and not in keeping with the disposition really ordained by the Court of G.R. No. 77976 November 24, 1988
Appeals. As stated in Macabuhay v. Manuel (101 SCRA 835) where we cited Padua v. GABRITO vs. CA
Robles (66 SCRA 485):
This is a petition for review on certiorari with preliminary injunction and restraining order
... that the meaning, operation and consequences of a judgment must be of the decision of the Court of Appeals * dated March 4, 1987 in CA-G.R. No. SP No. 08710, "Maximo
ascertained like any other written instrument and that a judgment rests on Gabrito et al. vs. Hon. Nicias O. Mendoza and Roberto Tan et al.," affirming the April 2, 1986 decision of the Regional Trial
Court of Olongapo City ** which also affirmed the decision of MTCC, Branch V, Olongapo City, and the Resolution of
the intention of the Court oas gathered from every part thereof including respondent court dated March 30, 1987 denying herein petitioners' motion for reconsideration.
the situation to which it applies and the attendant circumstances.
The appeal originated as an unlawful detainer complaint filed by herein private
A reading of the decision and its background facts shows that the controversy litigated respondents with the Municipal Trial Court, Branch V, Olongapo City.
and passed upon by the Court of Appeals was confined to the ownership of seven (7)
hectares of land which forms part of the twenty two (22) hectares parcel of land covered
The antecedent facts as summarized by the Court of Appeals are as follows:
by a torrens title in the name of the petitioners.
The spouses Roberto Tan and Benita Ching-Tan filed a complaint in the
The Court of Appeals ruled that the respondents are entitled to seven (7) hectares of the
Municipal Trial Court against defendants Maximo Gabrito, et al., alleging
property but not necessarily the seven (7) hectares possessed by them. They are entitled
that they are the possessors and legal owners of the property situated at
to co-possession with appellees untill the undivided seven (7) hectares are definitely
No. 107 Gordon Ave., New Kalalake, Olongapo City as evidenced by Tax
segregated through partition.
Declaration No. 4-2046. The defendants are leasing portions of this
parcel of land, each paying the corresponding monthly rentals due
For us to now rule that the respondents will enjoy co-possession with the petitioners over thereon.
seven (7) hectares which belongs to the former would be inequitous even as actual co-
possession over twenty two (22) hectares would not conform to the final judgment. There
On the leased portion, the defendants constructed buildings and have
is the other consideration that segregation of the definite seven (7) hectares must await
allowed other persons to sublease the same for commercial purposes.
the partition among the heirs, a procedure outside the control of the respondents.
As the spouses Tan have no other property where they could construct
We, therefore, rule that the co-possession mentioned in the Court of Appeals judgment
their residential house, the spouses Tan notified the defendants (in
refers to the right of the respondents, already certain and vested but not yet specific,
January 1984) that they intend to personally use the land to build their
over any seven (7) hectares not spelled out, the respondents shall continue to possess
house thereon and gave defendants three (3) months to vacate the
the seven (7) hectares thy have held since the litigated sale and enjoy all its furits. Theuy
premises and remove the structures and improvements which defendants
will have no share of the fruits of the other fifteen (15) hectares nor its enjoyment but
had constructed thereon.
neither shall the petitioners have any share in the fruits or enjoyment of the seven 97)
hectares held by the respondents. It would be in the interests of all concerned if the
partition of the property among the heirs is effected immediately and the respondents are In April 1984, defendants requested for an extension of time within which
finally given their definite seven (7) hectares as provided in the appellate judgment. to vacate, which was granted by the spouses Tan. However, from that

291
 time on, defendants also stopped paying monthly rentals due on the land
they leased.
In view of this, in July 1984, defendants were told to leave the premises
and to pay rentals in arrears. As defendants refused to comply with both
demands, the matter was brought to the Barangay Council for settlement.
As no agreement was reached, a certification to file action was issued to
the spouses Tan. Hence, the Tans filed an action for unlawful detainer
with damages against Gabrito, et al.
In answer to the complaint, defendants Gabrito, et al. denied the material
allegations of the complaint and alleged that: they are builders in good
faith over the land as provided in Article 448 of the Civil Code; the land
where the houses of defendants were built is a public land, not yet
awarded nor titled to anybody; plaintiffs's alleged predecessor-in-interest
not being the owner thereof could not have passed nor transferred
ownership thereof to them (plaintiffs) considering that Gloria Carillo's
Miscellaneous Sales Application No. (X-4-4320) has not yet been acted
upon by the Bureau of Lands; plaintiffs and their predessors-in-interest
are absentee applicants over the land, hence, are disqualified to own the
same; plaintiffs have never been in possession of the land while the
defendants are in actual physical possession thereof; the sale of plaintiffs'
alleged predecessor-in-interest in favor of plaintiffs is null and void for
being in violation of P.D. No. 1517 as defendants being lessees of the
land have the right of first refusal thereof.
Defendants brought a counterclaim for damages against the plaintiffs.
(Rollo, Annex "C", pp. 39-40).
Respondent Municipal Trial Judge applied the rule on summary procedure in this case,
rendered its decision dated November 22, 1985, the dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered for all the defendants to
vacate the parcel of land described in par. 3 of the complaint, removing
therefrom the buildings and any other improvements respectively owned
by them; and to pay plaintiffs the following as reasonable compensation
for the use of the premises:
Maximo Gabrito—at
P250.00 per month from April 1984 until he vacates the premises;
Roger Libut—at
P150.00 per month from May 1984 until he vacates the premises;
Liza de Vera—at:
P150.00 per month from April 1984, until she vacates the premises;
Carmelita Uy—at
Pl 70.00 per month from April 1984, until she vacates the premises.
for all defendants to pay, in equal shares, damages by way of attorney's
fees in the amount of ONE THOUSAND PESOS ( P1,000.00 ) as well as
costs.
SO ORDERED. (Rollo, p. 35).
On appeal to the Regional Trial Court (Civil Case No. 450-08-5), the decision of the
Municipal Trial Court was affirmed in its decision dated April 2, 1986, the dispositive
portion of which reads:
WHEREFORE, premised on all the foregoing consideration and finding
no prejudicial and reversible error was ever committed by the lower
Court, the Court affirms in toto the decision being appealed, with costs
against the defendants-appellants.
SO ORDERED. (Rollo, Annex 'B' p. 38).
On review, herein respondent Court of Appeals sustained the decision rendered by the
Regional Trial Court Branch LXXIV, and ruled;
WHEREFORE, the Petition for Review herein is DISMISSED for lack of
merit. (Rollo, Annex "C", p. 44).
On March 16, 1987, the petitioner filed their "Motion for Reconsideration and Opposition
to the Motion for Immediate Execution Pending Further Proceedings" which was denied
by the Ninth Division of respondent Court of Appeals in its Resolution dated March 30,
1987 and granted the Motion for Immediate Issuance of a Writ of Execution filed by
private respondents (Annex "F", Rollo, pp. 57-58).
Hence, this petition for review on certiorari filed on April 13, 1987.
On April 21, 1987, Acting Chief Justice Andres Narvasa, authorized the grant of
Temporary Restraining Order in this case which was confirmed by the Second Division of
this Court in its Resolution dated April 27, 1987 (Rollo, pp. 86, 87, 88).
292
In a Resolution dated June 8, 1987, petitioners were required to comment on the motion
dated April 26, 1987 (Rollo, p. 94) of counsel for respondents, praying to set aside the
temporary restraining order issued on April 21, 1987 and to issue a writ of execution
pending appeal or to allow the Court of Appeals to proceed with the execution of the
decision pending appeal (Rollo, p. 115), which was complied with by petitioners on July
22, 1987 (Rollo, p. 143).
In the resolution of October 5, 1987 (Rollo, p. 187) the petition was given due course and
the parties were required to submit their respective memoranda within twenty (20) days
from notice. Petitioners' memorandum was submitted on December 3, 1987 (Rollo, p.
196). Respondents submitted their memorandum on April 12, 1988 (Rollo, p. 235).
Petitioners raised the following issues:
1. That a Municipal Trial Court has no jurisdiction to take cognizance of a
case for Unlawful Detainer under Sec. 1 of Rule 70 of the Rules of Court,
where the plaintiffs are merely the legal possessors and recent
transferees of a public land, and the defendants are the absolute owners
of the building existing on the same land, for a number of years already.
2. That the respondent Regional Trial Court, Branch LXXIV, Olongapo
City, ought to have dismissed the action for Unlawful Detainer and as the
same was also heard on appeal by the said Court on this jurisdictional
challenge.
3. The market value of the residential houses or buildings of the
defendants on the said land is approximately P170,000.00, and it was
with plaintiffs' predecessor-in-interest, one Gloria Carillo-Potente that
defendants caused said structures to be erected on said land plaintiffs
having only acquired from said predecessor, by means of a Deed of Sale
of such rights sometime on January 5, 1984.
4. Upon this frame of facts which are admitted in the Decision of both
Courts, only a Court of General Jurisdiction, a Regional Trial Court, can
have the competence to try and decide the same: the Court of Special
Limited Jurisdiction, cannot take cognizance of such facts as an action for
Unlawful Detainer.
5. Arguendo, that the Court of Origin has jurisdiction to take cognizance
of the cause of action for Unlawful Detainer, it should have not heard the
case in accordance with the Rules of Summary Proceedings, and based
its Decision on an Affidavit hearing, as the question of ownership was
being contested between plaintiffs and defendants, with respect to whom
was the preferred grantee to the same land, and which falls under the
complete administration and control of the Bureau of Lands.
6. In fact, the Court of Origin, Branch V, Municipal Trial Court in Cities,
Olongapo, should have suspended the proceedings, as there was an
Administrative Protest being heard by the District Land Office of
Olongapo City.
7. On the question of suspension of proceedings denied by the Court of
Origin, Municipal Trial Court in Cities, Branch V, Olongapo City, an action
for certiorari was filed before Branch LXXIII of Regional Trial Court,
Olongapo City, Civil Case No. 399-0-85, and although a Restraining
Order against Municipal Trial Court in Cities, Branch V, City of Olongapo,
was issued, the same was already academic as by that time said
Municipal Trial Court, Branch V, Olongapo City, has already rendered its
Decision in favor of private respondent hereat, plaintiff therein.
8. Branch LXXIV, Regional Trial Court, Olongapo, in its Decision
rendered on appeal, did not pass upon such matters, specified supra, so
as to reverse the Decision of the Court of Origin: the subject Decisions,
have not considered the due process rights of petitioners toward their
residences and structures, the same are facing the risk of condemnation
and destruction without fair hearing, and such improvements have an
aggregate value of Pl70,000.00, more or less.
9. Respondent Honorable Judge Mendoza of Branch LXXIV, Regional
Trial Court, Olongapo, may have been misled by the citation of authority,
case of Vda. de Bocaling vs. Laguna, et al., 54 SCRA, 243, relied upon
by appellees, said case being totally inapplicable to the facts of this case.
10. Respondent Deputy Sheriff Rogelio Lumanlan, without regard to the
fif'teen (15) days period finality of the Order and/or Writ of Demolition,
harrassed herein petitioners, notwithstanding the pendency of matters
involved to their extreme discomfort and anxiety.
11. The Decision of the Honorable Court of Appeals, Annex "C",
sustained the Decision of the Regional Trial Court and ignored the vital
issues posed for resolution: A Motion For Reconsideration, copy is hereto
attached as Annex "D", was presented, precisely to stress the same but,
a pointed or precise ruling upon such issues was avoided in the
293
 Resolution dated 30th of March, 1987, true copy attached herein as
Annex "E".
12. On the other (sic) upon Motion of private respondents, the Tans,
despite Opposition thereto, Writ of Execution pending appeal was issued
and respondent Deputy Sheriff Lumanlan enforced the same, copy of
which is hereto attached as Annex "F": true copy of Notice to Vacate
served by said respondent Deputy Sheriff to petitioners is attached as
Annex "G" herein.
13. Per Annex "D" Motion For Reconsideration a constitutional point, was
reared forth, on first impression, per proviso of Sec. 10, Art. XIII-new,
1986 Constitution, relevant to demolition and resettlement, and,
Resolution, dated 30th March, 1987, Annex "E", of the Honorable
Appellate Authority, avoided said constitutional question, without passing
upon the same.
14. Of Jurisdictional matters: Decision dated March 4, 1987, of the
Honorable Court of Appeals was, received on March 6, 1987, Motion For
Reconsideration was filed on March 16, 1987, and Resolution dated 30th
of March, 1987, denying Motion for Reconsideration was received on
April 1, 1987: thus, this Petition is filed within the 15 day period. (Rollo,
pp. 4-8).
All of which boil down to the main issue of whether or not an action for unlawful detainer
is the proper action to oust petitioners from their occupation of the land in dispute.
There is no question as to the ownership of the land in litigation as both petitioners and
private respondents admit that the same is a public land and owned by the government.
The bone of contention is, who has a better right to possess the land which definitely falls
under the jurisdiction of the Municipal Trial Court and the rule of summary procedure
may properly be applied.
In a preliminary conference held pursuant to Section 6 of the Rule on Summary
Procedure, defendants admitted that they entered the premises as lessees and had been
paying rentals for the use of the land to Gloria Carillo, private respondents' predecessor-
in-interest (Order dated May 15, 1985 in Civil Case No. 2511, MTC, Olongapo City,
Branch V; Rollo, pp. 72-73). When requested to vacate the premises, petitioners asked
<äre|| anº•1àw>
for an extension of time which request was granted. However, petitioners failed to vacate
the premises and also stopped paying rentals. In view of said admissions, petitioners had
unquestionably recognized private respondents' prior right of possession over the
questioned property.
Petitioners' allegation in their answer that they are builders in good faith over the land as
provided for in Article 448 of the Civil Code is untenable. As ruled by this Court, Article
448 of the Civil Code, applies only where one builds on land in the belief that he is the
owner of the land, but does not apply where one's interest in the land is that of a lessee
under a rental contract (Balucanag v. Francisco, 122 SCRA 498 [1983]). More than that,
it has been settled that the mere fact that, in his answer, defendant claims to be the
exclusive owner of the property from which plaintiff seeks to eject him is not sufficient to
divest the Municipal Trial Court of jurisdiction (Vivar v. Vivar, 8 SCRA 847, 849 [1963];
De Santa vs. Court of Appeals, 140 SCRA 52 [1985]).
In addition, this Court held in Bocaling v. Laguna, et al (54 SCRA 243, 250 [1973]) that:
The rule is well-settled that lessees, like petitioner, are not possessors in
good faith because he knew that their occupancy of the premises
continues only during the life of the lease, and they cannot as a matter of
right, recover the value of their improvements from the lessor, much less
retain the premises until they are reimbursed. Their rights are governed
by Article 1678 of the Civil Code which allows reimbursement of lessees
up to one-half of the value of their improvements if the lessor so elects.
Petitioners contend that the above cited case is "completely inapplicable to the case at
bar, because the genesis case of Ejectment therein was subjected to a compromise
Agreement" (Rollo, p. 18). Such contention is, however, untenable. One of the issues
raised in the above-cited case was whether or not lessees are builders and/or
possessors in good faith entitled to reimbursement for the value of their improvements.
The Court categorically resolved the issue in the negative without qualification nor even a
reference to the compromise agreement alluded to by the petitioner.
In a later development, petitioners filed a supplemental memorandum submitting the
decision of the Bureau of Lands dated June 7, 1987, the dispositive portion of which
reads:
IN VIEW OF ALL THE FOREGOING, the Miscellaneous Sales
Application No. 4320 of Benita Ching Tan should be, as hereby as it is
rejected forfeiting to the government whatever amount had been paid on
account thereof. The miscellaneous sales application of Maximo Gabrito,
Carmelita Uy, Roger Libut and Liza de Vera shall continue to be given
294
 due course after a subdivision survey of the portion occupied by them
shall have been made at their pro-rata expense.
SO ORDERED.
In view thereof, petitioners maintain that they are the lawful owners of the buildings and
the legal possessors of subject land and that the records of the court proceedings show
the pendency of the administrative protest before the Bureau of Lands between the same
litigating parties (Rollo, pp. 166-167).
Respondents countered that the decision of the Bureau of Lands granting preferential
right to the petitioners to apply for the subject parcel of land is still on appeal before the
Department of Natural Resources. 1 Hence, said decision which is not yet final, cannot
affect the outcome of this case because the authority given to the land department over the
disposition of public land does not exclude the courts from their jurisdiction over possessory
actions, the character of the land notwithstanding (Rollo, pp. 246-247).
The contention of private respondents is well taken.
This issue has long been laid to rest by this Court. As early as the case of Pitarque v.
Sorilla (92 Phil. 55 [1952]), this Court ruled that:
The vesting of the Lands Department with authority to administer, dispose of, and
alienate public lands must not be understood as depriving the other branches of
the Government of the exercise of their respective functions of powers thereon,
such as the authority to stop disorders and quell breaches of peace by the police
and the authority on the part of the courts to take jurisdiction over possessory
actions arising therefrom not involving, directly or indirectly, alienation and
disposition.
Said ruling was reiterated in Bahayang v. Maceren, 96 Phil 390 (1955); in Molina v. De
Bacud, 19 SCRA 56 (1967) and in Rallon v. Ruiz, Jr., 28 SCRA 331 (1969). In the latter
case, the Court specifically ruled on the jurisdictional question, as follows:
Courts have jurisdiction over possessory actions involving public lands to
determine the issue of physical possession (in forcible entry cases before the
inferior court) on the better right of possession (in accion publiciana cases before
court of first instance). And this is because the issue of physical possession
raised before the courts is independent of the question of disposition and
alienation of public lands which should be threshed out in the Bureau of Lands.
The above ruling was further reiterated in Francisco v. Secretary of Agriculture and
Natural Resources (121 SCRA 380 [1983]) and in a recent case of National
Development Co., et al. v. Hervilla, G.R. No. 65718, June 30, 1987 (151 SCRA 520),
where it was held that:
It is now well settled that the administration and disposition of public lands are
committed by law to the Director of Lands primarily, and ultimately to the
Secretary of Agriculture and Natural Resources. The jurisdiction of the Bureau of
Lands is confined to the determination of the respective rights of rival claimants
of public lands or to cases which involve disposition and alienation of public
lands. The jurisdiction of courts is limited to the determination of who has the
actual, physical possession or occupation of the land in question (in forcible entry
cases, before municipal courts) or, the better right of possession (in accion
publiciana, in cases before the Court of First Instance, now Regional Trial Court).
And even more recently in the case of Guerrero v. Amores, et al., G.R. No.
L-34492 promulgated on March 28, 1988, the Court clearly stated that "pending final
adjudication of ownership by the Bureau of Lands, the Court has jurisdiction to determine
in the meantime the right of possession over the land." Corollary thereto, the power to
order the sheriff to remove improvements and turn over the possession of the land to the
party adjudged entitled thereto, belongs only to the courts of justice and not to the
Bureau of Lands.
In the same case, the application of the principle of exhaustion of administrative
remedies with reference to public lands, was further clarified by this Court as follows:
On the other hand, the application of the principle of exhaustion of administrative
remedies as a condition precedent to the filing of a juridical action is confined to
controversies arising out of the disposition of public lands (Geukoko vs. Araneta,
102 Phil. 706 (1957); Marukot vs. Jacinto, 98 Phil. 128 (1957), alienation of
public lands (Rallos vs. Ruiz, Jr., supra) or to the determination of the respective
rights of rival claimants to public lands (Pitarque vs. Sorilla, supra) and not to
possessory actions involving public lands which are limited to the determination
of who has the actual, physical possession or occupation of the land in question
(Rallos vs. Ruiz, Jr., supra).
<äre||anº• 1àw>
In fact, the Bureau of Lands in its decision of June 7, 1987, admitted the jurisdiction of
the courts to decide the case on the question of physical possession, although not on the
question of ownership (Rollo, p. 179).
295
Under the circumstances, a careful study of the records failed to show any cogent reason
to disturb the findings of the Municipal Trial Court in Cities and of the Regional Trial
Court, both of Olongapo City, and finally of the Court of Appeals.
WHEREFORE, the decision of respondent Court of Appeals is AFFIRMED and the
temporary restraining order is lifted. Costs against petitioners.
SO ORDERED.
--- xxx END OF EFFECTS OF ACQUISITION xx ---
G.R. No. 86774 August 21, 1991
PRESLEY vs. BEL AIR VILLAGE ASSOCIATION
This is a petition for review of the decision of the Court of Appeals promulgated on
November 28, 1988 affirming the decision of the Regional Trial Court in toto. The
dispositive portion of the decision reads:
WHEREFORE, the defendants are enjoined permanently from using the
property in question as a pan de sal store or from using it for any other
commercial purposes; the defendants are ordered to pay, jointly and
severally, the plaintiff the sum of P3,803.55 with legal interest from
February 9, 1981 until the said sum is fully paid and the defendants are
further ordered to pay, jointly and severally, the sum of P4,500.00 as and
for attorney's fees. (Rollo, p. 30)
The facts as stated by the Court of Appeals are as follows:
A complaint for specific performance and damages with preliminary
injunction was filed by plaintiff-appellee, Bel-Air Village Association, Inc.
(BAVA for short) against Teofilo Almendras and Rollo Almendras (now
both deceased and substituted by defendant-appellant Enedina Presley)
for violation of the Deed Restrictions of Bel-Air Subdivision that the
subject house and lot shall be used only for residential and not for
commercial purposes and for non-payment of association dues to plaintiff
BAVA amounting to P3,803.55.
The Almendrases were at the time of the filing of the action the registered
owners of a house and lot located at 102 Jupiter Street, Bel-Air Village,
Makati, Metro Manila. As such registered owners, they were members of
plaintiff BAVA pursuant to the Deed Restrictions annotated in their title
(TCT No. 73616) over the property in question and defendant Presley, as
lessee of the property, is the owner and operator of 'Hot Pan de Sal
Store' located in the same address.
At the time the Almendrases bought their property in question from
Makati Development Corporation, the Deed Restrictions (Exh. "C") was
already annotated in their title (Exh. "B") providing (among others) 'that
the lot must be used only for residential purpose' (Exh. "B-1" and "B-2").
When BAVA came to know of the existence of the 'Pan de sal' store, it
sent a letter to the defendants asking them to desist from operating the
store (Exh. "D").
Under the existing Deed Restrictions aforesaid, the entire Bel-Air
Subdivision is classified as a purely residential area, particularly Jupiter
Road which is owned by and registered in the name of BAVA.
It has likewise been established that the Almendrases had not paid the
BAVA membership dues and assessments which amounted to P3,802.55
as of November 3, 1980. Teofilo Almendras contended that there was no
written contract between him and appellee BAVA. Only a consensual
contract existed between the parties whereby Almendras regularly pays
his dues and assessments to BAVA for such services as security,
garbage collection and maintenance and repair of Jupiter Street.
However, when the services were withdrawn by appellee BAVA, there
was no more reason for the latter to demand payment of such dues and
assessments. (Rollo, pp. 30-31)
After due hearing on the merits, the trial court rendered the decision in favor of BAVA
which was affirmed by the respondent Court of Appeals.
On January 20, 1989, the Court of Appeals denied the Motion for Reconsideration.
Consequently, the petitioner filed the instant petition with this Court raising the following
issues, to wit:
A
THE RULING OF RESPONDENT COURT OF APPEALS IS NOT IN
ACCORDANCE WITH THE RECENT CONSOLIDATED DECISION EN
BANC OF THIS HONORABLE SUPREME COURT PROMULGATED
296
 DECEMBER 22,1988 IN RE SANGALANG, BEL-AIR VILLAGE
ASSOCIATION INC. v. INTERMEDIATE APPELLATE COURT AND
AYALA CORPORATION G.R. NO. 71169; BEL-AIR VILLAGE
ASSOCIATION INC. v. TENORIO, ET AL.-G.R. NO. 74376; BEL-AIR AIR
VILLAGE ASSOCIATION, INC. v. COURT OF APPEALS AND
ROMUALDEZ, ET AL G.R. NO. 76394; BEL-AIR VILLAGE
ASSOCIATION INC. v. COURT OF APPEALS AND FILLEY, ET AL.-G.R.
NO. 78182; BEL-AIR VILLAGE ASSOCIATION, INC. v. COURT OF
APPEALS AND MONCAL, ET AL.-G.R. NO. 82281, WHICH
CONSOLIDATED DECISION APPLIES ON ALL FOURS IN THE CASE
AT BAR IN FAVOR OF PETITIONER.
B
THE RULING OF RESPONDENT COURT OF APPEALS ADJUDGING
PETITIONER SOLIDARILY LIABLE TOGETHER WITH THE
ALMENDRASES TO PAY THE ALLEGED UNPAID ASSOCIATION
DUES IS PATENTLY CONTRARY TO THE EVIDENCE AND FACTS.
C through the Metro Manila Commission (MMC), had reclassified Jupiter
THE RULING OF RESPONDENT COURT OF APPEALS ADJUDGING
PETITIONER SOLIDARILY LIABLE TO PAY ATTORNEY'S FEES IS
WITHOUT ANY LEGAL OR FACTUAL BASIS. (Rollo, p. 11-12)
During the pendency of the case with this Court, petitioner Enedina Fox Presley died on
January 4, 1991. She was substituted by her two daughters as heirs, namely Olivia V.
Pizzaro and Consuelo V. Lacson.
The issues raised in the instant petition have already been dealt with in the consolidated
cases decided by this Court promulgated on December 22, 1988 entitled Sangalang, et
al. vs. Intermediate Appellate Court and Ayala Corporation, G.R. No. 71169; Bel-Air
Village Association, Inc. v. Intermediate Appellate Court and Rosario de Jesus Tenorio
and Cecilia Gonzalvez, G.R. No. 74376; Bel-Air v. Court of Appeals and Eduardo and
Buena Romualdez, G.R. No. 76394; BAVA v. Court of Appeals, Dolors Filley and J.
Romero Associates, G.R. No. 78182; and BAVA v. Court of Appeals, Violeta Moncal and
Majal Development Corp., G.R. No. 82281. (168 SCRA 634 [1988])
Apparently, when the respondent court promulgated the questioned decision on
November 28, 1988 the Sangalang case had not yet been decided by this Court. It was
however, aware of the pending case as it made mention of the several cases brought to
court by BAVA against the aforesaid commercial establishments.
The petitioner in the instant case is similarly situated as the private respondents in G.R.
Nos. 74376; 76394; 78182 and 82281 who converted their residential homes to
commercial establishments; hence, BAVA filed suits against them to enforce the Deeds
of Restrictions annotated in their titles which provide among others, "that the lot must be
used only for residential purposes."
The Court in the Sangalang case, however, held:
xxx xxx xxx
... In the Sangalang case, we absolve the Ayala Corporation primarily
owing to our finding that is not liable for the opening of Jupiter Street to
the general public. Insofar as these petitions are concerned, we likewise
exculpate the private respondents, not only because of the fact that
Jupiter Street is not covered by the restrictive easements based on the
'deed restrictions' but chiefly because the National Government itself,
Street into a 'high density commercial (C-3) zone,' (See rollo, G.R. No.
71169, Id., 117) pursuant to its Ordinance No. 81-01 Hence, the
petitioners have no cause of action on the strength alone of the said deed
restrictions. (p. 667; Emphasis supplied)
In the instant petition, BAVA assails the Court's decision in the Sangalang case, more
specifically the Court's interpretation of Ordinance No. 81-01 passed by the Metro Manila
Commission (MMC) on March 14, 1981. It avers that due to the multitude of issues
raised and the numerous pleadings filed by the different contending parties, the Court
was misled and unfortunately erred in concluding that Jupiter Street was reclassified as a
"high density commercial (C-3) zone" when in fact, it is still considered as a "(R-1)
residential zone."
If indeed private respondent's observations were accurate, the Court will certainly not
hesitate to correct the situation and the case at bar would be the proper occasion to do
so. We have carefully examined the pleadings but have found no reason to reconsider
the Sangalang doctrine. In assailing the Court's decision, the private respondent has
come out with mere assertions and allegations. It failed to present any proofs or
convincing arguments to substantiate its claim that Jupiter Street is still classified as a
residential zone. (See Filinvest v. Court of Appeals, 182 SCRA 664 [1990]) No new
zoning re-classification, ordinance, certification to the effect or jurisprudence for that
297
matter was brought to the attention of this Court which would necessarily compel us to
take a second look at the Sangalang Case. The Court can not reverse a precedent and
rule favorably for the private respondent on the strength of mere inferences.
The respondent court in the case at bar was not at all entirely wrong in upholding the
Deed of Restrictions annotated in the title of the petitioners. It held that the provisions of
the Deed of Restrictions are in the nature of contractual obligations freely entered into by
the parties. Undoubtedly, they are valid and can be enforced against the petitioner.
However, these contractual stipulations on the use of the land even if said conditions are
annotated on the torrens title can be impaired if necessary to reconcile with the legitimate
exercise of police power. (Ortigas & Co. Limited Partnership v. Feati Bank and Trust Co.,
94 SCRA 533 [1979]).
We reiterate the Court's pronouncements in the Sangalang case which are quite clear:
It is not that we are saying that restrictive easements, especially the
easements herein in question, are invalid or ineffective. As far as the Bel-
Air subdivision itself is concerned, certainly, they are valid and
enforceable. But they are, like all contracts, subject to the overriding
demands, needs, and interests of the greater number as the State may
determine in the legitimate exercise of police power. Our jurisdiction
guarantees sanctity of contract and is said to be the 'law between the
contracting parties,' (Civil Code, supra, art. 1159) but while it is so, it
cannot contravene 'law, morals, good customs, public order, or public
policy.' (supra, art. 1306). Above all, it cannot be raised as a deterrent to
police power, designed precisely to promote health, safety, peace, and
enhance the common good, at the expense of contractual rights,
whenever necessary. . . (p. 667)
Jupiter Street has been highly commercialized since the passage of Ordinance No. 81-
01. The records indicate that commercial buildings, offices, restaurants, and stores have
already sprouted in this area. We, therefore, see no reason why the petitioner should be
singled out and prohibited from putting up her hot pan de sal store. Thus, in accordance
with the ruling in the Sangalang case, the respondent court's decision has to be
reversed.
With respect to the demand for payment of association dues in the sum of P3,803.55, the
records reveal that this issue is now moot and academic after petitioner Presley
purchased the property subject of lease from the Almendrases and settled all association
dues.
Likewise, the demand for payment of attorney's fees is now without legal or factual basis.
WHEREFORE, the petition is hereby GRANTED. The decision of the respondent court
dated November 28, 1988 is REVERSED and SET ASIDE. The complaint of the private
respondent is DISMISSED.
SO ORDERED.
G.R. No. 90596 April 8, 1991
SOLID MANILA CORP vs. BIO HONG TRADING
This is an appeal filed by way of a petition for review on certiorari under Rule 45 of the
Rules of Court.
The petitioner raises two questions: (1) whether or not the Court of Appeals1 erred in
reversing the trial court which had rendered summary judgment; and (2) whether or not it
erred in holding that an easement had been extinguished by merger.
We rule for the petitioner on both counts.
It appears that the petitioner is the owner of a parcel of land located in Ermita, Manila,
covered by Transfer Certificate of Title No. 157750 of the Register of Deeds of Manila.
The same lies in the vicinity of another parcel, registered in the name of the private
respondent corporation under Transfer Certificate of Title No. 128784.
The private respondent's title came from a prior owner, and in their deed of sale, the
parties thereto reserved as an easement of way:
. . .a portion thereof measuring NINE HUNDRED FOURTEEN SQUARE
METERS, more or less, had been converted into a private alley for the benefit of
neighboring estates, this being duly annotated at the back of the covering
transfer Certificate of title per regulations of the Office of the City Engineer of
Manila and that the three meterwide portion of said parcel along the Pasig River,
with an area of ONE HUNDRED SEVENTY NINE (179) SQUARE METERS,
more or less, had actually been expropriated by the City Government, and
developed pursuant to the beautification drive of the Metro Manila Governor. (p.
3, Record).2
As a consequence, an annotation was entered in the private respondent's title, as
follows:
298
 Entry No. 7712/T-5000 –– CONSTRUCTION OF PRIVATE ALLEY –– It is
hereby made of record that a construction of private alley has been undertaken
on the lot covered by this title from Concepcion Street to the interior of the
aforesaid property with the plan and specification duly approved by the City
Engineer subject to the following conditions to wit: (1) That the private alley shall
be at least three (3) meters in width; (2) That the alley shall not be closed so long
as there's a building exists thereon (sic); (3) That the alley shall be open to the
sky; (4) That the owner of the lot on which this private alley has been constituted
shall construct the said alley and provide same with concrete canals as per
specification of the City Engineer; (5) That the maintenance and upkeep of the
alley shall be at the expense of the registered owner; (6) That the alley shall
remain open at all times, and no obstructions whatsoever shall be placed
thereon; (7) That the owner of the lot on which the alley has been constructed
shall allow the public to use the same, and allow the City to lay pipes for sewer
and drainage purposes, and shall not act (sic) for any indemnity for the use
thereof; and (8) That he shall impose upon the vendee or new owner of the
property the conditions abovementioned; other conditions set forth in Doc. No.
4236, Page No. 11, Book No. 84 of Nicasio P. Misa, Not. Pub. of Manila.3
The petitioner claims that ever since, it had (as well as other residents of neighboring
estates) made use of the above private alley and maintained and contributed to its
upkeep, until sometime in 1983, when, and over its protests, the private respondent
constructed steel gates that precluded unhampered use.
On December 6, 1984, the petitioner commenced suit for injunction against the private
respondent, to have the gates removed and to allow full access to the easement.
The court a quo shortly issued ex parte an order directing the private respondent to open
the gates. Subsequently, the latter moved to have the order lifted, on the grounds that:
(1) the easement referred to has been extinguished by merger in the same person of the
dominant and servient estates upon the purchase of the property from its former owner;
(2) the petitioner has another adequate outlet; (3) the petitioner has not paid any
indemnity therefor; and (4) the petitioner has not shown that the right-of-way lies at the
point least prejudicial to the servient estate.
The private respondent's opposition notwithstanding, the trial court issued a "temporary
writ of preliminary injunction to continue up to the final termination of the case upon its
merits upon the posting of a P5,000.00 bond by the plaintiff.4 (the petitioner herein).
Thereafter, the respondent corporation answered and reiterated its above defenses.
On April 15, 1986, the petitioner moved for summary judgment and the court a quo ruled
on the same as follows:
In view of the foregoing, this Court finds it unnecessary to try this case on the merit (sic)
and hereby resolve (sic) to grant the plaintiffs motion for summary judgment. (pp. 15-107,
Record).5
On January 19, 1987, the trial court rendered judgment against the private respondent,
the dispositive portion of which states:
WHEREFORE, judgment is hereby rendered making permanent the temporary
mandatory injunction, that had been issued against the defendant, and for the
defendant to pay the plaintiff the costs of this suit.
The defendant's counterclaim against the plaintiff is hereby dismissed, for lack of
merit. (Summary Judgment, p. 6).6
The private respondent appealed to the respondent Court of Appeals.
Meanwhile, the private respondent itself went to the Regional Trial Court on a petition for
the cancellation of the annotation in question. The court granted cancellation, for which
the petitioner instituted CA-G.R. SP No. 13421 of the respondent Court of Appeals which
ordered the restoration of the annotation "without prejudice [to] the final outcome of7 the
private respondent's own appeal (subject of this petition).
In reversing the trial court which had, as earlier mentioned, rendered summary judgment,
the respondent Court of Appeals held that the summary judgment was improper and that
the lower court erroneously ignored the defense set up by the private respondent that the
easement in question had been extinguished. According to the Appellate Court, an
easement is a mere limitation on ownership and that it does not impair the private
respondent's title, and that since the private respondent had acquired title to the
property, "merger" brought about an extinguishment of the easement.
The petitioner submits that the respondent Court of Appeals erred, because the very
deed of sale executed between the private respondent and the previous owner of the
property "excluded" the alley in question, and that in any event, the intent of the parties
was to retain the "alley" as an easement notwithstanding the sale.
As already stated at the outset, the Court finds merit in the petition.
299
There is no question that an easement, as described in the deed of sale executed
between the private respondent and the seller, had been constituted on the private
respondent's property, and has been in fact annotated at the back of Transfer Certificate
of Title No. 128784. Specifically, the same charged the private respondent as follows:
"(6) That the alley shall remain open at all times, and no obstructions whatsoever shall
be placed thereon; (7) That the owner of the lot on which the alley has been constructed
shall allow the public to use the same, and allow the City to lay pipes for sewer and
drainage purposes, and shall not [ask] for any indemnity for the use thereof. . ."8 Its act,
therefore, of erecting steel gates across the alley was in defiance of these conditions and
a violation of the deed of sale, and, of course, the servitude of way.
The Court then is of the opinion that injunction was and is proper and in denying
injunctive relief on appeal, the respondent Appellate Court committed an error of
judgment and law.
It is hardly the point, as the Court of Appeals held, that the private respondent is the
owner of the portion on which the right-of-way had been established and that an
easement can not impair ownership. The petitioner is not claiming the easement or any
part of the property as its own, but rather, it is seeking to have the private respondent
respect the easement already existing thereon. The petitioner is moreover agreed that
the private respondent has ownership, but that nonetheless, it has failed to observe the
limitation or encumbrance imposed on the same
There is therefore no question as to ownership. The question is whether or not an
easement exists on the property, and as we indicated, we are convinced that an
easement exists.
It is true that the sale did include the alley. On this score, the Court rejects the
petitioner's contention that the deed of sale "excluded" it, because as a mere right-of-
way, it can not be separated from the tenement and maintain an independent existence.
Thus:
Art. 617. Easements are inseparable from the estate to which they actively or
passively belong.9
Servitudes are merely accessories to the tenements of which they form part.10 Although
they are possessed of a separate juridical existence, as mere accessories, they can not,
however, be alienated11 from the tenement, or mortgaged separately.12
The fact, however, that the alley in question, as an easement, is inseparable from the
main lot is no argument to defeat the petitioner's claims, because as an easement
precisely, it operates as a limitation on the title of the owner of the servient estate,
specifically, his right to use (jus utendi).
As the petitioner indeed hastens to point out, the deed itself stipulated that "a portion
thereof [of the tenement] measuring NINE HUNDRED FOURTEEN SQUARE METERS,
more or less, had been converted into a private alley for the benefit of the neighboring
estates. . ."13 and precisely, the former owner, in conveying the property, gave the private
owner a discount on account of the easement, thus:
WHEREAS, to compensate for the foregoing, the parties hereto agreed to adjust
the purchase price from THREE MILLION SEVEN HUNDRED NINETY
THOUSAND FOUR HUNDRED FORTY PESOS (P3,790,440.) to THREE
MILLION FIVE HUNDRED THREE THOUSAND TWO HUNDRED FORTY
PESOS (P3,503,240.00)14
Hence, and so we reiterate, albeit the private respondent did acquire ownership over the
property –– including the disputed alley –– as a result of the conveyance, it did not
acquire the right to close that alley or otherwise put up obstructions thereon and thus
prevent the public from using it, because as a servitude, the alley is supposed to be open
to the public.
The Court is furthermore of the opinion, contrary to that of the Court of Appeals, that no
genuine merger took place as a consequence of the sale in favor of the private
respondent corporation. According to the Civil Code, a merger exists when ownership of
the dominant and servient estates is consolidated in the same person.15 Merger then, as
can be seen, requires full ownership of both estates.
One thing ought to be noted here, however. The servitude in question is a personal
servitude, that is to say, one constituted not in favor of a particular tenement (a real
servitude) but rather, for the benefit of the general public.
Personal servitudes are referred to in the following article of the Civil Code:
Art. 614. Servitudes may also be established for the benefit of a community, or of
one or more persons to whom the encumbered estate does not belong.16
In a personal servitude, there is therefore no "owner of a dominant tenement" to speak
of, and the easement pertains to persons without a dominant estate,17 in this case, the
public at large.
300
Merger, as we said, presupposes the existence of a prior servient-dominant owner
relationship, and the termination of that relation leaves the easement of no use. Unless
the owner conveys the property in favor of the public –– if that is possible –– no genuine
merger can take place that would terminate a personal easement.
For this reason, the trial court was not in error in rendering summary judgment, and
insofar as the respondent Court of Appeals held that it (the trial court) was in error, the
Court of Appeals is in error.
Summary judgments under Rule 34 of the Rules of Court are proper where there is no
genuine issue as to the existence of a material fact, and the facts appear undisputed
based on the pleadings, depositions, admissions, and affidavits of record.18 In one case,
this Court upheld a decision of the trial court rendered by summary judgment on a claim
for money to which the defendant interposed the defense of payment but which failed to
produce receipts.19 We held that under the circumstances, the defense was not genuine
but rather, sham, and which justified a summary judgment. In another case, we rejected
the claim of acquisitive prescription over registered property and found it likewise to be
sham, and sustained consequently, a summary judgment rendered because the title
challenged was covered by a Torrens Certificate and under the law, Torrens titles are
imprescriptible.20
We also denied reconveyance in one case and approved a summary judgment rendered
thereon, on the ground that from the records, the plaintiffs were clearly guilty of laches
having failed to act until after twenty-seven years.21We likewise allowed summary
judgment and rejected contentions of economic hardship as an excuse for avoiding
payment under a contract for the reason that the contract imposed liability under any and
all conditions.22
In the case at bar, the defense of merger is, clearly, not a valid defense, indeed, a sham
one, because as we said, merger is not possible, and secondly, the sale unequivocally
preserved the existing easement. In other words, the answer does not, in reality, tender
any genuine issue on a material fact and can not militate against the petitioner's clear
cause of action.
As this Court has held, summary judgments are meant to rid a proceeding of the ritual of
a trial where, from existing records,23 the facts have been established, and trial would be
futile.
What indeed, argues against the posturing of the private respondent –– and
consequently, the challenged holding of the respondent Court of Appeals as well –– is
the fact that the Court of Appeals itself had rendered judgment, in its CA-G.R. No. 13421,
entitled Solid Manila Corporation v. Ysrael, in which it nullified the cancellation of the
easement annotated at the back of the private respondent's certificate of title ordered by
Judge Ysrael in LRC Case No. 273. As the petitioner now in fact insists, the Court of
Appeals' judgment, which was affirmed by this Court in its Resolution dated December
14, 1988, in G.R. No. 83540, is at least, the law of the case between the parties, as "law
of the case" is known in law, e.g.:
xxx xxx xxx
Law of the case has been defined as the opinion delivered on a former appeal.
More specifically, it means that whatever is once irrevocably established as the
controlling legal rule of decision between the same parties in the same case
continues to be the law of the case, whether correct on general principles or not,
so long as the facts on which such decision was predicated continue to be the
facts of the case before the court. (21 C.J.S. 330) (Emphasis supplied).
It may be stated as a rule of general application that, where the evidence on a
second or succeeding appeal is substantially the same as that on the first or
preceding appeal, all matters, questions, points, or issues adjudicated on the
prior appeal are the law of the case on all subsequent appeals and will not be
considered or readjudicated therein. (5 C.J.S. 1267) (Emphasis supplied.)
In accordance with the general rule stated in Section 1821, where, after a definite
determination, the court has remanded the cause for further action below, it will
refuse to examine question other than those arising subsequently to such
determination and remand, or other than the propriety of the compliance with its
mandate; and if the court below has proceeded in substantial conformity to the
directions of the appellate court, its action will not be questioned on a second
appeal.
As a general rule a decision on a prior appeal of the same case is held to be the
law of the case whether that decision is right or wrong, the remedy of the party
deeming himself aggrieved being to seek a rehearing. (5 C.J.S. 1276-77).
(Emphasis supplied.)
Questions necessarily involved in the decision on a former appeal will be
regarded as the law of the case on a subsequent appeal, although the questions
are not expressly treated in the opinion of the court, as the presumption is that all
the facts in the case bearing on the point decided have received due
consideration whether all or none of them are mentioned in the opinion. (5 C.J.S.
1286-87). (Emphasis supplied.)24
301
CA-G.R. No. 13421 is the law of the case because clearly, it was brought to determine
the rights of the parties regarding the easement, subject of the controversy in this case,
although as a petition for "cancellation of annotation" it may have, at a glance, suggested
a different cause of action.
And for reasons of fair play, the private respondent can not validly reject CA-G.R. No.
13421 as the law of the case, after all, it was the one that initiated the cancellation
proceedings with the Regional Trial Court in LRC No. 273 that precipitated that appeal.
In the second place, the proceedings for cancellation of annotation was in fact meant to
preempt the injunction decreed by the lower court in this case. Plainly and simply, the
private respondent is guilty of forum-shopping, as we have described the term:
xxx xxx xxx
There is forum-shopping whenever, as a result of an adverse opinion in one
forum, a party seeks a favorable opinion (other than by appeal or certiorari) in
another. The principle applies not only with respect to suits filed in the courts but
also in connection with litigations commenced in the courts while an
administrative proceeding is pending, as in this case, in order to defeat
administrative processes and in anticipation of an unfavorable administrative
ruling and a favorable court ruling. This is specially so, as in this case, where the
court in which the second suit was brought, has no jurisdiction.25
to which contempt is a penalty.26
As it happened, in its effort to shop for a friendly forum, the private respondent found an
unfriendly court and it can not be made to profit from its act of malpractice by permitting it
to downgrade its finality and deny its applicability as the law of the case.
As a personal servitude, the right-of-way in question was established by the will of the
owner.
In the interesting case of North Negros Sugar Co., Inc. v. Hidalgo,27 this Court, speaking
through Justice Claro Recto, declared that a personal servitude (also a right of way in
that case) is established by the mere "act"28 of the landowner, and is not "contractual in
the nature,"29 and a third party (as the petitioner herein is a third party) has the
personality to claim its benefits. In his separate opinion, however, Justice Jose Laurel
maintained that a personal or voluntary servitude does require a contract and that "[t]he
act of the plaintiff in opening the private way here involved did not constitute an offer . . .
"30 and "[t]here being no offer, there could be no acceptance; hence no contract."31
The Court sees no need to relive the animated exchanges between two legal titans (they
would contend even more spiritedly in the "larger" world of politics) to whom present
scholars perhaps owe their erudition and who, because of the paths they have taken,
have shaped history itself; after all, and coming back to the case at bar, it is not disputed
that an easement has been constituted, whereas it was disputed in North Negros' case.
Rather, the question is whether it is still existing or whether it has been extinguished. As
we held, our findings is that it is in existence and as a consequence, the private
respondent can not bar the public, by erecting an obstruction on the alley, from its use.
WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals is SET
ASIDE and the decision of the Regional Trial Court is hereby REINSTATED. The
petitioner and its counsel are hereby required to SHOW CAUSE why they should not be
punished for contempt of court, and also administratively dealt with in the case of
counsel, for forum shopping.
IT IS SO ORDERED.
--- xxx END OF VOLUNTARY EASEMENT xxx ---
G.R. No. 77425 June 19, 1991
ROMAN CATHOLIC ARCHOBISHOP OF MANILA vs. CA
These two petitions for review on certiorari1 seek to overturn the decision of the Court of
Appeals in CA-G.R. CV No. 054562 which reversed and set aside the order of the
Regional Trial Court of Imus, Cavite dismissing Civil Case No. 095-84, as well as the
order of said respondent court denying petitioner's motions for the reconsideration of its
aforesaid decision.
On November 29, 1984, private respondents as plaintiffs, filed a complaint for
nullification of deed of donation, rescission of contract and reconveyance of real property
with damages against petitioners Florencio and Soledad C. Ignao and the Roman
Catholic Bishop of Imus, Cavite, together with the Roman Catholic Archbishop of Manila,
before the Regional Trial Court, Branch XX, Imus, Cavite and which was docketed as
Civil Case No. 095-84 therein.3
In their complaint, private respondents alleged that on August 23, 1930, the spouses
Eusebio de Castro and Martina Rieta, now both deceased, executed a deed of donation
in favor of therein defendant Roman Catholic Archbishop of Manila covering a parcel of
land (Lot No. 626, Cadastral Survey of Kawit), located at Kawit, Cavite, containing an
area of 964 square meters, more or less. The deed of donation allegedly provides that
the donee shall not dispose or sell the property within a period of one hundred (100)
302
years from the execution of the deed of donation, otherwise a violation of such condition
would render ipso facto null and void the deed of donation and the property would revert
to the estate of the donors.
It is further alleged that on or about June 30, 1980, and while still within the prohibitive
period to dispose of the property, petitioner Roman Catholic Bishop of Imus, in whose
administration all properties within the province of Cavite owned by the Archdiocese of
Manila was allegedly transferred on April 26, 1962, executed a deed of absolute sale of
the property subject of the donation in favor of petitioners Florencio and Soledad C.
Ignao in consideration of the sum of P114,000. 00. As a consequence of the sale,
Transfer Certificate of Title No. 115990 was issued by the Register of Deeds of Cavite on
November 15, 1980 in the name of said petitioner spouses.
What transpired thereafter is narrated by respondent court in its assailed decision.4
On December 17, 1984, petitioners Florencio Ignao and Soledad C. Ignao filed a motion
to dismiss based on the grounds that (1) herein private respondents, as plaintiffs therein,
have no legal capacity to sue; and (2) the complaint states no cause of action.
On December 19, 1984, petitioner Roman Catholic Bishop of Imus also filed a motion to
dismiss on three (3) grounds, the first two (2) grounds of which were identical to that of
the motion to dismiss filed by the Ignao spouses, and the third ground being that the
cause of action has prescribed.
On January 9, 1985, the Roman Catholic Archbishop of Manila likewise filed a motion to
dismiss on the ground that he is not a real party in interest and, therefore, the complaint
does not state a cause of action against him.
After private respondents had filed their oppositions to the said motions to dismiss and
the petitioners had countered with their respective replies, with rejoinders thereto by
private respondents, the trial court issued an order dated January 31, 1985, dismissing
the complaint on the ground that the cause of action has prescribed.5
Private respondents thereafter appealed to the Court of Appeals raising the issues on (a)
whether or not the action for rescission of contracts (deed of donation and deed of sale)
has prescribed; and (b) whether or not the dismissal of the action for rescission of
contracts (deed of donation and deed of sale) on the ground of prescription carries with it
the dismissal of the main action for reconveyance of real property.6
On December 23, 1986, respondent Court of Appeals, holding that the action has not yet
prescibed, rendered a decision in favor of private respondents, with the following
dispositive portion:
WHEREFORE, the Order of January 31, 1985 dismissing appellants' complaint is
SET ASIDE and Civil Case No. 095-84 is hereby ordered REINSTATED and
REMANDED to the lower court for further proceedings. No Costs.7
Petitioners Ignao and the Roman Catholic Bishop of Imus then filed their separate
motions for reconsideration which were denied by respondent Court of Appeals in its
resolution dated February 6, 1987,8 hence, the filing of these appeals by certiorari.
It is the contention of petitioners that the cause of action of herein private respondents
has already prescribed, invoking Article 764 of the Civil Code which provides that "(t)he
donation shall be revoked at the instance of the donor, when the donee fails to comply
with any of the conditions which the former imposed upon the latter," and that "(t)his
action shall prescribe after four years from the non-compliance with the condition, may
be transmitted to the heirs of the donor, and may be exercised against the donee's heirs.
We do not agree.
Although it is true that under Article 764 of the Civil Code an action for the revocation of a
donation must be brought within four (4) years from the non-compliance of the conditions
of the donation, the same is not applicable in the case at bar. The deed of donation
involved herein expressly provides for automatic reversion of the property donated in
case of violation of the condition therein, hence a judicial declaration revoking the same
is not necessary, As aptly stated by the Court of Appeals:
By the very express provision in the deed of donation itself that the violation of
the condition thereof would render ipso facto null and void the deed of donation,
WE are of the opinion that there would be no legal necessity anymore to have
the donation judicially declared null and void for the reason that the very deed of
donation itself declares it so. For where (sic) it otherwise and that the donors and
the donee contemplated a court action during the execution of the deed of
donation to have the donation judicially rescinded or declared null and void
should the condition be violated, then the phrase reading "would render ipso
facto null and void" would not appear in the deed of donation.9
In support of its aforesaid position, respondent court relied on the rule that a judicial
action for rescission of a contract is not necessary where the contract provides that it
may be revoked and cancelled for violation of any of its terms and conditions.10 It called
303
attention to the holding that there is nothing in the law that prohibits the parties from
entering into an agreement that a violation of the terms of the contract would cause its
cancellation even without court intervention, and that it is not always necessary for the
injured party to resort to court for rescission of the contract.11 It reiterated the doctrine that
a judicial action is proper only when there is absence of a special provision granting the
power of cancellation.12
It is true that the aforesaid rules were applied to the contracts involved therein, but we
see no reason why the same should not apply to the donation in the present case. Article
732 of the Civil Code provides that donationsinter vivos shall be governed by the general
provisions on contracts and obligations in all that is not determined in Title III, Book III on
donations. Now, said Title III does not have an explicit provision on the matter of a
donation with a resolutory condition and which is subject to an express provision that the
same shall be considered ipso factorevoked upon the breach of said resolutory condition
imposed in the deed therefor, as is the case of the deed presently in question. The
suppletory application of the foregoing doctrinal rulings to the present controversy is
consequently justified.
The validity of such a stipulation in the deed of donation providing for the automatic
reversion of the donated property to the donor upon non-compliance of the condition was
upheld in the recent case of De Luna, et al. vs. Abrigo, et al.13 It was held therein that
said stipulation is in the nature of an agreement granting a party the right to rescind a
contract unilaterally in case of breach, without need of going to court, and that, upon the
happening of the resolutory condition or non-compliance with the conditions of the
contract, the donation is automatically revoked without need of a judicial declaration to
that effect. While what was the subject of that case was an onerous donation which,
under Article 733 of the Civil Code is governed by the rules on contracts, since the
donation in the case at bar is also subject to the same rules because of its provision on
automatic revocation upon the violation of a resolutory condition, from parity of reasons
said pronouncements in De Luna pertinently apply.
The rationale for the foregoing is that in contracts providing for automatic revocation,
judicial intervention is necessary not for purposes of obtaining a judicial declaration
rescinding a contract already deemed rescinded by virtue of an agreement providing for
rescission even without judicial intervention, but in order to determine whether or not the
rescission was proper.14
When a deed of donation, as in this case, expressly provides for automatic revocation
and reversion of the property donated, the rules on contract and the general rules on
prescription should apply, and not Article 764 of the Civil Code. Since Article 1306 of said
Code authorizes the parties to a contract to establish such stipulations, clauses, terms
and conditions not contrary to law, morals, good customs, public order or public policy,
we are of the opinion that, at the very least, that stipulation of the parties providing for
automatic revocation of the deed of donation, without prior judicial action for that
purpose, is valid subject to the determination of the propriety of the rescission sought.
Where such propriety is sustained, the decision of the court will be merely declaratory of
the revocation, but it is not in itself the revocatory act.
On the foregoing ratiocinations, the Court of Appeals committed no error in holding that
the cause of action of herein private respondents has not yet prescribed since an action
to enforce a written contract prescribes in ten (10) years.15 It is our view that Article 764
was intended to provide a judicial remedy in case of non-fulfillment or contravention of
conditions specified in the deed of donation if and when the parties have not agreed on
the automatic revocation of such donation upon the occurrence of the contingency
contemplated therein. That is not the situation in the case at bar.
Nonetheless, we find that although the action filed by private respondents may not be
dismissed by reason of prescription, the same should be dismissed on the ground that
private respondents have no cause of action against petitioners.
The cause of action of private respondents is based on the alleged breach by petitioners
of the resolutory condition in the deed of donation that the property donated should not
be sold within a period of one hundred (100) years from the date of execution of the deed
of donation. Said condition, in our opinion, constitutes an undue restriction on the rights
arising from ownership of petitioners and is, therefore, contrary to public policy.
Donation, as a mode of acquiring ownership, results in an effective transfer of title over
the property from the donor to the donee. Once a donation is accepted, the donee
becomes the absolute owner of the property donated. Although the donor may impose
certain conditions in the deed of donation, the same must not be contrary to law, morals,
good customs, public order and public policy. The condition imposed in the deed of
donation in the case before us constitutes a patently unreasonable and undue restriction
on the right of the donee to dispose of the property donated, which right is an
indispensable attribute of ownership. Such a prohibition against alienation, in order to be
valid, must not be perpetual or for an unreasonable period of time.
Certain provisions of the Civil Code illustrative of the aforesaid policy may be considered
applicable by analogy. Under the third paragraph of Article 494, a donor or testator may
1âw phi1
prohibit partition for a period which shall not exceed twenty (20) years. Article 870, on its
part, declares that the dispositions of the testator declaring all or part of the estate
inalienable for more than twenty (20) years are void.
304
It is significant that the provisions therein regarding a testator also necessarily involve, in
the main, the devolution of property by gratuitous title hence, as is generally the case of
donations, being an act of liberality, the imposition of an unreasonable period of
prohibition to alienate the property should be deemed anathema to the basic and actual
intent of either the donor or testator. For that reason, the regulatory arm of the law is or
must be interposed to prevent an unreasonable departure from the normative policy
expressed in the aforesaid Articles 494 and 870 of the Code.
In the case at bar, we hold that the prohibition in the deed of donation against the
alienation of the property for an entire century, being an unreasonable emasculation and
denial of an integral attribute of ownership, should be declared as an illegal or impossible
condition within the contemplation of Article 727 of the Civil Code. Consequently, as
specifically stated in said statutory provision, such condition shall be considered as not
imposed. No reliance may accordingly be placed on said prohibitory paragraph in the
deed of donation. The net result is that, absent said proscription, the deed of sale
supposedly constitutive of the cause of action for the nullification of the deed of donation
is not in truth violative of the latter hence, for lack of cause of action, the case for private
respondents must fail.
It may be argued that the validity of such prohibitory provision in the deed of donation
was not specifically put in issue in the pleadings of the parties. That may be true, but
such oversight or inaction does not prevent this Court from passing upon and resolving
the same.
It will readily be noted that the provision in the deed of donation against alienation of the
land for one hundred (100) years was the very basis for the action to nullify the deed of d
donation. At the same time, it was likewise the controverted fundament of the motion to
dismiss the case a quo, which motion was sustained by the trial court and set aside by
respondent court, both on the issue of prescription. That ruling of respondent court
interpreting said provision was assigned as an error in the present petition. While the
issue of the validity of the same provision was not squarely raised, it is ineluctably related
to petitioner's aforesaid assignment of error since both issues are grounded on and refer
to the very same provision.
This Court is clothed with ample authority to review matters, even if they are not
assigned as errors on appeal, if it finds that their consideration is necessary in arriving at
a just decision of the case:16 Thus, we have held that an unassigned error closely related
to an error properly assigned,17 or upon which the determination of the question properly
assigned is dependent, will be considered by the appellate court notwithstanding the
failure to assign it as error.18
Additionally, we have laid down the rule that the remand of the case to the lower court for
further reception of evidence is not necessary where the Court is in a position to resolve
the dispute based on the records before it. On many occasions, the Court, in the public
interest and for the expeditious administration of justice, has resolved actions on the
merits instead of remanding them to the trial court for further proceedings, such as where
the ends of justice, would not be subserved by the remand of the case.19 The aforestated
considerations obtain in and apply to the present case with respect to the matter of the
validity of the resolutory condition in question.
WHEREFORE, the judgment of respondent court is SET ASIDE and another judgment is
hereby rendered DISMISSING Civil Case No. 095-84 of the Regional Trial Court, Branch
XX, Imus, Cavite.
SO ORDERED.
G.R. No. L-69970 November 28, 1988
DANGUILAN vs. IAC
The subject of this dispute is the two lots owned by Domingo Melad which is claimed by
both the petitioner and the respondent. The trial court believed the petitioner but the
respondent court, on appeal, upheld the respondent. The case is now before us for a
resolution of the issues once and for all.
On January 29, 1962, the respondent filed a complaint against the petitioner in the then
Court of First Instance of Cagayan for recovery of a farm lot and a residential lot which
she claimed she had purchased from Domingo Melad in 1943 and were now being
unlawfully withheld by the defendant. 1 In his answer, the petitioner denied the allegation
and averred that he was the owner of the said lots of which he had been in open, continuous
and adverse possession, having acquired them from Domingo Melad in 1941 and 1943. 2 The
case was dismissed for failure to prosecute but was refiled in 1967. 3
At the trial, the plaintiff presented a deed of sale dated December 4, 1943, purportedly
signed by Domingo Melad and duly notarized, which conveyed the said properties to her
for the sum of P80.00. 4 She said the amount was earned by her mother as a worker at the
Tabacalera factory. She claimed to be the illegitimate daughter of Domingo Melad, with
whom she and her mother were living when he died in 1945. She moved out of the farm only
when in 1946 Felix Danguilan approached her and asked permission to cultivate the land and
to stay therein. She had agreed on condition that he would deliver part of the harvest from the
farm to her, which he did from that year to 1958. The deliveries having stopped, she then
consulted the municipal judge who advised her to file the complaint against Danguilan. The
plaintiff 's mother, her only other witness, corroborated this testimony. 5
305
For his part, the defendant testified that he was the husband of Isidra Melad, Domingo's
niece, whom he and his wife Juana Malupang had taken into their home as their ward as
they had no children of their own. He and his wife lived with the couple in their house on
the residential lot and helped Domingo with the cultivation of the farm. Domingo Melad
signed in 1941 a private instrument in which he gave the defendant the farm and in 1943
another private instrument in which he also gave him the residential lot, on the
understanding that the latter would take care of the grantor and would bury him upon his
death. 6 Danguilan presented three other witnesses 7 to corroborate his statements and to
prove that he had been living in the land since his marriage to Isidra and had remained in
possession thereof after Domingo Melad's death in 1945. Two of said witnesses declared that
neither the plaintiff nor her mother lived in the land with Domingo Melad. 8
The decision of the trial court was based mainly on the issue of possession. Weighing
the evidence presented by the parties, the judge 9 held that the defendant was more
believable and that the plaintiff's evidence was "unpersuasive and unconvincing." It was held
that the plaintiff's own declaration that she moved out of the property in 1946 and left it in the
possession of the defendant was contradictory to her claim of ownership. She was also
inconsistent when she testified first that the defendant was her tenant and later in rebuttal
that he was her administrator. The decision concluded that where there was doubt as to the
ownership of the property, the presumption was in favor of the one actually occupying the
same, which in this case was the defendant. 10
The review by the respondent court 11 of this decision was manifestly less than thorough.
For the most part it merely affirmed the factual findings of the trial court except for an
irrelevant modification, and it was only toward the end that it went to and resolved what it
considered the lone decisive issue.
The respondent court held that Exhibits 2-b and 3-a, by virtue of which Domingo Melad
had conveyed the two parcels of land to the petitioner, were null and void. The reason
was that they were donations of real property and as such should have been effected
through a public instrument. It then set aside the appealed decision and declared the
respondents the true and lawful owners of the disputed property.
The said exhibits read as follows:
EXHIBIT 2-b is quoted as follows: 12
I, DOMINGO MELAD, of legal age, married, do hereby declare in this receipt
the truth of my giving to Felix Danguilan, my agricultural land located at
Barrio Fugu-Macusi, Penablanca, Province of Cagayan, Philippine Islands;
that this land is registered under my name; that I hereby declare and bind
myself that there is no one to whom I will deliver this land except to him as he
will be the one responsible for me in the event that I will die and also for all
other things needed and necessary for me, he will be responsible because of
this land I am giving to him; that it is true that I have nieces and nephews but
they are not living with us and there is no one to whom I will give my land
except to Felix Danguilan for he lives with me and this is the length—175 m.
and the width is 150 m.
IN WITNESS WHEREOF, I hereby sign my name below and also those
present in the execution of this receipt this 14th day of September 1941.
Penablanca Cagayan, September 14, 1941.
(SGD.) DOMINGO MELAD
WITNESSES:
1. (T.M.) ISIDRO MELAD
2. (SGD.) FELIX DANGUILAN
3. (T.M.) ILLEGIBLE
EXHIBIT 3-a is quoted as follows: 13
I, DOMINGO MELAD, a resident of Centro, Penablanca, Province of
Cagayan, do hereby swear and declare the truth that I have delivered my
residential lot at Centro, Penablanca, Cagayan, to Felix Danguilan, my son-
in-law because I have no child; that I have thought of giving him my land
because he will be the one to take care of SHELTERING me or bury me
when I die and this is why I have thought of executing this document; that the
boundaries of this lot is—on the east, Cresencio Danguilan; on the north,
Arellano Street; on the south by Pastor Lagundi and on the west, Pablo
Pelagio and the area of this lot is 35 meters going south; width and length
beginning west to east is 40 meters.
IN WITNESS HEREOF, I hereby sign this receipt this 18th day of
December 1943.
(SGD.) DOMINGO MELAD
WITNESSES:
(SGD.) ILLEGIBLE
(SGD.) DANIEL ARAO
306
It is our view, considering the language of the two instruments, that Domingo Melad did
intend to donate the properties to the petitioner, as the private respondent contends. We
do not think, however, that the donee was moved by pure liberality. While truly
donations, the conveyances were onerous donations as the properties were given to the
petitioner in exchange for his obligation to take care of the donee for the rest of his life
and provide for his burial. Hence, it was not covered by the rule in Article 749 of the Civil
Code requiring donations of real properties to be effected through a public instrument.
The case at bar comes squarely under the doctrine laid down in Manalo v. De
Mesa, 14 where the Court held:
There can be no doubt that the donation in question was made for a
valuable consideration, since the donors made it conditional upon the
donees' bearing the expenses that might be occasioned by the death and
burial of the donor Placida Manalo, a condition and obligation which the
donee Gregorio de Mesa carried out in his own behalf and for his wife
Leoncia Manalo; therefore, in order to determine whether or not said
donation is valid and effective it should be sufficient to demonstrate that,
as a contract, it embraces the conditions the law requires and is valid and
effective, although not recorded in a public instrument.
The private respondent argues that as there was no equivalence between the value of
the lands donated and the services for which they were being exchanged, the two
transactions should be considered pure or gratuitous donations of real rights, hence, they
should have been effected through a public instrument and not mere private writings.
However, no evidence has been adduced to support her contention that the values
exchanged were disproportionate or unequal.
On the other hand, both the trial court and the respondent court have affirmed the factual
allegation that the petitioner did take care of Domingo Melad and later arranged for his
burial in accordance with the condition imposed by the donor. It is alleged and not denied
that he died when he was almost one hundred years old, 15which would mean that the
petitioner farmed the land practically by himself and so provided for the donee (and his wife)
during the latter part of Domingo Melad's life. We may assume that there was a fair exchange
between the donor and the donee that made the transaction an onerous donation.
Regarding the private respondent's claim that she had purchased the properties by virtue
of a deed of sale, the respondent court had only the following to say: "Exhibit 'E' taken
together with the documentary and oral evidence shows that the preponderance of
evidence is in favor of the appellants." This was, we think, a rather superficial way of
resolving such a basic and important issue.
The deed of sale was allegedly executed when the respondent was only three years old
and the consideration was supposedly paid by her mother, Maria Yedan from her
earnings as a wage worker in a factory. 16 This was itself a suspicious circumstance, one
may well wonder why the transfer was not made to the mother herself, who was after all the
one paying for the lands. The sale was made out in favor of Apolonia Melad although she had
been using the surname Yedan her mother's surname, before that instrument was signed and
in fact even after she got married. 17 The averment was also made that the contract was
simulated and prepared after Domingo Melad's death in 1945. 18 It was also alleged that even
after the supposed execution of the said contract, the respondent considered Domingo Melad
the owner of the properties and that she had never occupied the same. 19
Considering these serious challenges, the appellate court could have devoted a little
more time to examining Exhibit "E" and the circumstances surrounding its execution
before pronouncing its validity in the manner described above. While it is true that the
due execution of a public instrument is presumed, the presumption is disputable and will
yield to contradictory evidence, which in this case was not refuted.
At any rate, even assuming the validity of the deed of sale, the record shows that the
private respondent did not take possession of the disputed properties and indeed waited
until 1962 to file this action for recovery of the lands from the petitioner. If she did have
possession, she transferred the same to the petitioner in 1946, by her own sworn
admission, and moved out to another lot belonging to her step-brother. 20 Her claim that
the petitioner was her tenant (later changed to administrator) was disbelieved by the trial
court, and properly so, for its inconsistency. In short, she failed to show that she
consummated the contract of sale by actual delivery of the properties to her and her actual
possession thereof in concept of purchaser-owner.
As was held in Garchitorena v. Almeda: 21
Since in this jurisdiction it is a fundamental and elementary principle that
ownership does not pass by mere stipulation but only by delivery (Civil
Code, Art. 1095; Fidelity and Surety Co. v. Wilson, 8 Phil. 51), and the
execution of a public document does not constitute sufficient delivery
where the property involved is in the actual and adverse possession of
third persons (Addison vs. Felix, 38 Phil. 404; Masallo vs. Cesar, 39 Phil.
134), it becomes incontestable that even if included in the contract, the
ownership of the property in dispute did not pass thereby to Mariano
Garchitorena. Not having become the owner for lack of delivery, Mariano
Garchitorena cannot presume to recover the property from its present
possessors. His action, therefore, is not one of revindicacion, but one
against his vendor for specific performance of the sale to him.
307
In the aforecited case of Fidelity and Deposit Co. v. Wilson, 22 Justice Mapa declared for
the Court:
Therefore, in our Civil Code it is a fundamental principle in all matters of
contracts and a well- known doctrine of law that "non mudis pactis sed
traditione dominia rerum transferuntur". In conformity with said doctrine
as established in paragraph 2 of article 609 of said code, that "the
ownership and other property rights are acquired and transmitted by law,
by gift, by testate or intestate succession, and, in consequence of certain
contracts, by tradition". And as the logical application of this disposition
article 1095 prescribes the following: "A creditor has the rights to the
fruits of a thing from the time the obligation to deliver it arises. However,
he shall not acquire a real right" (and the ownership is surely such) "until
the property has been delivered to him."
In accordance with such disposition and provisions the delivery of a thing
constitutes a necessary and indispensable requisite for the purpose of
acquiring the ownership of the same by virtue of a contract. As Manresa
states in his Commentaries on the Civil Code, volume 10, pages 339 and
340: "Our law does not admit the doctrine of the transfer of property by
mere consent but limits the effect of the agreement to the due execution
of the contract. ... The ownership, the property right, is only derived from
the delivery of a thing ... "
As for the argument that symbolic delivery was effected through the deed of sale, which
was a public instrument, the Court has held:
The Code imposes upon the vendor the obligation to deliver the thing
sold. The thing is considered to be delivered when it is placed "in the
hands and possession of the vendee." (Civil Code, art. 1462). It is true
that the same article declares that the execution of a public instrument is
equivalent to the delivery of the thing which is the object of the contract,
but, in order that this symbolic delivery may produce the effect of
tradition, it is necessary that the vendor shall have had such control over
the thing sold that, at the moment of the sale, its material delivery could
have been made. It is not enough to confer upon the purchaser
the ownership and the right of possession. The thing sold must be placed
in his control. When there is no impediment whatever to prevent the thing
sold passing into the tenancy of the purchaser by the sole will of the
vendor, symbolic delivery through the execution of a public instrument is
sufficient. But if, notwithstanding the execution of the instrument, the
purchaser cannot have the enjoyment and material tenancy of the thing
and make use of it himself or through another in his name, because such
tenancy and enjoyment are opposed by the interposition of another will,
then fiction yields to reality—the delivery has not been effected. 23
There is no dispute that it is the petitioner and not the private respondent who is in actual
possession of the litigated properties. Even if the respective claims of the parties were
both to be discarded as being inherently weak, the decision should still incline in favor of
the petitioner pursuant to the doctrine announced in Santos & Espinosa v.
Estejada 24 where the Court announced:
If the claim of both the plaintiff and the defendant are weak, judgment
must be for the defendant, for the latter being in possession is presumed
to be the owner, and cannot be obliged to show or prove a better right.
WHEREFORE, the decision of the respondent court is SET ASIDE and that of the trial
court REINSTATED, with costs against the private respondent. It is so ordered.
G.R. No. 112127 July 17, 1995
CENTRAL PHILIPPINE UNIVERSITY vs. CA
CENTRAL PHILIPPINE UNIVERSITY filed this petition for review on certiorari of the
decision of the Court of Appeals which reversed that of the Regional Trial Court of Iloilo
City directing petitioner to reconvey to private respondents the property donated to it by
their predecessor-in-interest.
Sometime in 1939, the late Don Ramon Lopez, Sr., who was then a member of the
Board of Trustees of the Central Philippine College (now Central Philippine University
[CPU]), executed a deed of donation in favor of the latter of a parcel of land identified as
Lot No. 3174-B-1 of the subdivision plan Psd-1144, then a portion of Lot No. 3174-B, for
which Transfer Certificate of Title No. T-3910-A was issued in the name of the donee
CPU with the following annotations copied from the deed of donation —
1. The land described shall be utilized by the CPU exclusively for the
establishment and use of a medical college with all its buildings as part of
the curriculum;
2. The said college shall not sell, transfer or convey to any third party nor
in any way encumber said land;
308
 3. The said land shall be called "RAMON LOPEZ CAMPUS", and the said
college shall be under obligation to erect a cornerstone bearing that
name. Any net income from the land or any of its parks shall be put in a
fund to be known as the "RAMON LOPEZ CAMPUS FUND" to be used
for improvements of said campus and erection of a building thereon. 1
On 31 May 1989, private respondents, who are the heirs of Don Ramon Lopez, Sr., filed
an action for annulment of donation, reconveyance and damages against CPU alleging
that since 1939 up to the time the action was filed the latter had not complied with the
conditions of the donation. Private respondents also argued that petitioner had in fact
negotiated with the National Housing Authority (NHA) to exchange the donated property
with another land owned by the latter.
In its answer petitioner alleged that the right of private respondents to file the action had
prescribed; that it did not violate any of the conditions in the deed of donation because it
never used the donated property for any other purpose than that for which it was
intended; and, that it did not sell, transfer or convey it to any third party.
On 31 May 1991, the trial court held that petitioner failed to comply with the conditions of
the donation and declared it null and void. The court a quo further directed petitioner to
execute a deed of the reconveyance of the property in favor of the heirs of the donor,
namely, private respondents herein.
Petitioner appealed to the Court of Appeals which on 18 June 1993 ruled that the
annotations at the back of petitioner's certificate of title were resolutory conditions breach
of which should terminate the rights of the donee thus making the donation revocable.
The appellate court also found that while the first condition mandated petitioner to utilize
the donated property for the establishment of a medical school, the donor did not fix a
period within which the condition must be fulfilled, hence, until a period was fixed for the
fulfillment of the condition, petitioner could not be considered as having failed to comply
with its part of the bargain. Thus, the appellate court rendered its decision reversing the
appealed decision and remanding the case to the court of origin for the determination of
the time within which petitioner should comply with the first condition annotated in the
certificate of title.
Petitioner now alleges that the Court of Appeals erred: (a) in holding that the quoted
annotations in the certificate of title of petitioner are onerous obligations and resolutory
conditions of the donation which must be fulfilled non-compliance of which would render
the donation revocable; (b) in holding that the issue of prescription does not deserve
"disquisition;" and, (c) in remanding the case to the trial court for the fixing of the period
within which petitioner would establish a medical college. 2
We find it difficult to sustain the petition. A clear perusal of the conditions set forth in the
deed of donation executed by Don Ramon Lopez, Sr., gives us no alternative but to
conclude that his donation was onerous, one executed for a valuable consideration
which is considered the equivalent of the donation itself, e.g., when a donation imposes a
burden equivalent to the value of the donation. A gift of land to the City of Manila
requiring the latter to erect schools, construct a children's playground and open streets
on the land was considered an onerous donation. 3 Similarly, where Don Ramon Lopez
donated the subject parcel of land to petitioner but imposed an obligation upon the latter to
establish a medical college thereon, the donation must be for an onerous consideration.
Under Art. 1181 of the Civil Code, on conditional obligations, the acquisition of rights, as
well as the extinguishment or loss of those already acquired, shall depend upon the
happening of the event which constitutes the condition. Thus, when a person donates
land to another on the condition that the latter would build upon the land a school, the
condition imposed was not a condition precedent or a suspensive condition but a
resolutory one. 4 It is not correct to say that the schoolhouse had to be constructed before
the donation became effective, that is, before the donee could become the owner of the land,
otherwise, it would be invading the property rights of the donor. The donation had to be valid
before the fulfillment of the condition. 5 If there was no fulfillment or compliance with the
condition, such as what obtains in the instant case, the donation may now be revoked and all
rights which the donee may have acquired under it shall be deemed lost and extinguished.
The claim of petitioner that prescription bars the instant action of private respondents is
unavailing.
The condition imposed by the donor, i.e., the building of a medical school upon
the land donated, depended upon the exclusive will of the donee as to when this
condition shall be fulfilled. When petitioner accepted the donation, it bound itself
to comply with the condition thereof. Since the time within which the condition
should be fulfilled depended upon the exclusive will of the petitioner, it has been
held that its absolute acceptance and the acknowledgment of its obligation
provided in the deed of donation were sufficient to prevent the statute of
limitations from barring the action of private respondents upon the original
contract which was the deed of donation. 6
Moreover, the time from which the cause of action accrued for the revocation of the
donation and recovery of the property donated cannot be specifically determined in the
instant case. A cause of action arises when that which should have been done is not
done, or that which should not have been done is done. 7 In cases where there is no
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special provision for such computation, recourse must be had to the rule that the period must
be counted from the day on which the corresponding action could have been instituted. It is
the legal possibility of bringing the action which determines the starting point for the
computation of the period. In this case, the starting point begins with the expiration of a
reasonable period and opportunity for petitioner to fulfill what has been charged upon it by the
donor.
WHEREFORE, the decision of the Regional Trial Court of Iloilo, Br. 34, of 31 May 1991
is REINSTATED and AFFIRMED, and the decision of the Court of Appeals of 18 June
1993 is accordingly MODIFIED. Consequently, petitioner is directed to reconvey to
private respondents Lot No. 3174-B-1 of the subdivision plan Psd-1144 covered by
Transfer Certificate of Title No. T-3910-A within thirty (30) days from the finality of this
judgment.

The period of time for the establishment of a medical college and the necessary buildings Costs against petitioner.
and improvements on the property cannot be quantified in a specific number of years
because of the presence of several factors and circumstances involved in the erection of
SO ORDERED.
an educational institution, such as government laws and regulations pertaining to
education, building requirements and property restrictions which are beyond the control
of the donee. --- xxx END OF REVOCATION & REDUCTION OF DONATIONS xxx ---

Thus, when the obligation does not fix a period but from its nature and circumstances it
can be inferred that a period was intended, the general rule provided in Art. 1197 of the
Civil Code applies, which provides that the courts may fix the duration thereof because
the fulfillment of the obligation itself cannot be demanded until after the court has fixed
the period for compliance therewith and such period has arrived. 8

This general rule however cannot be applied considering the different set of
circumstances existing in the instant case. More than a reasonable period of fifty (50)
years has already been allowed petitioner to avail of the opportunity to comply with the
condition even if it be burdensome, to make the donation in its favor forever valid. But,
unfortunately, it failed to do so. Hence, there is no more need to fix the duration of a term
of the obligation when such procedure would be a mere technicality and formality and
would serve no purpose than to delay or lead to an unnecessary and expensive
multiplication of suits. 9 Moreover, under Art. 1191 of the Civil Code, when one of the
obligors cannot comply with what is incumbent upon him, the obligee may seek rescission
and the court shall decree the same unless there is just cause authorizing the fixing of a
period. In the absence of any just cause for the court to determine the period of the
compliance, there is no more obstacle for the court to decree the rescission claimed.

Finally, since the questioned deed of donation herein is basically a gratuitous one,
doubts referring to incidental circumstances of a gratuitous contract should be resolved
in favor of the least transmission of rights and interests.10 Records are clear and facts are
undisputed that since the execution of the deed of donation up to the time of filing of the
instant action, petitioner has failed to comply with its obligation as donee. Petitioner has slept
on its obligation for an unreasonable length of time. Hence, it is only just and equitable now to
declare the subject donation already ineffective and, for all purposes, revoked so that
petitioner as donee should now return the donated property to the heirs of the donor, private
respondents herein, by means of reconveyance.

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